Running a business is one of the most hectic activities in the world. In fact, effective business strategies keep on changing and there is no formula that works in all challenges. This report will give a detailed analysis of the simulation results of Bee Company in relation to its management decisions based on underlying market changes. Basically, it will give an analysis on the impact of marketing, corporate social responsibility, external changes in the market, such as those brought by decisions of competitors on the performance of the company. In addition to the above, the report will also give a detailed analysis of the company’s decisions and their impacts on earnings per share, return on equity, stock price, credit ratings, scoreboard performance, as well as company image.
Effective implementation of competitive strategies is essential for the success of a business. In the business world, companies are always developing new strategies that will enable them to acquire more customers from competitors. In light of this, it is prudent for businesses to constantly develop new tactics, depending on the trends in the market, so that they may remain competitive and influential in their industry.
In the footwear industry, the kind of material that a business uses directly influences the demand for its products. To elaborate, if a company uses low-quality material few people are always willing to buy its products, especially if they are highly priced. On the contrary, if a company uses high-quality material and sells its products at a competitive price, many people are always willing to buy its products. With this in mind, Bee Company has implemented the strategy of using high-quality material and pricing its products at a competitive price (Stoner, Freeman, & Gilbert, 2016).
Bee Company has also initiated aggressive marketing campaigns in order to gain a significant share of the global footwear market. In general, marketing has the potential of influencing and altering consumer behavior. Simply, an advert makes consumers to desire a company’s products and accordingly increases the demand for a company’s products (Walker & Millins, 2013). In order to maximize the immense opportunities provided by marketing, Bee Company has continuously increased its spending on marketing. In turn, these marketing efforts have led to increased profitability for the company.
Corporate Social Responsibility
Corporate social responsibility (CSR) is one of the measures that the company has undertaken to improve its brand image. In order to achieve the objective of improving its image, Bee Company has continuously contributed to community social activities through donation. In addition to this, the company has allocated a significant proportion of its CSR budget on employee and management training. Due to the increased CSR activities Bee Company image in the footwear industry has improved.
An overall view of the entire market performance is essential in determining the current and future performance of an organization. In light of this, the company has the duty of checking how its internal and external environment influence its performance. In light of this, political, social, economic, technological, and legal (PESTEL) have a direct impact on the industry.
The political environment in the footwear industry refers to activities such as the government goodwill in the industry. In this case, the government willingness to offer trade incentives as well as tax holiday and overall tax regime has an impact on the industry’s performance. In general, if there is the political will to offer incentives into this industry, businesses such as Bee Company prosper (Pride, Hughes, & Kapoor, J., 2011).
Economics refers to the viability of engaging in the footwear industry. In order for investors to be willing to spend enough cash on their investments, they must be aware that the trade will be able to break even and give them profits. At the moment, the footwear industry is lucrative and is offering enough returns for investors.
The social factors are essential determinants of the trend and patterns in the footwear industry. Social factors refer to the demography of an area such as gender, age, and population in a region. In light of this, the footwear industry must always manufactured shoes that fit within the current society in order for it to succeed.
Technology simply refers to the available techniques and skills necessary to manufacture different types of shoes. The availability of modern and well-developed technology enables the shoe industry to manufacture high-quality shoes at a low price. Accordingly, technology is an important indicator of the competitiveness of companies in the shoe industry since it simplifies their manufacturing, distribution, as well as communication (Heizer, Render, & Munson, 2016).
Environmental factors are increasingly becoming important determinants of the success of an organization. Interestingly, more and more buyers are demanding that their products be packaged, manufactured, and sold in an ethical manner. In the shoe industry, consumers have concerns about the welfare of employees working conditions, the use of green energy, as well as the ethical and hygienic disposal of shoe manufacturing chemicals. Companies that fail to consider these factors eventually end up with few customers who are willing to buy their products.
The legal factor refers to the prevailing regulations that govern each industry. In this case, it refers to laws on marketing, employment contracts, business contracts, as well as licenses. Businesses in the footwear industry must always factor these issues when determining where to establish their companies. In general, however, regulation in the footwear industry require companies to have ethical behavior on their activities.
Bee Company is a shoe manufacturing company that was established in 2010. The company specializes in the retail, wholesale, and private label manufacturing and selling of shoes. Notably, shoes that are for retail are sold through the internet using the company’s website. Since its establishments, the company has had a vision of being the largest manufacturer and seller of official, leisure, and sports footwear.
Bee Company specializes in selling its products in two major markets, North America and the Asia-Pacific region. These two markets are huge and easy to operate in addition. In addition, the company is fully aware of the manner in which these markets operate. The company has a manufacturing plant on each market. Since the footwear industry is very competitive, with eight firms currently in this industry, Bee Company must constantly develop new tactics to remain competitive.
The main competitive position of Bee Company is its ability to generate high return on earnings per shares to its investors. Since the start of its operation, the company has continuously generated high returns for its shareholders, which has enabled them to create trust with the customers. The company’s EPS were $2.65, $3.18, $2.94, and $4.23 for year 2011, 2012, 2013, and 2014 respectively.
The main strengths of the company are its huge capital reserve. Bee Company has a lot of resources which it can use in the marketing of its products as well as open up a new plant in a strategic position, which will enable it to access more capital for its activities. In addition to the above, Bee Company has a strong and positive image among the public in the production of high-quality shoes as well as responsible corporation. Primarily, Bee Company’s efforts in CSR as well as in the use of high-quality products have enabled it to have a positive image. The main weakness for Bee Company is its lack of plants in Latin America region and Europe-Africa area. As a result, it has been unable to make maximum sales in these regions. In light of this, it should develop new plants in these localities.
Decisions made in an organization directly affect its performance. In practice, decisions are usually made either to counter moves made by a competitor, to respond to market changes, or to influence the demand in the market. With this understanding, Bee Company made various changes on marketing, corporate social responsibility, materials used in production, and dividend payments.
As from 2012, the company began to aggressively engage in the marketing of its products in order to have a sizeable share of the market. In 2011, the company had failed to use marketing tactics to promote its products. As a result, it had lost a sizeable share of its market to competitors. These measures were effective in enabling the company to prosper. Generally, it was expected that if the business spent more resources in marketing activities it would be able to increase the demand for its products. The demand for these commodities increased, however, at a slow pace.
Corporate Social Responsibility
CSR was one of the main decisions that were made the management. Basically, the company decided to increase its allocation of resources in doing charitable activities as well as training its employees on ways of fulfilling the customer’s demands. In general, an increase in CSR has the impact of improving a company’s image, which in turn increases customers’ willingness to buy its products. In addition to this, through CSR the company is always able to display its banners, issue branded shirts, caps, and umbrellas. In light of this, CSR also acts as an important marketing and promotion tools. In fact, it enables a company to be regular household name when it comes to the sale of specific commodities.
Since Bee Company’s management understood the importance of CSR, they decided to spend a lot of resources in this market from 2011. Basically, it was believed that spending cash through indirect marketing tactics such as CSR will have a long-term effect of increasing the demand for the company’s shoes. The company allocated a substantial amount of money in charitable donations. In addition, it also engaged in the training of employees and the top management. The use of CSR resulted in the slow but gradual increase in the demand for the company’s products. However, this growth was not very fast since rival companies such as D Company were also engaging in CSR activities.
The use of superior material has the overwhelming benefit of portraying a company as a manufacturer of high-quality products. Generally, when a company uses high-quality materials to manufacture its products, most customers are always willing to pay more for these commodities. In addition, these type of products creates a positive image for the company as a producer of high quality but affordable items. Better still, as the demand for these products increases, the company can always increase their prices and target specific markets. However, the cost of superior raw materials can make a company’s products to be unaffordable. Therefore, it is always appropriate for a business to have various classes of products, some that expensive but made from high-quality products and some that are sold at ordinary prices but are made of standard quality material (Laudon & Laudon, 2015).
With this understanding, Bee Company intended to be the market leader by specializing in the manufacture of high-quality products. The company’s management believed that if it used high-quality products but sold them at ordinary prices, it would increase its market share since most people always want high-quality products. The only problem with this tactic is that Bee Company would be forced to earn low profits from the sale of each product. The customer’s responses to the initiatives of the company were as expected. Generally, there was an increase in the demand for products sold by the company, which enabled it to increase its market share.
Dividends plan an important role in encouraging individuals to invest in a company. To begin with, increased dividends payout makes investors have a direct benefit for their investments. On the contrary, the use of these funds at times has a negative impact on the company. Simply, a dividend payout means that the company does not re-invest its profits in various lucrative business opportunities. In light of this competing needs, a company’s management must always make prudent decisions on how it will spend its profits; issue dividends or capitalize the profits (Griffin, 2015).
In order to make maximum benefits from its activities, Bee Company decided to capitalize its profits and not issue dividends to its shareholders. As expected, this method has resulted in the company having a lot of capital, which it may use in various investment opportunities. The changes that have occurred in the business due to retention of more profits have been as expected. In addition to the above, the retention of capital has also improved Bee Company credit rating from C+ to B+. Accordingly, it can now access more capital and achieve its objectives of increasing its market share (Westerfield, Jeffrey, & Ross, 2013).
Focus simply refers to the concentration of energy and resources in a particular objective. In business activities, a company may either decide to target all potential individuals in the market or specific individuals. In this case, a company examines its resources, knowledge, and behavior of the market to form the most appropriate decision. If a company’s management has limited knowledge of the entire market, it may concentrate in a small narrow market depending on its desired demographics (Ferrell & Hartline, 2012). In light of this, the company may specialize based on age group, gender, income levels, or location.
Bee Company focuses on only two regions of the entire market, North America, and the Asia-Pacific region. Accordingly, it avoids the Latin America and Europe and Africa markets, which it is not fully aware of their trends. The trend in this two markets has been as expected, initially, Bee Company had difficulty accessing new customers. However, it has slowly known how this market behaves which has enabled it to increase its market share in these regions. Specifically, the company has known the right pricing tactics, the age of consumers who are always willing to buy products, and the tastes and preferences of buyers in these regions. As a result, it manufactures and sells shoes that meet their specific needs.
Bee Company results have been continuously improving over the years. In fact, its earnings per share rose from 2.65 in 2011 to 4.23 in 2014. This rise in EPS was almost double that of 2011, which shows the company’s increased profitability over the period. The main cause for this continuous rise in profits were the company’s aggressive sales and marketing efforts, which led to increased demand for the company’s shoes and subsequently more revenue and profits.
The company’s return on equity (ROE) had a slight increase from 16.4 in 2011 to 17.6 in 2014. However, the changes in ROE, in which it had an increase from 16.6 in 2011 to 17.7 in 2012, and then a fall to 14.4 in 2013 and a huge rise to 17.6 in 2014 indicates that the company’s ROE is sensitive to changes in the business profits and activities.
The company’s scoreboard showed that investors’ expectations in the company had risen from 100 in 2011 to 110 in 2014. In general, these results indicated that the company image had changed to more positive since it was making profits. However, when compared to competitors, the Company D had the highest investors score at 117. There was a 7 points difference which indicated that the company needed to improve its performance. The change from the year 2013 was +8. This score indicated that the company had undertaken prudent measures, which had resulted in it making huge profits. Accordingly, Bee Company should continue undertaking this measures so that it may remain to be profitable in the long term.
Bee Company performance has been mixed with increased and declines over the period. On overall, however, the performance has been improving over time. After having a sharp decline in its market share, the company undertook various marketing methods, which have enabled it to increase its market share. These measures enabled the company to make profits of $42,265 in 2014. Bee’s market share in the North American market was 9.5% in the internet segment, 11.9% in the wholesale segment, and 8.3% in the private label segments. In all the segments, the business market share was below that of the industry’s average. Accordingly, the company should improve its performance. For example, the internet and wholesale segment had an industry’s average of 12.5%.
Importantly, Bee’s stocks have continuously improved over the period in 2011 the company’s shares had a market price of $32.78, $42.85 in 2012, 32.10 in 2013, and $55.99 in 2014. In light of this upward growth in the value of shares, the company can easily access capital from investors since most of them may be willing to buy shares that have shown to improve over time. Importantly, a positive image and trust among investors are important in enabling a business to access capital for its investment activities.
The company has been continuously having positive earnings per share for its investors. Generally, the ability to have a positive (EPS) is an indication that the industry in which the business is operating is profitable. In addition, it also shows that the company is taking prudent financial measures to use only the right amount of resources for its activities. Bee Company had EPS of 2.65, 3.18. 2.94. and 4.23 in 2011, 2012, 2013, and 2014 respectively. In light of this, the company should continue implementing financial strategies that encourage consumers to buy its products and enable it to make maximum profits.
Underlying Strategic Principles
Strategic Utilization of Resources
Simply, Bee Company has undertaken policies of ensuring that it utilizes its resources effectively in order to make maximum returns. In order to achieve this goal, the company focuses on using high-quality materials that it uses in making its footwear products. Accordingly, it has been able to make more profits and of increase the demand for its products by being known to be a manufacturer of high-quality footwear.
Training is another strategic measure that the company has undertaken. Simply, the company uses a significant proportion of its resources on training its employees and managers in the corporate social responsibility program. In effect, the company has been able to have a team of skillful individuals who are able to offer quality services. From 2011 to 2014, Bee Company has enjoyed been position two in CSR, which indicates its efforts in ensuring its employees are competitive. This strategy has the benefit of ensuring that Bee will have a team of individuals who will be able to produce high-quality footwear in future (Carroll & Buchholtz, 2012).
The company strategy of capitalizing dividends has enabled it to amass a lot of capital for its future investments. Since its establishment in 2010, the company has not been able to issue dividends. In light of this, the company can now be able to invest most of its cash in various income generating activities and position itself more strategically in future so that it may make more profits.
Key Learning Points About Strategy
The main understanding of macro environments is that it enables the business to align its strategies with changing environment. Macro environmental factors such as increased tax levels can negatively impact on Bees profits. Therefore, if the company understands these changes it will be able to align its strategies and react appropriately to various changes in its macro environment.
In the competitive business world, companies always make decisions based on activities of competitors. Simply, if a competitor lowers the price of its products, the company must analyze the impact of this move on its products. In light of this understanding, the strategies made by competitors is appropriate for the success of a business.
The complexities of running a business are usually due to the challenges in the internal and external business environment in a company. Businesses are always faced with the challenge of fulfilling the legal requirements, which are at times bureaucratic and expensive. In addition, there are internal challenges, such as fulfilling the needs of the human resource and those of investors, which may at times conflict the company’s long-term objectives. For example, shareholders may want to be paid a lot of dividends while employees may want more salary. On the contrary, the company may be desiring to invest these funds in long-term projects (Bateman & Snell, 2016). Ultimately, there is always a challenge in determining how to meet the requirements of all these individuals.
A shared focus in the company enables a business to quickly and easily fulfill its objectives. Importantly, it enables the company to minimize the time needed in lobbying various stakeholders to accept certain terms. For example, if all stakeholders in a company have the same focus, such as increasing a company’s production capacity, they may be willing to sacrifice some of their current benefits. With regards to this example, shareholders may be willing to forego their dividends, similarly, employees may be willing to accept a low salary (Williams, Kerin, & Hartley, 2013).
From the discussions above it is clear that internal and external environment affect the manner in which the business succeeds in its industry. In this case, the business’ ability to position itself strategically in the market, by establishing manufacturing plants in areas that it has a clear understanding of the customer’s behavior influences its success. For example, by Bee Company utilizing the strategy of focus, it has been able to learn how the North American and Asia-Pacific market work. Accordingly, the business has been able to make profits in these regions over time. The internal environment such as the company decision not to issue dividends has enabled it to increase its capital, which has in turn improved the company’s liquidity and credit rating. On the external environment, the business ability to respond appropriately has greatly determined its success or failure. For example, the business failure to market its products despite the increased marketing efforts by competitors made it have low profits. On the contrary, when it responded by increasing its marketing efforts in 2012, its sales and profits increased. In light of this, the strategic decisions made by the company about its internal operations as well as a reaction to external measured have a long-term impact on its success.
Bateman, T., & Snell S., 2016, Management: Leading & collaborating in a competitive world (12th Ed.), McGraw-Hill Education, New York, NY.
Carroll, A., & Buchholtz, A., 2012, Business and society: Ethics, sustainability, and stakeholder management (9th Ed.), Cengage Learning, New York, NY.
Ferrell, O., & Hartline, M., 2012, Marketing strategy, (5th Ed.), South-Western, Hoboken, NJ.
Griffin, R., 2015, Fundamentals of management (8th Ed.), Cengage Learning, New York, NY.
Heizer, J., Render, B., & Munson, C., 2016, Operations management: Sustainability and supply chain management (12th Ed.), Pearson, New Jersey, NJ.
Laudon, K & Laudon, J, 2015, Management information systems: Managing the digital firm (14th Ed.), Pearson Publishers, Upper Saddle River, NJ.
Pride, W., Hughes, R., & Kapoor, J., 2011, Business (11th Ed.), Cengage learning, New York, NY.
Stoner, J., Freeman, R., & Gilbert, D., 2016, Management (6th Ed.), Prentice Hall College, New York, NY.
Walker, O., & Millins, J., 2013, Marketing strategy: A decision-focused approach (8th Ed.). McGraw-Hill Education, New York, NY.
Westerfield, S., Jeffrey, R., & Ross, B., 2013, Corporate Finance: Core principles and applications, McGraw-Hill Higher Education, New York, NY.
Williams, R., Kerin, R., & Hartley, S., 2013, Marketing: The core (5th Ed.). Business and Economics, New York, NY.
North America Market
Corporate Social Responsibility