TNT-Company 42A Owners of Company 43A Taylor Boyd: Accounting Major, Graduating May 2011 Nicole Teibel: Accounting Major, Graduating May 2011 Trey Broome: Finance Major, Graduating in May 2011 Each introduce ourselves and say our name, major, and anticipated graduation date 30 SECONDS

Evaluation of Competitive Forces Power Threat Why? 1. Suppliers High In all wholesale segments demand was larger than pairs sold 2. Buyers Customers can choose among more than 2 alternatives 3. Substitutes Low Customers cannot leave the industry 4. New Entrants New Firms were able to enter the industry in year 18 and take over market share 5. Rivalry > 2 competitors roughly equal in size As a result of the higher the collective POWER of the five competitive forces, the expected profitability of the average rival with no particular strengths or weaknesses is lower than the cost of capital.

BSG strategic group map Year 17 North America This is our snapshot of Year 17 in North America, we are the Dark Blue Region . This strategic group map depicts our relative performance in North America before new companies were able to enter the industry in the following year. In the other three regions competition is very high and companies A, B, and C are all occupying the same region in the top right.

Change from Year 17-Year 18 Due to New Entrants in Industry

Key Success Factors BSG Footwear Industry Actual Footwear Industry Inventory Turnover Scale of Operations Manufacturing Efficiency Buyer Loyalty: http://web.ebscohost.com/ehost/detail?vid=2&hid=14&sid=e42e6561-bc6a-4fcb-b8db-6da16cf8c0ff%40sessionmgr12&bdata=JnNpdGU9ZWhvc3QtbGl2ZSZzY29wZT1zaXRl#db=buh&AN=42418628#db=buh&AN=42418628 Celebrity Appeal: http://www.baltimoresun.com/business/bs-bz-under-armour-basketball-shoe-20100819,0,4034620.story. Economies of Scale: http://proquest.umi.com.www.lib.ncsu.edu:2048/pqdlink?Ver=1&Exp=09-25-2015&FMT=7&DID=1983416321&RQT=309 Differences between the BSG and real life arise due to the human element. This cannot be mimicked in a simulation.

Critique of Company 43A Industry 43A cites on their blog the use of Nike’s Strategy. We believe that thus far they have done an overall effective job of managing their company and increasing our wealth as shareholders. Their strategy of differentiation, however, has been their only short-coming, and could affect long-term profitability. SLIDE 5: [4 MINUTES] Teams vision: At K-Powers footwear, we pledge to offer differentiated quality through the use of superior materials and craftsmanship practices. With our product, one can expect a premium image and ownership experience of high value. As an investor of our company, we will strive to maintain stock value above expectations, thus increasing earnings per share for our owners. We will place strong emphasis in sustaining profit gaining years thus enabling the issuance of dividends to our owners.

43A Strength Assessment Year 17 Key Success Factor 43A Industry Average 43A Score Industry Average Score Inventory Turnover 26.07 22.81 5 1 Scale of Operations 445,553,000 393,562,000 Manufacturing Efficiency .599 .570 2 4

43 A Market Share Growth North America Years 13-16

Financial Performance Trend Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 EPS $2.73 $4.55 $3.74 $6.22 $4.85 $7.77 ROE 16.5% 21.7% 15.4% 23.9% 19.7% 17.3% Net Profit 11.1% 15.8% 12.7% 17.1% 13.7% 16.4% 14.7% Financial performance of Company A has been increasing, on average, in all the above measures since the new management took over. However, it is important to note the fluctuations in the Company’s net profit. This could likely be from fluctuations in the prices of superior materials.

Critique Continued We believe that overall, as shareholders, we have been impressed with the performance of Company A in Industry 43. Our main critique is the use of the diversification strategy. Their operating efficiency is above the industry average. This indicates that the Costs of Goods Sold is larger, as a percentage of revenue, than others in the industry. To sustain long-term profitability, we believe that they should rely less on their use of superior materials, due to the fact that they cannot control the price at which these materials are purchased. Their market share growth in both the wholesale and internet segments has begun to decline since year 14.

Specific Recommendations For 43A To create and sustain a competitive advantage with regards to customers it is important that Company A maintain the best possible relationship with wholesale suppliers. These wholesale suppliers are a major channel, and if the price of superior materials increases, Company A will then be forced to pass these price increases along to wholesale distributors, and could possibly continue to loose market share in that segment. To create and sustain a competitive advantage with regards to the shareholders it is important that Company A continue to distribute it’s earnings leftover after capital investments in the form of dividends. In the most recent year they distributed 1 dollar per share, and continuing this trend will help to maintain a good relationship between the two parties.

Helpful links http://web.ebscohost.com/ehost/detail?vid=2&hid=111&sid=cea88fd3-9238-43ea-a676-7bb8f6f6506d%40sessionmgr104&bdata=JnNpdGU9ZWhvc3QtbGl2ZSZzY29wZT1zaXRl#GoToAllQVI Nike’s Asia Pacific Industry Report (team 43 cites nike article on blog)