Ranking in the simulation game (position in city market) n/a 10

4. CASE STUDY Sneaker brand Shoestring has been selling trainers in the men's and children market for five years. They have adopted a cost leadership strategy. They are cutting all unnecessary costs and focusing on efficiency to have the most affordable trainers. Table 1: Sales, Revenue and Cost Data for Shoestring (2021-2025) 2025 2024 2023 2022 Years Sales volume Men Children 64,073 37,124 51,258 32,669 48,695 30,708 46,260 29,787 Total revenues (Men) 3,203,650 2,562,900 2.434,750 2,313,000 Total revenues (Children) 1,856,200 1,633,450 1,535,400 1,489,350 Total revenues 5,059,850 4,196,350 3,970,150 3,802,350 Cost of sales (Men) 1,537,752 1,230,192 1,168,680 1,110,240 Cost of Sales (children) 965,224 849,394 798,408 774,462 Distribution Cost 404,788 335,708 317,612 304,188 Total Cost of sales 2,907,764 2,415,294 2,284,700 2,188,890 Gross margin 2, 152,086 1,781,056 1,685,450 1,613,460 Marketing and Sales 240,000 240,000 240,000 120,000 General administration cost 1,500,000 1,400,000 1,200,000 1,200,000 293,460.0 Net profit 412,086.00 141,056.00 245,450.00 Decisions Purchasing cost Men trainers: 24,00 Children trainers: 26,00 Distribution cost The distribution cost is 4,00 per pair of trainers Due to problems in the supply chain, distribution costs may increase. The in- house research team estimates that distribution costs may increase by 10%. 5 However, some supply-chain consultancies expect distribution costs to increase by 20%. Selling price Men trainers: 50.00 Children trainers: 50.00 Promotion Cost of promotion campaigns Launching a campaign to capture market share in the women's market: 200,000 Launch a television add: 350,000 . News MORE AND MORE KIDS SEEN WEARING SNEAKERS. "I wonder what we used to wear when we were kids," says Margaret Hamilton, trend watcher. "If I see 20 kids a day, certainly 15 of them are wearing sneakers, as if there are not any more practical shoes for kids than sneakers." TREND: MOCCASINS COMPETITOR FOR MEN'S SNEAKERS. You can spot them more and more: stylish flat shoes in hip colours. They are called moccasins, and they are a real trend within men's fashion, taking over from sneakers. Annie Conners, stylist at Terra Men's Fashion, does not think it is odd. "The modern man is more in touch with their style. Women used to be the only ones checking whether their shoes and handbags matched; now, you see men checking their belts and shoes in a similar way. "Sneakers are loved for their comfort and versatility, but so are moccasins. A pro for moccasins is that they look slightly more classy and serious underneath formal attire, and men are becoming more and more aware of this." WOMEN'S MARKET A NEW TARGET SEGMENT FOR SNEAKERS. Research done by Female Sneaker shows that more companies aim for women as their target group. Many large retail stores have started selling sneakers specifically designed for women, and smaller stores have followed suit. At the moment, there are 440,000 potential women customers in search of women's trainers. Only two competitors are currently operating in that market, but research shows ample room for new contenders. 6 INFLATION ON THE RISE Due to extended supply chain disruptions, and the linked increase in inflation, interest rates are rising. To address this, the Bank of England has decided to raise its interest rate by 1%, leading commercial banks to announce that they will offer loans at a rate of 3%. CUSTOMERS CHOOSE QUALITY! More and more consumers choose quality shoes. "This has everything to do with durability and sustainability", according to Jimmy Cahill. "The consumer has access to more information and realizes it does not want cheap, mass-produced products. Instead, they prefer good quality shoes, which fit well and promote a healthy and sustainable lifestyle." Market research Market size Total volume per market segment (number of sneakers sold in each market segment) Men Women Children 452,744 440,000 300,854 Market Analysis The government has announced that it expects 'substantial growth' in consumer spending. However, a well-known consultancy forecasts consumer spending to remain low or even to stagnate. Market analysis by your in-house team has concluded that there is a 50% probability of the government being right and that the chances of consumer spending stagnating are very low. Your in-house research team has also done some analysis about the sneaker market. . The children's market will grow by 8% over a five-year period. Entering the women's market with trainers priced at 40 could result in a 2% market share in the first year. After that, the market share will increase 2% every year, so that after five years, Shoestring's market share will be 10% of the women's market. . The company has spare capacity, so apart from the marketing campaign, fixed costs would not increase. 7 Television campaigns could increase the total demand in the men's and children's markets. In the first year of the campaign, additional profit could reach 150,000. Profits will continue growing as indicated in the table below: Years Additional profits 1 150,000 2 153,000 3 156,060 4 159,181 5 162,364 5. MARKING CRITERIA You will be assessed on the extent of your ability to evidence . grasp of decision-making concepts and techniques ability to apply the acquired knowledge and skills ability to reflect on your decisions and their impact on financial, environmental, and social performance Ability to reflect on the differences between individual and group decision making using theoretical concepts and experience