Boa Technology Written Assignment Branding, Marketing Plan

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Boa Technology Assignment

Please answer the two questions below. The answers for both must be completed in two pages or three pages (total), single-spaced, double space between paragraphs.

 

o   What are your recommendations for Garett Graubins’ 2015 U.S. marketing plan?

 

  • Be specific about which market (B2B, B2I, and/or B2I) you recommend and the 2-3 summits (product categories) deserving the most attention. Offer specific ideas about how to approach that market.  [You are expected to provide justification for your recommendation and implementation plan.]

 

  • Whether you recommend building a brand with consumers or not, use two creative idea generation techniques and generate five low-cost, grassroots ideas that would help Boa build a brand in one of its product categories.

 

 

  • o   Five low-cost, grassroots ideas that would help Boa build a brand in one of its product categories.

    08 Fall$

    Boa Technology – Marketing An Ingredient Joe Cannon, Professor of Marketing Colorado State University

    Colorado State University, College of Business, Multimedia Case Series #2014-01

     

     

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    $ Boa$Technology:$Marketing$an$Ingredient1$

    Garett’Graubins,’Global’Marketing’Director’for’Boa’Technology’sat’ in’the’Front’Range’Conference’room’at’Boa’Technology'(referred’to’ most’frequently’as’simply’“Boa”).’He’was’preparing’to’meet’with’ his’sevenImember’marketing’team’to’discuss’Boa’s’marketing’ program’for’2015.’In’less’than’a’month’Graubins’would’have’to’pull’

    together’his’ recommendations.’ The’team’would’be’ debating’questions’ around’target’ markets’and’whether’ Boa’needed’to’more’ aggressively’promote’ the’Boa’brand’with’ endIusers.”

    Boa’began’in’the’late’ 1990s’with’an’ entrepreneur’seeking’ a’better’way’to’“lace’

    up”’snowboard’boots’and’hockey’skates.’In’business’for’nearly’15’ years,’Boa’has’grown’quickly’–’having’sold’more’than’70’million’of’ its’reel’and’wire’closure’systems’in’that’time’and’more’than’18’

    1 ‘This’case’was’prepared’by’Joe’Cannon,’Professor’of’Marketing’at’Colorado’State’ University’with’research’assistance’from’Conor’Blanchet.’Cale’Rogers’handled’ multimedia’production.’The’authors’thank’Garett’Graubins,’Mark’Soderberg,’Chuck’ Mason,’and’Ilya’Minkin’for’interviews’that’aided’in’case’development’and’Boa’ Technology’for’sharing’some’of’the’video’content.’The’case’was’developed’as’a’ basis’for’class’discussion,’not’as’an’illustration’of’effective’or’ineffective’ management’and’should’not’be’used’as’a’source’of’primary’data.’Some’data’in’the’ case’has’been’modified’for’reasons’of’confidentiality.’

    million’in’the’last’year.’The’Boa’Closure’System’is’an’ingredient’ used’in’other’products.’Boa’sells’its’closure’systems’to’more’than’ 150’leading’premium’brands’worldwide.’These’brand’partners’are’ mostly’in’various’footwear’categories.’For’example,’Burton,’ FootJoy,’and’Specialized’use’the’Boa’Closure’System’on’select’styles’ of’its’snowboard’boots,’golf’shoes,’and’cycling’shoes,’respectively,’ and’Boa’collaborates’with’these’brand’partners’to’help’each’ integrate’the’Boa’Closure’System’into’these’products’as’a’ replacement’for’shoe’laces,’buckles,’or’Velcro’straps.”

    In’the’U.S.,’almost’all’of’Boa’s’marketing’efforts’focus’on’building’ relationships’with’brand’partners.’Using’a’consultative’selling’ approach,’the’company’s’sales’force’helps’brand’partners’with’ designing’higher’quality’products.’Graubins’wonders’if’it’is’time’to’ build’the’Boa’brand’with’some’consumer’segments.’

    Graubins’and’his’team’have’long’admired’how’some’“ingredient’ brands”’have’built’strong’brand’equity’with’consumers.’Brands’like’ GoreITex'(waterproof’fabric),’Intel'(and’its’iconic’“Intel’Inside”’ campaign’for’computer’chips),’Shimano'(cycling’components),’and’ Nutrasweet'(artificial’sweetener)’are’well’known’by’consumers’II’ even’though’each’is’usually’purchased’as’a’component’in’another’ brand.’Many’consumers’know’and’trust’the’GoreITex’name’II’and’ seek’it’out’when’shopping’for’waterproof’jackets’or’shoes.’When’ buying’a’new’bike,’the’Shimano’name’on’a’derailleur'(used’in’ shifting’gears)’can’be’another’sign’of’quality.’That’kind’of’brand’ equity’helped’these’brands’stave’off’competition’and’offered’ power’in’negotiations’with’partners.’

    ‘

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    Two$Boa$Closure$System$dials$on$a$Louis$Garneau$cycling$shoe.$

     

     

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    Boa’successfully’built’consumer’awareness’for’the’Boa’Closure’ System’among’hikers,’walkers,’and’golfers’in’a’few’select’Asian’ markets.’But’creating’similar’awareness’in’the’United’States’would’ be’expensive’–’and’risky.’Graubins’thought’a’strong’brand’at’the’ consumer’level’might’help’Boa’grow’faster’and’hold’off’ competition.’He’also’wondered’whether’it’might’be’a’better’idea’to’ concentrate’efforts’at’the’retail’level.’In’the’product’categories’ where’Boa’operated,’retailers’are’often’strong’influences’on’ consumer’choice.’Could’Boa’increase’its’training’of’retail’ salespeople’on’its’closure’systems?’Boa’might’develop’better’pointI ofIpurchase’materials’retailers’could’use’to’highlight’Boa’s’benefits.’ Or’was’it’too’soon’for’Boa’to’engage’in’this’type’of’strategy?’ Perhaps’the’best’option’would’be’to’continue’the’efforts’at’the’ brand’partner’and’trade’level.”

    As’Graubins’prepared’for’his’meeting’he’considered’how’the’Boa’ brand’had’evolved’in’the’last’decade,’he’reviewed’market’research,’ and’he’thought’about’how’Boa’s’CEO,’CFO,’and’VP’of’Sales’and’ Marketing’might’think’about’more’aggressively’targeting’ consumers.’He’knew’that’many’were’comfortable’with’the’current’ approach’I’it’was’working’and’the’company’was’growing’fast.’He’

    also’knew’that’some’in’the’company’wouldn’t’want’to’do’anything’ to’take’attention’away’from’potentially’large’emerging’ opportunities’in’the’medical’devices,’safety/utility’footwear,’and’ athletic’shoe’productImarkets.’

    The$“Boa$Lacing$System”$is$Born$$

    After’selling’a’successful’medical’device’company,’entrepreneur’ Gary’Hammerslag’moved’to’Steamboat’Springs,’Colorado’where’he’ enjoyed’snowboarding’and’watching’his’kids’play’hockey.’ Hammerslag’was’a’natural’inventor;’when’he’saw’a’problem’he’ tried’to’solve’it.’He’soon’recognized’that’shoelaces’were’a’poor’ solution’for’tightening’snowboard’boots’and’ice’hockey’skates.’ Laces’didn’t’stay’tight’and’often’came’undone’with’intense’physical’ activity.’ReItying’laces’required’stopping’the’activity’and’taking’off’ gloves’to’complete’the’task.’Problems’were’opportunities’for’ Hammerslag.’His’tinkering’eventually’lead’to’the’Boa’Lacing’System,’ a’novel’combination’of’steel’wire,’eyelets’and’small’reel’than’evenly’ tightens’the’wire’as’the’reel’turns.2’The’video’shows’how’it’works’ today’–’which’is’not’that’different’from’what’Hammerslag’ developed’almost’two’decades’ago.’

    2 ‘“The’Culture’of’Your’Business’Gary’Hammerslag’–’Boa’Technology,”’My#New# Enterprise,’retrieved’November’1,’2014.” https://mynewenterprise.com/bt_hammerslag_culture.php’

     

     

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    Hammerslag’founded’Boa’Technology’in’1998.”By’2001’Vans’and’ K2’snowboard’boots’featured’Boa.’In’2004,’Boa’could’be’found’on’ cycling’shoes’and’a’year’later’golf’shoes.’Boa’grew’from’there’to’ become’a’global’brand’with’sales’almost’evenly’split’among’Asia,’ Europe’and’the’United’States.’In’2011,’as’Boa’moved’into’markets’ beyond’footwear’–’including’medical’equipment’and’helmets’–’it’ changed’the’product’s’name’to’the’Boa’Closure’System.3′

    Boa$Technology$$

    From’humble’beginnings’in’a’oneIroom’office’above’a’liquor’store’ in’Steamboat’Springs,’Colorado,’Boa’Technology’has’grown’to’120′ employees’spread’between’global’headquarters’in’Denver,’ Colorado,’and’additional’offices’in’Japan,’Hong’Kong,’China,’and’ Austria.’Today’there’are’over’43’million’Boa’reels’and’20’million’ BoaIpowered’products’worldwide.”

    3 ‘“Boa’Technology’s’lacing’system’lands’big’investor,’grows’beyond’shoes,”’Denver# Post,#July’10,’2012,’retrieved’November’1,’2014,’ http://www.denverpost.com/business/ci_21039899/boaItechnologysIlacingI systemIlandsIbigIinvestorIgrows”’

    As’a’small’company,’Boa’faces’some’challenges.’Its’fast’growth’ strains’financial’and’human’resources.’With’many’opportunities,’ Boa’has’to’be’selective’in’deciding’where’to’direct’these’resources.’ The’company’has’some’vulnerability’to’competitors’with’deep’ pockets’that’might’try’to’move’into’the’same’markets’with’a’similar’ alternative’closure’system.’While’Boa’found’it’relatively’easy’to’ enter’categories’like’cycling’and’snow’sports’where’its’employees’ are’also’customers’and’they’know’the’categories’well,’they’have’no’ such’advantage’in’new’markets’like’medical’devices’and’ safety/utility’footwear.”

    ‘

    Boa’builds’on’its’strengths.’Most’Boa’Closure’Systems’can’be’found’ on’outdoor’and’athletic’footwear’–’and’Boa’has’attracted’an’active’ and’engaged’workforce.’It’helps’that’Boa’employees’know’and’use’ its’product’–’they’are’riders,’hikers,’runners,’golfers,’and’cyclists.’ Those’same’employees’are’known’for’their’tenacity’and’grit’in’ solving’customer’problems.’Boa’also’enjoys’some’patents’that’help’ protect’its’innovative’products.’The’small’company’has’also’been’ nimble’–’seizing’on’new’opportunities’as’they’arise’–’and’dedicated’ to’producing’a’high’quality’product.’The’company’s’strong’

     

     

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    leadership’team’has’a’wealth’of’experience’in’both’the’sports’and’ technology’markets.”

    Boa#Technology#Leadership#Team##

    Mark’Soderberg’is’Boa’Technology’s’President’and’CEO.’Soderberg’ has’been’with’the’company’since’2002’after’working’for’more’than’ a’dozen’years’in’the’ski’industry.’He’served’as’president’for’10’years’ before’adding’CEO’to’his’title’when’Gary’Hammerslag’stepped’ down’in’2012.’Mark’s’background’is’in’engineering’and’he’uses’Boa’ when’he’mountain’bikes’–’and’also’on’a’medical’brace’when’he’ injures’himself’in’his’favorite’sport'(which’he’did’just’recently).”

    Merle’McCreery’is’Boa’Technology’s’Chief’Financial’Officer.’He’has’ been’with’Boa’for’three’years’after’working’for’many’years’in’high’ tech.’McCreery’is’part’of’the’approval’process’for’the’annual’ marketing’budget’and’he’expects’marketing’proposals’to’show’a’ positive’return.’Merle’wears’Boa’s’when’he’golfs.’

    Boa’s’Vice’President’of’Sales’and’Marketing’is’Chuck’Mason.’He’has’ been’with’the’company’for’more’than’four’years.’He’began’his’ career’as’a’buyer’for’Christy’Sports,’a’regional’retailer’specializing’in’ ski’and’snowboard’equipment.’He’later’worked’in’sales’ management’for’major’snowboard’and’ski’brands’K2’and’Burton.’ Chuck’tightens’Boa’Closure’Systems’before’hiking,’cycling’and’ snowboarding.”

    Garett’Graubins,’Director’of’Global’Marketing,’has’been’with’Boa’ for’6’years.’He’leads’a’team’of’seven’in’the’marketing’department.’ Garett’previously’worked’at’The’Integer’Group'(a’DenverIbased’ad’ agency),’TrailRunner’Magazine,’and’The’North’Face.’Garett’recently’ finished’his’MBA’at’Colorado’State’University.’Garett’dials’in’his’Boa’ before’running’trails'(he’recently’completed’the’Hardrock’100IMile’

    Endurance’Run),’flying’down’mountains’on’his’snowboard,’or’ hopping’on’his’road’bike.”’

    Manufacturing#and#Supply#Chain#

    Boa’outsources’production’of’its’reels’to’a’Chinese’firm’that’ manufactures’to’Boa’s’rigid’specifications.’The’Boa’Closure’System’ comes’in’a’range’of’sizes,’colors,’and’torque/power’levels.’Boa’tries’ to’avoid’making’custom’products’for’each’application,’preferring’to’ find’the’component’in’its’product’line’that’best’meets’a’customer’s’ needs.’Adding’the’Boa’Closure’System’to’a’product’might’cost’from’ $1I$10′(cost’to’the’brand’partner:’the’multiplier’to’the’end’user’ may’be’as’high’as’4x’that’amount)’depending’on’size,’durability,’ torque/power’level,’and’the’length’of’the’wire’lace.’Greater’torque’ is’needed’to’close’snowboard’and’ski’boots’for’example,’as’ compared’to’hiking’shoes.”

    Boa’maintains’a’warehouse’in’Hong’Kong.’The’factories’producing’ Boa’brand’partners’’shoes,’boots,’or’other’products’order’directly’ from’Boa.’Boa’then’ships’the’order’directly’to’that’factory.”

    Competition$and$Competitive$Advantage$

    Boa’faces’competition’with’different’types’of’products’that’also’ perform’the’closure’function.’In’many’product’categories’traditional’ shoelaces,’buckles,’or’Velcro®’might’be’used’for’closure.’The’type’ of’competitor’varies’across’product’categories.’For’example,’many’ snowboard’and’ski’boots’use’buckles,’possibly’supplemented’by’ Velcro®’for’closure.’On’the’other’hand,’hiking’shoes/boots,’golf’ shoes,’and’safety’shoes’most’often’use’laces.”

    As’Boa’s’reel’system’has’gained’in’popularity,’products’from’ competitors’have’emerged.’While’Boa’s’patents’and’its’firstImover’ advantage’have’helped’it’slow’copycat’competition,’the’downside’

     

     

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    of’Boa’s’success’is’the’attention’it’draws’from’competitors.’If’Boa’ continues’its’success,’competitors’will’work’around'(or’ignore)’ Boa’s’intellectual’property’and’patents.’In’the’cycling’market,’ Rocket’7’s’Freelock’includes’a’similar’system’–’although’this’brand’ produces’a’limited’number’of’highIend’custom’shoes.’

    Boa’s’policy’of’only’working’with’premium’brands’has’also’brought’ in’new’competition.’Boa’actively’seeks’premium#brands’that’it’feels’ are’the’best’fit’for’its’premium’closure’system’and’where’Boa’can’ add’the’most’value.’Boa’sometimes’refuses’to’work’with’brands’ that’it’believes’are’not’a’good’fit’for’its’brand’image.’This’happened’ in’South’Korea,’where’ATOP’Closure’Systems'(a’competitor’that’ also’sells’a’dialIbased’closure’system)’out’of’Taiwan’found’a’ beachhead’with’brands’Boa’was’unable’to’work’with.’In’South’ Korea,’more’than’half’of’all’hiking’boots/shoes’are’sold’with’a’BoaI like’dial’closure.’So’almost’every’brand’felt’it’had’to’have’at’least’ some’products’in’its’line’with’this’style’of’closure’system.’Most’ went’to’Boa’first,’but’when’Boa’refused’to’work’with’them,’they’ turned’to’ATOP.’ATOP’s’subsequent’quality’problems’and’Boa’s’ willingness’to’partner’with’brands’it’had’previously’declined’helped’ Boa’regain’most’of’this’market.’But’Boa’remains’concerned’that’ consumers’are’unable’to’distinguish’between’Boa’and’ATOP.’

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    Competitive#Advantages#of#the#Boa#Closure#System#

    As’compared’to’these’traditional’closure’systems,’the’Boa’Closure’ System’offers’a’range’of’features’and’benefits’including:’

    • GloveIlike’fit’–’precise’customer’comfort’fit’without’ pressure’points.’

    • MicroIadjustable’–’Boa’s’reels’can’be’finely’tuned’to’ maximize’comfort.’

    • Fast’–’the’easy’on,’easy’off’system’saves’time’–’a’big’ benefit’in’some’categories.”

    • OnItheIfly/oneIhanded’operation’–’With’easy’oneIhanded’ adjustment,’laces’can’be’adjusted’while’still’riding’a’bike’or’ without’removing’gloves’on’the’side’of’a’ski’slope.”

    • Powerful’closure’–’once’the’Boa’Closure’system’is’locked’in’ place,’laces’stay’tight.’

    • Durable’–’using’aircraft’grade’stainless’steel’cables,’Boa’ offers’a’lifetime’warranty’on’its’closures.’

    • Never’comes’untied’–’especially’valued’by’those’in’ competition.’

     

     

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    • Lightweight’and’easy’to’clean’–’Boa’doesn’t’attract’mud’or’ ice,’cutting’weight’for’skiers’or’mountain’bikers.’

    ‘

    Boa’s’main’competitive’disadvantage’is’the’closure’system’s’cost’ compared’to’laces’or’Velcro®.’Depending’on’the’size’and’ torque/power’required’for’closure,’footwear’products’using’one’of’ these’traditional’systems’may’cost’from’$20I$60’less’at’retail’as’ compared’to’a’similar’product’using’a’Boa’Closure’System.4’As’an’ example,’when’adidas’introduced’its’tour360’golf’shoe’in’late’2014,’ the’manufacturers’suggested’retail’price'(MSRP)’was’$180’with’a’ Boa’Closure’System’and’$140’without.5’Sometimes’a’brand’will’use’ the’unique’nature’to’enhance’margins’whereas’some’brands’may’ sacrifice’margin’in’order’to’move’more’product’and’better’establish’

    4 ‘Assume’the’average’Boa’Closure’System’sells’to’the’brand’partner’factory’for’ $3.90’per’unit'(per’dial)’and’provides’Boa’with’a’50%’contribution’margin.’95%’of’ all’systems’involved’two’units'(e.g.,’one’each’on’a’pair’of’shoes).’Larger’systems,’ like’those’used’in’snow’sports,’sell’for’almost’twice’that’amount’and’smaller’ systems’in’shoes’are’about’25%’lower.’Actual’data’disguised’for’confidentiality.” 5 ‘“Adidas’Golf’Introduces’tour360’x’golf’shoes,”’GolfWeek,’October’18,’2014,’ downloaded’on’November’2,’2014’at’ http://golfweek.com/news/2014/oct/18/adidasIgolfIshoesItourI360IxIboaIclosureI systemI/’

    their’position’with’the’Boa’Closure’System.’Many’customers’value’ the’benefits’Boa’s’closure’system’delivers.’Select’online’customer’ reviews’can’be’seen’in’the’case’appendix’Exhibit’1.”

    One’of’Boa’s’competitive’advantages’relative’to’other’reelI’and’dialI based’closure’systems’comes’from’its’strong’relationships’with’ brand’partners’through’collaboration’in’development’and’design.’ Boa’s’systems’are’also’of’higher’quality’and’include’a’lifetime’ warranty.’Boa’also’sells’at’a’10I40%’premium’over’competitive’reel’ systems’like’ATOP,’Freelock,’and’JogDial.”

    Boa’s$“Seven$Summits”$$$

    Boa’s’“Seven’Summits”’are’the’seven’product’categories’that’make’ up’90%’of’Boa’sales.’While’Boa’is’committed’to’climbing’all’of’these’ summits,’each’summit’varies’in’market’potential’and’Boa’s’current’ position’differs’as’well.’There’are’also’major’differences’across’ Boa’s’three’main’global’markets’–’the’U.S.,’Asia,’and’Europe.’Exhibit’ 2’in’the’case’appendix’provides’an’overview’of’the’seven’summits’ and’we’elaborate’below.”

    Snow#Sports#–#Snowboard#and#on’Ski#

    Snow’sports’were’Boa’s’first’market.’Skiing’and’snowboarding’have’ longer’wires’and’place’more’stress’a’closure’system’and’ consequently’rely’on’Boa’s’larger’and’higher’torque’models.’ Convenience,’quick’release,’and’the’ability’to’microIadjust’the’fit’ throughout’the’day’appeals’to’snow’sport’enthusiasts.’Most’major’ snowboard’boot’makers’now’sell’several’models’using’the’Boa’ Closure’System’and’almost’half’of’all’snowboard’boots’now’include’ one.’About’600,000’pairs’of’snowboots’are’sold’in’the’United’States’ annually.”

     

     

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    The’retail’market’for’snowboard’equipment’and’apparel’is’highly’ fragmented’with’many’different’outlets.’The’market’includes’more’ than’1200’different’locations.’It’is’dominated’by’specialty’shops,’ which’in’2012’sold’about’57%’of’all’equipment’and’apparel'(down’ 11%’from’previous’year,’in’dollar’volume).’Online’sellers’account’ for’27%'(up’5%)’with’chain’stores’accounting’for’16%'(down’12%’in’ dollars).6”

    Cycling#

    Cycling’was’another’early’category’for’Boa.’Cyclists’like’the’ability’to’ reach’over’and’singleIhandedly’tighten’their’shoes’on’the’fly.’This’is’ one’of’the’company’s’best’markets’with’a’higher’market’share.’ More’recently’some’manufacturers’have’added’Boa’to’helmets’for’ improved’fit.”While’1.7’million’cycling’shoes’are’sold’annually,’only’ higher’end’shoes’are’a’good’candidate’for’a’Boa’Closure’System.’

    The’cycling’shoe’market’is’highly’fragmented’with’dozens’of’brands.’ The’shoes’are’often’sold’at’retail’bike’shops’II’another’fragmented’ market’dominated’by’independent’specialty’shops.’There’are’about’ 3700’independent’bike’shops,’almost’all’carrying’cycling’shoes,’but’ online’stores’from’Amazon’to’BikeShoes.com,’and’Zappos’also’sell’ the’shoes.’Total’dollar’sales’of’bicycle’shoes’have’shown’modest’ growth’in’recent’years.”

    Golf#

    The’Boa’Closure’System’can’be’found’on’different’styles’of’golf’ shoe’brands,’including’FootJoy,’Adidas,’and’Mizuno.’Golfers’ appreciate’the’precision,’durability,’convenience’and’comfort’the’ system’offers.’In’the’U.S.,’Boa’s’market’penetration’is’still’limited’to’ the’low’single’digits,’percentageIwise’–’but’the’real’size’of’the’ 6 ‘“Snowboard’Equipment’Market’Briefing”’TransWorld#Business,’June’3,’2013;’ http://business.transworld.net/131703/features/snowboardImarketIbriefing/”’

    opportunity’might’be’reflected’in’the’success’Boa’has’seen’in’Asia.’ It’is’estimated’that’more’than’50%’of’all’golf’shoes’sold’in’the’ Japanese’golf’market’in’2015’will’include’a’Boa’Closure’System.7’In’ the’United’States’about’3.4’million’golf’shoes’are’sold’annually.”

    Boa’recently’commissioned’market’research’to’learn’more’about’ the’U.S.’golf’market.’More’than’590’core’golfers'(defined’as’those’ playing’eight’or’more’rounds’per’year)’completed’an’online’survey.’ The’study’found’38%’aided’awareness’of’Boa’Closure’Systems,’ although’among’those’aware’only’13%'(so’5%’of’the’total’sample)’ indicated’they’were’extremely’or’very’familiar’with’Boa.”

    Golf’shoes’are’sold’through’a’wide’range’of’channels;’about’40%’ are’sold’in’offIcourse’specialty’stores'(e.g.,’Golf’Smith,’Golf’Galaxy),’ about’a’quarter’are’sold’online,’and’another’15%’each’through’onI course’channels'(pro’shops’at’golf’courses)’and’sporting’goods’ stores.’Golf’shoes’are’sold’through’an’estimated’9000’outlets’in’the’ U.S.”While’onIcourse’channels’do’not’sell’as’many’shoes,’presence’ in’these’channels’raises’customer’awareness’–’which’may’lead’to’ actual’sales’in’other’channels.”While’FootJoy’has’the’largest’market’ share,’Puma,’Adidas’Golf,’and’Ecco’are’the’shoe’brands’most’ associated’with’innovation,’style’and’performance.”

    Trail#and#Outdoor#

    Hiking’boots’and’lowItop’hiking’shoes’have’grown’in’popularity’–’ for’use’on’the’trail’and’around’the’town.’Hikers’appreciate’the’ durability’and’security’Boa’brings.’The’outdoor’market’is’finding’ nonIfootwear’uses’by’bringing’Boa’to’backpacks’for’waist’and’ lumbar’adjustment’and’hydration’packs'(Boa’adjusts’the’fit’and’can’

    7 ‘”Adidas’Golf’Introduces’tour360’x’golf’shoes,”’GolfWeek,’October’18,’2014,’ downloaded’on’November’2,’2014’at’ http://golfweek.com/news/2014/oct/18/adidasIgolfIshoesItourI360IxIboaIclosureI systemI/’

     

     

    ! 9

    reduce’water’“slosh”).’South’Korean’customers’particularly’favor’ Boa’–’with’about’half’of’their’hiking’shoes’and’boots’including’a’Boa’ Closure’System.’In’the’United’States’the’market’is’much’larger’ (estimated’at’3.1’million’shoes’and’boots’per’year)’but’market’ penetration’for’Boa’remains’modest'(less’than’1%).”

    Boa’recently’commissioned’a’study’of’the’hiking’market,’surveying’ 825’hikers'(who’reported’hiking’four’or’more’times’per’year).’In’the’ hiking’market,’aided’awareness’of’the’Boa’Closure’System’was’17%’ IIwith’only’12%’of’those’customers’indicating’extremely’or’very’ familiar’with’Boa.’Boa’seemed’to’show’appeal’to’this’market.’ Among’those’exposed’to’the’concept,’75%’of’shoe’buyers’and’85%’ of’boot’buyers’indicated’they’definitely’or’probably’would’try’Boa’ equipped’footwear.’These’numbers’are’well’beyond’the’normative’ range.’The’study’showed’that’Merrell’and’The’North’Face’were’ brands’perceived’as’having’higher’performance,’better’comfort/fit,’ and’more’innovative’and’aligned’well’with’Boa.”

    Hiking’shoes’were’primarily’sold’through’sporting’goods'(29%),’ outdoor’specialty'(25%),’athletic’specialty'(15%),’and’online'(11%)’ stores.’Most’of’the’11,000’shoe’stores’in’the’U.S.’sell’some’form’of’ hiking’shoe’or’boot.’As’compared’to’hiking’shoes,’the’channels’for’ hiking’boots’show’some’differences,’with’more’volume’going’ through’outdoor’specialty'(41%),’then’sporting’goods'(26%),’online’ (9%)’and’athletic’specialty'(8%).’The’hiking’shoe’market’includes’ dozens’of’brands,’but’just’six’have’more’than’5%’market’share’and’ the’leaders’are’well’known’in’athletic’footwear:’Nike'(20%),’Adidas’ (14%),’and’New’Balance'(14%)’are’market’leaders.’Hiking’boots’are’ dominated’by’brands’well’known’in’outdoor’apparel,’led’by’ Timberland'(22%),’Columbia'(13%),’and’The’North’Face'(12%).”

    #

    #

    Utility/Safety#

    Boa’sees’a’huge’opportunity’in’the’utility’and’safety’shoe’market.’ The’market’is’much’larger’overall’as’compared’to’some’of’the’ athletic’markets’–’and’Boa’s’Closure’System’offers’many’endIuser’ benefits.’Simply’getting’shoelaces’off’the’shoe'(and’the’floor)’ makes’it’safer’and’oneIhanded’closing’allows’workers’to’easily’ adjust’fit’–’a’big’benefit’to’workers’who’often’wear’gloves’on’the’ job.’

    The’European’market’is’especially’attractive.’Strict’regulations’ govern’worker’safety’in’Europe.’Many’employers’purchase’the’ shoes’for’employees,’leading’to’less’price’sensitivity.’One’of’the’ larger’makers’of’utility/safety’shoes’in’Europe’is’Bata’Industrials’ (see’video).’The’U.S.’market’still’offers’many’opportunities’–’ particularly’in’the’construction’and’manufacturing’sectors8’–’with’ an’estimated’300’million’pairs’of’utility’and’safety’shoes’sold’ annually.’

    ‘

    8 ‘“Industrial’Protective’Footwear’Market’–’Global’Industry’Analysis,’Size,’Share’ 2013I2019,”’found’at’LinkedIn,’on’November’2,’2014’http://goo.gl/MpKnNF’

     

     

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    While’the’U.S.’market’is’not’seen’as’quite’as’attractive’an’ opportunity’as’Europe,’many’of’the’same’benefits’carry’over.’On’ sheer’size’alone’the’utility/safety’market’is’much’larger’than’the’ summits’described’above’and’growth’is’predicted’to’continue.”

    Athletic#Shoes#

    Athletic’shoes,’running’shoes’in’particular,’are’another’large’ potential’market’where’Boa’has’yet’to’gain’a’foothold'(pun’ intended).’The’company’is’building’a’basecamp,’working’with’ specialty’brand’Zoot’Sports,’which’focuses’on’footwear’in’the’ triathlon’niche’and’this’might’be’the’market’segment’where’Boa’ finds’a’beachhead.’The’lightweight’and’fast’Boa’Closure’System’has’ high’value’for’these’customers.’Triathletes’that’must’change’ footwear’midIcompetition’see’benefits’from’Boa’s’quick’on/off’ performance.”’

    Boa’sees’a’huge’opportunity’if’its’closure’system’benefits’of’gloveI like,’precision’fit’and’light’weight’can’be’transferred’to’the’giant’ running’shoe’market.’High’top’basketball’shoes’along’with’football,’ baseball,’and’soccer’cleats’also’offer’big’opportunities.’Across’all’ athletic’shoes,’Boa’estimates’more’than’250’million’shoes’are’sold’ in’the’United’States’each’year.’Most’of’the’nation’s’11,000’shoe’ stores’sell’athletic’shoes,’with’1700’specialty’athletic’shoe’stores.”

    Medical#Devices##

    A’wide’range’of’medical’devices’can’operate’better’with’a’Boa’ Closure’System’than’they’do’with’hookIandIloop'(i.e.’Velcro®).’ Boa’s’microIadjustability,’and’oneIhanded’operation’offer’real’ benefits’on’braces’–’and’this’is’where’Boa’has’made’its’first’inroads.’ This’market’is’also’huge,’with’an’estimated’115’million’braces’and’ adjustment’prosthetics’sold’annually’in’the’United’States.’With’an’ aging’population’this’market’offers’potentially’high’growth.’This’

    market’is’a’bit’more’difficult’to’approach,’as’it’differs’significantly’ from’Boa’s’traditional’markets’and’lies’beyond’its’core’competency.”

    Boa’s’efforts’in’this’category’are’preliminary.’The’opportunity’is’ very’large.’But’uncertainty’around’the’effects’of’the’Affordable’Care’ Act’and’insurance’along’with’Boa’s’inexperience’working’with’this’ type’of’market’have’Boa’proceeding’with’caution’in’the’medical’ device’market.”’

    Selling$an$Ingredient$

    Boa’makes’an’“ingredient”’that’is’added’to’other’products’–’and’ the’total’package’delivers’greater’customer’value.’Exhibit’3’in’the’ case’appendix’provides’a’figure’that’shows’Boa’s’place’in’the’ customer’and’supply’chain.”

    1. Ryder.’The’beginning’of’this’chain’shows’Ryder,’the’Chinese’ manufacturer’that’produces’most’of’Boa’s’Closure’Systems’ which’it’ships’to…”

    2. !’Boa’s’Warehouse.’As’noted’earlier,’Boa’warehouses’ most’of’its’Boa’Closure’Systems’in’Hong’Kong’where’it’ awaits’orders’from…’

    3. !’brand’partner’factories.’The’brand’partner’factories’have’ no’control’over’the’closure’systems’they’use’–’these’are’ contract’manufacturers’that’produce’shoes,’boots,’or’ medical’devices’based’on’specifications’from…’

    4. !’Boa’s’premium’partner’brands.’The’premium’brands’ with’well’known’names’like’FootJoy,’Red’Wing,’adidas,’and’ Specialized’collaborate’with’Boa’on’development’and’ design’of’shoes’that’include’the’Boa’Closure’System.’Boa’s’ premium’partner’brands’almost’exclusively’rely’on…’

    5. !’retail’channels’of’distribution’–’often’specialty’shops’in’ these’categories’–’to’sell’to…’

     

     

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    6. !’consumers’–’the’ultimate’purchaser’and’endIuser’of’a’ product’with’a’Boa’Closure’System.”

    Garett’Graubins’believes’that’Boa’has’three’broad’targets’that’ could’be’the’centerpiece’of’his’marketing’strategy’–’brand’partners,’ retailers,’and’consumers.’Currently’Boa’s’efforts’with’each’target’ vary’considerably.”

    ‘

    The#B2B#(BusinessLtoLBusiness)#Strategy#–#Focus#on#Brand#Partners#

    Boa’s’current’strategy’in’almost’all’of’its’productImarkets’focuses’ on’building’and’maintaining’relationships’with’its’more’than’100′ premium’brand’partners.’Boa’carefully’cultivates’longIterm’ partnerships’with’a’select’group’of’brand’partners.’As’a’premium’ ingredient,’Boa’understands’that’its’reputation’is’tied’closely’to’the’ products’it’goes’into’–’so’it’will’not’work’with’every’brand’in’a’ market.’Boa’conducts’market’research’to’find’which’brands’in’a’ category’have’more’innovative’customers,’more’likely’to’try’ something’new’like’the’Boa’Closure’System.”

    Boa’works’closely’with’its’brand’partners’throughout’the’design,’ manufacturing,’and’marketing’process.’The’collaboration’is’ mutually’beneficial,’with’Boa’s’team’assuring’the’highest’quality’ products’and’applications’–’which’results’in’greater’sell’through’ that’benefits’Boa.’This’attention’to’quality’and’responsiveness’to’ warranty’claims’fosters’the’close’relationships.’Boa’s’brand’partners’ see’the’value’in’this’type’of’buyerIseller’relationship.’Doug’ Robinson,’VP’of’Product’Design’and’Development’with’premium’ brand’golf’partner,’FootJoy,’discusses’the’collaborative’partnership’ his’company’enjoys’with’Boa.”

    ‘ In’its’early’years,’Boa’typically’granted’the’first’brand’in’a’new’ product’category’one’year’of’exclusive’rights’in’that’category.’This’ means’that’Boa’would’not’sell’to’other’brands’in’the’category’for’ the’protected’time’period.’The’exclusive’arrangement’rewarded’ and’incentivized’a’brand’for’the’pioneering’work’it’did’to’make’its’ customers’aware’of’the’unique’benefits’of’the’Boa’Closure’System.’ Boa’no’longer’finds’it’necessary’to’grant’exclusive’arrangements.”

    Boa’thought’that’brand’partners’would’continue’to’promote’the’ Boa’Closure’System’–’even’after’exclusive’arrangements’had’ expired.’Boa’figured’it’could’save’marketing’dollars’having’its’brand’ partners’build’the’Boa’name’as’these’partners’touted’the’benefits’ of’the’Boa’Closure’System’on’their’products.’That’worked’well’ when’new’partners’came’on’board’–’when’partners’were’excited’ about’the’benefits’the’new’feature’brought’to’their’shoes’and’ boots.’But’after’a’year’or’two,’brand’partners’typically’promoted’ the’newest’product’features’–’and’the’Boa’closure’became’“old’ news.”’Boa’realized’that’building’the’Boa’brand’was’going’to’need’ to’be’left’to’Boa.’Mark’Soderberg,’CEO’of’Boa’Technology’discusses’ this’in’the’video’below.’Boa’discovered’that’if’it’wanted’to’build’ brand’equity’at’the’consumer’level,’it’was’unlikely’to’get’the’ sustained’support’it’would’take’from’its’brand’partners.”

     

     

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    ‘

    #

    B2I#(BusinessLtoLInfluencer)#Strategy#–#Focusing#on#Retailers#

    In’most’of’major’categories’where’Boa’operates,’retailers,’the’retail’ environment,’and’retail’salespeople’work’with’consumers.’Retail’ salespeople’typically’assist’in’the’purchase’of’athletic’shoes’as’well’ as’with’hiking,’snowboard,’and’ski’boots.’Retail’salespeople’help’ customers’with’decisions’about’styles’and’fit.’Customers’will’usually’ pick’up’a’product’and’see’how’it’works.’Online’stores’have’ mimicked’this’type’of’interaction’with’information,’photos,’and’ often’videos.’Many’final’choices’in’these’categories’are’made’in’a’ store’following’these’kinds’of’interactions.’Retail’can’have’an’ influence’on’consumer’choice’–’and’Boa’could’increase’its’ marketing’at’this’influencer’stage.”

    “Taste’of’Boa”’is’one’program’Boa’has’used’to’influence’the’ influencers.’Boa’s’top’management’team’universally’points’to’Taste’ of’Boa’as’one’of’Boa’s’most’successful’marketing’efforts.’Taste’of’ Boa’allows’nearly’any’lowIcut’shoe’to’be’retrofitted’with’a’Boa’ Closure’System.’The’program’has’been’used’at’the’past’three’

    Outdoor’Retail’tradeshows’–’a’show’that’attracts’media,’industry’ influencers,’potential’brand’partners,’and’retailers’that’sell’Boa’s’ brand’partner’s’products.’Visitors’to’the’tradeshow’can’drop’off’ their’shoes’and’have’their’shoelaces’replaced’with’a’Boa’Closure’ System.’As’Graubins’says,’“Once’people’try’Boa,’they’love’Boa.’This’ retrofit’project’is’designed’to’give’people’a’taste’of’Boa’so’that’they’ can’learn’what’tens’of’millions’of’people’know’already’–’that’Boa’is’ better.”’The’program’is’not’inexpensive’for’Boa.’Taking’Taste’of’Boa’ to’a’trade’show’adds’travel’cost’to’labor’and’parts’–’eventually’ running’$70I90’to’retrofit’a’pair’of’shoes.’Over’the’course’of’a’fourI day’trade’show’Boa’can’retrofit’500’pairs’of’shoes’–’and’has’ demand’for’many’more.’While’costly,’the’program’lets’an’ influencer’try’Boa’on’a’pair’of’shoes’they’already’know’and’like,’and’ it’costs’less’than’offering’a’partner’brand’s’shoes’on’a’ complimentary’basis.’Click’on’the’video’to’hear’Boa’s’Vice’President’ of’Sales’and’Marketing’Chuck’Mason’talk’about’Taste’of’Boa.”

    ‘ ‘ There’are’other’ways’that’Boa’might’educate’the’retail’influencer.’ While’Boa’exhibits'(sets’up’a’booth)’at’a’few’trade’shows’per’year9,’

    9 ‘In’2014,’Boa’was’an’exhibitor’at’the’two’Outdoor’Retailer’shows’and’The’Running’ Event.”

     

     

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    key’marketing’and’senior’management’personnel’typically’attend’a’ dozen’or’more’trade’shows’each’year.”Trade’shows’offer’an’ opportunity’for’Boa’to’connect’and’network’with’current’and’ potential’brand’partners’and’retailers.”

    Boa’might’be’able’to’increase’its’influence’on’consumer’decisions’ through’retail’in’different’ways.’Boa’might’increase’pointIofI purchase’displays’to’demonstrate’the’benefits.’Boa’could’create’ video’“reviews”’that’online’retailers’could’post.’The’company’might’ also’seek’to’educate’retail’salespeople’on’the’benefits’of’the’Boa’ Closure’System’through’training.’Boa’might’offer’a’program’to’ encourage’customers’to’buy’a’BoaIpowered’product’at’a’discount.’ Until’now,’Boa’s’focus’on’retail’has’been’limited,’but’Graubins’ wonders’if’now’is’the’time’to’ramp’up’efforts’at’this’level.”’

    2C#(BusinessLtoLConsumer)#Strategy#–#Building#Ingredient#Brand# Equity#with#Consumers#

    The’last’strategic’option’was’to’invest’in’consumer’branding’–’to’ build’awareness’and’preference’for’the’Boa’Closure’System’at’the’ consumer’level.’Graubins’thought’growth’could’be’accelerated’with’ more’consumer’awareness.’Customers’that’tried’Boa,’liked’Boa’–’a’ lot.’If’Boa’could’speak’directly’to’consumers,’it’could’control’the’ messaging’about’the’benefits’of’the’closure’system.’Boa’was’also’ concerned’about’the’possibility’of’new’entrants’that’could’offer’ similar’style’closure’devices.’If’customers’failed’to’see’differences’ between’closure’systems,’a’price’war’might’break’out’with’brand’ partners’playing’suppliers’off’one’another’for’lower’prices.’ Customer’awareness’of’and’preference’for’Boa’might’help’fend’off’ this’type’of’competition.”

    On’the’other’hand,’Graubins’wondered’if’a’strong’Boa’brand’might’ alienate’its’brand’partners’and’harm’carefully’developed’ collaborative’relationships.’A’brand’partner’does’not’want’to’hear’

    that’customers’are’coming’in’asking’for’“golf’shoes’with’that’Boa’ Closure’System”’instead’of’“those’new’adidas’golf’shoes.”’It’would’ be’prohibitively’expensive’to’build’brand’awareness’across’all’of’ Boa’s’categories’–’but’he’might’be’able’to’build’a’case’in’selected’ product’categories’or’with’specific’target’markets.”

    While’such’efforts’have’not’been’used’in’the’U.S.,’Boa’has’had’ some’success’in’the’Asian’market.’As’noted’earlier,’competition’in’ the’South’Korean’hiking’ shoe/boot’market’ forced’Boa’to’expand’ its’roster’of’partners’ there.’Boa’also’fought’ off’competition’with’a’ print,’public’relations,’ and’social’media’ advertising’campaign’ directed’at’South’ Korean’hikers.’At’the’ same’time,’Boa’also’ increased’its’ investment’in’ supporting’its’South’ Korean’brand’partners’’ marketing’efforts.’A’ sample’of’the’“Dialed’ In”’campaign’is’shown’ here.10”’When’the’ campaign’started’Boa’ had’about’10%’share’of’ the’hiking’market,’but’ after’adding’more’

    10 ‘In’South’Korea’it’is’not’unusual’for’ads’–’like’this’one’–’to’include’both’written’

    English’and’Korean.”

     

     

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    brands’and’building’consumer’preference,’almost’half’of’all’new’ hiking’shoes/boots’are’now’equipped’with’a’Boa’Closure’System.’ Boa’has’also’used’advertising’and’other’consumerIdirected’ promotional’efforts’targeting’the’Japanese’golfer’–’and’about’half’ of’all’golf’shoes’in’Japan’sold’today’are’BoaIpowered.’These’efforts’ have’helped’revive’Boa’s’growth’in’snowboarding’in’Japan’and’ spark’an’opportunity’in’casual’footwear.’Graubins’wondered’if’ similar’results’could’be’achieved’in’the’much’larger’U.S.’market.”

    Influenced’by’Geoffrey’Moore’s’Crossing#the#Chasm,’Graubins’ thought’the’mainstream’U.S.’market’may’not’be’ready’for’new’shoe’ closure’technology.’Crossing’the’Chasm’referred’to’the’diffusion’of’ new’technological’innovations’to’a’broader’market.’Moore’ suggested’that’innovators’and’early’adopters’sought’technology’ and’performance’–’while’latter’adopters’would’buy’a’solution’and’ convenience.’This’suggested’that’categories’most’ripe’for’branding’ might’be’those’further’along’the’product’adoption’curve'(see’ Technology’Adoption’Lifecycle’graphic’below).”

    $

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    If’Graubins’were’to’propose’consumerIdirected’marketing,’he’ would’also’have’to’figure’out’how’to’develop’that’branding.’To’this’ point,’most’of’Boa’s’marketing’communications’have’emphasized’ features’and’benefits.’They’wonder’whether’they’might’be’able’to’ build’an’image’around’the’brand.’Graubins’expands’on’these’ideas’ in’this’video.”

    ‘

    $ Planning$for$2015$’

    Graubins’reviewed’his’options’for’2015.’He’knew’that’that’he’must’ decide’how’to’allocate’his’resources’across’brand’partners'(B2B),’ retailers'(B2I),’and’consumers'(B2C).’In’the’U.S.’market,’marketing’ resources’were’allocated’about’90%’toward’brand’partners’and’ 10%’toward’retailers.’Graubins’pondered’if’this’should’change.’No’ matter’which’direction’he’went,’he’also’knew’he’had’to’decide’ which’categories’would’receive’the’most’attention.’No’matter’the’ allocation’of’resources,’Graubins’needed’to’identify’which’2I3’of’ the’7’summits’would’get’the’lion’s’share’of’resources’in’2015.’An’ even’allocation’across’all’7’would’not’give’any’one’summit’enough’ punch’to’move’them’further’up’the’long’climb.’Garett’also’knew’

    that’Soderberg’and’McCreery’would’expect’financial’justification’for’ any’plan’he’put’forward.”

    The’Boa’headquarters’golden’Lab,’Emma,’nuzzled’at’Graubins’’arm.’ After’patting’Emma’on’the’head,’he’went’through’his’notes’again.’ Graubins’was’eager’to’meet’with’his’team’and’get’their’input’on’ the’budget.’Together’they’would’have’to’prepare’a’set’of’ recommendations’in’time’for’next’month’s’budget’meeting.’

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    Discussion$Questions$$

    For’this’case,’you’have’the’option’of’going’beyond’the’case.’Unlike’other’case’studies,’you’are’welcome’to’add’your’own’ experiences’or’do’online/offline’research’to’enhance’your’recommendations.”

    1. What’is’the’value’of’a’brand’for’a’consumer?’A’manufacturer?’An’ingredient?” 2. Why’would’an’ingredient’want’to’develop’a’consumer’brand?” 3. If’Boa’develops’a’higher’profile’with’consumers,’what’are’the’upsides’for’Boa’s’premium’partner’brands?’What’

    are’the’downsides/risks?’ 4. What’are’your’recommendations’for’Garett’Graubins’’2015’U.S.’marketing’plan?’Be’specific’about’which’market’

    (B2B,’B2I,’and/or’B2I)’you’recommend’and’the’2I3’summits'(product’categories)’deserving’the’most’attention.’ Offer’specific’ideas’about’how’to’approach’that’market.”

    5. Whether’you’recommend’building’a’brand’with’consumers’or’not,’use’two’creative’idea’generation’techniques’ and’generate’five’lowIcost,’grassroots’ideas’that’would’help’Boa’build’a’brand’in’one’of’its’product’categories.”’

    [Note:’questions’4’and’5’must’be’turned’in’as’a’written’assignment’and’completed’in’two’pages’or’less’single’ spaced,’doubleIspace’between’paragraphs.]

     

     

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    Appendix$

    Exhibit#1#–#Sample#of#Online#Customer#Reviews#

    Golf’Shoes'(from’Amazon.com)’

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    Work’boots'(from’Red’Wing’Shoes’–’redwingshoes.com)’

    ‘

    Continued’on’the’following’page.’

     

     

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    Cycling’shoes'(from’Specialized.com)’

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    Exhibit#2:#Summary#Data#for#Boa’s#Seven#Summits#

    Summit’ Primary$benefits’ Key$Brand$Partners’

    2015$U.S.$ Market$$$

    ($$millions/$000s$ units$)11′

    Boa’s$U.S.$ market$ share**’

    Market$ Growth$ (2015V20)’ Notes’

    Snowboard’ boots’

    Precision’fit,’one’handed,’ powerful’closure’

    Burton,’K2,’Ride,’Flow,’ DC,’Salomon’

    $60′ (600)’

    43%’ Slow’ Boa’is’wellIknown,’ established’

    Cycling’shoes’ adjust’on’the’fly,’oneI handed,”

    Scott,’Lake,’Specialized’ $125′ (1700)’

    ‘

    14%’ Slow/’ moderate’

    Dialed’closures”becoming’ the’standard’

    Golf’shoes’ microIadjustable,’precise’ and’customizable’fit’

    Footjoy,’Adidas,’Izuna’ $53′ (3400)’

    <1%'(50%’in’ Asia)’

    Slow’ Can’Asian’success’translate’ to’U.S.?’

    Trail’&’ Outdoor’shoes’ &’boots’

    Secure,’microIadjustable,’ precision’fit’

    The’North’Face,’Treksta,’ Viking,’K2’Korea’

    $310′ (3100)’

    <1%’ (~’50%’in’

    South’Korea)’

    Moderate’ Can’South’Korean’success’ translate’to’U.S.?’

    Utility/’Safety’ shoes’

    durable,’setIitIandIforgetI it,’oneI’handed’

    Red’Wing,’Elten,’Bata,’ Sievi’

    $1,500′ (300,000)’

    <1%'(stronger’ in’Europe)’

    Moderate” New’market,’Boa’s’fastest’ growing’segment’by’%’

    Athletic’ footwear’

    MicroIadjustable,’adjust’ on’the’fly’

    Hayabusa,’Zoot,’Topo’ Athletic’

    $49812′ (250,000)’

    <.001%’ Moderate’ No’foothold’

    Medical/’ bracing’and’ adjustment’ prosthetics’

    MicroIadjustable,’ precision’fit’

    DeRoyal,’Exos,’ Futuro/ACE'(3M)’

    $565′ (115,570)’

    <.1%’new’ market’

    Uncertain’ Uncertainty’around’ Affordable’Care’Act,’maze’ of’regulations’and’ reimbursement’policies.”

    ‘ ‘ ‘ ‘ ‘ ‘ ‘

    11 ‘Dollar’estimates’from’internal’and’secondary’sources’and’include’some’informed’estimates.’These’values’should’not’be’used’for’secondary’research.’Dollar’values’are’total’

    market’size,’not’sales’potential’for’Boa.’The’premium’nature’of’Boa’s’product’suggests’that’not’all’of’these’sales’are’candidates’for’the’Boa’Closure’System.”

    12 ‘Dollar’value’from’running’shoes’only,’source:’http://www.runningusa.org/2014IstateIofItheIsportIpartIiiIrunningIindustryIreport;’Boa’estimates’that’more’than’734’million’pairs’

    of’all’athletic’footwear'(including’general’cross’training,’running,’basketball,’soccer,’baseball,’football,’and’more)’are’sold’globally’each’year.”

     

     

     

    ! 20

    Exhibit#3:#Marketing#an#Ingredient#–#Boa’s#Customer#Chain#

    #

 
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BAS 2826 Pre-Test Spring 2014

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Question 1
1. In a newspaper release, Corning, Inc. announced it had received a favorable ruling from China’s Ministry of Commerce on allegations that it was selling its fiber more cheaply in China than in other countries. Corning was falsely accused of:

dumping

offloading

boycotting

repatriating

crossdocking
4 points
Question 2
1. When Britain refused to buy bananas from South America, the U.S. government, as a means of helping its trade partners, legislated taxes on some imported British-produced goods. These taxes included a nearly 100 percent _____ on Scottish wool products.

quota

export duty

boycott

tariff

WTO violation
4 points
Question 3
1. Marlin manufactures 22 caliber rimfire rifles. It is designing advertisements and planning the promotional mix for marketing in eastern Europe, South Africa, India, and Brazil. The advertising manager should expect all of the following to cause problems EXCEPT:

media availability

government regulations

exchange control

cultural differences

translation problems
4 points
Question 4
1. FedEx entered into an alliance with Chronopost Internationale, a subsidiary of the French post office. Under this alliance, FedEx will transport French international shipments in its aircraft, and the French postal service will deliver FedEx packages across Europe. This is an example of:

contract manufacturing

a trade bypass

licensing

a joint venture

service exporting
4 points
Question 5
1. An English manufacturer of cricket equipment sells directly to Georgia-based Universal Sports, which markets the products in the United States and Canada. Universal Sports is an example of a(n):

franchisee

contract broker

export agent

franchisor

contract manufacturer
4 points
Question 6
1. According to an article in the Financial Times, bringing Coca-Cola to the Chinese market presented a special challenge to the soft drink manufacturer. This challenge most likely had to do with which element of the marketing mix?

production

direct marketing

distribution

pricing

sales promotions
4 points
Question 7
1. Computer SalesA price war began in Japan in the personal computer market when Dell, Inc. introduced PCs at prices 25 to 60 percent lower than rivals. Dell targeted corporate customers from its Tokyo offices by “direct sales,” the company’s preferred name for mail order and its main avenue for PC sales in the United States. Japan is the world’s second-largest market for personal computers and had been ruled by NEC Corporation, which maintained a strong dealer network and had traditionally sold its computers at very high prices. Dell joined IBM and Compaq in targeting the Japanese market. Dell bet it could succeed in Japan by transplanting its U.S. method of operations in which the company assembles the PC to customer specifications, loads it with software, and delivers it to the customer. The company’s success depended on its ability to sell PCs over the telephone. Analysts doubted this was possible in Japan because dealer networks are the key to the market, but Dell executives believed name recognition was the main hurdle. To familiarize its target market with the idea of buying a computer sight unseen, Dell launched a major ad campaign through direct mail and ads in computer-related magazines and newspapers.
Refer to Computer Sales. The fact that Japanese consumers do not buy through the methods typically used by Dell is an example of how the _____ environment influences global marketing.

legal

economic

technological

natural

cultural
4 points
Question 8
1. Jim Beam Distillery launched a Pan-European campaign across 28 markets from Russia to Scandinavia and into southern Europe to reposition its bourbon. It focused on finding men in bars and featuring them in local print ad campaigns as “real friends” of Jim Beam. Such an ambitious ad campaign could be threatened by which of the following changes in the legal environment?

negative changes in how Europeans perceive alcohol

an inflationary period, which makes drinking expensive American bourbon a luxury item

the enactment of a quota limiting how much Jim Beam can be imported

the development of a fad for clear liquor like vodka

a dramatic increase in the number of alcoholics in Europe
4 points
Question 9
1. Alabama Adventure, an amusement park in Birmingham, offers reduced rates on weekdays and higher prices for those who want to attend on weekends. It also offers lower prices for patrons who enter the park after 4 p.m. This is a way to contend with the service characteristic of:

variability

perishability

intangibility

inseparability

simultaneous production and consumption
4 points
Question 10
1. Smithsonian Children’s ExhibitA children’s exhibit at the Smithsonian Institution’s International Gallery was titled, “Microbes: Invisible Invaders . . . Amazing Aliens.” The 5,000-square-foot interactive exhibit uncovered a mysterious and virtually invisible universe of microscopic organisms–from those that sustain life to those that threaten our health. Its purpose was to show children that microbes are basically germs. The exhibit shows how researchers and others fight infection worldwide. The exhibit had hands-on activities, including a model kitchen where children learned about good and bad microbes. A virtual reality game with holograms and 3-D animations let participants combat deadly viruses. The long-term objective of the exhibit was to ensure the world’s supply of microbiologists in the upcoming decades.
Refer to Smithsonian Children’s Exhibit. The visitors to the exhibit represent the Smithsonian Institution’s:

service entity

promotional tools

target market

benefit strength

benefit complexity
4 points
Question 11
1. Smithsonian Children’s ExhibitA children’s exhibit at the Smithsonian Institution’s International Gallery was titled, “Microbes: Invisible Invaders . . . Amazing Aliens.” The 5,000-square-foot interactive exhibit uncovered a mysterious and virtually invisible universe of microscopic organisms–from those that sustain life to those that threaten our health. Its purpose was to show children that microbes are basically germs. The exhibit shows how researchers and others fight infection worldwide. The exhibit had hands-on activities, including a model kitchen where children learned about good and bad microbes. A virtual reality game with holograms and 3-D animations let participants combat deadly viruses. The long-term objective of the exhibit was to ensure the world’s supply of microbiologists in the upcoming decades.
Refer to Smithsonian Children’s Exhibit. The _____ makes it difficult for the Smithsonian to prioritize its objectives and evaluate its performance.

creation of a benefit strength

lack of a financial objective

inability to promote the exhibit

absence of service qualities

presence of intangible factors
4 points
Question 12
1. Many people would like to sell and buy on eBay, the most popular of the current Internet auction sites, but they have questions about the process and how to sell and price their merchandise. A company called Keen.com has set up a directory of specialists to whom you can address questions. When you choose a name and click on the “Call Now” button, the specialist is contacted and will personally call and answer your questions. Keen.com charges a per-minute fee to the person who contacts its specialist. Keen.com would be classified as a:

good

tangible resource

tangible product

service

nonprofit organization
4 points
Question 13
1. Rejection HotlineHas someone who was definitely not your type ever kept asking for your phone number and wouldn’t take “no” for an answer? A lot of people seem to have had this experience. Now when that annoying individual asks for your phone number, you can give this bothersome individual the number for the Rejection Hotline, which will explain to the individual that he or she is “dumb, short, fat, ugly, annoying, arrogant, or a general loser.” There is no charge for this service, which is available in 14 major cities and in Ireland. The Rejection Hotline handles about 150,000 calls weekly.
Refer to the Rejection Hotline. Because the Rejection Hotline does not rely on humans, each time a person calls he or she will receive an identical prerecorded message. This means that unlike many service products, the Rejection Hotline is:

tangible

not perishable

consistent

not produced and consumed simultaneously

not responsive
4 points
Question 14
1. Boutique HotelsIn an industry where guests are tired of cookie cutter hotels, some consumers are looking for personalized service, which can be found in boutique hotels. Boutique hotels cater to their guests’ sense of their personal image as being discriminating, more sophisticated, and more hip. Frequently, these guests don’t want to be where the crowds are. This is a small but growing market niche. There are no generally recognized rules for boutique hotels, but they tend to be small and service oriented, with high-style decor and top-notch restaurants. Employees are called cast members. Amenities include cordless phones, CD players, Aveda brand bath and hair products, and down comforters and pillows.
Refer to Boutique Hotels. To evaluate the quality provided by boutique hotels, customers would most likely depend on _____ qualities.

experience

relational

credence

search

synergistic
4 points
Question 15
1. TeamBuilds is a service organization that has corporate teams pay $7,500 for an all-day team-building session with a management consultant while they work together on renovating a Habitat for Humanity home. Participants in the team-building exercises would use a(n) _____ quality to evaluate TeamBuilds.

credence

search

information

appraisal

experience
4 points
Question 16
1. Marriott Hotels, as well as Hyatt Regency and Adam’s Mark Inns, have expended many resources in developing Web sites that allow prospective customers to learn all that is necessary before selecting a hotel destination. The sites then allow individuals to make reservations at the hotel that best satisfies their requirements. Which of the following reflects the distribution strategy used by these hotel chains?

considerations of the storage of the service

the development of a long channel of intermediaries

the decision to use direct distribution

intensity of distribution

the physical appearance of your particular outlet
4 points
Question 17
1. Ian Trent has an MBA and is being recruited by an investment banking firm as a sales representative. He has had ten years of experience in selling industrial supplies. He was quite successful in this job but is worried that selling investment strategies may be more difficult. What factor would be the major reason for this worry?

Services are intangible and, therefore, different from his previous experience.

His services and the products he sells are inseparable.

The marketing program of investment strategies is inconsistent.

The cost inventory management system of reimbursing him may cause a problem when he makes investments.

The extensiveness of distribution is unimportant when selling an investment service.
4 points
Question 18
1. _____ was the technique used to suggest that a customer who wanted to buy a $29 shirt would also be a likely prospect for a cigar humidor.

Predictive modeling

Customer segmentation

Market aggregation

Recency-frequency-monetary analysis

Data interpolation
4 points
Question 19
1. According to the CEO of Allied Office Products, “We’re a head-count business: I know that if you have a 60-person office, you should buy $300 worth of basic office supplies—paper, pens, staples—from us with each order, but if that’s all we get, we stagnate. For us to grow, we have to convince the customer, who already likes our products and service, to buy more than just basic supplies; we have to increase the order by 10, 20, or 30 times.” Allied’s salespeople are trained to push the company’s less traditional, higher-margin lines such as coffee and refreshments, printing and forms management, and office furniture. Allied’s salespeople are engaging in:

cross-selling

trading up

buyer empowerment

alliance building

bundling
4 points
Question 20
1. Blood ServicesAs flextime, consulting, telecommuting, and downsizing make it more difficult for people to donate blood at the workplace, Brooklyn/Staten Island Blood Services has launched a CRM marketing campaign to boost awareness and repeat donations. Early in the campaign it went to its listings of previous donors and pulled out those with birthdays in February, March, and April. These donors were sent a birthday card with the greeting, “On the anniversary of your life, would you consider saving another’s life?”
Refer to Blood Services. The organization used CRM marketing to:

cross-sell other products

design targeted marketing communications

increase effectiveness of its distribution strategy

define customer service

do all of these things
4 points
Question 21
1. Blood ServicesAs flextime, consulting, telecommuting, and downsizing make it more difficult for people to donate blood at the workplace, Brooklyn/Staten Island Blood Services has launched a CRM marketing campaign to boost awareness and repeat donations. Early in the campaign it went to its listings of previous donors and pulled out those with birthdays in February, March, and April. These donors were sent a birthday card with the greeting, “On the anniversary of your life, would you consider saving another’s life?”
Refer to Blood Services. What technique did the organization use to analyze its donor information?

data identifying

recency-frequency-monetary analysis

niche marketing

predictive modeling

customer segmentation
4 points
Question 22
1. Hattie is a thirty-something executive. When she went to the phone to place a catalog order for a humidor for her father, she was pleased when the operator suggested that she might also be interested in a subscription to a magazine targeted to cigar lovers. The operator was using _____–a method commonly used to leverage customer information.

data mining

cross-selling

trading up

database enhancement

a database channel
4 points
Question 23
1. The first Nokia flagship store opened in the United States in 2005. The 2,000-square-foot store has minimalist displays stretched along the walls with interactive visuals that consumers can change or add text messages to via the products nestled below. ” Experience Areas” feature phones connected to photo printers, speakers, notebook computers, and Bluetooth headsets to demonstrate the interactivity and full range of features available on the cell phones. These “Experience Areas” are examples of _____ where customers can interact with the technology and provide information to Nokia.

touch points

focus areas

data mining

information search periods

experimental points
4 points
Question 24
1. New-Jersey based Foremost Manufacturing makes lighting reflectors and other fabricated metal products. Foremost Manufacturing recognizes that being “good enough” just isn’t good enough. With this in mind, Foremost has embarked on a program to transform itself into a manufacturing enterprise with an unwavering focus on customer service. In other words, Foremost has adopted a(n):

ethnocentric perspective

demand-based focus

sales orientation

supply-based focus

customer-centric focus
4 points
Question 25
1. In a speech, David Poirier, chief information officer of Hudson’s Bay Company, a Canadian retailer, said, “We [Hudson’s Bay Company] had all kinds of data in different places. We didn’t have a single view of the customer until we focused on finding one method to manage relationships with our customers.” Hudson’s Bay would use a _____ to profile customer segments for better CRM marketing efforts.

data mart

customer information system

data warehouse

decision support system

data cluster

 

 
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Case #8 Nucor 100 Points

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Operating assumptions

Exhibit 12B
Modernized Unmodernized
Thin-slab Minimill Integrated Mill Integrated Mill
HR CR HR CR HR CR
Operating assumptions
Labor / hour $20.00 $20.00 $23.50 $23.50 $23.50 $23.50
Scrap / ton $90.00 $90.00 $80.00 $80.00 $80.00 $80.00
Man hours / ton 1.75 2.65 2.85 4.50 3.90 5.85
Capacity Utilization 90.00% 90.00% 90.00% 90.00% 75.00% 75.00%
Operation costs / ton
Labor $35.00 $53.00 $67.00 $105.50 $91.50 $141.00
Ore 0 0 51 54 52 56
Coal 0 0 35 37.5 38 40.5
Energy 24 38 9 23 9.5 25
Scrap 100 102 13.5 9.5 19.5 15.5
Materials and supplies 56 72.5 71 93 72.5 95.5
Maintenance & repairs 10 17.5 15 26.5 17 29.5
Total costs / ton $225.00 $283.00 $261.50 $349.00 $300.00 $403.00
Revenue / ton $306.50 $390.50 $326.00 $454.50 $325.00 $453.00

CF analysis-thin slab

Assumptions:
Annual growth rate of price of steel 4.00% 6.84% (historical)
Annual growth rate of operating costs 4.00%
Tax rate 35.00%
Discount rate 15.00%
Thin Slab Minimill
0 1 2 3 4 5 6 7 8 9 10 11 12
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Capacity(million of tons of steel) 0 0 0
Shipments (12A)
– Hot-rolled sheets (HR) (12A) 0 0 0 0.25 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5
– Cold-rolled sheets (CR) (12A) 0 0 0 0.175 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.35 0.35
Revenue / ton
– Hot-rolled sheets (HR) (12B) 306.5
– Cold-rolled sheets (CR) (12B) 390.5
Total revenue (shipment*rev/ton)
– Hot-rolled sheets (HR)
– Cold-rolled sheets (CR)
Operating costs / ton
– Hot-rolled sheets (HR) (12B) 225
– Cold-rolled sheets (CR) (12B) 283
Total operating costs(shipment*cost/ton)
– Hot-rolled sheets (HR)
– Cold-rolled sheets (CR)
Depreciate over 10 years 0.00
Income
– Hot-rolled sheets (HR)
– Cold-rolled sheets (CR)
Total income
Taxes
Add back depreciation 0.00
Subtract capital expenditures
Subtract startup costs 30.00
Subtract working capital costs 30.00
Cash flow
Internal rate of return (IRR)
Discounted cash flow
Sum of discounted cash flow
Investment criterion: 25% ROA by year 5? Year 5 CF:
Year 5 Assets:
Year 5 ROA:

CF analysis – Modernize

Assumptions:
Annual growth rate of price of steel 4.00% 6.84% (historical)
Annual growth rate of operating costs 4.00%
Tax rate 35.00%
Discount rate 15.00%
Modernized integrated mill
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Capacity(million of tons of steel) 0 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2
Shipments (12A)
– Hot-rolled sheets (HR) (12A) 0 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1
– Cold-rolled sheets (CR) (12A) 0 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35 1.35
Revenue / ton
– Hot-rolled sheets (HR) (12B) 326
– Cold-rolled sheets (CR) (12B) 454.5
Total revenue (shipment*rev/ton)
– Hot-rolled sheets (HR)
– Cold-rolled sheets (CR)
Operating costs / ton
– Hot-rolled sheets (HR) (12B) 261.5
– Cold-rolled sheets (CR) (12B) 349
Total operating costs(shipment*cost/ton)
– Hot-rolled sheets (HR)
– Cold-rolled sheets (CR)
Depreciate over 25 years 0
Income
– Hot-rolled sheets (HR)
– Cold-rolled sheets (CR)
Total income
Taxes
Add back depreciation 0
Subtract capital expenditures
Cash flow
Internal rate of return (IRR)
Discounted cash flow
Sum of discounted cash flow
Investment criterion: 25% ROA by year 5? Year 5 CF:
Year 5 Assets:
Year 5 ROA:

CF analysis – Unmodernized

Assumptions:
Annual growth rate of price of steel 4.00% 6.84% (historical)
Annual growth rate of operating costs 4.00%
Tax rate 35.00%
Discount rate 15.00%
Unmodernized integrated mill
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Capacity(million of tons of steel) 0 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2
Shipments (12A)
– Hot-rolled sheets (HR) 0 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68
– Cold-rolled sheets (CR) 0 1.08 1.08 1.08 1.08 1.08 1.08 1.08 1.08 1.08 1.08 1.08 1.08 1.08 1.08 1.08 1.08 1.08 1.08 1.08 1.08 1.08 1.08 1.08 1.08 1.08
Revenue / ton
– Hot-rolled sheets (HR) (12B) 325
– Cold-rolled sheets (CR) (12B) 453
Total revenue (shipment*rev/ton)
– Hot-rolled sheets (HR)
– Cold-rolled sheets (CR)
Operating costs / ton
– Hot-rolled sheets (HR) (12B) 300
– Cold-rolled sheets (CR) (12B) 403
Total operating costs(shipment*cost/ton)
– Hot-rolled sheets (HR)
– Cold-rolled sheets (CR)
Depreciate over 25 years (no expenditure to dep.) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Income
– Hot-rolled sheets (HR)
– Cold-rolled sheets (CR)
Total income
Taxes
Add back depreciation 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Subtract capital expenditures 0
Cash flow
Discounted cash flow
Sum of discounted cash flow
 
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Quantitative Analysis Word And Excel

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Instructions

All information required for this assignment is provided below:

Read the Cash Is King case study and complete the following requirements.

Quantitative Analysis: 

  1. Using the data input provided (Exhibit 1), prepare LAF’s master budgets in Excel. Do not hard-code numbers into the spreadsheet, except where permitted in the financing section of the cash budget.

Qualitative Analysis: 

In a 2 page report, based on the results of your quantitative analysis:

  1. Determine a credit recommendation for Kent Bank, to lend or not. Justify your credit decision.
  2. Explain why the cash budget is more important to a bank than the accounting net income when determining a credit decision.

Deliverables

  • Quantitative Analysis (Excel Required): You are required to use the provided Excel workbook to complete the quantitative analysis for this assignment.
  • Qualitative Analysis (Word Required): Prepare a 2-page summary addressing the required qualitative analysis, as noted in the Student Workbook.  Your paper is required to be formatted according to APA requirements.  Be sure to incorporate key concepts from this unit’s readings and properly cite your references according to APA requirements.  Do NOT embed the results of your quantitative analysis in your Word document.  You should only reference parts of your quantitative analysis in your written analysis.  Your written responses to the qualitative prompts should not be presented in a question and answer format.

    Case Study

    Data

    Cash Is King
    Exhibit 1. Excel Data Input Section
    Input Data (all currency in US$)
    Budgeted Sales Expected
    April (units) 2,500
    May (units) 6,000
    June (units) 3,000
    July (units) 2,500
    August (units) 2,000
    Selling Price/Unit $120.00
    Cash Collection Pattern
    Month of sale 40%
    Following month 55%
    Uncollectible 5%
    Cash Payments for Materials
    Month of purchase 40%
    Following month 60%
    Production Requirements
    Raw material per unit (lb.) 5
    Raw material cost per lb. $7.00
    Direct labor hours per unit 0.5
    Direct labor rate per hour $40.00
    Variable MOHD per direct labor hour $10.00
    Fixed MOHD per month $57,950
    Depreciation in fixed MOHD $20,000
    Selling & Administrative (S&A) Costs
    Variable S&A cost per unit sold $1.25
    Fixed S&A cost per month $63,000
    Depreciation in fixed S&A cost $10,000
    Other Cash Outflows
    Cash dividends paid each month $15,000
    Equipment purchases May $47,820
    Equipment purchases June $154,600
    Desired Ending Inventory
    Finished goods 20%
    Raw materials 40%
    Cash $30,000
    Beginning Account Balances as of March 31
    Cash $37,745
    Accounts receivable $132,000
    Finished goods inventory $30,750
    Finished goods cost per unit $75.00
    Finished goods inventory (units) 410
    Raw materials inventory $32,200
    Raw materials (lb.) 4,600
    Accounts payable $55,000
    Land $520,000
    Buildings and equipment $1,800,000
    Accumulated depreciation ($750,000)
    Common stock $500,000
    Retained earnings $1,247,695
    Exhibit 2. Sales at Different Levels
    Decreased by
    Budgeted Sales Expected 2% 5% 10%
    April (units) 2,500 2,450 2,375 2,250
    May (units) 6,000 5,880 5,700 5,400
    June (units) 3,000 2,940 2,850 2,700
    July (units) 2,500 2,450 2,375 2,250
    August (units) 2,000 1,960 1,900 1,800

    Student Template

    Yellow – You may only use cell references to data & formulas. NO HARD-KEYING! Little Annin Flagmakers
    Blue – you may hard-key numbers in these cells Sales Budget (US$)
    April May June Quarter
    Budgeted sales (units)
    Selling price per unit
    Total Sales
    Little Annin Flagmakers
    Schedule of Expected Cash Collections (US$)
    April May June Quarter
    Accounts receivable
    Beginning balance
    April sales
    May sales
    June sales
    Total Cash Collections
    Accounts Receivable as of June 30
    Little Annin Flagmakers
    Production Budget
    April May June Quarter July August
    Budgeted sales
    Add: Desired ending inventory
    Total needs
    Less: Beginning inventory
    Required Production
    Little Annin Flagmakers
    Direct Materials Budget (US$)
    April May June Quarter
    Required production in units
    Raw materials per unit (lbs.)
    Production needs (lbs.)
    Add: Desired ending inventory
    Total needs
    Less: Beginning inventory
    Raw materials to be purchased
    Cost of raw materials
    Total Cost of Raw Materials
    Little Annin Flagmakers
    Schedule of Expected Cash Disbursements for Material (US$)
    April May June Quarter
    Accounts payable
    Beginning balance
    April purchases
    May purchases
    June purchases
    Total Cash Disbursements for Materials
    Accounts Payable as of June 30
    Little Annin Flagmakers
    Direct Labor Budget (US$)
    April May June Quarter
    Units to be produced
    Direct labor hours per unit
    Total direct labor hours needed
    Direct labor cost per hour
    Total Direct Labor Cost
    Little Annin Flagmakers
    Manufacturing Overhead Budget (US$)
    April May June Quarter
    Budgeted direct labor hours
    Variable MOHD rate
    Total variable MOHD
    Fixed MOHD expense
    Total MOHD expense
    Less: Depreciation
    Cash Disbursements for MOHD
    MOHD rate /direct labor hour
    Little Annin Flagmakers
    Unit Product Cost (US$)
    Absorption cost per unit Quantity Cost Cost/unit
    Direct materials
    Direct labor
    Manufacturing overhead
    Unit Product Cost
    Little Annin Flagmakers
    Cost of Goods Sold Budget (USD)
    Cost of Goods Sold (FIFO) Units Cost/unit Total Cost
    Beginning finished goods inventory
    Add: Cost of goods manufactured
    Good available for sale
    Less: Ending finished goods inventory
    Cost of Good Sold
    Little Annin Flagmakers
    Selling and Administrative Expense Budget (US$)
    April May June Quarter
    Budgeted sales in units
    Variable S&A per unit
    Total variable S&A
    Total fixed S&A
    Total S&A expense
    Less: Depreciation
    Cash Disbursements for S&A
    Little Annin Flagmakers
    Cash Budget (US$)
    April May June Quarter
    Beginning Cash Balance
    Add: Receipts
    Cash collections
    Total Cash Available
    Less disbursements
    Direct materials
    Direct labor
    Manufacturing overhead
    Selling and administrative
    Dividends
    Equipment purchases
    Total Disbursements
    Excess (deficiency) of cash available
    Financing
    Borrowing
    Repayments
    Interest
    Total Financing
    Ending Cash Balance
    Little Annin Flagmakers
    Budgeted Income Statement (US$)
    Quarter Ending June 30
    Net sales
    Less: Cost of goods sold
    Gross margin
    Less: S&A expenses
    Net operating income
    Less: Interest expense
    Net income
    Computation of Net Sales
    Sales
    Less uncollectible amounts
    Net Sales
    Little Annin Flagmakers
    Budgeted Balance Sheet (US$)
    Ending March 31 Ending June 30
    Current assets
    Cash
    Accounts receivable
    Raw materials inventory
    Finished goods inventory
    Plant and equipment
    Land
    Buildings and equipment
    Accumulated depreciation
    Total Assets
    Liabilities
    Accounts payable
    Stockholder’s equity
    Common stock
    Retained earnings
    Total Liabilities and Stockholder’s Equity

     

    Adapted from IMA

    IMA EDUCATIONAL CASE JOURNAL VOL. 11, NO. 4, ART. 4, DECEMBER 2018 ISSN 1940-204X

    Cash Is King: Master Budgets to Inform a Credit Decision

    Anne M.A. Sergeant, CMA, PhD Seidman College of Business Grand Valley State University Grand Rapids, MI Neal VandenBerg, CPA, PhD Seidman College of Business Grand Valley State University Grand Rapids, MI

    MANUFACTURING AND SG&A COSTS

    The flags are made in one plant, which has a capacity of 6,200 units per month. LAF budgets have 20% of next month’s sales in finished goods inventory at the end of each month. There is plenty of storage space for finished goods.

    Fabric is the only direct material and each flag requires five pounds of fabric at US$7 per pound. LAF plans to have 40% of next month’s fabric needs on hand at the end of the month. Fabric is purchased on credit with 40% paid in the month of purchase and 60% paid the next month. The standard direct labor hours to manufacture one flag is 0.50 hours at US$40 per hour. For simplicity, direct labor costs are budgeted as if they were paid when incurred. Manufacturing overhead rates are computed quarterly and applied based on direct labor hours. Fixed manufacturing overhead costs are estimated to be US$57,950 per month, of which US$20,000 is property, plant, and equipment (PPE) depreciation. Variable manufacturing overhead, including indirect materials, indirect labor, and other costs, is estimated at US$10 per direct labor hour.

    The selling and administrative expenses include variable selling costs (primarily

    shipping) of US$1.25 per unit and fixed costs of US$63,000 per month, of which US$10,000 is depreciation of the administrative office building and equipment.

    FINANCIAL STATEMENT DETAILS AND CASH PLANNING

    LAF uses first in, first out (FIFO) inventory valuation. As of March 31, the expected finished goods inventory is 410 units, valued at US$75 per unit. The company expects to have 4,600 pounds of fabric on hand, valued at US$7 per pound. Other expected account balances include accounts payable at US$55,000, accounts receivable at 132,000, cash at US$37,745, land at US$520,000, and building and equipment at US$1,800,000 with accumulated depreciation of US$750,000. LAF has no long-term debt; common stock is valued at US$500,000 and is not expected to change during the quarter; expected retained earnings as of March 31 are US$1,247,695.

    LAF budgets for US$30,000 ending cash balance each month and is requesting a line of credit that will allow it to adjust for its cash needs. The dividends of US$15,000 are paid each month. During the quarter, LAF planned to purchase equipment in May and June for US$47,820 and US$154,600, respectively. This equipment is being

     

     

    purchased to increase capacity and is not expected to come on line until after the quarter, thus not affecting the manufacturing overhead costs.

    LOAN DETAILS

    LAF has requested a line of credit of US$60,000 to cover production costs during the seasonal increase in business. Kent Bank uses the following terms on its lines of credit. All borrowing is done at the beginning of the month in whole dollar increments. All repayments are made at the end of the month in whole dollar increments. The full line of credit is expected to be paid off by the end of the quarter with all the interest repaid at the end of the quarter. The interest rate on this loan is 16% per year.

     

    ASSIGNMENT REQUIREMENTS:

    1. Quantitative Analysis: a. Using the data input provided (Exhibit 1), prepare LAF’s master budgets in

    Excel. Do not hard-code numbers into the spreadsheet, except where permitted in the financing section of the cash budget.

    2. Qualitative Analysis:

    In a 2-3 page report, based on the results of your quantitative analysis: a. Determine a credit recommendation for Kent Bank, to lend or not. Justify

    your credit decision. b. Explain why the cash budget is more important to a bank than the

    accounting net income when determining a credit decision.

     

     

    Cash Is King

 
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