The document outlines strategies for a shoe manufacturing company to achieve the lowest production and distribution costs through economies of scale, best practices, and supply chain management. It recommends an aggressive approach of using high leverage through debt to grow quickly, corner the market through predatory pricing, and acquire excess manufacturing capacity from competitors to further lower costs and increase market share. Financially, it suggests managing equity, debt, stock purchases, and dividends to optimize returns while maintaining adequate credit ratings during the high growth phase.

1. EROS Indian Institute of Technology Kanpur

2. OUR STRATEGY Company Logo

3. Our Strategies Lowest Production Cost – Manufacturing Strategy Economies of Scale AP–Wholesale (High SQ), LA–Private (Low SQ), NA–till AP & LA grow TQM & Best Practices Lowest Distribution Cost – Distribution & SCM Strategy Separate Plants for WS & PL SCM to minimize taxation Product Strategy (Marketing, Positioning) Differentiation: Premium - Aim 9,500 (SQ rating, No of models) Financial Practices (Leverage, Financing – Equity/Debt) Grow with high Leverage: Debt/Assets Ratio Issuing, Repurchasing Stock – to manage credit rating, ROE, EPS Refinancing Loans Dividends - waste of capital for temporary stock increases (Only Y17) Company Logo 7,50 9,50 9,100 9,200 5,350 7,500 9,500

4. Private Label Purchase 2000 LA & max in AP in 1 st year and also in subsequent 3-4 years if possible Use excess capacity in Private Label (After 2-3 year, no one will mess with your PL Market if they cant match your costs) Produce PL only in LA – Can save ~4$/pair with huge capacity and proper distribution mgmt By dumping, One can have 100% share of PL, but not for WS Sell of NA plant when you are credit constrained High PL market share increases Image ratings by increasing total share (worry less about CSR or selling WS shoes at higher SQ) Drastic market share increases and bid-price reduction in PL would hit competitors who have bid for PL unawares (Silencing them for 1-2 years – Cr rating falls to C, stock pr lowers than 15) Company Logo

5. Finance Take Only 10 yr loans – the game is not going to last ten years 10 yr loans have the less effect on Cr ratings (compared to 1,5 yr) Avoid issuing stock unless credit constrained (decreases EPS) Grow fast and huge by taking big loans initially , but maintain B + credit rating In the last two years, sell excess unprofitable capacity, repurchase stock, give dividends (Or if you think industry is too oversupplied) Repurchasing stock better than dividend. (Increases both EPS & ROE) Avoid stock repurchasing and dividend during start & mid years - It would hurt your ability to grow fast and invest Repurchasing stock at high stock price in the last year can be beneficial (reduce Equity drastically in ROE) Do not spend in CSR, instead upgrade your LA & AP plants Company Logo

6. Whole Sale Don't spend too much on celebrity initially but bid around 1-2k max (high marketing $/shoe) Initially, use much needed capital to grow (dump excess shoe in PL) When big enough for low marketing $/shoe even with very high celebrity & adv costs => go for celebrities Celebrity has to be accompanied with high advertising Cost (PTO) Company Logo

7. Start Strategy Company Logo

8. Y 14 downfall reason Company Logo This year we underperformed very badly

9. Y 15 Strategy Diversion Company Logo Surprise to competitors & niche segment – Still not large enough for 9,500

10. Marketing Strategy Y17 Company Logo

11. Problems Quickly purchase used Capacity before others Anticipate Demand, Supply Fluctuation Anticipate pricing effects Private Label bids – avoid too low, high Do not be predictable Company Logo

12. Learning's Economics – Demand, Supply, Economies of Scale Strategic Manufacturing, Distribution & Supply Chain to reduce Costs Predatory strategy - Cornering the market Finance Equity/Debt Mgmt – Stock sale/purchase, Dividend policy, Loan mgmt Using Leverage - Debt/Assets Practical implications of business decisions on ROE, EPS Balancing between Investor expectation/Financial Stability/ Production Costs/ Distribution/Quality/ Prices/Brand Image Long term decisions (Y 11,12,13,14,15) – Investments, Capacities Short term decisions (Y16, Y17) – Cash Out, dividends, stock repurchase CSR is useless!!! Company Logo

13. Key Learning Company Logo Big Fish always gobble up the Small Fish - Matsya Nyaya Grow fast and Big before your competitors do

14. Revenue, Sales & Market Share Company Logo

15. EPS & ROI Company Logo

16. STOCK PRICE – 234.02 Company Logo Stock Price of Nearest Competitor in Y17 was 78.9

17. Conclusion Reach max capacity in AP and LA as soon as possible Best practices, TQM, economies of scale by huge capacities – Low Cost => Indulge in predatory pricing to suffocate competitors. Buy off the NA capacities that they sell After 2-3 years, invest in celebrities and marketing to push sales from your excess capacity plants v/s competitors who would not have enough muscle and economies of scale to invest in celebrities. Don’t invest in CSR Image ratings will automatically increase thru increase sales from excess capacity Increase no of models rather than SQ rating – Models is fixed cost (beneficial in economies of scale) while SQ rating increase is variable cost Company Logo

18. Company Logo Thank You