CEO The mission of Knockout Shoes is to be recognized as a socially responsible company providing high quality shoes for the North American and Latin American markets. The overall strategy of Knockout Shoes is focused differentiation while addressing socially responsible business practices. The decisions by operations, financing, and marketing support this strategy because we have limited all production to North America and Latin American. We have limited sales to Wholesale and Internet sales in North America and Latin America. We have purchased the contracts of Ophrah Beyonse, Tiger Green, and Jose Montana. We have engaged in green manufacturing practices. We have limited the number of models sold. We use high-quality materials in the manufacturing process. We have provided sufficient capital to sustain operations. We have provided a return to stockholders and to society. VPO We produce all of our shoes in North America and Latin America because this allows for better control over the manufacturing process and reduces the cost to ship shoes to the two target markets. We limited our models to 50 to maintain better control over the manufacturing process and to limit the costs for styling. We have set our superior material usage rate at 80% to ensure a high quality shoe. We use green materials. We have set the enhanced styling features to $20,000 per model to support the production of a shoe that is perceived to be high quality. We have invested in energy efficiency. We use recycled boxing materials. Our entire workforce has received ethics training, and we have a diverse workforce. We spend $2,000 per worker on Best Practices Training. VPM We have set our wholesale price at $60 and our internet price at $85 because the shoes are high quality shoes. We sell only in North America and Latin America. We do not allow internet sales outside of North America and Latin America. We have contracted with Ophrah Beyonse, Tiger Green, and Jose Montana because these three have the best celebrity appeal scores for our two markets. We do not provide for private label production because it does not support our strategy of focused differentiation. We have set our advertising budget at $10,000,000. We offer a $3 rebate as part of our advertising strategy. We are able to provide delivery within 1 week because most of our shoes are manufactured in the country in which they are sold. We have few shipments between North America and Latin America. VPF We have issued 100,000 shares of stock and secured a 10-year bank loan of $8,000,000 to finance operations. We declared a dividend of $.15 to provide a return to stockholders. We have plans to ensure that ROE is at least 15% per year. We have plans to ensure that our cost of pairs sold is no more than 53%. We have plans to ensure that our default risk is no more than Medium. We have committed 3% of pre-tax profits for charitable contributions. The New Product Development Proce ...

1. CEO
The mission of Knockout Shoes is to be recognized as a socially
responsible company providing high quality shoes for the North
American and Latin American markets.
The overall strategy of Knockout Shoes is focused
differentiation while addressing socially responsible business
practices. The decisions by operations, financing, and
marketing support this strategy because we have limited all
production to North America and Latin American. We have
limited sales to Wholesale and Internet sales in North America
and Latin America. We have purchased the contracts of Ophrah
Beyonse, Tiger Green, and Jose Montana. We have engaged in
green manufacturing practices. We have limited the number of
models sold. We use high-quality materials in the
manufacturing process. We have provided sufficient capital to
sustain operations. We have provided a return to stockholders
and to society.
VPO
We produce all of our shoes in North America and Latin
America because this allows for better control over the
manufacturing process and reduces the cost to ship shoes to the
two target markets. We limited our models to 50 to maintain
better control over the manufacturing process and to limit the
costs for styling. We have set our superior material usage rate
at 80% to ensure a high quality shoe. We use green materials.
We have set the enhanced styling features to $20,000 per model
to support the production of a shoe that is perceived to be high
quality. We have invested in energy efficiency. We use
recycled boxing materials. Our entire workforce has received
ethics training, and we have a diverse workforce. We spend

2. $2,000 per worker on Best Practices Training.
VPM
We have set our wholesale price at $60 and our internet price at
$85 because the shoes are high quality shoes. We sell only in
North America and Latin America. We do not allow internet
sales outside of North America and Latin America. We have
contracted with Ophrah Beyonse, Tiger Green, and Jose
Montana because these three have the best celebrity appeal
scores for our two markets. We do not provide for private label
production because it does not support our strategy of focused
differentiation. We have set our advertising budget at
$10,000,000. We offer a $3 rebate as part of our advertising
strategy. We are able to provide delivery within 1 week
because most of our shoes are manufactured in the country in
which they are sold. We have few shipments between North
America and Latin America.
VPF
We have issued 100,000 shares of stock and secured a 10-year
bank loan of $8,000,000 to finance operations. We declared a
dividend of $.15 to provide a return to stockholders. We have
plans to ensure that ROE is at least 15% per year. We have
plans to ensure that our cost of pairs sold is no more than 53%.
We have plans to ensure that our default risk is no more than
Medium. We have committed 3% of pre-tax profits for
charitable contributions.
The New Product Development Process

3. Because introducing new products on a consistent basis is
important to the future success of many organizations,
marketers in charge of product decisions often follow set
procedures for bringing products to market. In the scientific
area that may mean the establishment of ongoing laboratory
research programs for discovering new products (e.g.,
medicines) while less scientific companies may pull together
resources for product development on a less structured
timetable.
In this PowerPoint slide show, we present a process comprising
the key elements of new product development. While some
companies may not follow a deliberate step-by-step approach,
the steps are useful in showing the information input and
decision making that must be done in order to successfully
develop new products. The process also shows the importance
market research plays in developing products. We should note
that while this process works for most industries, it is less
effective in developing radically new products. The main reason
lies in the inability of the target market to provide sufficient
feedback on advanced product concepts since they often find it
difficult to understand radically different ideas. So while many
of these steps are used to research breakthrough ideas, the
marketer should exercise caution when interpreting the results.
*
New Products are vital
As the cartoon highlights, in this era of rapid changes in our
external environment, innovation is imperative. A firm cannot
rest on their laurels (and current products). Furthermore, the

4. time it takes firms to bring new products to market has
accelerated. Firms that fail to develop new products put
themselves at risk as their existing products are vulnerable to
changing customer needs and tastes, new technologies,
shortened product-life-cycles, and increased competition. In
this PowerPoint slideshow, we highlight the 8 step new product
development process as described by Kotler and Keller (2016).
*
8 Step New-Product Development Process1. Idea Generation2.
Idea Screening3. Concept Development and Testing4.
Marketing Strategy Development5. Business Analysis6.
Product Development7. Market Testing8. Commercialization
How Kotler and Keller (2016) describes the New Product
Development Process is as an eight stage process in which the
new product can be dropped at any time. Other sources will
condense some of the steps so you may see others refer to fewer
steps. If you look at these closely though, they are not deleting
any of the activities, but instead are combining some of them.
*
Step 1: Idea GenerationAt this stage marketers need to ask: Is
the idea worth considering?If yes, proceed to idea screening.If
no, drop.Ideas for new products can come from:Customers and
channel membersScientists and engineersBy examining
competitorsTop management
The first step of new product development requires gathering
ideas to be evaluated as potential product options. For many

5. companies idea generation is an ongoing process with
contributions from inside and outside the organization. Many
market research techniques are used to encourage ideas
including: running focus groups with consumers, channel
members, and the company’s sales force; encouraging customer
comments and suggestions via toll-free telephone numbers and
website forms; and gaining insight on competitive product
development through secondary data sources. One important
research technique used to generate ideas is brainstorming
where open-minded, creative thinkers from inside and outside
the company gather and share ideas. The dynamic nature of
group members floating ideas, where one idea often sparks
another idea, can yield a wide range of possible products that
can be further pursued.
*
Step 2: Idea ScreeningAt this stage marketers need to ask: Is
the product idea compatible with company objectives,
strategies, and resources?If yes, proceed to Concept
Development and Testing.If no, drop.
In Step 2, the ideas generated in Step 1 are critically evaluated
by company personnel to isolate the most attractive options.
Depending on the number of ideas, screening may be done in
rounds with the first round involving company executives
judging the feasibility of ideas while successive rounds may
utilize more advanced research techniques. As the ideas are
whittled down to a few attractive options, rough estimates are
made of an idea’s potential in terms of sales, production costs,
profit potential, and competitors’ response if the product is
introduced. Acceptable ideas move on to the next step.
*

6. Step 3: Concept Development and TestingAt this stage
marketers need to ask: Can we find a good concept consumers
say they would try it?If yes, proceed to Marketing Strategy
Development.If no, drop.Example of Concept
Development/TestingRegarding a concept of new shower
enclosures coated with Teflon, a marketer asks
consumers:Would this type of shower enclosure solve a cleaning
problem for you?
With a few ideas in hand the marketer now attempts to obtain
initial feedback from customers, distributors and its own
employees. Generally, focus groups are convened where the
ideas are presented to a group, often in the form of concept
board presentations (i.e., storyboards) and not in actual working
form. For instance, customers may be shown a concept board
displaying drawings of a product idea or even an advertisement
featuring the product. In some cases focus groups are exposed
to a mock-up of the ideas, which is a physical but generally
non-functional version of product idea. During focus groups
with customers the marketer seeks information that may
include: likes and dislike of the concept; level of interest in
purchasing the product; frequency of purchase (used to help
forecast demand); and price points to determine how much
customers are willing to spend to acquire the product.
*
Step 4: Marketing Strategy DevelopmentAt this stage marketers
need to ask: Can we find a cost-effective, affordable marketing
strategy?If yes, proceed to Business Analysis.If no, drop.

7. Marketing strategy development involves describing the target
market’s size, structure and behavior; the planned product
positioning; and the sales, market share, and profit goals sought
in the first few years. Then marketers would outline the
planned price, distribution strategy, and marketing budget for
the first year. Finally, marketers would describe the long-run
sales and profit goals and marketing-mix strategy over time.
*
Step 5: Business AnalysisAt this stage marketers need to ask:
Will this product meet our profit goal?If yes, proceed to Product
Development.If no, drop
At this point in the new product development process the
marketer has reduced a potentially large number of ideas down
to one or two options. Now the process becomes very dependent
on market research as efforts are made to analyze the viability
of the product ideas. The key objective at this stage is to obtain
useful forecasts of market size (e.g., overall demand),
operational costs (e.g., production costs) and financial
projections (e.g., sales and profits). Additionally, the
organization must determine if the product will fit within the
company’s overall mission and strategy. Much effort is directed
at both internal research, such as discussions with production
and purchasing personnel, and external marketing research, such
as customer and distributor surveys, secondary research, and
competitor analysis. This stage involves preparing sales, cost,
and profit projections in more detail than in the previous stage
to determine whether they satisfy company objectives.
*

8. Step 6: Product DevelopmentAt this stage marketers need to
ask: Have we got a technically and commercially sound
product?If yes, proceed to Market Testing.If no, drop.Example
of Product Development StageA new-product development
department is excited about a new product idea for a suntan
lotion that goes on blue, but fades away as the ability of the
lotion to protect skin disappears.Projected sales, growth, and
profit looks promising.The idea has been passed to R&D to
determine if the product could be feasibly made.
Ideas passing through business analysis are now given serious
consideration for development. Companies direct their research
and development teams to construct an initial design or
prototype of the idea. Marketers also begin to construct a
marketing plan for the product. Once the prototype is ready the
marketer seeks customer input. However, unlike the concept
testing stage where customers were only exposed to the idea, in
this step the customer gets to experience the real product as
well as other aspects of the marketing mix, such as advertising,
pricing, and distribution options (e.g., retail store, direct from
company, etc.). Favorable customer reaction helps solidify the
marketer’s decision to introduce the product and also provides
other valuable information such as estimated purchase rates and
understanding how the product will be used by the customer.
Reaction that is less favorable may suggest the need for
adjustments to elements of the marketing mix. Once these are
made the marketer may again have the customer test the
product. In addition to gaining customer feedback, this step is
used to gauge the feasibility of large-scale, cost effective
production for manufactured products.
*
Step 7: Market TestingAt this stage marketers need to ask:

9. Have product sales met expectations?If yes, proceed to
CommercializationIf no, send the idea back for product
development.Examples of Consumer-Goods Market
TestingSales-Wave ResearchConsumers initially try the product
at no cost then are reoffered the product, or a competitors’
product at a slightly reduced price.Simulated Test Marketing –
lab storeControlled Test Marketing Panel of stores carry new
product for a fee.
Products still surviving are ready to be tested as real products.
In some cases the marketer accepts what was learned from
concept testing and skips over market testing to launch the idea
as a fully marketed product. But other companies may seek
more input from a larger group before moving to
commercialization. The most common type of market testing
makes the product available to a selective small segment of the
target market (e.g., one city), which is exposed to the full
marketing effort as they would be to any product they could
purchase. In some cases, especially with consumer products sold
at retail stores, the marketer must work hard to get the product
into the test market by convincing distributors to agree to
purchase and place the product on their store shelves. In more
controlled test markets distributors may be paid a fee if they
agree to place the product on their shelves to allow for testing.
Another form of market testing found with consumer products is
even more controlled with customers recruited to a “laboratory”
store where they are given shopping instructions (simulated test
marketing). Product interest can then be measured based on
customer’s shopping response. Finally, there are several high-
tech approaches to market testing including virtual reality and
computer simulations. With virtual reality testing customers are
exposed to a computer-projected environment, such as a store,
and are asked to locate and select products. With computer
simulations customers may not be directly involved at all.
Instead certain variables are entered into a sophisticated

10. computer program and estimates of a target market’s response
are calculated.
*
Step 8: CommercializationAt this stage marketers need to ask:
Are product sales meeting expectations?If yes, make future
plans.If no, modify the product or marketing program or
drop.This is the most expensive step of the new product
development process.
If market testing displays promising results the product is ready
to be introduced to a wider market. Some firms introduce or
roll-out the product in waves with parts of the market receiving
the product on different schedules. This allows the company to
ramp up production in a more controlled way and to fine tune
the marketing mix as the product is distributed to new areas.
*
SourcesKnowthis.com (2011). New Product Development
Process. Retrieved May 19, 2011, from
http://www.knowthis.com/principles-of-marketing-
tutorials/managing-products/new-product-development-
process/.Kotler, P. and Keller, K.L. (2016). Marketing
Management (15th ed.). Upper Saddle River, NJ: Pearson
Prentice Hall.Richardson, P. (2011, February, 16). Dilbert New
Product. Retrieved May 19, 2011 from
http://www.witiger.com/marketing/dilbertnewproductSM.jpg.
*

11. **For Question #1 – 2, each answer needs to be one (1) page
long, single spaced
**For each written discussion answer, you must significantly
relate the text and source material that is listed below (all this
information is provided in the provided attachments or web
link) to your discussion answer. First discuss the material and
then apply it in answering the questions and discussion.
---------------------------------------------------------------------------
-----------------------------------
Question #1 (answer in one page, single spaced):
In Chapter 15, Kotler and Keller (see attachment labeled, pg
437-454), discuss the New Product Development Process.
Additionally, there is an attached PowerPoint Presentation (see
attachment labeled, New Product Development Process) that
focuses on the eight stages of the New Product Development
process.
Utilizing the attached information (the attached text pages and
PowerPoint) discuss the eight steps of the New Product
Development Process by:
1. Illustrating how your employer or company (please use a
college or university as the company/employer, you can pick
any department within a college/university, like the Admissions
Department, or the Registrar Department, or the Financial Aid
Department, etc.) would utilize these eight steps
2. What improvements would you recommend to them.
*Make sure to answer BOTH #1 and #2 above in your response
---------------------------------------------------------------------------
-----------------------------------------
Question #2 (answer in one page, single spaced):

12. In Chapter 13, Kotler and Keller (see attachment labeled, pg
376-378) discuss some of the unique issues surrounding luxury
products. Then in Chapter 16, Kotler and Keller (see attachment
labeled, pg 465-466) discuss how consumer psychology
influence how consumers’ perceive price. Finally, in the
following Ted Talk video (see link below) from 2008, Benjamin
Wallace details his experiences with trying some of the world’s
most expensive luxury products and if they were worth the
price:
https://www.ted.com/talks/benjamin_wallace_on_the_price_of_
happiness
Utilizing the information above, please discuss
1. What represents luxury to you and focus on two (2) examples
of luxury when explaining what represents luxury to you,
2. Why do those two examples represent luxury to you, and how
does price impact that perception?
*Make sure to answer BOTH #1 and #2 above in your response
9/17/2015
about:blank 1/5
Advanced shoes
Industry 12
PLANT OPERATIONS REPORT Year 14
(projected)
PLANT CAPACITY (000s of pairs w/o OT)
North AmericaPlant
Europe-Africa

13. Plant
Asia-Pacific
Plant
Latin America
Plant
All Plants
Combined
Plant Capacity at the End of Year 13
+ New Construction (initiated in Year 13)
+ Capacity Purchased (at beginning of Y14)
– Capacity Sold-Off (at beginning of Y14)
Capacity Available for Year 14 Production
New Construction Initiated in Year 14
Total Capacity Available for Year 15
2,100 pairs
2,200 pairs
100
0
0
2,200
0
0 pairs
0 pairs
0
0

14. 0
0
0
4,000 pairs
4,000 pairs
0
0
0
4,000
0
0 pairs
0 pairs
0
0
0
0
0
6,100 pairs
6,200 pairs
100
0
0
6,200
0

15. Plant Upgrade ——–
Options
Online (initiated prior to Y14)
Pending (initiated in Y14)
D
none
none
none
C
none
none
none
PLANT INVESTMENT ($000s) North AmericaPlant
Europe-Africa
Plant
Asia-Pacific
Plant
Latin America
Plant
All Plants
Combined
Gross Investment at the End of Year 13
+ Upgrade Options (initiated in Year 13)
+ New Construction (initiated in Year 13)
+ Capacity Purchased (at beginning of Y14)
– Capacity Sold-Off (at beginning of Y14)

16. + Energy Efficiency Initiatives (in Y14)
Gross Investment in Year 14 Capacity
– Accumulated Depreciation (through Y13)
– Current Depreciation (incurred in Y14)
Net Investment in Year 14 Capacity
Upgrade and Construction Work in Progress
92,322
0
4,750
0
0
2,896
99,968
39,749
4,998
55,221
0
0
0
0
0
0
0
0
0
0
0
0

17. 218,633
0
0
0
0
5,264
223,897
60,699
11,195
152,003
0
0
0
0
0
0
0
0
0
0
0
0
310,955
0
4,750
0
0
8,160
323,865
100,448

18. 16,193
207,224
0
LABOR STATISTICS Year 13 Year 14
North America
Year 13 Year 14
Europe-Africa
Year 13 Year 14
Asia-Pacific
Year 13 Year 14
Latin America
Compensation ——–
($000s per worker)
Annual Base Wage
Incentive Pay
Total Compensation
Worker Productivity (pairs per worker per year)
Number of Workers Employed
Incentive Pay Per Pair ($ per non-rejected pair)
5,092 5,156
347 343
15.5 15.6
6.5 6.6
22.0 22.2
1.35 1.35

19. 0 0
0 0
0.0 0.0
0.0 0.0
0.0 0.0
0.00 0.00
2,451 2,377
1,441 1,485
2.9 2.9
0.9 0.9
3.8 3.8
0.40 0.40
0 0
0 0
0.0 0.0
0.0 0.0
0.0 0.0
0.00 0.00
Cumulative Best ——–
Practices
$ Per Worker
$ Per Branded Pair
888
0.20
0
0.00
500

20. 0.20
0
0.00
PRODUCTION STATISTICS Branded P-Label
North America
Branded P-Label
Europe-Africa
Branded P-Label
Asia-Pacific
Branded P-Label
Latin America
Branded P-Label
Overall
Footwear ———–
Production
(000s of pairs)
Regular Pairs Produced
Overtime Pairs Produced
Rejected Pairs
Net Footwear Production
Reject Rate (% of regular + OT production)
Number of Models Produced
S/Q Rating of Pairs Produced
1,766 0
0 0
91 0

21. 1,675 0
5.1% 0.0%
200 0
4☆ 4☆
0 0
0 0
0 0
0 0
0.0% 0.0%
0 0
0☆ 0☆
3,133 393
0 0
223 24
2,910 369
7.1% 6.1%
200 100
5☆ 4☆
0 0
0 0
0 0
0 0
0.0% 0.0%
0 0
0☆ 0☆
4,899 393
0 0

22. 314 24
4,585 369
6.4% 6.1%
Capacity Utilization (max utilization at full OT = 120%) 80.3%
0.0% 88.1% 0.0% 85.4%
BRANDED PRODUCTION COSTS $000s $ / pair
North America
$000s $ / pair
Europe-Africa
$000s $ / pair
Asia-Pacific
$000s $ / pair
Latin America
$000s $ / pair
Overall
This section lists
costs for branded
production only.
Private-Label
production costs
are listed on the
Private-Label
Operations report.
Materials Costs —– Standard
Superior
Labor Costs —– Regular Pay
Overtime Pay

23. Best Practices Training
Plant Supervision
Enhanced Styling/Features
TQM/6-Sigma Quality Program
Production Run Set-Up
Plant Maintenance
Depreciation
Total Production Costs
Cost of Rejected Pairs
5,256 3.14
12,607 7.53
7,615 4.55
0 0.00
274 0.16
2,058 1.23
2,000 1.19
1,100 0.66
6,000 3.58
7,248 4.33
4,998 2.98
49,156 29.35
2,532 1.52
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00

24. 0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
9,325 3.20
22,366 7.69
5,001 1.72
0 0.00
587 0.20
2,640 0.91
1,600 0.55
1,778 0.61
6,000 2.06
10,947 3.76
9,952 3.42
70,196 24.12
4,997 1.71
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00

25. 14,581 3.18
34,973 7.63
12,616 2.75
0 0.00
861 0.19
4,698 1.02
3,600 0.79
2,878 0.63
12,000 2.62
18,195 3.97
14,950 3.26
119,352 26.03
7,529 1.64
Company Operating Reports
Copyright © GLO-BUS Software, Inc. Page 1
9/17/2015
about:blank 2/5
Advanced shoes
Industry 12
DISTRIBUTION & WAREHOUSE REPORT Year 14
(projected)
WAREHOUSE OPERATIONS (thousands of branded pairs)
North America
Warehouse
Europe-Africa

26. Warehouse
Asia-Pacific
Warehouse
Latin America
Warehouse
Company
Total
Incoming ———————
Shipments from
North America Plant
Europe-Africa Plant
Asia-Pacific Plant
Latin America Plant
Pairs Sold ——————— Internet Segment
Wholesale Segment
Total Branded Sales
Ending Inventory from Year 13
Inventory Clearance (at the beginning of Y14)
Beginning Inventory (carried over from Y14)
Pairs Available for Sale (inventory + shipments)
Required Inventory (needed to achieve delivery time)
Inventory Surplus (Shortfall)
Ending Inventory (pairs left over at the end of Y14)
43 pairs

27. 40 pairs
0
43
1,377
0
0
0
1,420
137
1,243
1,380
40
-505
36 pairs
33 pairs
0
36
0
0
1,377
0
1,413
144
1,236

28. 1,380
33
-561
29 pairs
27 pairs
0
29
0
0
918
0
947
108
812
920
27
-625
29 pairs
27 pairs
0
29
298
0
615
0

29. 942
110
805
915
27
-680
137 pairs
127 pairs
0
137
1,675
0
2,910
0
4,722
499
4,096
4,595
127
-2,371
Model Availability (weighted average)
S/Q Rating (weighted average)
200
4☆

30. 200
5☆
200
5☆
200
5☆
Weighted average of
beginning inventory +
new incoming pairs
shipped from plants.
COST OF BRANDED PAIRS SOLD $000s $ / pair
North America
$000s $ / pair
Europe-Africa
$000s $ / pair
Asia-Pacific
$000s $ / pair
Latin America
$000s $ / pair
Overall
Cost of Beginning Year 14 Inventory
+ Production Cost of Incoming Pairs
± Exchange Rate Cost Adjustments
+ Freight on Incoming Pairs
+ Import Tariffs on Incoming Pairs
– Cost of Ending Year 14 Inventory

31. Cost of Branded Pairs Sold in Year 14
1,274 29.63
40,411 29.35
0 0.00
1,377 1.00
0 0.00
1,213 30.33
41,849 30.33
1,030 28.61
33,216 24.12
+2,129 +1.55
2,754 2.00
5,508 4.00
1,042 31.58
43,595 31.59
715 24.66
22,144 24.12
0 0.00
918 1.00
0 0.00
678 25.11
23,099 25.11
977 33.69
23,580 25.83
+2 +0.00
1,826 2.00
3,690 4.04

32. 862 31.93
29,213 31.93
3,996 29.17
119,351 26.03
2,131 0.46
6,875 1.50
9,198 2.01
3,795 29.88
137,756 29.98
WAREHOUSE OPERATING EXPENSES $000s $ / pair
North America
$000s $ / pair
Europe-Africa
$000s $ / pair
Asia-Pacific
$000s $ / pair
Latin America
$000s $ / pair
Overall
Packaging / Shipping ——– Internet
Wholesale
Inventory Storage Costs
Warehouse Lease and Maintenance
Total Warehouse Operating Expenses

33. 22 0.02
1,397 1.01
2,614 1.89
1,000 0.72
5,033 3.65
18 0.01
1,469 1.06
2,601 1.88
1,000 0.72
5,088 3.69
15 0.02
1,102 1.20
1,786 1.94
1,000 1.09
3,903 4.24
15 0.02
1,122 1.23
1,771 1.94
1,000 1.09
3,908 4.27
70 0.02
5,090 1.11
8,772 1.91
4,000 0.87
17,932 3.90
INVENTORY CLEARANCE $000s $ / pair
North America
$000s $ / pair
Europe-Africa

34. $000s $ / pair
Asia-Pacific
$000s $ / pair
Latin America
$000s $ / pair
Overall
Direct Costs ——–
of Pairs
Cleared
Production/Freight/Tariffs
Inventory Storage
Packaging/Shipping
Net Revenues from Pairs Cleared
Margin Over Direct Costs
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00

35. 0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
Company Operating Reports
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Advanced shoes
Industry 12
MARKETING & ADMINISTRATIVE REPORT Year 14
(projected)
MARKETING EXPENSES $000s $ / pair
North America
$000s $ / pair
Europe-Africa

36. $000s $ / pair
Asia-Pacific
$000s $ / pair
Latin America
$000s $ / pair
Overall
Internet ————–
Segments
Advertising
Web Site Maintenance
Celebrity Endorsements
Total Internet Marketing
696 5.08
1,087 7.93
0 0.00
1,783 13.01
708 4.92
1,143 7.94
0 0.00
1,851 12.85
411 3.81
857 7.94
0 0.00
1,268 11.74
421 3.83

37. 873 7.94
0 0.00
1,294 11.76
2,236 4.48
3,960 7.94
0 0.00
6,196 12.42
Wholesale ———
Segments
Advertising
Rebate Redemption
Retailer Support
On-Time Delivery
Celebrity Endorsements
Total Wholesale Marketing
6,315 5.08
932 0.75
923 0.74
932 0.75
0 0.00
9,102 7.32
6,080 4.92
1,483 1.20
876 0.71
618 0.50
0 0.00
9,057 7.33

38. 3,089 3.80
325 0.40
498 0.61
609 0.75
0 0.00
4,521 5.57
3,079 3.82
604 0.75
518 0.64
604 0.75
0 0.00
4,805 5.97
18,563 4.53
3,344 0.82
2,815 0.69
2,763 0.67
0 0.00
27,485 6.71
1.
Total regional advertising expenditures are allocated to internet
and wholesale seg-
ments based on each segment's percentage of total branded pairs
sold in the region.
2.
Total expenditures for celebrity endorsements are allocated to i
nternet and whole-
sale segments based on each segment's percentage of total brand
ed pairs sold.

39. ADMINISTRATIVE EXPENSES $000s $ / pair
North America
$000s $ / pair
Europe-Africa
$000s $ / pair
Asia-Pacific
$000s $ / pair
Latin America
$000s $ / pair
Overall
General Administration
Other Corporate Overhead
Total Administrative Expenses
608 0.44
2,177 1.58
2,785 2.02
608 0.44
2,177 1.58
2,785 2.02
406 0.44
1,451 1.58
1,857 2.02
403 0.44
1,443 1.58
1,846 2.02

40. 2,025 0.44
7,248 1.58
9,273 2.02
Advanced shoes
Industry 12
PRIVATE-LABEL REPORT Year 14
OFFERS SUBMITTED North AmericaMarket
Europe-Africa
Market
Asia-Pacific
Market
Latin America
Market
Company
Total
Offers to Private ————
Label Buyers
Pairs Offered (000s)
S/Q Rating
Bid Price ($ per pair)
4☆
0 pairs
35.00
0☆
185 pairs

41. 35.00
4☆
184 pairs
35.00
0☆
224 pairs
35.00
593 pairs
Pairs Offered (000s) 0 pairs 185 pairs 184 pairs 0 pairs
369 pairs
PRODUCTION SHIPPING $000s $ / pair
North America
$000s $ / pair
Europe-Africa
$000s $ / pair
Asia-Pacific
$000s $ / pair
Latin America
$000s $ / pair
Overall
Production ———–
Costs

42. Materials ————–
Labor ——————–
Standard
Superior
Regular
Overtime
Styling / Features
Production Run Set-Up
Other Allocated Costs
Total Production Costs
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
1,907 5.17
1,299 3.52
629 1.70
0 0.00

43. 600 1.63
625 1.69
3,235 8.77
8,295 22.48
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
1,907 5.17
1,299 3.52
629 1.70
0 0.00
600 1.63
625 1.69
3,235 8.77
8,295 22.48
Pairs Produced (000s of pairs after rejects) 0 pairs 0 pairs 369
pairs 0 pairs 369 pairs
Shipments To ———————–
(000s of pairs)
N.A. Warehouse
E-A Warehouse
A-P Warehouse

44. L.A. Warehouse
0 pairs
0
0
0 pairs
0 pairs
0
0
0 pairs
0 pairs
185
184
0 pairs
0 pairs
0
0
0 pairs
0 pairs
185
184
0 pairs
1.
Best practices, plant supervision, TQM/6-Sigma, plant maintena
nce, and deprecia-
tion cost allocations based on percentage of total pairs produced
before rejects.
2.
For more private-label production info (rejected pairs, reject rat
e, number of models,

45. and S/Q rating) see the Production Statistics section of the Plant
Operations Report.
REVENUES / COSTS / MARGINS $000s $ / pair
North America
$000s $ / pair
Europe-Africa
$000s $ / pair
Asia-Pacific
$000s $ / pair
Latin America
$000s $ / pair
Overall
Direct ————–
Costs
Production Costs
± Exchange Rate Adjustments
Freight
Import Tariffs
Packaging / Shipping
Gross Private-Label Revenues
± Exchange Rate Adjustments
Net Private-Label Revenues
Margin Over Direct Costs
0 0.00
0.00

46. 0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00
6,475 35.00
–172 –0.93
6,303 34.07
4,159 22.48
267 1.44
370 2.00
740 4.00
222 1.20
545 2.95
6,440 35.00
+242 +1.32
6,682 36.32
4,136 22.48
0 0.00
184 1.00
0 0.00
221 1.20
2,141 11.64
0 0.00
0 0.00
0 0.00
0 0.00
0 0.00

47. 0 0.00
0 0.00
0 0.00
0 0.00
12,915 35.00
70 0.19
12,985 35.19
8,295 22.48
267 0.72
554 1.50
740 2.01
443 1.20
2,686 7.28
Company Operating Reports
Copyright © GLO-BUS Software, Inc. Page 3
Total company administrative expenses are allocated to each reg
ion based on the region's percentage of total branded pairs sold.
1
2
1
2
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48. 9/17/2015
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Advanced shoes
Industry 12
INCOME STATEMENT Year 14
(projected)
CONSOLIDATED INCOME STATEMENT $000s $ / pair
North America
$000s $ / pair
Europe-Africa
$000s $ / pair
Asia-Pacific
$000s $ / pair
Latin America
$000s $ / pair
Overall
Segment Revenues ——— Internet
Wholesale
Private-Label
Operating —–—
Costs
Cost of Pairs Sold
Warehouse Expenses
Marketing Expenses

49. Administrative Expenses
Gross Revenues from Footwear Sales
± Exchange Rate Adjustments
Net Revenues from Footwear Sales
Operating Profit (Loss)
11,645 85.00
59,664 48.00
0 0.00
71,309 51.67
0 0.00
71,309 51.67
41,849 30.33
5,033 3.65
10,885 7.89
2,785 2.02
10,757 7.79
12,240 85.00
59,328 48.00
6,475 35.00
78,043 49.87
-2,030 -1.30
76,013 48.57
49,131 31.39
5,310 3.39
10,908 6.97
2,785 1.78
7,879 5.03
9,180 85.00

50. 33,292 41.00
6,440 35.00
48,912 44.30
1,794 1.63
50,706 45.93
27,419 24.84
4,124 3.74
5,789 5.24
1,857 1.68
11,517 10.43
9,350 85.00
33,810 42.00
0 0.00
43,160 47.17
980 1.07
44,140 48.24
29,213 31.93
3,908 4.27
6,099 6.67
1,846 2.02
3,074 3.36
42,415 85.00
186,094 45.43
12,915 35.00
241,424 48.63
744 0.15
242,168 48.78
147,612 29.74
18,375 3.70
33,681 6.79
9,273 1.87

51. 33,227 6.69
PROFITABILITY & PAYOUT Year 13 Year 14
Earnings Per Share $1.99 $1.88
Dividend Per Share $0.00 $0.00
Interest Income (Expenses)
Other Income (Expenses)
Pre-Tax Profit (Loss)
Income Taxes
Net Profit (Loss)
-5,336 -1.07
-1,000 -0.20
26,891 5.42
8,067 1.63
18,824 3.79
1.
These items include revenues collected from and costs associate
d with inventory liquidated at the beginning of Y14. See the last
section of the Distribution & Warehouse Report.
2.
This item includes any charitable contributions and/or instructor
-imposed fines (appearing as negative) and/or instructor-awarde
d refunds (appearing as positive).
3.
The income tax rate is 30%. If a net loss was recorded in Y13, t
he loss is carried forward and may offset some or all taxable Y1
4 profit and reduce Y14 income taxes.
Advanced shoes
Industry 12
REVENUE-COST-PROFIT PERFORMANCE
IN THE BRANDED SEGMENTS

52. Year 14
INTERNET MARKET PERFORMANCE $000s $ / pair
North America
$000s $ / pair
Europe-Africa
$000s $ / pair
Asia-Pacific
$000s $ / pair
Latin America
$000s $ / pair
Overall
Operating ——
Costs
Cost of Pairs Sold
Warehouse Expenses
Marketing Expenses
Administrative Expenses
Revenues from Internet Sales
Customer-Paid Shipping Fees
Gross Internet Revenues
± Exchange Rate Adjustments
Net Internet Revenues
Operating Profit (Loss)
10,275 75.00

53. 1,370 10.00
11,645 85.00
0 0.00
11,645 85.00
4,155 30.33
1,498 10.93
1,783 13.01
277 2.02
3,932 28.70
10,800 75.00
1,440 10.00
12,240 85.00
-286 -1.99
11,954 83.01
4,549 31.59
1,575 10.94
1,851 12.85
290 2.01
3,689 25.62
8,100 75.00
1,080 10.00
9,180 85.00
304 2.81
9,484 87.81
2,712 25.11
1,221 11.31
1,268 11.74
218 2.02

54. 4,065 37.64
8,250 75.00
1,100 10.00
9,350 85.00
192 1.75
9,542 86.75
3,512 31.93
1,244 11.31
1,294 11.76
222 2.02
3,270 29.73
37,425 75.00
4,990 10.00
42,415 85.00
210 0.42
42,625 85.42
14,928 29.92
5,538 11.10
6,196 12.42
1,007 2.02
14,956 29.97
MARKET STATISTICS Year 13 Year 14 Year 13 Year 14
Year 13 Year 14 Year 13 Year 14 Year 13 Year 14
Pairs Sold (000s)
Market Share
Operating Profit Margin
115 137
9.0% 9.0%
32.8% 33.8%

55. 125 144
9.8% 9.4%
37.4% 30.9%
89 108
9.3% 9.1%
40.6% 42.9%
89 110
9.3% 9.2%
23.4% 34.3%
418 499
9.3% 9.2%
33.8% 35.1%
WHOLESALE MARKET PERFORMANCE $000s $ / pair
North America
$000s $ / pair
Europe-Africa
$000s $ / pair
Asia-Pacific
$000s $ / pair
Latin America
$000s $ / pair
Overall
Operating —––
Costs
Cost of Pairs Sold

56. Warehouse Expenses
Marketing Expenses
Administrative Expenses
Gross Wholesale Revenues
± Exchange Rate Adjustments
Net Wholesale Revenues
Operating Profit (Loss)
59,664 48.00
0 0.00
59,664 48.00
37,694 30.33
3,535 2.84
9,102 7.32
2,508 2.02
6,825 5.49
59,328 48.00
-1,572 -1.27
57,756 46.73
39,046 31.59
3,513 2.84
9,057 7.33
2,495 2.02
3,645 2.95
33,292 41.00
1,248 1.54
34,540 42.54
20,387 25.11
2,682 3.30
4,521 5.57

57. 1,639 2.02
5,311 6.54
33,810 42.00
788 0.98
34,598 42.98
25,701 31.93
2,664 3.31
4,805 5.97
1,624 2.02
-196 -0.24
186,094 45.43
464 0.11
186,558 45.55
122,828 29.99
12,394 3.03
27,485 6.71
8,266 2.02
15,585 3.80
MARKET STATISTICS Year 13 Year 14 Year 13 Year 14
Year 13 Year 14 Year 13 Year 14 Year 13 Year 14
Pairs Sold (000s)
Market Share
Operating Profit Margin
1,260 1,243
9.5% 8.1%
12.7% 11.4%
1,242 1,236
9.9% 8.1%
20.2% 6.3%

58. 828 812
9.5% 6.8%
14.8% 15.4%
829 805
9.9% 6.7%
-16.9% -0.6%
4,159 4,096
9.7% 7.6%
9.5% 8.4%
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Advanced shoes
Industry 12
BALANCE SHEET & CASH FLOW REPORT Year 14
(projected)

59. Cash On Hand 0
Accounts Receivable (see Note 1) 60,542
Footwear Inventories 3,795
Total Current Assets 64,337
Net Plant Investment (see Note 2) 207,224
Construction Work in Progress 0
Total Fixed Assets 207,224
Total Assets 271,561
Accounts Payable (see Note 3) 13,190
Overdraft Loan Payable (see Note 4) 27,166
1-Year Bank Loan Payable (see Note 5) 0
Current Portion of Long-Term Loans (see Note 6) 0
Total Current Liabilities 40,356
Long-Term Bank Loans Outstanding (see Note 7) 0
Total Liabilities 40,356
Beginning
Balance
Change
in Y14
Common Stock (see Note 8) 10,000 0 10,000
Additional Capital (see Note 9) 100,000 0 100,000
Retained Earnings (see Note 10) 102,385 +18,820 121,205
Total Shareholder Equity 212,385 +18,820 231,205
Return on Average Equity for Year 14 (see Note 11) 8.5%
Note 1:

60. Of the $242,168 net revenues reported in the Y14 income statem
ent, 25% have
not been collected from customers (and will be collected in Y15
).
Note 2:
For more details on net plant investment, see the Plant Investme
nt section of
the Plant Operations Report.
Note 3:
Of the $52,760 in materials used for footwear production in Y14
, 25% have not
been paid for (and will be paid for in Y15).
Note 4:
Loans for overdrafts are incurred automatically to prevent a neg
ative year-end
cash balance and carry an interest rate 2% above the rate for 1-y
ear loans.
Note 5:
The company's interest rate for a 1-year loan in Y14 was 8.2%.
Note 6:
This item represents the principal portion of all outstanding 5-y
ear and 10-year
bank loans due to be repaid in Year 15.
Note 7: Long-term bank loans outstanding:
Loan
Number
Initial
Year

61. Original
Principal
Interest
Rate Term
Out-
standing
Principal
Annual
Principal
Payment
Year 15
Interest
Payable
1 Y7 115,000 8.5% 10-Yr 0 0 0
2 Y9 24,000 7.5% 5-Yr 0 0 0
3 Y0 0 0.0% 0-Yr 0 0 0
4 Y0 0 0.0% 0-Yr 0 0 0
5 Y0 0 0.0% 0-Yr 0 0 0
6 Y0 0 0.0% 0-Yr 0 0 0
7 Y0 0 0.0% 0-Yr 0 0 0
8 Y0 0 0.0% 0-Yr 0 0 0
9 Y0 0 0.0% 0-Yr 0 0 0
10 Y0 0 0.0% 0-Yr 0 0 0
11 Y0 0 0.0% 0-Yr 0 0 0
12 Y0 0 0.0% 0-Yr 0 0 0
13 Y0 0 0.0% 0-Yr 0 0 0
14 Y0 0 0.0% 0-Yr 0 0 0
15 Y0 0 0.0% 0-Yr 0 0 0
16 Y0 0 0.0% 0-Yr 0 0 0
Note 8:

62. There are 10,000 shares issued and outstanding at a par value of
$1.00 per
share. The authorized maximum number of shares outstanding is
40,000.
Note 9:
Additional Capital represents the amount over and above par val
ue that share-
holders have paid to purchase new shares of stock.
Note 10: Retained Earnings is a summation of all after-tax
profits the company has
earned that have not been distributed to shareholders in the for
m of dividends.
Note 11: The formula for Return
on Average Equity is:
After-Tax profit
(Beginning Equity + Ending Equity) ÷ 2
ASSETS $000s
LIABILITIES $000s
SHAREHOLDER EQUITY $000s
Balance Sheet Notes (all dollar and share figures in thousands)
BALANCE SHEET
Beginning Cash Balance 0
Cash —————–
Inflows
Receipts from Sales (see Note 1) 241,539

63. Bank Loans ————————1-Year
5-Year
10-Year
0
0
0
Stock Issues (0 shares issued) 0
Sale of Existing Plant Capacity 0
Loan to Cover Overdrafts 27,166
Interest on Y13 Cash Balance 0
Cash Refunds (awarded by instructor)
Total Cash Available from All Sources 268,705
Payments to Materials Suppliers (see Note 2) 52,764
Production Expenses (see Note 3) 61,092
Distribution and Warehouse Expenses 35,742
Marketing and Administrative Expenses 42,957
Capital ———–
Outlays
Plant Upgrade Options Initiated 0
Purchase of Used Plant Capacity 0
Construction of New Capacity 0
Energy Efficiency Initiatives 8,160
Repayment of Principal ———–
on Bank Loans (see Note 4)
Overdraft Loan 48,787
1-Year Loan 0
5-Year Loans 4,800
10-Year Loans 0

64. Interest Payments on —————Overdraft Loan 4,976
Bank Loans 360
Stock Repurchases (0 shares repurchased) 0
Income Tax Payments 8,067
Dividend Payments to Shareholders 0
Charitable Contributions 1,000
Cash Fines (assessed by instructor)
Total Cash Outlays 268,705
Net Cash Balance (at the end of Year 14) 0
Note 1:
Receipts from Sales represents 75% of Year 14 revenues and 25
% of Year 13
revenues due to a 3-month lag in receivables collections.
Note 2:
Payments to Materials Suppliers represents 75% of the cost of m
aterials used
for Y14 production and 25% of teh cost of materials used for Y1
3 production due
to a 3-month lag in payments made to materials suppliers.
Note 3:
Production Expenses include all Y14 production-related expense
s (adjusted for
the exchange rate effects of shipping to regional
warehouses) except for
depreciation (which is a non-cash accounting charge).
Note 4:
Overdraft and 1-year loans received in Year 13 were repaid in f
ull in Year 14.

65. Interest on an overdraft loan received in Y13 would also be repa
id in Y14.
CASH AVAILABLE IN YEAR 14 $000s
CASH OUTLAYS IN YEAR 14 $000s
Cash Flow Notes
Credit ————
Rating
Measures
Interest Coverage Ratio (oper. profit ÷ interest exp.) 6.23
Debt-To-Assets Ratio (total debt ÷ total assets) 0.10
Default Risk Ratio (free cash flow ÷ principal payments) 1.29
Default Risk Rating (see Note 1) Medium
Credit Rating (at the end of Year 14) B+
Current Ratio (current assets ÷ current liabilities) 1.59
Operating Profit Margin (operating profit ÷ net sales revenues)
13.7%
Net Profit Margin (after-tax profit ÷ net sales revenues) 7.8%
Dividend Payout (dividend per share ÷ earnings per share) 0.0%
Free Cash Flow (after-tax profit + [depreciation – dividends] )
35,017
Total Principal Payments ($000s to be paid in Year 15) 27,166
Note 1:
A default risk ratio of 3.00 or higher results in a Low default ris
k rating, 1.00 to
3.00 results in a Medium rating, and below 1.00 results in a Hig
h rating.
CASH FLOW STATEMENT

66. SELECTED FINANCIAL STATISTICS
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