Aiming to be the best costs provider, we try to provide the best combination of the quality, image, service and model availability with the lowest prices. For the same token, we want our customers to get the best value by spending the same amount of the money. We took following actions to realize our strategy. We increased budget allocations to quality control in our Asia and Latin American plants in Y13 and Y14, which attributed to the positive variance. Increased the investment in methods improvement and styles and features to improve our quality rating and reduce the manufacturing costs.
In Y14, we increased delivery time for Internet orders to next day air, “A” mailing option. This had a favorable impact on our Internet Sales for Y14. Effective in Y14, the delivery costs for Internet and branded markets dropped, resulting in an overall decreased cost, and increase in net income. In order to capture this, we upgraded our delivery option. In order to improve our customer service and marketing ratings, BEX increased dollars in our retail support budget. We also increased the number of our retail outlet in every geographic market.
In Y13 and Y14, we took advantage of celebrity endorsement opportunities, as we aim to achieve our marketing goals. As of Y14, BEX currently holds 4 celebrity endorsement contracts. Each year, as profits increased, BEX has been committed to giving back to our dedicated labor staff by increasing incentive pay, which in return increases the productivity and decrease the reject rate. The increase in the number of “megastores” has contributed to our increased markets share in the branded market. Incorporated a higher percentage of long-wear material in athletic footwear products.
Gave up the private label market, which is a low price and low quality market. 2. External environment The footwear industry can be broadly divided into two groups. Companies D, E and F are focusing on low end of the market. Companies A, B and C are doing the business in high end market. Basically, we are directly competing with companies A and C, although the remaining companies also have big influence on us. Several comments on the current external environment. – The over capacity situation has gone. Passing through the blind investment period, many companies have got rid of their additional capacities.
The overall demand has exceeded the overall capacities. – Company C is using all the resources to push up their quality/image/service/model and to charge a high premium from it. – Company A has survived the financial difficulty and tried to follow its differentiation strategy. – Influenced by the strategies of companies A and C, the prices of footwear market have been pushed up a lot. Given the situation of the industry, we took following actions. Upgrade of Asian plant to take effect in Y15 to accommodate increasing demand. Tried to increase our quality/image/service/model and prices, while still maintained a lower price than A and C’s.
Internal situation Trying to provide best value to our customers, the demand of our products exceeded our supply in year 14. We had stockouts in Asia, Europe and Latin America. This hurts our service rating a lot. Influenced by the increasing market demand, we increased our whole sale and internet sale prices. This helped to improve our EPS/Revenue/ROE and stock price. We had lots of cash on hand. We invested in retail outlet support and increased delivery options to recover our service rating. In order to avoid stock outs, we had to adjust our price to a higher level.
Having much cash on hand, we did partial payment of outstanding bond debt to maintain our AAA bond rating and reduce our interest costs. Increased dividend payout ratio. 4. Overall Following our strategy and the paying great attention to the market situation, we successfully reached and exceeded our operation targets. As the demands and whole sale prices keep increasing, we anticipate that our Revenue/EPS and stock price will still increase. However, we have lost the market leader position since year 14. We plan to take following actions to strengthen our competitive position.