Les MIz is a family enterprise that was established in 1984 by the late Don Bienvenido Ducor. The enterprise has its mission to provide high quality ladies leather shoes for the export market. Don Ducor dreamt of becoming the premiere Filipino exporter of high quality footwear to Europe.
In 1990, Mrs. Españada, Don Ducor’s daughter, took over the management of the company after her father died. Mrs. Españada had trouble running the company because it was saddled with low sales, debt burden, and operational problems.
I. Time Context and Setting: 1992, Philippines
II. Statement of Objective
To assess the feasibility of Les Miz Shoes’ long-term mission and to develop an overall strategy to attain it
III. Central Problem
What strategic plan is most appropriate so that Les Miz Shoes will be able to attain its objective?
IV. Areas of Consideration
1. Ability to survive and continue its operations despite of recurring losses through the years.| 1. Unable to develop and implement definite pricing strategy.| 2. Ability to handle production even without the new machineries.| 2. Inability to consider advertising and marketing strategy to increase sales. | 3. Ability to create export-quality shoes. | 3. Holds a contract with Rustom’s that states Les Miz could not sell its shoes through distribution outlets other than Rustom’s branches, which limits the company’s distribution strategy.|
1. Soaring sales in Les Miz’s low-priced line of shoes.| 1. The fluctuating dollar rates have led to unstable importation costs along with higher interest rates brought about by the instability of the political environment.| 2. The cash settlement released Les Miz from its long-term debts and freed the company from its enormous interest payments from such loans which had been made to buy non-performing assets.| 2. Les Miz imports 100 percent of its raw materials that is too costly which leads the company to increase the shoes’ price that results to lower sales.| 3. Has the ability to distribute its products through establishing its own outlets.| 3. Importers preferred to deal with shoemakers who already had established local markets.|
V. Alternative Courses of Action
Action| Pro/s| Con/s|
1. Develop and implement marketing and pricing strategies.| * There will be a higher probability for stable sales increase, increased market share, and reduced stiff competition. * The company will able to assess and plan definite prices that are sufficient to cover the costs incurred. * The company will be able to have more patrons.| * Lack of budget to develop and implement such strategies. * The management doesn’t have the knowledge to make such strategies.| 2. Cancel the contract with Rustan’s and develops its own distribution strategy.| * The company’s distribution strategy will not be limited to Rustan’s. * There will be an increase in market share.| * It will be difficult for the company to distribute on its own because they are not a prominent company unlike Rustan’s. * It is difficult to search for good market locations. * Lack of budget to establish branches.| 3. Establish prominence in the local market prior to the export market.| * Importers prefer to deal with companies who already had established local markets. * The company will have to face lesser risks in fluctuating dollar rates which have lead to unstable importation costs and higher interest rates * The company will generate higher returns due to lower production costs and probable higher sales.| * It will take ample time for the company to attain its primary objective.|
VI. Strategy Formulation
I therefore conclude that the best solution to the problem is alternative course of action no. 3 which is to establish prominence in the local market prior to the export market. Because with this plan of action is most appropriate so that Les Miz Shoes will be able to attain its objective, although in a longer period of time. Moreover, the company can expect that there will be lesser risks and higher returns.
VII. Plan of Action
1. Instead of using imported raw materials that are too costly, which leads the company to increase the shoes’ price that results to lower sales, the company may choose to use materials that can be found locally that are of the same quality. 2. Develop strategies that are necessary for the company to attain company’s objective such as marketing strategy to increase sales and assess stiff competition, and pricing strategy to stabilize production planning. 3. By the time the company is able to generate high enough returns; they can plan on distributing its products on its own established outlets on good market locations and increase the company’s market share. 4. After establishing prominence in the local market, the company can now able to plan it on the export market and attain its primary objective.
VIII. Potential Problems
1. What if the company is not able to find suitable raw materials locally? 2. What if the company is not able to generate enough returns locally due to stiff competition? 3. What if the management is not willing and doesn’t like the idea of the suggested plan of action?
IX. Contingency Plan
1. This will least likely to happen because Philippines is well-known for its high quality products which are made from materials that are found locally. But in such case, the company can assess the problem by looking for materials in countries that the company will be best benefited considering both the costs that will be incurred and its quality. 2. The problem will be least likely happen considering that Les Miz is able to produce export-quality products and that marketing, distribution and pricing strategies development and implementation are included in the plan of action. 3. The company may choose to consider plan of action number 1 or 2, although the overall problem of the company will not be assessed.