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El Cerrito Presentation (DRAFT) - BASM 523 - Sept 11, 2017
El Cerrito Presentation (DRAFT) - BASM 523 - Sept 11, 2017
Prepared by: Group of Gao, Li, Li, Marcelo, Putra, and Sharma
1
Background
Executive Summary
El Cerrito is 64-year old leather goods company that operates in the luxury goods space. It has a
consistent line of products, steady operations, and a loyal customer base. Its portfolio of products
includes handbags, accessories, and other products.
It is a brand-driven company with brand at the core of the companys vision and strategy. As such, El
Cerrito embraced the values of customer satisfaction, integrity, innovation, and collaboration.
Michael Belden, the current VP of marketing for RS International (parent company of El Cerrito), has
proposed three initiatives, which are forecasted to increase the profit margin by 4.2% in the coming
year. However, his CEO is targeting a 20% increase bottom line increase instead in order to ensure that
their stock price ($3.00 per share) is well-supported.
Initiatives such as expanding sales in outlet channels, implementing more robust production
outsourcing, and carrying out more extensive brand licensing strategy could augment current forecasts.
With that said, these proposed initiatives still carry risks and restrictions that could erode brand equity.
In order to achieve the aggressive net income growth target of 20% there must be a disruption to the current
business model as anything less would fall short of the target.
Long-term sustainability of the business model is imperative to support stock price. Therefore, El Cerrito
should be concerned with partnering with suitable investors and not be swept up by short-termism.
500 0.00%
-2.00%
Primary sales channel are 169 company-owned 480 -4.00%
Channel stores, which account for 64% of all sales while (in $ mn) 1997 1998 1999 2000
36% of sales come from 1,400 indirect retail Net Sales Revenue Growth
40 8.0%
Products are primarily internally manufactured but,
30 6.0%
Operations in recent years, El Cerrito has been slowly increasing
its reliance on more production outsourcing. 20 4.0%
10 2.0%
0 0.0%
While El Cerrito competes with other luxury brands, (in $ mn) 1997 1998 1999 2000
Competitors which are mostly based in Europe, they have a Operating Income Operating Income
unique advantage to their lower pricing and
emphasis on its American roots.
Gao, Li, Li, Marcelo, Putra, and Sharma 3
Analysis
40.0%
30.0%
10.0%
Increase more and/or evaluate to move up the luxury 0.0%
ladder and increase margin even further 1999 2000 2001 (est.)
Promotion Price
With a 7 million customer base, El Cerrito The proposed price increase can be more
needs more data on the effectiveness of drastic. More market research should be
its current campaigns (i.e. conversion done to explore the willingness to pay of
rate) the current customer segment.
Explore ways to fortify brand identity: Raising the price more might reposition
collaboration with companies from the brand in a more lucrative space
different industries for PR?