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The Business Turnaround

The Business Turnaround. The Business Turnaround Case Study. Define Current Business State Define Desired Business State. }. Be Realistic. Key Considerations of Current & Future States. Brand Category Competitive Situation Consumer Channel Dynamics Company.

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The Business Turnaround

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  1. The Business Turnaround

  2. The Business TurnaroundCase Study

  3. Define Current Business StateDefine Desired Business State } Be Realistic

  4. Key Considerations of Current & Future States • Brand • Category • Competitive Situation • Consumer • Channel Dynamics • Company -Key Strengths & Competencies To Be Exploited -Key Problems & Opportunities for Significant Improvement

  5. Brand • Global • Leading • Growing

  6. Category Dynamics • Growing – Worldwide – Mature and Emerging Markets • Category Will: -Be Around for a Long Time -Continue to Grow

  7. Competition • No Truly Global Competitor • Weak Competition – None More Than 15% Samsonite’s Size • Very Fragmented; Susceptible to Global Consolidation

  8. Consumer Needs • Product Features: • Ease of Mobility • Ease of Handling • Internal Organization - Best in Class • Styling: • Traditional • Casual • Fashion Forward - Consumer-Preferred

  9. Channels of Distribution • Luggage Specialty and Department Stores • National, Mid-priced Department Store Chains • Mass Merchandisers • Club Stores • Samsonite Owned Stores

  10. Company • Proven Record of Innovation • Proven Ability to Expand Into New Geography • Proven Products, Marketing, Sales & Distribution Already Has: • Clearly Defined Programs to Reduce SG&A • and Cost of Sales • Clearly Defined Programs to Globalize Best • Practices, Including Product and Brand • Marketing, as well as Manufacturing, • Sourcing, and & Operational Systems Needs:

  11. Samsonite Situation Summary • Leading Global Brands • Growing Worldwide Category • Multiple Channel Strategy Opportunities • Winning Competitive Position • Broad Consumer Appeal • Proven Innovative Global & Successful Company But… -Poor Cost Structure -Poor Global Competitor -Poor Global Best Practices -Poor Global Business Building Strategies

  12. Define Desired Business State for Company/Brand • From the Standpoint of the Consumer • From the Standpoint of Wall Street

  13. Consumer Vision of Samsonite An innovative, state of the art, best quality, luggage and travel accessory global leader, Samsonite does the best job of making travel easy and stylish for everyone in the world, at each key price point within the category. The brand is readily accessible for purchase, conveniently, on a global basis. Wall Street Vision of Samsonite A highly competent, trustworthy, innovative and successful, global company, possessing a healthy global leadership brand, capable of reliably generating sustained, double-digit earnings growth, at a strong return on equity, for the foreseeable future.

  14. Net…A Healthy, Growing and Very Profitable Global Luggage Brand/Company

  15. Define Measurable Criteria Necessary to Achieve Consumer and Wall Street Vision

  16. Define Measurable Criteria Necessary to Achieve Consumer and Wall Street Vision Consumer Criteria: -Brand Positioning -Target Audience Definition -Advertising & Media Plan -Products > > > By Trade Channel -Features -Styling -Price Points -Customer Service Requirements -By Trade Channel GLOBALLY BENCHMARKED VERSUS COMPETITION

  17. Define Measurable Criteria Necessary to Achieve Consumer and Wall Street Vision Wall Street Criteria: -P&L Double-Digit Growth -Double-Digit Top Line Performance -Return on Equity -Free Cash Flow & Accretive Plan for Use -Collaborative, Communicative and Helpful -No Disappointments -Consistent Pleasant Surprises GLOBALLY BENCHMARKED VERSUS COMPETITION

  18. Define Measurable Criteria Necessary to Achieve Consumer and Wall Street Vision Consumer Criteria: Wall Street Criteria: -Brand Positioning -Target Audience Definition -Advertising & Media Plan -Products -P&L Double-Digit Growth -Double-Digit Top Line Performance -Return on Equity -Free Cash Flow & Accretive Plan for Use -Collaborative, Communicative and Helpful -No Disappointments -Consistent Pleasant Surprises > > > By Trade Channel -Features -Styling -Price Points -Customer Service Requirements -By Trade Channel GLOBALLY BENCHMARKED VERSUS COMPETITION

  19. Define the Plans and Strategies Necessary to Achieve Vision Top Management Priorities

  20. Top Management Priorities – Define the Plans and Strategies Necessary to Achieve Vision • Organizational Effectiveness • Financial Considerations • Business Growth Opportunities

  21. Organizational Effectiveness • Top Management Priorities – Define the Plans and Strategies Necessary to Achieve Vision Leadership Team -Pick the Winning Team ASAP -Typically a Combination of the Best Inside the Company and Key Proven Executives Chosen from the Outside – Ideally People You Know and Trust -Senior Management Team -Fill Core Competency Outages Top Priorities > >

  22. Organizational Effectiveness • Top Management Priorities – Define the Plans and Strategies Necessary to Achieve Vision Organizational Structure -Simplify, Make Flexible, Nimble & Responsive -Design to be the Best Capable of Implementing Strategies Successfully and to Achieve Objectives -Eliminate Redundancies “An organization is Perfectly Designed to Get the Results it Achieves.” “Organizational Design Must Consistently Reflect Strategic Results to be Achieved.”

  23. Organizational Effectiveness • Top Management Priorities – Define the Plans and Strategies Necessary to Achieve Vision Organizational Incentives -Consistent with Shareholder Value -Consistent with Strategic Objectives

  24. Organizational Effectiveness • Top Management Priorities – Define the Plans and Strategies Necessary • to Achieve Vision Leadership Team -Pick the Winning Team ASAP -Typically a Combination of the Best Inside the Company and Key Proven Executives Chosen from the Outside – Ideally People You Know and Trust > > Top Priorities -Senior Management Team -Fill Core Competency Outages Organizational Structure -Simplify, Make Flexible, Nimble & Responsive -Design to be the Best Capable of Implementing Strategies Successfully and to Achieve Objectives -Eliminate Redundancies “An organization is Perfectly Designed to Get the Results it Achieves.” “Organizational Design Must Consistently Reflect Strategic Results to be Achieved.” Organizational Incentives -Consistent with Shareholder Value -Consistent with Strategic Objectives

  25. Top Management Priorities • Financial Considerations Cost Structure Improvements -Cost of Sales -SG&A

  26. Top Management Priorities • Cost of Sales -Raw Material Costs -Manufacturing Costs -Stocking or Warehousing Costs -Freight Costs

  27. Top Management Priorities • Raw Materials -“Ask and You Shall Receive” – Put Pressure on Vendors for Lower Costs - Concentrate Your Business with Fewer Suppliers – Trade More Business for Lower Costs - Learn What Causes Supplier Costs to be High on Our Raw Materials – If Possible, Eliminate These Specifications

  28. Top Management Priorities • Manufacturing -Benchmark Global Best Practices -Search and Reapply These -Insure all Processes Operated with Statistical Control and Measurement -Insist on Improving Reliability, Line Efficiencies, and Preventive Maintenance -Insist on a State-of-the-Art, High Commitment Work System – Skill Based, Team Based, and Outcome Based

  29. Top Management Priorities Net: Examine: Every Way Money is Spent Ask: How to Eliminate or Lower Cost Consider: Outsourcing Anything That can be Done Cheaper Yet at Right Quality and Reliability

  30. Top Management Priorities • Balance Sheet -Increase Payables -Decrease Receivables -Monetize ALL Non-Strategic Assets -Manage Capital Spending Down to a Level Equal to Depreciation -Reduce “Work in Progress” -Globally Standardize Component Products Whenever Possible -Have Suppliers Carry Raw Material Inventories -Consider Outsourcing Components and/or Small Parts -Manage Finished Product Inventories to 45 Days or Less -Consider Moving More Toward Just-in-Time Manufacturing, Sourcing and Forecasting Systems -Reduce SKUs by 20-40% -Analyze SKU Profitability & Realization Contribution -Manage Debt Down and Reduce Cost of Debt

  31. Top Management Priorities • Business Growth Top Line Growth Acceleration Plan -Product Architecture -Pricing -Margin Mix -Expansion into New but Related Category Segments -Marketing/Sales Initiatives -Brand Positioning/Advertising/Target Audience -Trade Channel Strategy -Vertical Integration Into Retail -Geographic Expansion

  32. Top Management Priorities • PDCA – Plan, Do, Check, Act Establish, Monitor, and Control Systems -Insure Information Systems are Accurate and Credible

  33. SamsoniteGame Plan

  34. Samsonite Game Plan • New Management Team • Structural Cost Improvements • Significantly Improved Product and Pricing Global Line-up • Accelerated Top-Line Growth • Improved Balance Sheet • Strengthened Financial Position • Exceptional Earnings Potential

  35. Structural Cost Improvements • Streamlining Organization • Global Sourcing of Products/Raw Materials • Product/Component Standardization • Cost Control Measures

  36. Structural Cost Improvements Streamlining Organization

  37. Structural Cost Improvements Headcount USA Wholesale USA Retail Other Americas Europe Far East 10/31/96 1,550 729 3,481 2,354 72 8,186 4/33/97 1,393 813 2,526 2,306 141 7,179 1,007 Positions • 12% Worldwide Reduction • 33% Worldwide Core Corporate Reduction • Expected Savings of $10+ Million

  38. Structural Cost Improvements Global Sourcing High Cost Market Low Cost Markets Fiscal ‘97 Fiscal ‘98 Taiwan 34% Philippines Thailand Dominican Republic Other Lower Cost Countries Taiwan 16% 31% 33% 15% 5%

  39. Structural Cost Improvements Softside Global Component Standardization Description Upright Handle Systems EZCartTM Handle Systems Wheels Carry Handles Sewn Handles Fabrics (Exterior-Interior) Vinyls Hardware Films Mesh Zippers Locks Webbing Hang Tags/Collateral Total Projected Fiscal Year Savings vs. FY ’97 Hardside Projected Fiscal Year Savings vs. FY ‘97 Fiscal Year ‘96 31 3 23 52 100 56 35 75 20 10 20 20 30 100s 6/97 7 2 10 10 100 25 15 25 10 5 6 6 12 50 1/98 5 2 8 10 20 15 10 20 5 2 3 3 6 30 $1.7 Million $2.0 Million $4.0 Million $2.0 Million

  40. Structural Cost Improvements } $30 - $35 + Million Savings In Year 1 $50 - $55 Million In Year II • Streamlining of Organization • Global Sourcing of Products/Raw Materials • Product/Component Standardization • Cost Control Measures

  41. Significantly Improved Product & Pricing Global Line-Up • Broaden Range of Product Features and Price Points • Move to Global Product Line • Drive Enhanced Margin Structure

  42. Accelerated Top-Line Growth • Accelerate Introductions – New Global Product & Features • Strengthen Marketing & Innovation • Expand Product Offerings • -Business Bags • -Casual Bags • Broaden Channels of Distribution • Continue Worldwide Expansion

  43. Accelerated Top-Line Growth • Accelerate Introductions – New Global Product & Features • Strengthen Marketing & Innovation • Expand Product Offerings • -Business Bags • -Casual Bags • Broaden Channels of Distribution • Continue Worldwide Expansion

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