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۞ Seth Chapman
۞ Billy Pittman
۞ Tom Pittman
۞ David Gross
The initial investment was $200 each. One of the members was bought by others due to
lack of contribution to business. The basic idea behind start up of CDI was a new T-shirt
design of Seth’s own. The all three people had different degrees and experiences. Billy
held a dual major degree in graphic design and communications. Tom was doing
bachelors of Arts in advertising.
The first step was set up of a credit account with a local screen printing company in 1986.
In 1989, it grew to a trade mark of logo of college and design of university of Alabama
on T-shirts. Different designs were available for ladies and gents, tank tops, game day
designs and custom designs.
At the start of 1990, The 3 partners set up some new objectives and emphasized on
growth strategy. They wanted to create more trademarked designs for collegiate and
further included a product line for children’s clothing and adult-size apparels. The
financial l position was stronger at the end of 1989. CDI sales boosted up from $10,000
to $329, 548 in 1989. However, t he net income decreased form $18,316 to a loss of $19.
This further included a purchase of space where they could market their products and see
what the competitors were doing. The World Congress Center held a show where all the
displays could be kept. It also helped in bringing out what kinds of new products and
styles were coming into the market place.
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I.2 CDI MISSION STATEMENT
“We want to bring motivation and novelty to every sports person in the world.
We strive to be a leader in the collegiate licensed outfits industry with brands built on an
obsession for sports and a healthy lifestyle.
We are consumer focused. That means we continuously improve the quality, look, feel
and image of our products and our organizational structures to match and exceed
consumer expectations and to provide them with the highest value.
We are innovation and design leaders who seek to help athletes of all skill levels achieve
peak performance with every product we bring to the market.
We are committed to continuously strengthening our brands and products to improve our
competitive position and financial performance.
In the medium term, we will use more of the internal facets of the business and less
reliance on outer aspects. In the long-term, we will build relationships with suppliers as
our success wholly depends on the material they provide."
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۞ Provide quality and innovative services and products internally and externally.
۞ Maximize profits.
۞ Continuous improvement
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PART II CDI ENVIRONMENT
The other issue was copy right infringement. CDI took certain steps to ensure that copied
products were kept away from market and customer.
@ Manual
@ Automated
The only difference between automated and manual process is that machines could work
for hours whereas workers had to take breaks in manual systems. The other difference
was price. Automated machinery cost from $3,000 to $10,000 while manual equipment
ranges from $200 to $2,000.
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II.1.4 Economic Environment
The only aspect of economics discussed in the case is sectoral growth. The collegiate
licensing industry growth is discussed well in the case. The industry was growing and the
growth was traceable to a number of factors. The main reasons for the growth for
collegiate licensing industry were:
II.2.1 Clients
The clients included many customers from sports athletes to females. The main target
market comprises college students, trendy youngsters, females adult and the products
were manufactured for children as well. The new product line of CDI kept adding new
customers.
II.2.2 Competitors
@ Nike
@ Adidas
@ Russell Athletic
@ The Game
@ Artex
Russell Athletic was a fully integrated national supplier. Russell was involved in spinning
the yarn from cotton, making synthetic fibers from cotton, and manufacturing finished
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apparel in various cutting and sewing operations. It used both automated and manual
processes for printing. Russell also provided private label garments from apparel makers.
National players like The Game and Artex purchased private-label goods from apparel
makers and did their own screen printing. The Game offered a wide range of apparel
items including T-shirts, caps, sweatpants, scarves, gloves and Frisbees. It was not
involved in the production of non-printed apparel items. Champion Products Inc carried
larger garment selections consisting of athletic uniforms, recreational and leisure wear,
cycling clothes, fiber outfits, and athletic shoes. Rah-Rah sales Inc used private labeled
blanks and in-house own screen printing. It was also closing and moving away from
private label merchandise due to loss of business. It planned to move to a totally
differentiated strategy.
II.2.4 Suppliers
@ Promotional Pullovers
@ Hanes INC
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CDI suppliers for blanks included these. The main problem in the industry was cotton
shortage. Prices were high and supplies of all cotton garments were limited. The
agreements led to expensive charges and high COD.
CDI established an account with Hanes Inc but soon discovered that the prices were high.
Other relationships were made with Fruit of the Loom as a back up. It announced
increased prices in 1989 and CDI had to change its suppler. They switched back to Hanes
Inc due to reasonable prices.
II.2.5 Labor
The labor CDI had no special training and experience. Nothing is mentioned about the
type of people working at CDI. Some sales force used to work. They want to engage
more skilled and trained workforce in their organization. They want to reduce working
hours and expand staff. CDI focus is to get more recognition.
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II.3.2 Communication Network
CDI had a good network of communication. There was no top structure defied as such.
The network inside the organization was good because the 3 founders contributed
equally.
۞ Provide quality and innovative services and products internally and externally.
۞ Maximize profits.
۞ Continuous improvement
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II.3.5 Product
The products were collegiate licensed ones. The industry grew quickly. T-shirts, full line
of male and female designs, game day designs, custom designs for local organizations in
sweatshirts and tank tops. It had a niche strategy.
II.3.6 Advertising
To advertise in sports magazines like Sports Trends and Impression.
II.3.7 Pricing
It is currently charging a full wholesale price to buyers. There were no purchase
discounts.
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The distribution strategy was through reps. the certain rep groups worked for CDI. Rupp
Bookmeier was the one. However the distribution system was not that efficient and
needed improvement. Figure 1 shows the distribution network of CDI. The pink area
shows manufacturers’ rep of CDI and purple one show products. All of these were
earning a commission of 10%.
Cirle-M,
Cole Harris Campus Rapp
Cirle-M,
Campus Rapp
Earl Williams
Cirle-M,
Pat & Dan Campus Rapp
O Connell
Cirle-M,
Campus Rapp,
Bonnie Ross Greek Shirts
Cirle-M,
Herman, Campus Rapp
Thompson and
Wells
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@ Ability to supply game day 1989 Accounts Receivables
shirts for all University of increased, cash reduced)
Alabama athletic events. @ Poor distribution system
@ Copyrighted designs.
@ Design similarity
@ No well defined job
@ Weak pricing system (whole
descriptions (could be positive
sale charges)
since no red tape and decision
@ No Economies of scale
delaying occurred.)
@ Capital requirements (could
be financed with short term
loans)
Opportunities: Threats:
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athletic programs @ Unreliable manufacturers’ reps
It also had a niche in game day shirts which bigger players did not encompass.
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II.6.2 Inventory Management
It must improve its inventory management system. The inventory in 1989 has increased
from $17,279 to $23, 809. The cash has reduced. The more inventories are sold, the more
cash flows are there.
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II.6.9 Better Advertising Strategy
Some better advertising strategy needed to be adopted. They must advertise in sports
magazines and magazines read by teenagers or university students. They can introduce
sponsorship program which would give them wide recognition.
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PART III CORPORATE, BUSINESS AND OPERATIONAL
STRATEGIES CDI
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financial planning does not seem to exist in order to support the desired growth. The
Human resource strategy is that customer service has many employees, but the 3 owner
would also be found at customer service. The HR strategy has positive and negative
points both. Due to absence of a formal hierarchal structure, the decision-making can not
be delayed, (no power distance and red tapes). But one needs to know what his/her job is.
A company where ambiguity about certain job roles exist, may create problems.
The current business level strategy (focus) has strong plus weak points as well. The
benefit of focus strategy is that the CDI has a market niche in game day shirts for athletic
events, which large firms like Russell does not have. Through specialization and
concentration of its resources, CDI could serve requirements of niche segment better than
even big players in the market.
The biggest risk or handicap of focus strategy is that tastes of the niche segment could
change over time. (There is an impending taste for game day athletic shirts, but it may
change in future). CDI needs to be well aware of the tastes of the consumer segment
changing tastes. Even if the same market segment is captivated by bigger players with
economies of scale, CDI may suffer.
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III.5.1 (At Corporate Level) Diversification Strategy
CDI must go for some vertical back ward integration, after careful analysis, with its
suppliers. The high price charged by suppliers is a problem for them. It must also go for
forward integration with retail shops. Since cost is a problem, backward integration with
either (Fruit of the Loom, or Hanes Inc) would make CDI have some competitive
advantage. Forward integration would help CDI gain control over sales and prices of its
existing products.
The CDI suppliers plus distribution channel is weak and this is a time to go for vertical
integration. On the other hand, CDI can go for horizontal diversification as well. It can
merge with any of the big players in the industry. This would give a mutual benefit.
Stability and turnaround strategies can not be adopted. Stability strategy works where
environment is stable. CDI is not in a turnaround condition. CDI may plan to get acquired
by a bigger player in the industry for the sake of benefit.
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Low Cost Value Chain
CDI can adopt differentiation strategy but it would be a very challenging job. They need
to crate differentiation at every step in the chain. Products could be easily copied and
R&D investment very high. The following table makes it clear:
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Differentiated Value Chain
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III.6 THE CDI ENVIRONMENT
Competitors
(Adidas, Nike, Artex,
Rah-Rah Sales, Russell,
The Game,
Champion…)
Buyers
Technological
Legal
Manual +
environment
automated
infringement laws
technology
International
environment
III.7.2 Suppliers
The suppliers are really powerful as the success of CDI wholly depends on supply.
@ Promotional Pullovers
@ Hanes INC
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CDI suppliers for blanks included these. The main problem in the industry was cotton
shortage. Prices were high and supplies of all cotton garments were limited. The
agreements led to expensive charges and high COD.
CDI established an account with Hanes Inc but soon discovered that the prices were high.
Other relationships were made with Fruit of the Loom as a back up. It announced
increased prices in 1989 and CDI had to change its suppler. They switched back to Hanes
Inc due to reasonable prices.
III.7.3 Buyers
Powerful and all those who have a passion for collegiate licensed products.
III.7.4 Substitutes
Nothing is mentioned as substitute for a college licensed product, (in the case, as many
could exist).
New
Buyers
players
Internal
competitio
n
Substitutes
Suppliers
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III.7.5 Internal Competition
@ Nike
@ Adidas
@ Russell Athletic
@ The Game
@ Artex
Russell Athletic was a fully integrated national supplier. Russell was involved in spinning
the yarn from cotton, making synthetic fibers from cotton, and manufacturing finished
apparel in various cutting and sewing operations. It used both automated and manual
processes for printing. Russell also provided private label garments from apparel makers.
National players like The Game and Artex purchased private-label goods from apparel
makers and did their own screen printing. The Game offered a wide range of apparel
items including T-shirts, caps, sweatpants, scarves, gloves and Frisbees. It was not
involved in the production of non-printed apparel items. Champion Products Inc carried
larger garment selections consisting of athletic uniforms, recreational and leisure wear,
cycling clothes, fiber outfits, and athletic shoes. Rah-Rah sales Inc used private labeled
blanks and in-house own screen printing. It was also closing and moving away from
private label merchandise due to loss of business. It planned to move to a totally
differentiated strategy. (Many others are mentioned in the case, but nothing about the
strategies of competitors).
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PART IV EVALUATION MODEL
The mathematical models for strategy evaluation can be used. They are:
@ ROI
@ ROA
@ Profit margin
@ Debt/equity
@ Sales growth
@ Asset growth
By looking at the balance sheet and income statement of CDI, two year performance can
be measured.
1988 1989
The returns are negative and ROE is negative as well. This means that the current
strategies are not meeting the requirements and would not be effective in future as well.
A better model of strategy evaluation, balanced score card can also be used.
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PART V CASE TERMINOLOGIES
CASE GLOSSARY
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Aphorism; brief statement or principle
Boost; raise
Bustle; hurry
Contemplating; surveying
Converge; meet
Dart; back
Echo; sound
Embellished; beautified
Glimmer; shine
Imperative; urgent
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Liaison; network
Luminous; sparkling
Maneuver; planned
Roundabout; circumlocutory
Strenuous; tiring
Suavely; sophisticatedly
Ties; relationships
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Vendor; supplier
Vibrant; energetic
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