Revenue Growth and EBITA: Mercury International

Introduction

The growth rates envisaged for Mercury shoes had been targeted at 10-15% in revenues, EBITA, and stock prices for the coming four years. However, when this is compared with actual dismal performance during the last few fiscals and the fact that the targeted figures may not be achievable, due to several internal and external factors that weigh heavily upon the conduct of business operations in this company, in all global parts of the world in which it operates, namely, the US, Asia and the European Union.

Aspects that impact business growth and achievements

Several aspects negatively impact positive business growth and achievements in the future and these could be seen in terms of the following:

1. Productivity
2. Brand image
3. Presence of non-productive brands that do not contribute to overall business performance
4. Severe impacts of recessionary trends, mainly in EU countries and US markets.

It is now proposed to consider each of these aspects individually to arrive at the major reasons why estimated growth targets may not be forthcoming.

1. Productivity: It is seen that the major ailments of Mercury shoes are that it is not able to meet demand consistently and in all regions of operations. One of the main reasons for this is low productivity. In the US, the average worker produces 6800 units per quarter. In the EU countries of operation, this is 6600 units per quarter, while in Asia; this is only 5200 units per quarter. Besides, the Asian market does not have many production cycles and different product lines. Therefore, it is necessary to boost up productivity through incentive schemes or strategies like outsourcing production capacities to low-cost countries outside Asia. When spare capacities are utilized to the fullest, production is increased, which translates into higher revenue streams, thus contributing to revenue growth and increased EBITA. “Until root-cause analysis of worker efficiency roadblocks can be determined, supply chain staffing needs to be increased so that stock-outs do not occur” (Supply chain evaluation, 2010).
2. Mercury Shoes suffers from low brand image and reduced visibility in the marketplace. Their strong brand which sells the most is Boost brand, and for which the company incurs most budgeting costs. The other ancillary brands like Trail set brand and Snow step brands do not gain advertising mileage and thus do not possess strong brand image and customer choices which advertising and sales promotional strategies could produce. Therefore, it is necessary that these brands also receive strong advertising backups, leading to greater sales and revenue generations. Strong brand image, especially in competitive markets is a very important aspect of increased revenues and EBITA. “Moving forward in 2010 we plan to streamline our marketing efforts through utilization of myriad free marketing outlets, reallocation of dollars to emerging markets, eliminating ineffective and wasteful marketing, and rebranding of established brands” (Marketing strategy for Mercury shoes, 2010, p.1).
3. Another aspect that could lead to lowered revenues could be the production and marketing of non-productive brands which have no contribution value. In essence, these only serve to negate the positive aspects of other good, profit-making brands. Therefore it becomes necessary to either remove these brands, or ensure their contribution and success in future.
4. Major economies in the world have been affected due to major recessions that have severely impacted their economies. The business of Mercury Shoes has not been excluded from this too, but it is believed that through robust economic and financial risk alleviating measures, the negative aspects of a recession could be reduced. This could be in terms of effective hedging of foreign currency transactions and other risk alleviation measures.

Conclusions

Through sound product branding, sales and promotional techniques and diverse risk management tools, it is believed that uncertainties could be controlled to a large extent, and forecasted growth and EBITA could be achieved in the years to come.

Reference List

Marketing strategy for Mercury shoes, (2010). Mercury International Ltd, p.1. [Provided by customer].

Supply chain evaluation, (2010). MEMO. [Provided by customer].