Question 1

Michael Porter defined three generic competitive strategies. Explain the strategy chosen by Real VGS, and describe the decisions that they would need to make in termsof pricing, marketing and distribution to maximise market share.

Question 2

If VGS revenue in 2022 were 1,124,000, and the companysold women sneakers only, would VGS be makinga loss or a profit? Explain why.

Would your answer remainthe same if VGS sold menssneakers only?

Note: assume that fixed costs stated in the case study remain the same for both questions.

Question 3

What can VGS do to increase their profit in the next few years in your answerrefer to the VGSs strategy, and to the contribution margin of each type of sneakers.

Case study

RealVGS is a sneaker merchandising company that positions itself in the quality segment thanks to constant innovation in its business operations and products. The company started operating in London five years ago, specialising in men's and women's sneakers. RealVGS was set up by best friends Jana Smith and Oliver Johnson.Jana is responsible for the creative directionof the company and marketing. Oliver handles the administration and inventory management. A year ago, they brought in Jana's younger sister Alice, who recently quit a job in the financialsector, to join as RealVGSCFO, to undertake some research. Soon after entering, Alice was asked to review the company's current financial situation in 2022 and 2023 (presented in tables 1, 2, & 3) and to analyse the impact of a range of possible decisions on revenues and profits. The company is facing increasing competition from a newcomer within the quality market segment, GravitySneaks.

Table 1: Sales,Revenue, and cost

Sales	2022	2023
Sales volume
Men*	25,728	21,556
Women*	7,658	6,963
Total Revenues	2,121,020	1,495,580
Total Costof sales	1,058,872	819,077
Gross margin	987,794	676,503
Marketing andSales	78,954	435
General administration cost	451,000	391,000
Net profit	457,840	285,068

Table 2: Selling Pricesand Variable Costs

2022

2023

	Mens Sneakers	Womens Sneakers	Mens Sneakers	Womens Sneakers
Price per pair	60	70	50	60
Purchase Cost	30	32	24	26
DistributionCost	5	5	5	5

Table 3: Share of Total Market (Quality)

	2022	2023
Mens	19%	12.2%
Womens	11.5%	12.3%