Harrington Collection:

Project VivaProtégé Consulting

Agenda

Analysis

Project Proposal

Implementation

To dedicate our team of executives and staff into providing fashionable apparel to women in the

United States while ensuring speed, quality, ethics, and maintaining good relations with our customers, suppliers and shareholders.

Harrington Collection: Mission Statment

StrengthStrong

branding, high

creditability, Customer

loyalty, high quality

WeaknessLate entrance into activewear

market, Management’s disagreement, low gross

margin

OpportunitiesOutsource, expand into other

markets,

ThreatsLow market

share,

SWOT

Porter’s Five

Rivalry

New Entrants:Operating Leverage,

competitive pricing, etc.

Bargaining power of CustomersExisting Competition, Demand elasticity, Quality and existing

differentiation

SubstitutesIdentifying different

substitutes and market share, market size

SuppliersSRM Systems, etc.

Substitute Suppliers,

Porter’s Five

RivalryBargaining power of

CustomersExisting Competition, Demand elasticity, Quality and existing

differentiation

SubstitutesIdentifying different

substitutes and market share, market size

SuppliersSRM Systems, etc.

Substitute Suppliers,

Porter’s Five

Rivalry

New Entrants:Operating Leverage,

competitive pricing, etc.

Bargaining power of Customers

Existing Competition, Demand elasticity, Quality and existing

differentiation

SuppliersSRM Systems, etc.

Substitute Suppliers,

Porter’s Five

Rivalry

New Entrants:Operating Leverage,

competitive pricing, etc.

SubstitutesIdentifying different

substitutes and market share, market size

SuppliersSRM Systems, etc.

Substitute Suppliers,

Porter’s Five

Rivalry

New Entrants:Operating Leverage,

competitive pricing, etc.

Bargaining power of Customers

Existing Competition, Demand elasticity, Quality and existing

differentiation

SubstitutesIdentifying different

substitutes and market share, market size

Division Product Line Focus

Classification

Retail Price Range

Target Range

Competition Market Share

Harrington Limited

Designer collection

designer $500-1000+

Sophisticated Elegance

St. John 20%

Sopra Evening wear

Bridge $400-800 Status seeker

Kay Unger New York

5%

Christina Cole

Career wear

Bridge $300-700 Office Chic Tahari 8%

Vigor Career wear

Better $150-500 Trend Setter

BCBG Max Azria

7%

Harrington Manufacturing Divisions

Objective

NOWLow market shareLow profit growthLow competitive

advantageSlow adaptation to

market

VISIONHigh market shareHigh profit growthHigh competitive

advantageFast adaptation to

marketSatisfied Customers

Loyal suppliers

Project Viva

Loyal Customer Base Leverage on Vigor’s existing brand High speed via pull tactics

Project Viva: Competitive Advantage

Focused market

Broad market

QualityHarringtonCollection Viva

Price

Project Viva?

Harrington Collection

Viva

To enter the Women’s Activewear market

Division Product Line Focus

Classification

Retail Price Range

Target Range

Competition Market Share

Harrington Limited

Designer collection

designer $500-1000+ Sophisticated Elegance

St. John 22%

Sopra and Christina Cole

Evening wear and Career wear

Bridge $300-800 Status seeker and Office chic

Kay Unger New York , Tahari

15%*

Vigor and VIVA

Career Wear and Active wear

Better $40-500 Trend setter and active living seeker

BCBG Max Azria and Juicy Couture

11%**

Harrington Manufacturing Divisions after introduction of VIVA

* Made available at company stores** After intro of VIVA

Alternatives to Project Viva

Short-term profit Brand health

Initial Investment

Profitability Index NPV

Market Share increase

Viva under Vigor good good 12.7m 0.55 6.98m 11%

Viva not under Vigor good neutral 26.6m 0.09 (6.45m) 4%

No Viva bad bad null null 0 0%

Financial Plan: Expected NPV = $6.98m Marketing Plan: Pull tactics HR Plan: Cut costs

Project Viva: Scope

Investment: $12.7m Expected sales: 6m “units”/year Expected lifetime: 15 yearsβ=1.35 Discount rate, CAPM:

r = .03 + 1.35(.15-.03) = 19.2%

Expected NPV = $6.98m

Project Viva: Financial

Positive NPV, resources available. Increase plowback ratio to allow more such brand

expansions Increase awareness of NPV rule internally

Viva: Financial Plan

Start Up Costs

Start Up Costs Pants Plant 1,200,000.00

Start Up Costs 2,500,000.00

Equipment Pants Plant 2,000,000.00

Equipment Hoodie and Tee shirt Plan 2,500,000.00

Launch - PR Advertising 2,000,000.00

Fixtures for Company Stores (50,000 * 50 stores) 2,500,000.00

TOTAL START UP COSTS 12,700,000.00

ANNUAL deprciation start up costs (straight line) 2,540,000.00

Annual Ongoing Operating Costs —Fixed:

Overhead Pants Plant 3,000,000.00

Overhead Hoodie and Tee-shirt Plant 3,500,000.00

Rent Pants Plant 500,000.00

Rent Hoodie and Tee-shirt Plant 500,000.00

Management/Support 1,000,000.00

Advertising 2,000,000.00

Total Fixed Operating Costs 10,500,000.00

Direct variable costs: Hoodie Tee-shirt Pants

Sew and Press 3.25

2.00

2.85

Cut 1.15

0.40

0.70

Other Variable Labor 3.20

2.40

3.05

Fabric 9.10

2.20

7.50

Findings 3.85

0.50

2.30

Total Direct Variable Costs 20.55

7.50

16.40

Direct variable costs translated into "unit" cost Hoodie Tee-Shirt Pants

20.55 x 0.5 7.5 x 1.5 16.4 x 1 10.28

11.25

16.40

Indirect variable costs

Wholesale "unit" price

95.00 total variable costs as % of whole sale price 9.09%

Indrect variable costs per "unit"

8.64

direct variable costs per "unit"

37.93

indirect variable costs per "unit"

8.64

Total variable costs per "unit"

$46.57

Contribution

Wholesale price per "unit"

95.00

less total variable costs per "unit"

45.57

contribution per "unit"

$49.43

Breakeven

fixed annual costs

$13,040,000.00

(divided by) contribution per "unit"

$49.43 in each of the first 5 years

(equals) breakeven units

263,807

Profit margin

Revenue

$39,900,000.00 * Contribution

per unit

less fixed annual costs

$13,040,000.00

less total variable costs

$19,559,400.00

Profit before tax

$7,300,600

Sales Projections to Macroeconomy

1 2 3 4 5 6 7 8 9 10 11 12 13 14 150

2

4

6

8

10

12

Sales, optimisticSales, realisticSales, pessimistic

Sale

s, m

illio

ns o

f uni

ts

Years

Situation AnalysisOptimistic Realistic Pessimistic

C_0 (12.70) (12.70) (12.70)C_1 4.38 3.65 2.92C_2 4.38 3.65 2.92C_3 4.745 4.015 3.285C_4 5.11 4.38 3.65C_5 5.11 4.38 3.65C_6 5.475 4.745 3.65C_7 5.84 5.11 4.015C_8 6.205 5.475 4.015C_9 6.57 5.84 4.38C_10 6.935 5.84 4.38C_11 7.3 5.84 4.015C_12 5.84 5.11 3.65C_13 5.84 5.11 2.92C_14 5.11 4.38 2.92C_15 4.38 3.65 2.92Situational NPV $10.33 $7.23 $3.31 *Probability 0.3 0.4 0.3= $3.10 +$2.89 +$0.99 =NPV of project

@ 19.2% DCF = $6.98m, Risk: Beta=1.35

Pull tactics: Investment in market research◦ Focus groups◦Web-based consumer behavior monitoring

Advertising◦ Cut back on nation-wide advertising◦ Increase product endorsements

JIT Leverage on existing customer base for short-term Expand into new markets for long-term

Viva: Marketing Plan

The way it is: Push

Branding

Product

Design

Buying

The way it should be: Pull

Branding

Product

Design

Buying

Market Research

JITResponding to market

demand

Short

Lead

Times

Just in TI

MEReliability, internal communication,

CRM, SRM Systems

Mexico!

Life cycle of a fad design

Time, 1 month/increment

Sales Quantity, 1 m

illion/increment

Life cycle of a fad design

Time, 1 month/increment

Sales Quantity, 1 m

illion/increment

Viva Athletic WearThe Trend Setter

Competition from ourChinese friends

Target MarketPulling the JIT:

Working for our customers, not our designers

Viva Aura (perfume) Viva Crown (jewelry) Viva Diva (makeup) Viva Bra (lingerie) Viva Java (tabloid magazine)

To leverage on the existing loyal customer base Low risk

Selling the lifestyle

Products ‘sell themselves’∴ Cut back on excessive sales training Reduce “attractive” commissions Improved Horizontal Communication Diversify Reward innovation and foster idea champions

Human Resources

Appeal to customers’ values◦ Allows for charging a premium

Green energy solutions Project SHAL◦ Sustainable, Healthy, Active Living

Innovation and sustainability

Long-term abstract Intangible returns Ethical practices Lifestyle Integrated Branding◦ Cork floors◦ Recycled Receipts◦ Customer interaction◦ Extended offers for personal health products

Project SHAL SHAL

The other brands Harrington Limited◦ Cash Cow

Christina Cole & Sopra◦Merger

Vigor◦Maintenance of slow growth

Merger of Sopra and Christina Cole “Bridge” Same target market Cut costs, free up resources Similar market share “The status-seeking office chic”

Objective

NOWLow market shareLow profit growthLow competitive

advantageSlow adaptation to

market

VISIONHigh market shareHigh profit growthHigh competitive

advantageFast adaptation to

marketSatisfied Customers

Loyal suppliers

Project Viva

WBS

Risk Mitigation

Gantt

Implementation Cube

WBS

Project Viva

MarketingJIT, Pull

Customer Relations

MIS

Even faster lead time

Lifestyle selling

Introduction of Viva sub-brandsProject SHAL

HRCut costs

Decrease commission Decrease training

FinanceIncrease share price

Issue more stocks Increase Plowback Ratio

Gantt Chart: short term

2008 Q1 Q2 Q3 Q4

MarketingMarket Research Viva reception

Viva full launch

Finance Project Approval

10% increase in share prices in PVGO

HR/InnovationCut commission Diversification

Sustainability ResearchGreen initiatives

Gantt Chart: long term

2008 2010 2012 2014

Project Viva Enable JIT Lifestyle branding R&DAggressive promotions

Project SHAL Green initiativesCustomer appeal

Finance10% increase in share price

5% increase in Equity

10% increase in Equity

Risk: Decision TreeProject Viva

small initial steps

Good reception

Merge CC and S to free up resources

Open exclusive Viva stores

Bad reception

Mitigation:Re-brand

Objective

NOWLow market shareLow profit growthLow competitive

advantageSlow adaptation to

market

VISIONHigh market shareHigh profit growthHigh competitive

advantageFast adaptation to

marketSatisfied Customers

Loyal suppliers

Project Viva

Q?

Cora Lam June Kim Johnny Dewan

Protégé Consulting

Thank you