1905

Case study 3: Yeti in 2020

THI QUYNH ANH LE- N01448059

ANDREW MANZA- N01362106
TRUONG THI KHANH HUYEN – N01432549
YUNAN SONG – N01507123
DEREK LOPES DA SILVA- N01414618
NICHOLAS DI POCE- N01377103
Question 1:
Yeti’s competitive strategy is through Yeti ambassadors that establishes their brand image in
social media with the customers and future customers. Being a premium priced brand, they
have a more high-end target market. Also, they focus on direct-to-consumer sales, and that
makes them increase their brand loyalty. Doing this made them increase the percentage of
their revenue. In addition, they partnered with a couple of high value brands in order to
increase their perceived value in the market. For example, they have partnered with PGA tour
which is the most recognized golf tours in North America. With that being said, they have
gained sustained brand recognition by partnering with such an important organization. In
consequence to that, their brand has more value added to it with their revenue increasing
simultaneously. Another strategy that they used to add more value to their clientele was to
expand their product line. They started producing apparel to their customers, with that
making their consumers their own walking marketers. Next is deciding whether or not Yeti
passes as a winning strategy. When deciding if they had a winning strategy the three key
topics are; The fit test, the performance test, and the competitive advantage test. Yeti has
shown that they have a competitive advantage because it is sustainable. Yeti has shown that
they can provide assets for their organization that their competition can’t. Yeti’s performance
test is also very important because it shows how their system is performing and shows the
workload that they have. Lastly, is their fit test. The fit test for Yeti has shown that they have
a positive strategy and helps measure the fitness of the business condition. After reviewing
Yeti’s strategy the main impact that happened was in 2016-2017 where the strategy helped
show positive results immediately.
Question2: Financial analysis

Profitability

2019 2018 Analysis

Gross Profit 52.02% 49.19% Gross Profit Margin increased from 49.19% in 2018
Margin to 52.02% in 2019. This demonstrates the percentage
of income available to cover operational expenses
and generate a profit. The increase in gross profit
margin shows their revenue was increasing due to
the company’s direct-to-consumer strategy including
its website and Amazon Marketplace.

Operating 9.82% 13.11% Compared to 2018, the operating profit margin

Profit decreased to 9.82% due to the increase in operating
Margin cost and expense.

Net Profit 5.52% 7.42% Yeti's net profit decreased from 7.42% in 2018 to
Margin 5.52% in 2019. The efficiency of a company's
production facilities has a significant impact on net
profit; this decrease is influenced by greater cost of
goods sold. This decline is also due to the company
spending more on innovation costs and expenses to
increase product quality.

ROA 8.01% 11.2% Compared to 2018, the ROA decreased from 11.2%
 to 8.01% due to its failing profits as well as
diminishing asset productivity. However, it could
also be because of the investment company made on
innovation cost which could lead to massive asset
acquisition.

Summary Statement:
Yeti's financial status is generally steady. Their Gross Profit Margin has grown from 49.19%
in 2018 to 52.02% in 2019. This growth is the result of the corporation shifting its strategy,
which includes growing existing product groups and entering new product categories. They
are focusing on direct to customer sales via the company's direct to consumer approach,
which includes its website and the Amazon marketplace. The profit from operations
decreased from 13.11% in 2018 to 9.82% in 2019 as the firm increased its operating costs to
research, develop, and test new products. It is a good investment in order to remain
competitive. Even if it decreased in 2019, the operational profit is regarded satisfactory on
average. It demonstrates how well a corporation handles its costs. The company’s net profit
has decreased slightly from 7.42% to 5.59% in 2019. It basically means that the company is
making less money per dollar sales whether it is a lower sales price or high cost. In this
specific case, the decrease was from all the expenses the company made to increase its
production quality as well as the innovation cost. With the decrease in net profit, the return-
on-assets also decreased as well. Specifically, it decreased from 11.2% to 8.01%. With a
declining ROA, it might show that Yeti might have over-invested in assets which could have
finally failed to produce revenue growth in the end.

Liquidity and Debt ratios (Liquidity and Solvency)

2019 2018

Current ratio 2.12 1.59 Compared to 2018, the current ratio in 2019
increased by 0.53 from 1.59 to 2.12. This is
showing the ability of a company to pay
 current liabilities with assets that can be
converted to cash in the short term. Yeti
maintains an excellent current ratio, which
suggests that it has twice as many current
assets as liabilities to cover its debts.

Long term 2.31 9.82 Yeti has the Long term debt to equity ratio
debt to dramatically decreased from 9.82 in 2018 to
equity ratio 2.31 in 2019. A decreasing ratio indicates that
a company is becoming less reliant on debts
over time.

Working $190,235 $109,675 Compared to 2018, Yeti’s Working Capital

Capital increased from $109,675 to $190,235 in 2019.
The amount of cash available for a company's
day-to-day operations. The increase is due to
the company having a higher source of new
account receivable and prepaid expenses. They
can cover the long-term debt in 2019 to lower
liabilities.

Summary Statement:
For Liquidity and Solvency, Yeti has a great improvement in 2019 through three tool
analyses: Current ratio, Long term debt to equity ratio, and Working capital. The increase in
the current ratio shows that companies maintain good assets to cover their debt. In 2019, the
company lowered its long-term debt and increased its assets. Low ratios imply a stronger
ability to borrow extra cash if necessary. The amount of cash available for the company day
to day operation is higher than in 2018 from $109,675 to $190,235 in 2019. Greater numbers
indicate that the firm has more internal finances to pay its current liabilities on time and
finance inventory development, more accounts receivable, and a broader base of operations
without borrowing or raising additional equity capital. Yeti does have a stable current
financial situation to support future growth.
Question3: For YETI products the value of the product design is enhanced.
Product design has always been an important factor in the innovation and
development of concepts, playing an important role in optimizing the performance of a
product design, enhancing its value and beautifying its appearance. Only those who value and
invest in unique industrial design are the strongest competitors in the market.
Enhancing product design performance. Excellent industrial design can promote product
design that is more rigorous in material selection, product design that is more optimized in
terms of performance requirements and more suitable for people's use, product structural
design that is more likely to gain a sense of belonging from users, and appearance that is
more intimate in terms of shape and color, all of which are given by industrial design.
Consumer demand for product design of non-essential consumer goods has shifted from low-
level consumption such as quantity, price and function to a high level of quality, taste and
branding, with various factors such as completeness of function, good quality, ease of control
and health benefits becoming hot spots for consumer demand. Focus on the comprehensive
performance of product design to enhance the company's image and status, but also more
conducive to product design. Industrial design is the 'soul' of a company's brand.
Despite record revenue and net income in FY 2021, Yeti's share price plummeted
from 2021/10/11/14, from 103 to 31.5. The likely reason for this was a supply chain shortfall.
Evidence of this is Matt Reintjes saying on Yeti's Q4 conference call. "As we evaluated our
growth areas, our focus and optimisation mandate and current supply constraints, we
ultimately believe that we can better serve Yeti customers more efficiently through our strong
existing wholesale partnerships, the direct channels we have and the growing international
opportunities. "My recommendation is that Yeti should actively seek out factories that can
OEM its products, not just in specific countries and regions, as a single production region is
often subject to systemic risk, 'unavoidable risk' or 'non-diversifiable risk ".
Another recommendation would suggest Yeti to take into consideration would be to
try and reduce their current operations cost. As you can see in the chart above Yeti's net profit
decreased from 7.42% in 2018 to 5.52% in 2019 due to greater cost of goods sold and
operating expenses. We recommend they search around or even extend their network
resulting in the creation of new relationships with suppliers and finding a new effective
agreement that could allow them to reduce the expenses they are currently paying and
introduce a new arrangement that could lead to a substantial increase in profitability for the
company.
References:
CaseBook (2022). Yeti in 2020. MC Graw Hill.com
Crafting and Excecuting Strategy ( 23e). Thompson. The Quest for Competitive Advantage