How strategic management helps identifying a company's most promising business area
Companies distributing sports equipment in Switzerland have different challenges to cope with. For example, the seasonality of different sports defines how much effort has to be invested into one sport at a specific time of the year. Therefore, it may require selecting different sports that cover the different seasons. Already a mismatch in seasonal requirements may result in punctual peaks, positive and negative, in business and with that in financial figures. This is difficult to manage and requires a well thought through product portfolio.
Roger Kaufmann, 2019
Bachelor Thesis, Ruckstuhl Sport GmbH
Keywords: strategic management, strategic segmentation, industry analysis, competitor analysis, portfolio analysis
In 2010, a company active in the distribution of golf equipment acquired a company that focused on the distribution of sports equipment for various different sports. It was intended to push the business of the newly acquired company especially in the low season of the golf business. However, the focus of the employees remained on the golf business. While the low-season of the golf business was used to prepare for the next golf season, only little time was invested in the business of the newly acquired company. The devoted resources for the new business were limited on order fulfilment. Customer acquisition or promotional activities were neglected due to time constraints. Conclusively, many customers from the acquired company were lost and turnover decreased year for year.
Despite the fact that the employees have allocated tasks more efficiently in the last year, which allowed the employees to invest more time into the new business, they did not know what activities or sports should receive the most attention in order to increase sales. While the overall focus remained on the golf business, the focus of the new business was laid on the distribution of tennis and football equipment. However, actively targeting both segments was impossible due to the large effort needed for the golf business. Therefore, the company wants to focus on the distribution of sports equipment for a single sport by identifying the segment that matches the company’s capabilities and resources best.
To identify the most promising segment, the author used the strategic management model described in the book of Lombriser and Abplanalp "Strategisches Management" [Strategic Management] from 2018. The procedure described by Lombriser and Abplanalp was developed for the development, implementation, and control of a strategy. Therefore, it was adapted to the thesis’ objective by concentrating on the first four steps.
The process starts with an assessment of the company’s initial situation. This part analyses the success of the company’s current strategy in terms of financial results and strategic measures. Continuously, the company’s environment is analyzed by estimating the segments’ market sizes, conducting an industry analysis according to Michael Porter’s Five Competitive Forces, and a competitor analysis. The last part of the environmental analysis included the identification of the industries’ key success factors. According to the third part of Lombriser and Abplanalp’s process the company’s resources and capabilities are identified and compared to those of competitors. Then the value chain of a company has to be divided into primary and supporting activities. To identify sources for competitive advantages or disadvantages effort put into these activities are compared with competitors. Moreover, the influence of value chain activities on an industry’s key success factors have to be identified.
Finally, the information gathered from the previous analyses are summarized in the fourth part, the strategic analysis. Based on this information, the GE McKinsey matrix helps to assess the market attractiveness of a segment and also the company’s competitive strength within this segment. Ranking the segments based on their respective attractiveness and competitive strength allows to incorporate them into a GE McKinsey matrix to visually depict the most promising segment.
Despite the fact that the company's competitive strength in the tennis market was assessed to be higher, the final analysis showed that the football market is more attractive for the company. Therefore, it is advisable to focus on the football market. One of the main reasons is that the football season does not overlap with the golf season, but the tennis season does. Furthermore, the size of the football market was estimated to be larger than the tennis market.
Besides the recommendation to focus on the football market, the client received several recommendations on how the company should proceed. The recommendations are based on a consolidation of the company's value chain and the key success factors that were identified for the football industry. Conclusively, it is recommended that the company focuses on the marketing and sales activities because these are the activities that have the greatest influence on the key success factors.
In more detail, recommendations that the company should implement within the next four months are the following:
- Definition of a product range that satisfies the need of customers
- Design a product catalog including the newly defined product range
- Visit customers and distribute the product catalogs
By implementing these recommendations, the company's turnover is estimated to increase already in the next year.
Studiengang: Business Administration International Management (Bachelor)
Fachbereich der Arbeit: Andere