Case analysis

It was a cold day in February 2018 when Colin and Ed Power of Greenville, TX were out for their daily training run. During these runs the brothers often discussed possible business ventures and the decisions they would face. This day the topic was whether they should open a quality sports shoes and clothing business and, if yes, where it should be located.

Background

Colin Power, 30, was educated as a Physical Education teacher. He had competed on the High Scholl track team and at one time held the record. After teaching for a few years in Oklahoma, Colin had continued his education and in 2014 returned to Texas where he had completed the course work leading to a PhD in Physical Education. He accepted a position as a Physical Education teacher in Greenville High School. Through supplier contacts he had initiated while at the University of Texas, Dallas he also began to supply jackets, uniforms, skis and ASICS running shoes on a wholesale basis to a number of the schools in the Hunt County area.

His brother Ed, 46, was also athletic having played goal for the in the Greenville Senior Hockey league. Since he finished with hockey, Ed had taken up running and was an accomplished runner in the master’s (over 40) category. Ed was employed as a papermaker by the O-K Paper Center, a paper mill in Dallas.

In addition to teaching, Colin, with Ed’s help, organized a local track dub in the fall of 2014. The purpose of the club was to encourage young people from all of the schools to participate in track and field. There were about 20 young people who joined the club that fall. They were offered coaching in every event from the sprints to high jumping.

Although Colin enjoyed the coaching aspect of teaching he quickly became disillusioned with other aspects of the job. In January 2015, he left the profession to become the Executive Director of the Greenville YMCA. At the same time, he continued selling sporting goods to various schools and coaching through the track and field club.

In July 2016, Colin moved to Rockwall as Executive Director of their YMCA. In August of that year he and Ed opened their first store called Athlete’s Warehouse in Rockwall. The 300 square feet premises were leased in an older shopping district of Rockwall. Colin managed the operation while his brother‑in‑law took care of the day‑to‑day running of the business.

The following September 2017, in Greenville, Colin opened ‘The Fitness Factory, a fitness center, which concentrated on weightlifting and aerobics. As a sideline the business sold a limited line of sports shoes and clothing. The center was located in the basement of the Town Square Mall, a newly renovated building downtown which used to house other commercial tenants such as a hair dressing salon, a dress shop, a Sports Experts franchise, and a restaurant.

In December 2017, as a result of a reduction in funding experienced by the Rockwall YMCA, Colin’s position as Executive Director was terminated. On his return to Greenville, Colin immersed himself in the operation of The Fitness Factory to try and reverse the poor performance. While there appeared to be an adequate number of members, the cash flow generated was a problem. When customers purchased an annual membership there was an initial influx of funds, however, after the initial sale of memberships the cash flow was reduced to a dribble. To improve the cash flow, Colin expanded the operations of The Fitness Factory to include user‑pay ballet lessons and body shaping. After two months of hard work the cash flow appeared stable. However, the business could not support Colin on a full-time basis.

The Athlete’s Warehouse store in Rockwall closed in early January 2018, primarily because Colin was no longer available to provide management. In addition, first year sales had amounted to a disappointing $35,000 which Colin attributed more to problems with location than to the product line. About $12,000 of inventory at cost was brought to Greenville from the Rockwall store. Ed was in favor of selling the inventory and getting their money out of the venture. Colin wanted to establish a sporting goods store in Greenville because he was certain that an adequate market existed. However, he needed Ed’s support to finance the business. The venture was important to Colin because it allowed him to work for himself rather than for others. To Ed the decision involved tying up money he was saving for retirement which possibly could come within nine years.

During discussions on earlier training runs, the brothers tentatively discussed the proposed business. The store, which would be named ‘Athlete’s Warehouse,’ would specialize in good quality athletic footwear and athletic clothing. Its target market would be people between the ages of 13 and 34 who were involved in some type of athletic endeavor from school sports to adult recreational activities. None of the other stores in Greenville offered a similar mix and none had knowledgeable staff to assist in the purchase of proper shoes and clothing. Colin and Ed agreed these two factors were important to many buyers and would be the store’s key competitive advantage. Colin would provide full time management and Ed would work in the store as his shift schedule allowed. Both would be able to provide expert advice to customers with regard to the purchase of athletic goods, especially running shoes.

To open the store, they estimated they would need to invest $10,000 in renovations and display racks and about $20,000 inventory (at cost). At present they had $12,000 of the inventory and an old cash register from the Rockwall store. While Colin had established a credit rating with some suppliers, the newer ones with the bigger names, NIKE for example, required COD for the first order.

Recognizing the urgency in securing employment for Colin, the brothers began to review the various factors which would influence their decision.

Tasks for the Case Analysis

1. Conduct a thorough general environmental analysis (census.gov) and industry analysis (IBISWORLD.com) to find the current situation of the industry.

2. Conduct the comprehensive target market analysis considering that the proposed shop will be opened in Greenville, TX. Hints: Brothers are targeting certain age group. Identify the target age population, income potential etc.

3. Conduct a competitor analysis. Hint: look for the number of competitors in Greenville. Identify their strengths (size, age of the business, products (line, mix, etc.), augmented services, location, etc. and weaknesses.

4. Conduct location analysis. Hint: Find a suitable location based on products/services, location popularity, pedestrian traffic, etc.

5. Finally, identify the initial cost of starting the business (location, inventory, remodeling, renovation, etc. etc.). Given the information, identify how much capital needs to be borrowed and from whom (consider interest rates and other loan terms from different lenders).

Additional Hints:

For the target market analysis, you should be able to identify the number of potential customers that will be willing to buy from Athlete’s Warehouse and are also capable of paying for the products/services. For that, you will need to figure out income potential of the target age group in Greenville and consider where you are locating the business. Location has a big impact on the number of customers. You can also consider customers from the nearby smaller cities that go to Greenville for shopping.

It is a detailed case analysis and I am looking for at least 10-12 pages for the whole assignment. Justification and references are required for all assumptions, numbers, and figures used to make the case.