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Dick’s Sporting Goods. Case Analysis. Executive Summary.
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Dick’s Sporting Goods Case Analysis
Executive Summary • Typically when you are given a case, there is a particular opportunity or problem identified in the case or in the discussion questions that will become the focus of your analysis – let’s assume here that Dick’s is thinking about getting into the gym business and establishing a national chain of full-service gyms • Then you would briefly discuss the following: • Major issue facing Dick’s Sporting Goods • whether they should enter the gym business • Summary of Dick’s current strategy and financial position • Sell sporting goods apparel and equipment at higher than average margins; financially stable at the moment, good growth over the past few years • Recommendations • NO!
Business Model • Full-line sporting goods retailer • Focus on high-priced, brand name products • Higher margins • Excellent customer service • First-class inventory management system
General Environmental Forces • Political/economic – in current economy, consumers are looking for low prices; this is not Dick’s focus; new President seems to be a fitness fanatic – could encourage others to get interested • Sociocultural – the US has become increasingly concerned about its health and ways to improve it, this could prove beneficial to Dick’s • Each of these forces would help Dick’s from both a supplier of apparel and equipment as well as a gym
General Environmental Forces • Demographic – an aging population that is much more health conscious than previous generations; the rise in obesity should encourage consumers to look for ways to combat it • Legal forces – there is discussion of a bill that would allow taxpayers to deduct the costs associated with preventive health measures, such as exercise; there is also a campaign to promote physical activity guidelines • Again, each of these forces could help their existing business as well as the proposed business venture
Specific Environmental Forces • Suppliers – there are many suppliers of fitness apparel and equipment, but it is dominated by a handful (Nike, Adidas, Titleist, Reebok, etc.), these suppliers may have limited bargaining power over Dick’s • Customers – Dick’s likely appeals to middle and upper class customers; however such customers are more willing today to shop for bargains, and they do have many choices, as shown below
Specific Environmental Forces • Competitors – for sporting goods: Sports Authority (privately held), Cabelas, Hibbett Sports, Big Five, Wal-mart, and Foot Locker are among its key competitors; in addition, there are specialty sporting goods stores (NikeTown, Adidas stores, Reebok stores, etc.) – while Dick’s may be among the most profitable, it is important to realize that consumers do have many choices; Dick’s will not likely try to get in a price war to compete, but rather differentiate itself through its product selection and customer service • For gyms: Gold’s, Planet Fitness, Bally’s, Curves, YMCAs
SWOT • Strengths • brand recognition • Higher profit margins • Customer service • Inventory management • Knows the sporting goods business!
SWOT • Weaknesses • Seasonal nature of business (4th quarter is crucial) • No experience running a gym
SWOT • Opportunities • Dick’s strong financial position enables it to survive and grow during a tough economy • An aging population interested in health • The obesity crisis • A President committed to fitness • Congressional Activity related to health and fitness • Some national gyms are experiencing financial and customer retention problems
SWOT • Threats • The economy • Shift in consumer spending habits • Competitors (Wal-mart) • Starting up such a big venture could divert their resources and attention away from their core capabilities
Financial Analysis • Strong growth in Sales and income over the past three years (Yahoo Finance) • Strong cash position • Higher than industry average profit margins (Yahoo Finance)
Gym Industry Analysis • Include some stats on the key players and trends • Gold’s • Planet Fitness • City Sports Clubs • Bally’s • Fitness Together!!! (YEA!!!)
Recommendations • Do not enter into the gym market • Quite competitive • Could dilute their high-end brand image • Not a core competency