Bob Rhodes, age 32, is well known in his local sports activity. Ten years ago, he started business called The Sports Guy and raised capital from obtaining a bank loan and an equity investment from friends and family. His family and friends own 40% of the business while he owns the rest. Mortgage help him purchasing land in small town outside of GTA that consists of two lots on a corner in which one is used to build a store, and another one was planned for the parking lot but never executed the plan because of the surrounding activities. Local sports team account for 70% of the sales whereas 30% comes from regular walk-in customers.
Problem Statement & Objectives
The ...view middle of the document...
* The local teams buy about 70 % of the equipment and uniforms.
* Local sport people are also the customers of the store.
* About 30 % of sale comes from the regular retail trade, under which there is broad range of sports and recreational merchandise.
* Since all the above listed buyer have low power to bargain and loyal to the store so we can say that the buyer have less power.
1. Sporting goods manufacturer
2. Large wholesaler
* Large Sport companies, which make all the equipment usually, have the high power because of their size and they can control quantity and price of the product.
* Large wholesaler have less power because they cannot bargain the price and they cannot control the quantity.
* The sport guy is relatively small family business with very low buying power.
* Due to too small buying power the sports guy cannot negotiate better prices with the large sport equipment companies.
* Overall suppliers have high power.
1. Video games
3. Social media
* Video games are overtaking the traditional sport activities and this poses a huge threat to The Sports Guy.
* People choose amusement parks and movies over traditional sporting activities.
* Internet and social media take up most of the time of teenagers who were the most active group for all sports.
* Substitute threat is high especially from Internet, social media and video games because people are moving more towards these activities than play sports.
* Substitutes have balanced power.
Potential Entrants Threats
2. Sport celebrities
3. Super stores
* Big box Sport Retailers may look at taking advantage of a developing market.
* Super stores like Walmart have started concentrating on sports department within their stores and are opening in all developing areas.
* Potential entrants have high threat to the store because of their size and buying power, which leads to better prices.
* Based on the study, there is high threat from the entrants as its not costly to start business and easy to get out
* Canadian Tire in same area will be the biggest rival of The Sport Guy.
* New stores like Walmart and Target always look to expend in developing areas and are really hard to compete with.
* The level of competition is very high due to the large numbers of options available and reducing number of people playing sports.
Overall, the industry is very profitable and is an attractive industry. Both competitors and supplier power are relatively high, which makes it difficult for business to succeed.
Also there are substitute in the market, which are less costly, but still substitute power is less as sport is the activity that never bored and also one cannot resist it.