Bestsport Ltd Strategic Analysis

CASE 4

Strengths

• BestSport Ltd is profitable with earning of €3 million PBIT on assert of €24.75 million, approximately ROCE of 12%.

• The chain operation and franchising mode of BestSport Ltd is helpful to improve the efficiency of resource allocation, less organization and flexible adjustment which save the operation cost and increase the profit.

• The company sells a wide range of sports equipment and recently it has expanded its designer sports clothing, and the local retailers operate marketing activities to promote their products, these extend the market and enhance competitiveness.

• The company delegated decision-making to local individual shop managers, so manager will be more professional in sales, the sales volume will be increase and acquire trust of customers.

• The south of the country has 20 sports chain shops, it builds the influential brand in south of customers, different regions customers repeatedly receive the stimulation of unified information, it is a good public advertising to strengthen company’s image.

Weakness

• Domino effect exists in chain operation. The part of individual mismanagement may influent whole company, the lower service level of individual stores will affect the reputation of the whole enterprise.  

• The retail sector is very price sensitive, BestSport does have its own retailer in the south of the country, however, most of its income is derived from selling into retailers, but as the customers, can you find difference in different retailers. So margins tend to get squeezed as retailers try to pass some of the low price competition pressure onto BestSpot.  

• The market will be change, people’s lifestyle and consumption custom will change, so the retailers must adjust their marketing plan momentarily based on market demand. But when BestSport grows to a large size, It will be very difficult.

Opportunity

• BestSport should purchase the another chain of 15 sports shops to take advantage of the profitable and increase the funded internally.

• There is also the opportunity to develop products such as sunglasses and jewellery. Such high value items do tend to have associated with them, high profits.

• The business could also be developed internationally, building upon its strong global brand recognition. They are many markets that have the disposable income to spend on high value sports goods. It can corporate with large sports activities such as local sports meeting.

• Extensive use of franchising and make the chain operation network in the whole country, carry out large-scale expansion with low cost. Not only get more profit and no high capital risks.

• BestSport also can apply to the bank to support company’s financial.

Threat

• Threat of substitutes: substitutes limit the highest price of a company's products. The BestSport main operate sports equipment and designer sports clothing, as the market changes, the cheap substitutes will be appeared, and there will be less demand for BestSport.