Shelby Givens, G.M of WBL could not get the business on track to repay the funds the board had loaned it 16 months before. In Jan 2010, the business profited for the 1st time in two years. But, now she wants to decide on a future direction for the business, so that the debt payment can be speedy and her job gets more interesting. She also deals with multiple external and internal challenges, such as, boosting employee morale, revamping the underperforming F&B section, and growing the customer base. Analysis:
External Analysis
Porter’s five forces analysis*:
1) Competitive rivalry within the industry*
The rivalry within this industry is very low due to WBL’s strategic location and the loyalty of its patrons. The setup does face some competition from non-orthodox industries, such as, *Porter’s five forces analysis: adapted from
“http://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/” soccer practice, and restaurants’ happy hours. Therefore, we can categorise this force to be of medium effect. 2) Bargaining power of suppliers*
Due to the high availability of suppliers, this force can be categorised as low. In an advent of suppliers raising the prices, WBL can easily find a substitute. 3) Bargaining power of customers*
Since 52% of the surveyed customers fall in the mid-teenage to middle age group (the money holding group), these customers hold the key to financial success of WBL. “Furthermore, 45% of the surveyed customers cited lack of time being the reason for not bowling, WBL needs to save its customer base”** This force can be categorised as high. 4) Threat of new entrants*
Due to the strategic location of Westlake lanes, i.e. in downtown Raleigh and closer to neighbourhoods and restaurants, the threat of new entrants is quite minimal. 5) Threat of substitute products*
The neighbourhood around WBL also boasts of facilities, popular among kids, which offer rock climbing and laser tags. This is an indirect threat for WBL and shall be categorised as medium.
Furthermore, I have prepared a forecasted plan for both options considered by Shelby Givens. The income sheet forecasts and the break even analysis can be found under Exhibit1 & Exhibit2 of the appendix, respectively. Some assumptions that have been made to predict the outcome. *Porter’s five forces analysis: adapted from
“http://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/” **Data adapted from Table 3 provided on Page 6 of Westlake Lanes: How can this business be saved? These assumptions are provided as under:
1) Lane & Shoe rentals, Food & Soda and Beer sales have been considered at 80% of the average monthly YTD in 2010 (for Kid-friendly arcade plan – here-onwards “KFAPlan”) and 50% of the average monthly YTD in 2010 (for the Upscale Bowling Lounge Plan – here onwards “UBLPlan”). This is to account for the loss of adults customers due to the repair of lanes and the conversion of WBL to KFA. Furthermore, it is assumed that the conversion of WBL to UBL would encourage the participation of professional sportsmen who would not rent equipments. 2) Considering the demographic data provided in the case, three cases are considered:- Population distribution in case of
a. KFAPlan
b. UBLPlan
c. New option (KFAPlan and UBLPlan implemented together)
3) Advertising cost has been doubled for the KFAPlan and a third of the original cost has been considered for the UBLPlan. 4) Office expense doubled and Repair + Maintenance cost, along with Utilities and Insurance costs, have been assumed to be tripled as compared to the 2010 average YTP expense figures. Alternative solutions:
1) Exit strategy:Speak to the owners about liquidating the assets and gradually sell out WBL. This would enable to sell at a net profit of $ 37095 (Using data in Exhibit 3). This money can then be utilised for a different business plan. 2) Invest money towards developing WBL into UBL:Seeing the current debt in the business, the current demographic data, market trend and the required investment to develop from now, it can only be expected to break even in the next 5 years. Investing more money whilst staying in debt seems a risky way to take (profit 506.32% of the monthly average in 2009), with investment of $850,000. 3) Invest money towards developing WBL into KFA:Using this business plan, even though the investment would be late, it would take another 3.5 years for WBL to break even, considering profit as $6100 per month (profit 359.1% of the monthly average in 2009) and an investment of $240,000. 4) Implement team restructuring, cost cutting and marketing strategies: a. Seeing that Gary Spalding is ageing, a part-time stand-in needs to be recruited and Gary’s soft and hard skills are transferred to him gradually. b. Business hours should be analysed in order to understand the non productive hours. In these hours, 80% of the electrical equipments can be turned OFF. These hours can be utilised in making stand-in training programs to ensure the self-sustainability of WBL c. Marketing strategies should be restructured and customer capturing schemes be initiated. WBL vouchers can be printed with Train/Bus route maps on the back side. These pocket maps can be made available at various outlets. d. F&B section can be improved by partnering with local restaurants on a revenue sharing basis. This move will reduce the F&B costs while providing additional revenue e. More schemes, attracting customers can be brought in, such as, Birthday weekdays giving a pre-specified number of bowling lanes for 40% less the original cost. Since a birthday party normally happens in a very large group, the move can work out for the better for otherwise dull weekdays. Recommendations:
Taking all available solutions at hand, I would recommend Shelby Givens to employ the horizontal integration strategy and re-establish the brand WBL. She should implement alternative solution 4 immediately, which would help stabilise the business. After 2 years, she should have some capital to
implement alternative solution 3. As of now, getting out of debt seems to be the immediate concern for WBL. Therefore, any additional investment at this point of time does not seem as the best option.
Word count: 1000
Memo Appendix
Exhibit 1. Income sheet forecasts
Appendix prepared by Kumar Gaurav and Geo Paul Anthony Exhibit 2. Breakeven analysis
Appendix prepared by Kumar Gaurav and Geo Paul Anthon
