Tuesday, December 13, 2011

Boating Industry

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Chief Economic Characteristics & Growth Opportunities for Boating Industry.

A major characteristic of the boat industry is the overall economy. When the economy is booming then the sales of boats will increase. These types of boats are considered a luxury item and when the economy is failing, so are the sales. The growth opportunities of the boat industry are not as large as they use to be. The growth in the number of recreational boats in use has stalled over the past ten years, and the established number of participants has recently declined. The geographic area in which the products are purchased is another factor that affects the sales. There will obviously not be a demand for these boats in a cold state like Alaska. The areas that have lakes, and open waters will have more of a demand for these recreational boats, therefore growth opportunities in these areas are greater.

‘Industry Stage’ of Competition Ski Boating Industry

The competition boat industry is still growing but not rapidly. It is not yet declining except in economic hard times for example. The industry is in the growth and the maturity stage of the industry. There is always innovations in this industry, there always has to be a boat better than the last one. The industry’s profits are slowly falling because of the occasional period of overcapacity.

Competitive Forces in Industry & Most Important

Rivalry among these major sellers is moderate because of the number of competitors. There are only about five major competitors in this industry. The demand for these products is continuing to grow slowly. The customers cost of switching is low, the consumer could go buy another boat at about the same price. There are large capital requirements in order to start a boat company. The buyers are often attached to a certain brand, which is considered to be brand loyalty and/or a brand preference.

The competitive pressure from suppliers bargaining power is moderate to strong. The boat manufacturers use certain suppliers for different types of parts for their boats. The engine is an example because some industry leaders only use three different engine suppliers. There are only three major engine suppliers and because there are so, few they are able to compete on prices. The suppliers have an advantage with these companies because they don’t have to market their engines; they just sell them to the boat manufacturers.

The competitive pressures from substitute products is weak because if a consumer wants a wakeboarding boat then I am sure that they will not substitute a ski boat or a fishing boat. In this industry there are not many, if any, substitutes for the initial item wanted by the consumer. Depending on what is referred to as a substitute, the strength might change. There are many different models of a ski boat and a wakeboarding boat. There are so many options that the substitution pressure could be considered strong.

The number of buyers is important in this industry because the company is more willing to give a price break to a customer. The smaller the number of buyers the more the seller is willing to give a concession because if they lose the sale then it is harder to make up for the lost sale. The consumers who purchase these products are very aware of the prices, and maybe the costs. The buyers of these products are either using the boat for professional reasons are just as a recreational product. The buyers want a quality boat for the right price. They have the discretion on when and where they want to purchase these boats. The buying process for these boats is typically about six months. They are making a big purchase so they are going to research the information on these boats. The buying power is the most competitive factor in the competition boating industry.

The new entrants are unable to match the technology and the know how. The high capital requirements are so large that it turns the new entrants away. The customer loyalty is a factor in the industry. Most of the customers have a brand loyalty and will not switch to a no name company.

Key Driving Forces & Affecting Change in Industry

The changes in long-tern industry growth is affecting the industry because it heightens the competitive pressures, thus creating a battle for more market share. This may force some companies to close their doors. The shifts in buyer demographics can alter the competition by forcing adjustments in the customer service, or bringing different sales and promotion approaches into play. The product innovations can be a key driving force because it can widen the degree of product differentiation among the rival sellers. The advance in technology can make it possible to produce new and better products at a lower cost. This can cause changes in the capital requirements, and even the learning or experience curve effects. New marketing innovations can affect the buyers interest, increase product differentiation, and even lower unit costs. These innovations can cause the rivals to come up with a new strategy. There is a growing buying preference for differentiated products. These buyers are looking for new features, style changes, and more options. This can change the industry because the rivals are always looking to out differentiate the other. The consumers want more companies to offer warranties and they are starting to and this a major driving force.

Attractive or Unattractive Market

The competition boat industry is an unattractive market. The rivalry among the top sellers is strong. These companies are also looking to be more innovative than the other. The capital that is required to start a boat company is the industry’s largest entry barrier. The customer loyalty to the well-established companies is very strong. The three strongest competitors have a major advantage in gaining greater bargaining power over suppliers.

Companies in Strongest Position in Industry

The companies in the strongest position in the industry are Master Craft, Malibu Boats, and Correct Craft. These have been the leaders for some time.

Competitive Positions & Relative Competitive Advantages

Master Craft is attributed to its product standards. Master Craft has remained one of the front-runners in the competition inboards. Correct Craft offered the ‘bumper to bumper’ warranty, this was a first in the industry. Malibu is known for their innovation and quality.

Resource Strengths & Weaknesses- Élan

The resource strengths that Élan has is a powerful strategy supported by competitively valuable skills and expertise in key areas. These men have been in the boating industry for years, they just haven’t built them. They have knowledge in the industry so therefore they have the strength of the innovation skills needed in order for the company to be successful.

One of Élan’s weaknesses is their balance sheet; they are burdened with too much debt at this time. The company has a weak brand image or reputation because the company didn’t focus on their customer needs. Élan will now have to focus on this area in order to gain back a good brand image and reputation. Élan is just starting over again and they will have a weaker dealer network than the rivals. Élan has decided to bypass the retailers and sell directly to the end user. This will save Élan time in the delivery service as well as customer service.

Élan’s External Opportunities & Threats

Élan’s opportunities are going to be expanding the company’s product line in order to meet a broader range of customers needs. Their strategy is going to be to cater to the skiing and wakeboarding enthusiast with eight models and three series. The market share is open for grabbing because the top competitors are having a hard time right now. Élan has an opportunity to take away some market share once they start business.

Élan’s threats are the slowdowns in the market growth. The growing buying power of the buyers is also a threat because these customers are getting more precise in exactly what type of boat they are looking for. The price may have to be negotiated in order to sell the boat to them. These buyers are looking for a certain type of boat and they take a while to make the actual decision in which one to purchase.

Strategic Issues Affecting Favret & Blossman

Élan boats must be able to invest in research and development to stay on the leading edge of their competitors. They have to come up with fresh ideas and innovations that will make their brand name stand out in the competition. They must reinvent the value chain to lower costs, and to better their product. They are already stating that they must approach this company takeover with cost saving strategies. Ben & Jay need to make sure that they don’t fall between the cracks when they are strategizing. They need to be able to have lower costs, differentiation, and focusing without just taking the middle road.

Strategic Options (& Limitations) Viable to Achieve Stated Mission

To be hyper efficient in the manufacturing and marketing for recreational and competitive water sports enthusiasts. Élan is aiming to attacks its rivals first by revamping and streamlining its activity cost chain to achieve a cost advantage and then by pursuing first an ‘ours-is-better-than-theirs’ approach. Élan boats are dedicated to building long-term relationships with customers through superior training and customer support. Their objective is to capture the unsatisfied customers of its rivals by being a customer oriented company. Élan is going to offer a free week of ski school for new boat owners and free lesson and demo for the prospective buyers.

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