Shearwater Case Study free essay sample

Shearwater Adventures is an adventures tour operator in Victoria Falls, Zimbabwe. It specializes in rafting, canoeing, and kayaking on the Zambezi River. This river is the fourth largest river in the African continent. The company grew to dominate the â€Å"Adventure† market in Victoria Falls. As a result of this expansion, Shearwater Adventures became the most well known adventure-tour operator in the continent of Africa. This expansion occurred while the company was under the leadership of Robert Allen who joined Shearwater ten years ago. He began as a photographer with friend Mark Davis taking pictures and videos of the rafting trips. He went on to become Chief Executive Officer (CEO) after Davis’ departure. Shearwater was number one in the market. Regardless of their dominance in the Victoria Falls area and their position as leaders in the market, Shearwater adventures had to face the competition. They had to continue dominating while maintaining their reputation as a successful and profitable outdoor adventures operators. To achieve their established goals, Allen Roberts and his management team created different strategies in order to compete efficiently and to maintain their leader position. QUESTION 1: The fundamental strategies in 2006: First of all, the company was counting on its name and reputation since the word of mouth played an important role in new sales. Also, the goal of the Shearwater Adventures was to achieve repeat bookings from satisfied customers, maximize profit and increase their market share. Shearwater Adventures established partnerships and acquisitions with leading Tour Operators such as Jenman African Safaris to boost their reputation and to gain business. Acquisitions that have increased their competitive scope and profitability in the long run. Advertising is obviously key to attracting tourists who are confused about their choice concerning an adventure activity. The continuation of an advertising program was primordial for the company. The fundamental fact of their success and strength that made the company is the level of differentiation. Indeed, in comparison to their competitors, Shearwater Adventures differentiate themselves by offering far more activities than the competitors. This allows customers to have a wide range of choices from rafting trips to lion encounters. Meanwhile, most competitors offer more or less 3 options: white water rafting, boating and elephant riding. By offering more than the competitors, Shearwater created a competitive advantage by bringing customers what competitors could not. As a result, Shearwater remains a leader in the market and competitors will have no other choice than to design and create a new adventure. Otherwise, they could also copy Shearwaters products and services. In addition to its several activities, Shearwater offers packages allowing customers to choose from a selection of activities for one price. Through a differentiation strategy, and by distinguishing itself, Shearwater obtained a competitive advantage. This allowed Roberts to maintain his position in the market. As a result of these strategies, from 2004 to 2006 the number of guests increased from 26,351 to 41,868 as well as the revenue. QUESTION 2: Perform a 5-forces analysis of Shearwater’s competitive environment. FORCE 1: Rivalry among competing sellers The industry is ranges from around $400 $500 million, however this industry is fragmented: that is to say, it is spread worldwide in relation to areas offering the chance to perform such activities. There are many competitors: Over 40 areas of activities (i. e. kayaking, safari trips, extreme sports). Locations are all over the world and there are over 250,000 operators that compete in the same â€Å"outdoor activity† market. Yet, operators, such as Shearwater, focus on the local level when it comes to competing. Zimbabwe’s political and economical instability. Though Zimbabwe’s tourism had declined by 75% and inflation was at 1,200% Shearwater continued to be the market leader in the area with an 80% share market. It had managed to increase sales by 22 and 39% percent in the last couple of years. Shearwater dominates in Victoria Falls and become the most well known adventure tour in all of Africa. Even though Shearwater is the leader, companies have partnered up in acquisitions, associations and networks with other businesses in order to increase their market share. Rivalry among competitors is high. FORCE 2: Threat of New Entry For small businesses to enter the industry, the cost may be as low as $20,000 for a single activity operation. For larger, full-service operations a large entry cost of $200,000 is estimated. It may be difficult to start an operation in the U. S. because of cost of permits and government, state or municipal regulations. However, installing a new company is Southern Africa (for example Zimbabwe and other surrounding countries) is quite feasible for new operators in the market. We must continue to take into consideration the current economical and political instability of Zimbabwe for those organizations attempting to enter this market There is a certain â€Å"Experience Curve† path that a new company may experience. It is important for management to be thoroughly aware of every detail concerning operations and financial matters, as well as the local market. This experience may take some time to acquire. On top of that, a new competitor should realize that it would be competing with other brands (especially Shearwater) that have an already established notoriety, a client list and advertising distributors. Threat of entry is relatively moderate. FORCE 3: Threat of Substitute Products This is an â€Å"Outdoors/ Extreme Activities† Market. The necessary ingredients to create this service involve irreplaceable factors such as: waterfalls, natural water rapids, mountains, fresh air, nature, scenery, etc. There are new activities that may be though of, however those would go directly into competition, and would not be considered as substitutes. Threat of Substitute Products is low. FORCE 4: Bargaining Power of Suppliers The nature of the service supplied is not a commodity, and cannot be reproduced or duplicated. Even though suppliers reach the 250,000 mark worldwide, these operators are vastly spread out concerning the nature of the activity. White water rafting for instance, requires a location with a water body, waterfalls, rapids, wild outdoors settings and beautiful sceneries, among other things. The company can only go as far as supplying the equipment needed to ride these waters. The only way operators may integrate backwards is if they decide to produce their own equipment and trained professionals. However, this would only be a good strategy if the costs were less than what they already pay to suppliers. Given the type of activity offered, there is a small chance of supply shortage. The Bargaining Power of Suppliers is moderately high. FORCE 5: Bargaining Power of Buyers The demand for this industry is moderately sized. The target age in the industry was from mid 40’s to early 50’s. These people had the drive to stay â€Å"young at heart† and the available income to fulfill these desires. Until recently, the media has created an awareness of adventurous locations, and their desire to explore them increased. They may only integrate backwards by buying their own equipment and training themselves on outdoor skills. However, since most of the consumers are over the age of 40, this seems to be a bit of a challenge. Although Shearwater advertised locally and partnering with tour operators, the local community seems to have a certain amount of power over the promotion of this company. It has progressively gained notoriety, and Roberts should be mindful that should he upset the community, they may bad mouth his business. The Bargaining Power of Buyers is moderate. QUESTION 3: What are the KSFs for competing in the Extreme Adventure Sporting Industry? There are several variables that have had a direct impact on the effectiveness of Shearwater’s business. The specific factors that underlie the success of Shearwater Adventures are: Brand Recognition. The company relied on its name to achieve their goal of repeat bookings, and cooperation with other companies (e. g., tour operators) for cross-selling opportunities could offer them a higher probability to gain exposure and business. Strong Leadership Management: Mike Davis and Allen Roberts were excellent entrepreneurs. Their leadership, particularly Roberts’ role as Shearwater’s CEO after Davis left, played a critical role in enabling Shearwater to dominate the outdoor adventure market. Favorable Destination: Opening an outdoor adventure company in the United States is difficult due to the cost of permits, so opening an adventure operation in South Africa was more attractive and cost-effective. Strategic Partnerships: Strategic partnerships played an important role in Shearwater’s successful growth, since â€Å"Industry leaders were partnering through acquisitions, organized associations, and reseller networks in order to increase repeat bookings from satisfied customers. † Strategic Advertising Marketing: Their goal was to target and direct customers at the start of their vacation. Shearwater engaged in intense local advertising to attract a large number of newly arriving tourists who had not chosen an adventure. This allowed it to attract a large share of newly arriving, non-committed tourists. Variety of Activities Offered: Larger variety of outdoor adventures activities was a strong differentiation for Shearwater. Most competitors had a limited number of activities, making Shearwater superior in the local market. Companies that could offer a variety of activities had a much higher probability of gaining repeat business. Pricing Strategy: Bundling activities that allowed customers to choose from a selection of activities for one price was highly attractive and added to the company’s value and success. Cross-Selling Opportunities: Shearwater’s expansion into related business activities, like tourist transportation, lodging, and video photos, allowed the company to cross-sell and increase its sales revenue through these related business segments. Community Support: Support from locals was also an important reason for the company’s success, as it added credibility to the company. It enabled smooth operations for Shearwater, increased its reputation, and thus increasing its strength in the industry. Skilled Qualified Team: Through Allen Roberts’ leadership, he continued to build a solid management team due to his knack for attracting the right person for the right job. These 10 Key Success Factors have contributed to the growth and success of Shearwater Adventures, and has continued to make them a current market leader in the outdoor adventures industry in the Victoria Falls area. 4. SWOT Analysis Strengths: Located in the touristic area of the Victoria Falls, Zimbabwe Shearwater is considered to be the giant leader of the area (with 80% market share), in fact leader of all Africa. Company driven by a knowledgeable and experienced  manager, Allen Roberts â€Å"Industry image†, extreme sports are seen as a way to enjoy time away from hectic lives (average age of customers between 40s and 50s) Shearwater Adventures LTD. offers a wider range of activities then competitors (at least 11 activities against 3 for competitors) Possibility to organize both individual trips and packages (e. g. â€Å"Ticket to Adventure† package, where you can make huge savings and choose what you want to do and when) Strong local level awareness, â€Å"Word Of Mouth† has helped increase sales Entertainment Media helps increase popularity of the industry (Fear Factor, ESPN, Survivor etc. Improved equipment quality Weaknesses: Although Shearwater Adventures have 80% of the market share, competition is tough enough for company to worry about continuing market domination while maintaining its reputation as a â€Å"successful outdoor adventures operator† The company clearly has a tight budget, â€Å"Roberts and his management team had already cut Shearwater’s expenses to the bone and had given up their company cars for motorbikes†. Weak global level awareness, as companies looked to grow their market share and increase customer base on a local level (global level seemed ore of an obstacle) It appears that outdoor activities companies must deal with aging equipment and older owners when company reaches its maturity Opportunities: The Shearwater Adventures LTD. can link up with international travel companies for purposes such as gaining international awareness and prepaid guaranteed reservation Implement a better advertising plan for repeat bookings and cross-selling Maybe the business should consider acquiring other companies? Creating a new venture to attract a younger crowd Threats: Zimbabwe’s economical and political instability has caused a 75% decrease of the country’s tourism and inflation was 1200% causing prices to double every 22 days Competitors might offer a wider range of activities as it is relatively inexpensive and there are enough ventures to copy Shearwater or add new adventures 5. Provide recommendations concerning Shearwaters future strategy As we know Shearwater is already the leading company in the adventure/extreme industry for the contient, logically, the main question will be how to improve when you are already the number one or at least, how to stay number one? Buying Companies the idea of buying companies was from Allen Roberts himself and was, from my point of view, one of the most intresting. Buying companies allow you to kill the competition (within the area) and in the meantime to increase your market share by absorbing the competitors. In the other hand Shearwater will need a substantial amount of money for this type of investments, money that they may not be able to collect. Despite the financial factors, integrating competitors to the company will allow Mr Roberts to create his own rivalry in the Victorias fall area, allowing to expend, generate more revenues while controlling the all business. Targeting Market Segment The actual targeted segment, people who are â€Å"mid 40s to early 50† are certainly interested in lion encounter or safary but maybe less by more extreme sports such as kayaking or rafting. By focusing on this market segment they completely forget generation who grew up witth that kind of sports. Enhance by the media and famous energy drinks ( https://www. youtube. com/watch? v=mFo-HKKOsXchd=1 ) adventure or extreme sports have become a very important trend for the 20-30 years old. It would be a shame to miss such an opportunity to increase the market share when the only effort you have to make is to make people aware of your complex. Developing the companys assets A wide range of activities, affordables prices, but do they really focus on the essential? People around 50 are attracted by this healthy way of living so why dont they develop a healthy/fitness programme. Mixing sports and dietetic/healthy food as it is the trend nowdays. This strategy is using the current assets of the company in a different way that could be a lot more appealing for customers. Worldwide vision Advertising on a local/national level would be useless for Shearwater as it is already recognize as the number one. What they neeed is a worldwide vision, let people know that they are providing one of the best experience in the adventur industry, and if people are not interested in sport why wont they come for the location in itself. The use of new type of communication such as facebook twitter or threw sponsors (Red bull, Monsters.. ) have already helped the cause of extreme sports and pointed out the fact that people are more than intrested in that kind of leisure. Be a precursor In every single industry, leading companies overcome difficulties by creating their own product and/or creating the demand. In the past few years a lot of new sports have immerged, creating one, could be the chance of an international recognition and healthy finance. Their status of number one is not immutable, they should use their monopoly on the market to create what they think would be the adventure industry of tomorrow. As a reminder, the main question of the case study was â€Å"how to continue to dominate the market while maintaining the reputation as a successful outdoor adventures operator†. The difficulty of chosing a strategy is emphasis by their status of number one, with no comparable company all over the continent the only reasonable choice seems to completely create the wanted path. They got the recognition, the infrastructures as well as a strong leadership. By having a step ahead of the competitions they can maintain their reputation but for how long? To conclude, strenghen by their position, they should choke the competition by redifining what aventure industry means in their own words.