1. A key challenge, facing the firm
Frontier Adventure Racing (FAR) is a Canada-based company, whose activities are aimed at providing people with an opportunity to test their limits with the help of 36 hour races or five days Extreme races. The company has existed since 1998, and managed to get recognized as establishing the most important races across Canada. Moreover, the company’s president’s passion for races and dedication to his work helped FAR’s products to develop good reputation, and many of FAR races were extensively covered in the media.
Nevertheless, already fourth year in the row FAR cannot make a reasonable return investment. The lack of ROI currently represents the most important challenge for FAR. In turn, it is determined by a range of other issues. First of all, FAR loses money, when launching some of its products. While races in Ontario allow the organization to make money, the organization of ones in British Columbia and Quebec is too costly due to the need to cover travel costs for FAR staff, high costs of equipment charges British Columbia) and the need for interpreter (Quebec). High levels of staff turnover led to difficulties in building up relations with sponsors, whom the company heavily depends on. A decrease in sponsorship also led to a decrease in races’ media coverage and heavily influenced revenues, thus, forming a vicious circle. In this view, it is important for Mr. Zietsma to decide whether to invest significant amount of funds into television coverage of races.
2. External analysis
The analysis of macro-environment involves exploring political, economic, socio-cultural, technological and environment issues. Political situation in Canada is rather stable, and the government tends to limit its intrusion into business activities. At the same time, Canada currently faces a mild recession. However, the recession does not seem to be a source of significant worries. Firstly, the recent GDP contractions are quite small. Furthermore, the economy demonstrated a growth of the number of jobs in 2015. Finally, as the U.S. economy demonstrated a steady growth (despite the fluctuations at the stock market), Canada is expected to benefit from that and show positive GDP rates quite soon.From the socio-cultural viewpoint, Canadians are inclined to different types of sports, and extreme sports play an important role in sports culture. Special role is evidently played by winter extreme sports, such as Ice Cross Downhill. A growing interest in extreme sports led to the formation of several associations, such as All-Terrain Skate Cross Federation (ATSX) and Canadian Adventure Racing Association. The development of new technologies can be viewed as a positive trend for the development of sports, especially extreme ones. The more time individuals spend in offices, forced to be totally detached from the nature, the more inclined they may become to test their limits with the help of adventure racing.
Furthermore, technologies can be used to in order to improve the safety of races and providing participants with relevant instructions. Picturesque landscapes of Canada and beautiful rocks provide a good environment for launching different kinds of races. Finally, Canada has highly developed legislation, favourable for doing business. Canada Adventure Racing Association supports organizations, engaged into providing racing-related services by providing a Race Insurance Program, elaborating safety guidelines and ensuring wilderness-based events’ compliance with environmental laws.
Referring to the industry environment, it is necessary to mention that the barriers to entering the adventure racing industry are rather low, especially in case the individuals, possessing personal experience in the field of adventure racing, decide to open up the racing-related business in Canada. The bargaining powers of both customers and suppliers can be characterized as high. On the one hand, the company is dependent on the individuals, willing to take part in races. On the other hand, the company has to compete for equipment rentals. Furthermore, companies, engaged into adventure racing business, are highly dependent on sponsors and media coverage. The threat of substitutes is rather high due to a variety of available extreme sports. Finally, the competitive rivalry can be considered intense, because a number of adventure racing companies tend to compete in several domains, including participants, resources (e.g., the rental of equipment), sponsorship and media coverage.
3. Internal analysis
The 7S Framework, developed by McKinsey and Company (2016) suggests considering internal environment of an organization as an aggregate of 7s, such as skills, systems, structure, staff, strategy, style and shared values. FAR evidently has developed skills and expertise in the field of adventure racing. The popularity of its product and their well-managed design allows claiming that the company already developed its own style. Some systems are also present (e.g., attracting customers, organizing races, outsourcing sponsorship). However, a high employee turnover leads to the fact that not everyone possesses necessary skills, and staff development becomes impossible. Furthermore, employee turnover results in the lack of clear structure and, crucially, shared values. Finally, the case only names several ways the company’s president sees as possible solutions to the lack of revenue.
4. Alternatives
The first alternative deals with specifying the products, so that the government and military can be met. The government can sponsor some of the races to promote particular areas of Canada as tourism destinations. As for the military, they can use the products, similar to the ones, currently promoted by FAR, in order to train newcomers to the army.
A second alternative lies in a combination of rising prices for most effort-consuming products, currently offered by the company and investing into media coverage. A sophisticated way to revive interest to adventure races can deal with launching a reality show with the participation of celebrities in a partnership with a TV channel and using the FAR’s experience in organizing adventure races.
Notwithstanding a particular way the FAR selects in order to increase its revenue and return on investment, there is a significant need to reconsider the company’s staffing policy, so that shared values, structures, systems and skills can be formed in a more successful way.
5. Choice of alternative. Justification
I would suggest that FAR combines increasing prices for its products with initiating a launch of a reality show, based on the company’s experience of adventure racing. In this way, the company will have an excellent chance to ensure extensive media coverage of adventure racing with minimum expenses and significantly raise its own popularity, as well as the popularity of adventure racing. Moreover, the participation of celebrities can convert adventure racing into a luxury kind of extreme sport, attracting ever new customers and, thus increasing revenues. While implementing the alternative, it is necessary to pay significant attention to FAR’s current staffing issues and achieve mutually beneficial arrangements with a TV channel.
References
McKinsey & Company (2016). Enduring ideas: the 7S framework. Retrieved 24 February 2016 from http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/enduring-ideas-the-7-s-framework
