Strategic fit analysis of Gilbert sports Equipment Company - Essay Example

?Strategic fit analysis of Gilbert sports Equipment Company Gilbert Sports Equipment Company is the UK based manufacturer of sporting goods, mainly specialising in Rugby union balls and balls used in Netball. It was established by William Gilbert in the year 1823, as he along with his nephew, James, started making balls and boots for football. After the game of Rugby was invented by William Webb Ellis, he also started making Rugby balls, the mainstay of their business now. The early balls were larger and rounder than today's “with no fixed shape or size as this depended on the pig's bladder used” (hastingsrugby.org.uk). However, when the rules of Rugby and thereby rules regarding ball shapes and sizes got formalized in the early part of the 20th century and with availability of Rubber bladders, Gilbert Sports Company started making the modern Rugby balls. Although, the company changed hands quite a few times, the company continued to modernise and update the quality of the balls through the second part of the 20th century particularly during the 1980’s and 90’s. It was during the same period, they developed the first range of balls for Netball. However, it fell into the debt trap in 2002, and so it was acquired by another sports equipment maker, Grays of Cambridge in the same year. It continues to function with a lot of autonomy and even diversified into other product segments, with Grays of Cambridge ‘stewarding’ it. Thus, after rising from the internal crisis in 2002, Gilbert under Grays ownership has been able to consolidate its position. However, there are certain factors in its macro and micro environment, which could impact as well as influence its functioning. Market Environment Analysis Certain factors in the external environment as well as in the ‘immediate’ external environment will always influence the functioning and the strategies formulation of any organizations in the sport equipment manufacturing sector. Gilbert is no exception to it, as it can be controlled by the factors in the macro-environment, and also by factors in the micro-environment. Both these macro and micro factors can be collected and assessed in a detailed manner through certain analytical tools. The macro environment of Gilbert can be assessed through PEST analysis, while its micro-environment can be analyzed through Porters’ Five Forces. PEST Analysis Political When one focuses on the political factors in Gilbert’s external environment, the UK government can play both a regulatory and constructive role. Regulatory role in the sense, government with its regulations on quality, advertising, pricing, etc., influences the production processes of sports equipment companies including Gilbert. Constructive role in the sense, the UK government through programs like Schools Sports Partnership provide funds to schools to buy sports equipments and construct other infrastructures, so the children can have an active lifestyle with good fitness levels. Although, the UK government had “plans to end funding for the Schools Sports Partnership program, it was forced to back down as a result of pressure from top athletes, educators and school children themselves.” (caloo.co.uk 2011). Economic The economic aspect of the UK Sports Equipment manufacturing and retail market shows a positive picture, because it “is valued at US$4.1 billion and grew at a CAGR of 4.19% for the period 2004-2008.” (Reportlinker 2009). However, with the British economy showing little signs of full recovery from the 2008 economic recession, and threatening to go into recession again, the prospects of these sport equipment manufacturing organisations could also suffer. “Bank of England policymakers agree that Britain's stalled economy will fail to pick up in the current fourth quarter, according to minutes of their last meeting published on Wednesday.” (AFP 2011). If this situation continues, there could be lack of readily available finance options because of credit crunch, and this will make the consumers cut back on their non-essential spending, including spending on sports equipments. Socio-cultural Among the many socio-cultural aspects that could impact sports equipment manufacturing organisations particularly Gilbert, the one that is having maximum impact currently is the Rugby World Cup that is taking place in New Zealand. Although, England was the defending champion, it could not get past the quarterfinals stage with team's disappointing World Cup campaign marred by off-the-field controversies as well. (bbc.co.uk 2011). Because of this event, socially and culturally, England fans may not show greater affinity towards Rugby and its related sports equipments particularly that of Gilbert’s. This is considering England manager Martin Johnson has called the Gilbert manufactured Rugby World Cup balls “into question after Johnny Wilkinson missed five consecutive penalty kicks against Argentina.” (sportinglife.com 2011). Technological Technological developments that take place in external environment always make crucial impacts on the organisations, and that includes sports equipment manufacturers as well. For example, the balls used in Rugby as well as in Netball are constantly updated with various technological features. The Rugby balls used in the previous World Cups came under criticism from one team or other, including the charge of the ball being very slippery by the Fiji Rugby team during 2003 World Cup. To prevent these types of criticisms and to come up with a quality balls, optimum technologies like Multi Matrix 3D Grip, Hydratec, etc were used. With Gilbert being the official ball supplier, the technological up-gradation happened under the watchful eyes of Gilbert’s chief research and development engineer, Ian Savage. (Peary 2011). “The continued evolution of Gilbert's Netball match ball technology has ensured that it has maintained its position as market leader.” (gilbert-Netball.co.uk). Porter’s Five Forces Threat of the entry of new competitors When it comes to the sports equipment manufacturing particularly balls for Rugby and Netball, new competitors cannot make major impact. As UK sport equipment manufacturing industry is already saturated with big and small players and with Gilbert being the biggest of the big players, new competitors may not pose threat at all. “The Gilbert ball is now used by 8 of the IRB’s top 10 ranked teams and is the ball of choice of various country leagues, and the majority of elite teams worldwide.” (gilbertRugbyblog.com) Threat of substitute products or services As balls used in Rugby and Netball are manufactured extensively, there are chances of substitute products. However, Gilbert has its own range of quality, high technology integrated balls and so that threat can be nullified. However, Gilbert faced threat of substitute ‘service’ that too in an indirect manner. With Gilbert being the official supplier for the 2011 World Cup, all the World Cup teams were provided adequate balls for their home practice and for tournament practice in New Zealand. However, when England missed sizable penalty kicks, its manager Johnson suggested that the World Cup batch of balls are different, indicating that the match balls behave differently to practice balls, because they have not been kicked-in (irishtimes.com 2011). Although, opinions were raised that Gilbert may not have aptly given the correct balls, it was denied by the Gilbert management. Bargaining power of customers (buyers) The main customers or buyers of Gilbert’s sports equipments are the sports teams ranging from local to international teams, as well as other sports lovers who play Rugby and Netball as amateurs. When it comes to teams, particularly International teams which use Gilbert products as its official ball, the bargaining power is balanced, with both Gilbert and teams not exerting high bargaining power. As certain teams have made it their official ball on a long term contract, they cannot change it in middle, thus giving power to Gilbert. (Cleary 2011). However, at the same time, Gilbert cannot stay static and immune to criticisms about deficiency in services, under the guise that it has long term contracts, because those contracts could come to an end. Importantly, other consumers who buy their products would complain, and could switch to other makers. Bargaining power of suppliers Although Gilbert does its manufacturing and retailing by itself, it has to depend on suppliers to supply the raw materials needed for making their equipments. In addition, they have operations in Australia and New Zealand as well, and the suppliers will have higher bargaining power in these territories. If the transhipped ball has quality issues, then the suppliers’ particularly logistic handlers would have to be questioned, thus reducing the power in such instances. (Rugbyfootballhistory.com). Intensity of competitive rivalry Gilbert faces competition from major manufacturers of Rugby ball including Mitre, Webb Ellis, Kooga, etc. and minor players like Ram, Lusum, etc. (sportsballshop.co.uk). Among them, Mitre is the second biggest Rugby ball manufacturers in the world, following Gilbert, with Italian Rugby Federation using its balls. Wales also does not use Gilbert and instead their ball of choice is manufactured by Webb Ellis. However, as mentioned above, with Gilbert balls used in Rugby and Netball having official backings and being used in high profile world tournaments as well as by top teams, it does not face intense competitive rivalry. Gilbert’s Strategic Analysis- resource capability and its core competences through SWOT analysis Strength Being the pioneers in making of the balls for both these games, Gilbert has updated technology and quality optimally, and so it has a widespread customer base. After manufacturing mainly the Rugby balls throughout the 20th century, Gilbert diversified into other product categories and other interests during 1980’s and 1990s’. They developed all the sports equipments related to Rugby including footwear, clothing etc, in addition to modernising its Rugby balls. “During this time, the brand embraced and perfected the use of new synthetic technologies in its new Barbarian ball and expanded into wider areas of Rugby equipment, footwear and clothing.” (Free 2010). It was during the same time, Gilbert came up with its first ever Netball range, and now it has became one of the established brands in Netball range as well. Its Rugby balls also gained sort of official recognition, when it was given the tag of “official ball” of the 1995 and 1999 World Cups. This helped it to achieve greater market share. Gilbert received further ‘shot in the arm’, when its Rugby ball became the official ball for the ongoing Rugby World Cup in New Zealand. Gilbert has incorporated advanced technologies in its balls for Net Ball as well. Thus, Gilbert has come up with advanced and quality balls for Netball as well, and this was validated when it was selected as the official ball supplier for the senior and youth World Netball Championships in 2005 and 2007. Weaknesses Although, Gilbert has been working effectively, the financial crisis it faced in the year 2002 and the resultant acquisition by Garys of Cambridge can be considered as a weakness. In the last few decades, Gilbert has changed hands four times, and this is not a good track record for a world’s leading sports equipment manufacturing organization. The other weakness, which arose recently, is the criticism against its Rugby World Cup ball. As pointed out earlier, England Rugby team firstly doubted the quality of the match balls after its star player Johnny Wilkinson missed sizable number of kicks. It is not only English players, but Argentina also had their share of problems. Tournament favourite New Zealand and its players also complained with All Blacks kicker Dan Carter considered as the best marksman, stating, “if you don't quite strike it right it then doesn't fly as straight as you would like at times,” (superxv.com 2011). So, this widespread criticism against the Gilbert ball appears as a key weakness for it. Opportunities Although, taking over by the Grays of Cambridge exhibited some of Gilbert’s weakness, if it is able to aptly use Grays’ competitive advantages, it can surely get more opportunities. Grays is a long standing and well established sports equipment maker and so it has certain advantages, which can be aptly tapped by Gilbert. Gilbert is the official ball supplier for the next 2015 Rugby World Cup as well, which is going to take place in its home country of England. With England as hosts, Gilbert will get more opportunities particularly through heightened selling of its products to customers belonging to all segments. British Sport sector is a thriving one, and this event of World Cup can stimulate it further. With the game of Rugby spreading optimally in countries like Germany, Denmark and the UAE, Gilbert can expand its foreign operations as well. (gilbertRugby.com). On the same lines, Gilbert Netball is becoming the choice of leading clubs and national bodies worldwide, including in non-traditional territories as well (Netball.org) Threat Gilbert could face some long term threats. If Gilbert does not take into account all the criticisms against the ball that were levelled during the current World Cup and comes up with solutions, it could face the same problems in the next World Cup as well. Even “Andrew Challis, Gilbert's international brand manager, confirmed the balls had not been tested in an indoor stadium, such as that in Dunedin” (walesonline.co.uk 2011). Strategic Fit Analysis From the above analysis it is clear that Gilbert Sports Equipment Company has key strengths and also has slew of opportunities, which can be optimally tapped with the aid of those strengths, and importantly by optimizing its functioning even further. The main strength of Gilbert is that, it has been producing its key product of Rugby ball, since the invention of the game itself. That is, Gilbert association with Rugby has long traditions, and so it has bean at all the crucial stages of Rugby’s development and changes. If Gilbert threads the same ‘coexistence’ path, it can optimally tap all the opportunities that may present itself to it, particularly the next Rugby World Cup in England. In addition, one of the main strengths of Gilbert, which can aid it in actualizing all its opportunities thereby striking a strategic fit, is its apt incorporation of technology. For making its Rugby ball, Gilbert has incorporated Multi Matrix 3D Grip – “which maximises hand contact with the ball and provides ultimate passing and catching control”, TruflightTM – “patented TruflightTM Bladder improves aerodynamics to provide all match balls with ultimate balance and truer, longer flight”, Hydratec – which enhances the life and performance of balls, etc. (Rugbyfootballhistory.com). On the same lines, Gilbert also updated its balls for Netball with advanced technologies. “Gilbert has adapted its un-rivalled ball engineering experience to Netball, thus producing the best-performing patented grip pattern available.” (cylex-uk.co.uk). Even the takeover by Grays of Cambridge can augur well for Gilbert first because Grays is a well established brand and also because of the decentralized form of management carried out by them in the case of Gilbert. That is, Grays has not brought wholesome changes into the organisational structure and functioning of Gilbert, and allowed it to function independently under its supervision. “Under Grays stewardship, Gilbert continues to lead the way in ball technology and design, and to maintain the high standards set by James Gilbert over 180 years ago.” (gilbertrugby.com). In the UK, the sports sector is already a thriving one, as its worth is estimated around ?16.7bn and as it employs more than 441,000 people. (Doust, J 2011). As Gilbert aptly updates all the current technologies in the external environment, it can match up with competition and continue to provide quality products satisfying all segments of the customers, thereby optimally thriving and shinning in the opportunities rich market. 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