Capstone Strategic Analysis_Cypress Sporting Goods & Trophies_Halligan, Farrens, Turner, Owen,...

Strategic Analysis

Roy Farrens, Richard Guerrero, John Halligan, Jeff Owen, Trevor Turner

Business 499, Section 83

Sharon Kurtz, Ph.D. May 15, 2014

TABLE OF CONTENTS

PREFACE………………………………………………………………………………………………………………………………... I

ACKNOWLEDGEMENTS ................................................................................................................................................................... I

EXECUTIVE SUMMARY…………………………………………………………………………………………………………...1

HISTORY AND OVERVIEW…………………………………………………………………………………………………….. 5

INTRODUCTION........................................................................................................................................................................ 5

HISTORY ....................................................................................................................................................................................... 5

FOUNDING .........................................................................................................................................................................................5

MILESTONES .....................................................................................................................................................................................6

FIRM OVERVIEW ...................................................................................................................................................................... 6

MISSION.............................................................................................................................................................................................6

GOALS ................................................................................................................................................................................................7

GUIDING PRINCIPLES ......................................................................................................................................................................7

VISION................................................................................................................................................................................................8

PRODUCTS AND SERVICES ..............................................................................................................................................................8

MARKETS...........................................................................................................................................................................................8

ORGANIZATIONAL STRUCTURE .....................................................................................................................................................8

INTERNAL STAKEHOLDERS ............................................................................................................................................................9

SUMMARY OF FINDINGS............................................................................................................................................................... 10

INDUSTRY OVERVIEW ....................................................................................................................................................... 12

INDUSTRY INTRODUCTION.......................................................................................................................................................... 12

COMPETITOR CLASSIFICATIONS ................................................................................................................................................. 13

EXTERNAL STAKEHOLDERS ........................................................................................................................................................ 15


CONCLUSION ........................................................................................................................................................................... 17

EXTERNAL ANALYSIS………………………………………………………………………………………………………….. 23

INTRODUCTION..................................................................................................................................................................... 23

GENERAL ENVIRONMENT ................................................................................................................................................ 23

DRIVING FORCES: PESTEL ANALYSIS ..................................................................................................................................... 23


COMPETITIVE ENVIRONMENT...................................................................................................................................... 26

COMPETITIVE POSITIONING ....................................................................................................................................................... 26

SUPPLY CHAIN POSITIONING...................................................................................................................................................... 29

COMPETITIVE FORCES ................................................................................................................................................................. 30


CONCLUSION ........................................................................................................................................................................... 35

OPPORTUNITIES ............................................................................................................................................................................ 36

THREATS ........................................................................................................................................................................................ 37

INTERNAL ANALYSIS…………………………………………………………………………………………………………… 41

INTRODUCTION..................................................................................................................................................................... 41

RESOURCES AND CAPABILITIES................................................................................................................................... 41

RESOURCES .................................................................................................................................................................................... 41

TANGIBLE RESOURCES ................................................................................................................................................................ 43

INTANGIBLE RESOURCES............................................................................................................................................................. 45

CAPABILITIES................................................................................................................................................................................. 45


VALUE-ADDING ACTIVITIES ........................................................................................................................................... 48

PRIMARY ACTIVITIES ................................................................................................................................................................... 48

SECONDARY ACTIVITIES .............................................................................................................................................................. 50


PERFORMANCE MEASURES............................................................................................................................................. 51

FINANCIAL PERFORMANCE ANALYSIS ...................................................................................................................................... 52

NON-FINANCIAL PERFORMANCE ANALYSIS ............................................................................................................................ 55


STRATEGIES ............................................................................................................................................................................ 59

CORPORATE-LEVEL STRATEGY .................................................................................................................................................. 59

BUSINESS-LEVEL STRATEGY ...................................................................................................................................................... 60

CORPORATE- LEVEL ALIGNMENT ANALYSIS ........................................................................................................................... 61

BUSINESS-LEVEL ALIGNMENT ANALYSIS ................................................................................................................................ 64


CONCLUSION ........................................................................................................................................................................... 65

POSSIBILITIES AND RECOMMENDATIONS……………………………………………………………………………71

INTRODUCTION..................................................................................................................................................................... 71

STRATEGIC ALIGNMENT................................................................................................................................................... 71

CORPORATE-LEVEL STRATEGY .................................................................................................................................................. 71

BUSINESS-LEVEL STRATEGY ...................................................................................................................................................... 72

ALIGNMENT ANALYSIS ................................................................................................................................................................ 72

POSSIBILITIES AND RECOMMENDATIONS FOR IMPROVING STRATEGIC COMPETITIVE

ADVANTAGE ............................................................................................................................................................................ 75

POSSIBILITY I: INCREASE CONSUMER AWARENESS OF CYPRESS SPORTING GOODS & TROPHIES’ BRAND.................. 75

POSSIBILITY II: ESTABLISH A MORE CONCENTRATED PRODUCT FOCUS............................................................................. 77

POSSIBILITIES AND RECOMMENDATIONS FOR IMPROVING OPERATIONAL EFFICIENCIES...... 80

POSSIBILITY I: IMPROVE THE INVENTORY MANAGEMENT PROCESS ................................................................................... 80

POSSIBILITY II: IMPROVE THE INTERNAL FINANCIAL DECISION-MAKING PROCESS......................................................... 81

CONCLUSION ........................................................................................................................................................................... 83

IMPROVED COMPETITIVE POSITIONING ................................................................................................................................... 83

INCREASED VALUE-ADDED......................................................................................................................................................... 85

REFERENCES……………………………………………………………………………………………………………………….. 91

APPENDIX…………………………………………………………………………………………………………………………… 99

MEET THE TEAM ........................................................................................................................................................................ 99

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PREFACE ACKNOWLEDGEMENTS

The strategic analysis of Cypress Sporting Goods & Trophies was written by a team of California State

University, Monterey Bay students involved in the Business Administration program: John Halligan, Roy

Farrens, Trevor Turner, Jeff Owen, and Richard Guerrero. The team of authors gratefully acknowledges

the contributions of the university’s business professors, especially Mrs. Sharon Kurtz, Ph.D.

In preparing the report, substantial information was solicited from the owners and manager of Cypress

Sporting Goods & Trophies. The team of authors is especially appreciative of the consistent support,

cooperation, and data provided by Joe Cutrufelli, Debbie Cutrufelli, and Gina Cutrufelli-Carnazzo

throughout the process of developing the report.

Executive Summary

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EXECUTIVE SUMMARY This strategic business analysis examines the external and internal environment that affects the

way Cypress Sporting Goods & Trophies operates. From the report, it develops recommendations that can assist Cypress Sporting Goods & Trophies in obtaining a sustainable competitive advantage.

Cypress Sporting Goods & Trophies has been doing business in Monterey County for over 40

years. Joe and Debbie Cutrufelli, the current owners, first bought into the business and formed a partnership with Richard Rittenour in 1984. Four years later, Joe and Debbie bought out Richard and made the decision to move to a new location on N. Fremont Street in Monterey, California.

Cypress Sporting Goods & Trophies increased the range of sporting goods equipment offered, added embroidery, silk screening, and trophies. The company continued expansion in 2009 with

the creation of the Cypress Gators traveling baseball team. The company also expanded in 2011, when it opened batting cages next to its retail location. Cypress Sporting Goods & Trophies continues to strive to be the leader in sporting goods equipment in the Monterey County area.

Cypress Sporting Goods & Trophies’ external environment provides the business with numerous

challenges. These challenges create opportunities and threats that affect the growth of the company. The opportunities and threats are determined by analyzing the external environment’s driving forces, key success factors, and competitive forces. Cypress Sporting Goods & Trophies’

primary opportunities come from external economic and technological driving forces. Cypress Sporting Goods & Trophies could use all present opportunities order to differentiate itself from

competitors. Cypress Sporting Goods & Trophies has many resources that are used in its business operations.

In order to differentiate itself from competitors, Cypress Sporting Goods & Trophies can take advantage of its extraordinary resources which create capabilities and value-adding activities.

For example, the extraordinary resource of the batting cages provides Cypress Sporting Goods & Trophies with additional services that can be offered. The family environment that is created provides a comfortable working environment for the employees, resulting in low employee

turnover. The forty-year history and relationships with local businesses give the firm a strategic competitive advantage. Cypress Sporting Goods & Trophies’ current corporate-level strategy is

that of retrenchment, since its plan is to reduce the number of sporting goods offered and refocus on trophies. Its current business-level strategy is broad differentiation, since the customers pay a little more for excellent customer service, high quality products, and unique product offerings.

The possibilities and recommendations section of the report discusses ways Cypress Sporting

Goods & Trophies can gain a strategic competitive advantage and increase its operational efficiency. There are two possibilities and selected recommendations that result in Cypress Sporting Goods & Trophies gaining a strategic competitive advantage. These possibilities and

selected recommendations are:

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Possibility 1: Increase consumer awareness of Cypress Sporting Goods & Trophies’

brand

o Selected Recommendation: Create an official company website

Possibility 2: Establish a more concentrated product focus

o Selected Recommendation: Long-term transition to a more concentrated product

focus

There are two possibilities and selected recommendations that result in Cypress Sporting Goods

& Trophies increasing its operational efficiency. These possibilities and selected recommendations are:

Possibility 1: Improve the inventory management process

o Selected Recommendation: Create an inventory manager position and point of sales system

Possibility 2: Improve the internal financial decision-making process

o Selected Recommendation: Create a financial analyst position

If the selected recommendations are implemented, resulting in a new competitive positioning and

heightened value-adding activities, then Cypress Sporting Goods & Trophies can obtain a

sustainable strategic competitive advantage within the sporting goods stores industry.

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History and Overview

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HISTORY AND OVERVIEW INTRODUCTION

Cypress Sporting Goods & Trophies has been serving the people of the Monterey Peninsula for

over 40 years. It is family owned and operated by Joe and Debbie Cutrufelli, whose love for sports inspired them to purchase and grow the company into what it is today. Cypress Sporting Goods & Trophies sells quality sporting goods equipment, offers batting cage services, creates

custom uniform and jersey designs, and produces custom trophies and awards (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014). The following section discusses the

history and business overview of Cypress Sporting Good & Trophies. HISTORY

Founding

Cypress Sporting Goods & Trophies was started in 1968;

however, the original owner is unknown. One year later, Richard Rittenour purchased the company and for 15

years, he sold baseball equipment, uniforms, and small amounts of custom trophies. Then, in 1984, Richard and Joe Cutrufelli turned the business into a partnership.

Throughout the years, Rittenour’s interest in the company faded and in 1989, Joe Cutrufelli bought-out the company

and turned the business into a C Corporation, with ideas of offering more products and services. Today, Joe and his wife, Debbie, act as the sole owners of Cypress

Sporting Goods & Trophies. Also, their daughter, Gina Cutrufelli-Carnazzo, acts as the store manager (G.

Cutrufelli-Carnazzo, personal communication, February 4, 2014). Figure 1.1: The Cutrufelli Family, displays, from left to right, Gina Cutrufelli-Carnazzo, Joe Cutrufelli, and

Debbie Cutrufelli.

Original Products and Services. Cypress Sporting Goods & Trophies began with a small product assortment of baseball equipment, custom trophies, and baseball uniforms. The small

section of baseball equipment included wooden baseball bats, gloves, and cleats. When Joe took over in 1984, he expanded the products to include football, field hockey, lacrosse, and soccer

equipment (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014). Original Vision. When Cypress Sporting Goods & Trophies began, its original vision was to be

the leading provider of sporting goods in the Monterey area (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014).

Figure 1.1: The Cutrufelli Family

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Milestones Cypress Sporting Goods & Trophies has been in existence for over four decades. During this

time, it has achieved many goals and accomplishments. One major goal it has accomplished was moving into a bigger location where it would able to expand and grow. In 1989, when Joe

bought Cypress Sporting Goods & Trophies, his main goal was to expand and move into a bigger location. Joe and his family truly reached that goal in 2001 by moving into its current location on N. Fremont Street. This location allowed for the expansion and opening of its batting cage

services in 2011 (G. Cutrufelli-Carnazzo, personal communication, February 16, 2014). Refer to Figure 1.2: Timeline, for a visual representation of Cypress Sporting Goods & Trophies’

significant milestones.

Figure 1.2: Timeline

FIRM OVERVIEW

The following section provides information about Cypress Sporting Goods & Trophies’ vision,

mission, goals, guiding principles, products and services, and markets.

Mission

Cypress Sporting Goods & Trophies strives to deliver personal and friendly sporting goods

services to the people of the Monterey Peninsula. While its direct competitors’ advantages are in customer convenience, Cypress Sporting Goods & Trophies focuses on customer service with

quality equipment, attractively customized uniforms, impressive trophies, useful batting cages, and caring employees (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014). All employees pride themselves on recognizing returning customers, connecting on a more personal

level with them, and making their purchasing process “a more wholesome experience that they

1968• Founded (Original owner is unknown)

1969• Purchased by Richard Rittenour

1984• Formed partnership with Joe Cutrufelli

1989• Bought-out by Joe Cutrufelli and C corporation formed

2001• Moved to its current location, N. Fremont Street in Monterey

2009• Created Cypress Gators traveling baseball team

2011• Opened batting cages

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cannot find anywhere else in the Monterey Peninsula” (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014).

Goals

Goals are the desired results that a business would like to achieve. Cypress Sporting Goods & Trophies’ emphasis on executing its goals improves its business dramatically. Its goals are broken up into two categories: short-term and long-term goals (G. Cutrufelli-Carnazzo, personal

communication, February 4, 2014).

Short-Term Goals. Cypress Sporting Goods & Trophies has goals to improve its business as soon as possible, also known as short-term goals. The short-term goals are the following:

● Establish more awareness of trophy offering and products

● Create more awareness throughout Monterey county ● Categorize in-store product selection by sport sector ● Secure knowledgeable batting coaches for batting cage lessons

(G. Cutrufelli-Carnazzo, personal communication, February 4, 2014)

Long-Term Goals. Cypress Sporting Goods & Trophies has long-term goals for the future that

are intended to improve its business. These goals require more time and effort than short-term goals, in order to be achieved. The long-term goals are formulated to generate more business in a time-frame longer than a year. These types of goals are the following:

● Create a website with all products offered ● Establish electronic inventory tracking system

● Increase trophy department and obtain new equipment ● Expand the store’s space to create more room

(G. Cutrufelli-Carnazzo, personal communication, February 4, 2014)

Guiding Principles

Every employee of Cypress Sporting Goods & Trophies provides all buyers with friendly and

inviting customer service. Employees maintain a clean, but relaxed dress code and are encouraged to wear unique Cypress Sporting Goods & Trophies shirts while working. The work

environment promotes giving locals and repeat buyers discounts and/or product-return deadline extensions.

Employees are active members of the community that Cypress Sporting Goods & Trophies serves. This motivates each of them to always give their best effort when meeting consumer

needs and securing more business. The store is small and has very few employees. This increases Cypress Sporting Goods & Trophies’ ability to provide a more personalized response to customers, unlike its major competitors, Dick’s Sporting Goods or Sports Authority (G.

Cutrufelli-Carnazzo, personal communication, February 4, 2014). These companies hire significantly more employees that are responsible for many more types of products or services

that broaden their focus and reduce their ability to connect or relate with customers. For example, Dick’s Sporting Goods has an average of just over 57 employees per location throughout the 520 stores and 40 states it operates in, compared to Cypress Sporting Goods & Trophies’ single

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location and six total internal stakeholders (Hoover’s, a D&B company, 2014).

Vision

The vision of Cypress Sporting Goods & Trophies is to become "the leading embroidery, silk-

screening, and custom trophy design services on the Monterey Peninsula” (G. Cutrufelli-Carnazzo, personal communication, February 16, 2014).

Products and Services

Cypress Sporting Goods & Trophies retails products for the sports of baseball, soccer,

football, field hockey, lacrosse, and football. However, its specialty is baseball and it carries an extensive inventory that caters to local baseball teams and players. Cypress Sporting Goods & Trophies makes custom trophies using rotary engraving, and custom apparel and jerseys using

methods such as heat press and embroidery. Employees operate batting cages and host team parties (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014). Figure 1.3: Product

and Services Sample, provides a look into Cypress Sporting Goods & Trophies’ store and the assortment of products and services being offered on-site.

Baseball Gloves Custom Trophies Batting Cages Custom Uniforms

Figure 1.3: Product and Services Sample

Markets

Cypress Sporting Goods & Trophies’ target market consists of children active in youth sports,

college students, and active middle-age adults. More specifically, it is composed of community members between ages five and 45 years old, totaling approximately 241,700 people in the Monterey County (U.S. Census Bureau, 2012). Cypress Sporting Goods & Trophies is a sporting

goods retailer that focuses on baseball, soccer, football, field hockey, lacrosse, custom trophies, and uniform/jersey design. The most popular sport the company provides products and services

for is baseball. There are five baseball little leagues in Monterey County that require equipment and custom jersey services from Cypress Sporting Goods & Trophies (eteamz, 2014). In addition, there are many high school and college baseball teams that utilize Cypress Sporting Goods &

Trophies as an equipment provider. Also, many adult baseball enthusiasts access the batting cage services and purchase bats, mitts, uniforms, etc., in order to remain active in one of their favorite

hobbies (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014). Organizational Structure

The organizational chart Figure 1.4: Organizational Structure, shows the placement of each employee and differentiates the individual responsibilities within Cypress Sporting Goods &

Trophies. The owners, Joe and Debbie Cutrufelli, help run the store, while Gina Cutrufelli-Carnazzo manages the store. Their fellow employees are Nina D’Aquanno, Hilda Garlow, and

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Johnny Tarallo. Each of these employees oversees a specific segment of the store’s products and services. However, the structure is very informal and sometimes employees must accomplish

tasks outside their primary department (i.e. manage check-out station, assist customers with finding products, distribute inventory throughout the store, etc.). Also, seasonal employees are

hired when the demand for sporting goods increases and the current employees need assistance at accomplishing minor tasks (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014).

Figure 1.4: Organizational Structure

Joe and Debbie Cutrufelli are the owners of Cypress Sporting Goods & Trophies and supervise the entire store. Both Joe and Debbie work throughout the week to ensure the store runs

smoothly and is operating efficiently. They oversee general business operations and finances. Gina Cutrufelli-Carnazzo, the daughter of Joe and Debbie, is Cypress Sporting Goods &

Trophies’ store manager. Gina’s crucial responsibility is organizing the trophy services of the business and assisting with all other types of responsibilities throughout the store.

Nina D’Aquanno is the head of the uniform department. She organizes orders from all the different leagues, teams, and customers requesting different types of uniform products (i.e.

jerseys, pants, jackets, etc.). Hilda Garlow is in charge of managing the embroidery services and machines. Embroidery is Cypress Sporting Goods & Trophies’ most utilized process for developing custom uniform designs. Johnny Tarallo oversees the batting cage services and its

equipment. All three of the employees report back to Gina Cutrufelli-Carnazzo with operational updates, in order to remain effective and efficient at their positions. During the busy seasons, additional help is hired to assist with customers and perform the lowest level of responsibilities

(G. Cutrufelli-Carnazzo, personal communication, February 4, 2014).

Internal Stakeholders

Internal stakeholders are those that impact, or are impacted by, the operations or activities of a business. These stakeholders influence the ways in which a firm takes advantage of identified

threats and avoid significant threats (Ritson, 2012, p.29). The following stakeholder analysis

Owners

Joe and Debbie Cutrufelli

Uniforms

Nina D'Aquanno

Embroidery

Hilda Garlow

Batting Cages

Johnny Tarallo

Manager

Gina Cutrufelli-Carnazzo

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examines the internal stakeholders of Cypress Sporting Goods & Trophies. Figure 1.5: Internal Stakeholders and Their Level of Influence, visually categorizes the internal stakeholders of

Cypress Sporting Goods & Trophies as either primary or secondary stakeholders. It also rates each stakeholder’s level of influence in the company.

Internal Stakeholders

Low Medium High

Primary

Cutrufelli family members X

Secondary

Part-time employees X

Seasonal employees X

Figure 1.5: Internal Stakeholders and Their Level of Influence

Primary Internal Stakeholders. Joe and Debbie Cutrufelli are married and have solely owned Cypress Sporting Goods & Trophies since 1989, after buying out their previous partner, Richard

Rittenour. Their daughter, Gina Cutrufelli-Carnazzo, grew up watching the store grow into what it is today and is currently Cypress Sporting Goods & Trophies’ Manager. She spends the majority of her focus on the trophy services. The members of the Cutrufelli family have the most

investment in the company, a significant influence on business operations, and make all important operational decisions (G. Cutrufelli-Carnazzo, personal communication, February 16,

2014). Secondary Internal Stakeholders. Cypress Sporting Goods & Trophies also has three part-time

employees who assist with the different products and services offered. Custom uniform designs and orders are organized by Nina D’Aquanno. The embroidery of uniforms and jerseys is

performed by Hilda Garlow. Johnny Tarallo manages the batting cage services. He supervises customers and ensures they are using proper equipment. The sports that Cypress Sporting Goods & Trophies promotes, baseball, football, soccer, lacrosse, and field hockey have seasonal

schedules. This influences consumer spending trends to be seasonal as well. The different seasons often influence business orders and customer purchases to significantly increase or decrease. An increase forces Cypress Sporting Goods & Trophies to seek out more part-time

employees in order to successfully meet buyers’ demand. The number of seasonal employees hired is solely dependent on the level of influence the purchasing trends have on the company (G.

Cutrufelli-Carnazzo, personal communication, February 16, 2014). Summary of Findings

Cypress Sporting Goods & Trophies’ strengths are that it is well-established and has a loyal customer base. Its weaknesses include an inefficient organizational strategy, small store space, a

dated inventory management system, and the lack of an online presence. These strengths and weaknesses are represented in Figure1.6: Company Strengths and Weaknesses.

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Figure 1.6: Company Strengths and Weaknesses

Strengths. Cypress Sporting Goods & Trophies is well known in the market it serves. It has exceptional customer loyalty and many lifelong repeat customers. This is a great advantage over its competitors. By being established for over 40 years and serving the community of the

Monterey Peninsula, its entire existence, Cypress Sporting Goods & Trophies has developed meaningful relationships that consumers cannot receive from commercial retailers and online

services (G. Cutrufelli-Carnazzo, personal communication, February 16, 2014). Weaknesses. Cypress Sporting Goods & Trophies first weakness is its unofficial organizational

structure. While each employee has an official title, the structure is very informal and many times employees will have to accomplish tasks outside their primary department. This can lead to

confusion and increases the chance of mistakes that would occur when making significant business decisions. Another weakness is its small store space. This does not allow Cypress Sporting Goods & Trophies to equally rival direct competitors’ inventory selection and product

variety (G. Cutrufelli-Carnazzo, personal communication, February 16, 2014).

Also, in regards to inventory, the company catalogs its inventory information (i.e. costs, number of products ordered, current supply, etc.) by pen and paper. In today’s technologically advanced environment, this weakens Cypress Sporting Goods & Trophies’ ability to compete with its

direct competitors. Most competitors have already established an electronic inventory system that increases their efficiency tremendously when making and analyzing business decisions based on inventory. Finally, the most significant weakness is the fact that Cypress Sporting

Goods & Trophies has no official representation online through a business website. Websites are a huge advantage for the firm’s competitors and provide customers with a much higher level of

convenience and information (G. Cutrufelli-Carnazzo, personal communication, February 16, 2014).

Strengths

Well established

Loyal customers

Weaknesses

Informal organizational structure

Small store space

Inefficient inventory management

No online access

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INDUSTRY OVERVIEW

Industry Introduction

Cypress Sporting Goods & Trophies operates in three industries: clothing design services, fitness and recreational sports centers, and sporting goods stores. The company operates in the clothing

design services industry because it designs and manufactures sporting apparel. The NAICS code 541490 is the official representation of this industry. Cypress Sporting Goods & Trophies also

operates in the fitness and recreational sports centers industry because it offers batting cage services. This industry is represented by the NAICS code 713940 (NAICS Association, 2014).

The company operates in the sporting goods stores industry because it sells products and equipment in the area of baseball, soccer, football, lacrosse, and field hockey. The industry of

sporting goods stores, represented by NAICS code 451110, is the company’s primary and most profitable area of operation (NAICS Association, 2014). Figure 1.7: NAICS Codes, displays each of the three industry’s NAICS codes and there descriptive titles. It also bolds and underlines

the sporting goods stores industry, NAICS code 451110 to emphasize the fact that it is Cypress Sporting Goods & Trophies’ primary industry of operation. This section of the report focuses

and elaborates on this specific industry of sporting goods stores.

NAICS Code Description

541490 Clothing design services

713940 Fitness and Recreational Sports Center

451110 Sporting Goods Stores

Figure 1.7: NAICS Codes

The sporting goods store industry is primarily composed of brick and mortar retail stores that

specialize in sports equipment. The industry is concentrated, with the 50 largest companies taking in 55% of the total revenue. Larger retailers have an advantage with inventory prices and wide range of selection. However, small retailers can have an advantage by specializing in a

specific sport, by having more helpful staff, and by serving a local market (Hoover’s, a D&B company, 2014).

More recently, the broader retail industry has taken a severe blow from online stores. However, the sporting goods sector has fared much better, due to the prominence of online stores, which

began in the 2000’s. This can be attributed to customers wanting to try on and/or test inventory quality in the store, receive personal advice from knowledgeable staff, and take advantage of

local stores’ auxiliary services (i.e. batting cages) (Brown, 2014).

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Competitor Classifications

When classifying competitors within the sporting goods stores industry, there are three

classifications used: direct competitors, indirect competitors, and substitutes. Cypress Sporting Goods & Trophies has direct competitors in three different categories: sporting goods equipment,

custom jersey/uniform design, and trophy engraving. The direct competitors are established stores physically located near Cypress Sporting Goods & Trophies and its customers. Indirect competitors are companies that provide the same products and services as Cypress Sporting

Goods & Trophies, but solely conduct business over their websites on the Internet. Substitutes are companies that provide sporting goods equipment for sports other than baseball, football,

soccer, lacrosse, and field hockey (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014). Figure 1.8: Competitor Classifications, represents the direct and indirect competitors of Cypress Sporting Goods & Trophies, as well as its substitutes.

Figure 1.8: Competitor Classifications

Direct Competitors.

Sporting Goods. Cypress Sporting Goods & Trophies’ direct competitors include well

established stores with physical locations. These stores are: Dick’s Sporting Goods, Sports Authority, Big 5 Sporting Goods, and Central Coast Athletics. Central Coast Athletics is a

unique direct competitor, because it is the only other location in the immediate vicinity of

• Sporting Goods•Dick's Sporting Goods

•Sports Authority

•Big 5

•Central Coast Athletics

• Custom Unifomr Design•Central Coast Athletics

•Central Coast Silkscreen & Embroidery

• Trophies•Winners Awards & Engraving

•Pacific Etched Glass & Crystal

Direct Competitors

• Online Services•Modell's Sporting Goods

•Custom Ink

•Trophy Depot

Indirect Competitos

• Outdoor Recreation•Outdoor World

•REI

Substitutes

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Cypress Sporting Goods & Trophies that offers public batting cage services. However, Central Coast Athletics only sells baseball equipment (Central Coast Athletics, 2011). The others, Dick’s

Sporting Goods, Sports Authority, and Big 5 Sporting Goods, are not only located near Cypress Sporting Goods & Trophies, but also offer the same quality products for baseball, football,

soccer, lacrosse, and field hockey. However, these companies do not provide batting cage services, but do offer a more differentiated product selection across many different sports (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014).

Custom Uniform Design. Direct competitors in custom uniform design services, located on the

Monterey Peninsula, are Central Coast Athletics and Central Coast Silkscreen & Embroidery (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014). Central Coast Athletics assists customers in ordering custom baseball uniform equipment for those living in the Monterey Bay,

through both its store location in downtown Monterey and its website online (Central Coast Athletics, 2011). Central Coast Silkscreen & Embroidery is located in Pacific Grove and offers

services in screen printing, embroidery, and crochet for all aspects of consumers’ daily lives (Central Coast Silkscreen & Embroidery, n.d.).

Trophies. In the area of trophy design and engraving, Cypress Sporting Goods & Trophies’ direct competitors are Winners Awards and Engraving and Pacific Etched Glass & Crystal (G.

Cutrufelli-Carnazzo, personal communication, February 4, 2014). Located in Monterey, Winners Awards and Engraving performs laser engraving and glass etching to create custom trophies or awards for all types of occasions (Winners Awards & Engraving, 2013). Pacific Etched Glass &

Crystal can be classified as a commercial trophy engraving service provider in Pacific Grove (Pacific Etched Glass and Crystal, 2014).

Indirect Competitors

Sporting Goods. Cypress Sporting Goods & Trophies’ indirect competitors are providers of

quality sporting goods equipment, custom jersey/uniform design, and trophy engraving that can be accessed online. The significant indirect competitors threatening the health of Cypress

Sporting Goods & Trophies through the Internet are Modell’s Sporting Goods, customink.com, and trophydepot.com (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014). Modell’s Sporting Goods does have physical store locations; however, these locations are in the northeastern United States (Modell’s Sporting Goods, 2014). Therefore, Cypress Sporting Goods & Trophies is being threatened solely by Modell’s Sporting Goods’ online presence. The

company provides brand name sporting goods, apparel, and footwear that consumers can purchase online (Modell’s Sporting Goods, 2014).

Custom Uniform Design. Customink.com allows consumers to design custom apparel for all occasions including all kinds of sports uniforms. It makes the designing process easy and

convenient for those who do not wish to visit a physical store location for its custom uniform services (CustomInk, 2014).

Trophies. Trophydepot.com is similar to customink.com, however, it specializes in making, designing, and engraving of awards or trophies, rather than custom uniform designs. Customers

can visit trophydepot.com wherever they have online access and can order the exact trophies that

15

they want, without ever having to deal with driving to and from store locations (Trophy Depot, 2014).

Substitutes. Competitors that act as substitutes to Cypress Sporting Goods & Trophies’ products and services are providers of equipment for all types of outdoor recreation. The significant

substitutes are Outdoor World Sporting Goods and Recreational Equipment, Inc., (REI) (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014).

With three store locations in the Monterey Bay area, Outdoor World Sporting Goods does offer a small selection of equipment for baseball, soccer, football, lacrosse, and field hockey; however,

it specializes in equipment for camping, fishing, and hunting (Outdoor World Sporting Goods, 2014).

REI is the most significant substitute, because it sells outdoor recreational equipment, but not for general sports like baseball, football, and soccer. REI focuses on “camping, climbing, hiking,

paddling, snow sports, and travel” (REI, 2014). Consumers who visit these stores are given more options and have a higher probability of substituting their time for baseball, soccer, football,

lacrosse, and field hockey, with outdoor recreation such as camping, fishing, and hunting (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014).

External Stakeholders

Figure 1.9: External Stakeholders and Their Level of Influence, represents a summary of the

external stakeholders for Cypress Sporting Goods & Trophies. The chart is broken down into two different types of external stakeholders, primary and secondary. Primary external stakeholders are those who are directly affected by the success or failure of Cypress Sporting

Goods & Trophies. Secondary external stakeholders are those who are not directly affected, but who still have an interest in the success or failure of Cypress Sporting Goods & Trophies.

External Stakeholders

Low Medium High

Primary

Customers X

Suppliers X

Secondary

Competitors X

Figure 1.9: External Stakeholders and Their Level of Influence

Primary External Stakeholders. Customers and suppliers are considered primary stakeholders since they would be directly affected by the success and failure of Cypress Sporting Goods & Trophies. If the business were to close down, then customers would then have to find a new

place to buy their equipment, and the suppliers would lose one of their customers.

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Secondary External Stakeholders. Competitors are considered a secondary stakeholder since

they would be somewhat affected if Cypress Sporting Goods & Trophies went out of business. Secondary stakeholders include the firm’s competitors, because if Cypress Sporting Goods &

Trophies were to go out of business, its competitors would gain its market share, regardless of how insignificant it may be.

Summary of Findings

The sporting goods stores industry overview outlined specific opportunities and threats that

potentially impact Cypress Sporting Goods & Trophies. The current opportunities are to create an official company website, integrate an electronic inventory system within the business, and increase the usage of the batting cages. The current threat is the increasing competition from

name-brand commercial retailers of similar products and services. Refer to Figure 1.10: Company Opportunities and Threats, for a graphic representation of Cypress Sporting Goods &

Trophies’ current opportunities and threats.

Figure 1.10: Company Opportunities and Threats Opportunities. Cypress Sporting Goods & Trophies has multiple opportunities to improve its

business. First, an official company website would increase the reach of the store and expand its marketing abilities. It would allow more potential customers to gain access to the number of

products and services the company has to offer. Another opportunity related to technology, would be to integrate an electronic inventory management system into business operations. This would increase how efficiently the company orders more inventories, tracks its current

inventories, and how well it analyzes the effectiveness of its previous inventory orders. A third opportunity would be to increase the number of batting classes and lessons offered at the store’s

batting cages. Connecting customers with experienced batting coaches would enhance the unique services that make Cypress Sporting Goods & Trophies different from its competitors (G. Cutrufelli-Carnazzo, personal communication, February 16, 2014).

Threats. Cypress Sporting Goods & Trophies has been an established business for over forty

years and for a majority of that time, it was the only sporting goods store in the area. However, there are increasing numbers of competitors that have been opening their doors in the surrounding areas. The increasing competition takes away customers who don’t research which

Opportunities

Create official website

Integrate electronic inventory system

Offer official batting cage lessons

Threats Increased commercial retail

competition

17

stores to make purchases from and just seek out commercial, name-brand retailers. Due to the growing competition, Cypress Sporting Goods & Trophies must increase consumers’ awareness

of its store, its products, and its services (G. Cutrufelli-Carnazzo, personal communication, February 16, 2014).

CONCLUSION

The history and overview section of the strategic competitive analysis of Cypress Sporting

Goods & Trophies revealed the company’s strengths and weaknesses within its business operations. The analysis of the sporting goods stores industry, conducted in the industry overview, revealed the current opportunities and threats facing Cypress Sporting Goods &

Trophies. Figure 1.11: History and Overview SWOT Ratings Matrix, provides a more organized review of these strengths, weaknesses, opportunities, and threats, as well as their level of

significance to Cypress Sporting Goods & Trophies.

Strengths

Insignificant Moderate Significant

Well established X

Loyal customers X

Weaknesses


Informal organizational structure X

Small store space X

Inefficient inventory management X

No online access X

Opportunities


Create official website X

Integrate electronic inventory system X

Offer Official batting cage lessons X

Threats


Increased commercial retail competition X

Figure 1.11: History and Overview SWOT Ratings Matrix

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Strengths.

Well Established. Cypress Sporting Goods & Trophies’ first significant strength is its extensive

history of serving the people of the Monterey County. In fact, the company has been established within the community for over 40 years. Over the years, community members have developed

personal relationships with the Cutrufelli family and choose Cypress Sporting Goods & Trophies as their top sporting goods equipment provider (G. Cutrufelli-Carnazzo, personal communication, February 16, 2014).

Loyal Customers. By establishing itself as a successful provider of its products and services for so long and employing a small workforce, Cypress Sporting Goods & Trophies has secured a

tremendous amount of customer loyalty. Many of the firm’s direct competitors have not served the Monterey County as long and have a large amount of employees per store location. When

customers deal with a wide variety of people at one location, the chance of making personal connections is reduced. Personal connections increase a company’s effectiveness at satisfying customer needs and creating a more valuable purchasing experience. Cypress Sporting Goods &

Trophies excels in this area of customer service (G. Cutrufelli-Carnazzo, personal communication, February 16, 2014).

Weaknesses.

Informal Organizations Structure. Cypress Sporting Goods & Trophies has three significant

weaknesses. The first is an inefficient organizational structure. While each employee has a specific title, responsibilities are often handled by the employee with the most convenient schedule. The responsibilities are frequently small tasks, such as cleaning, organizing, and

stocking shelves with inventory. However, this weakness is classified as moderate, because sometimes responsibilities are based on significant business decisions. With a loosely-based

organizational system, the chance of making detrimental operational mistakes can be very costly to the company’s success (G. Cutrufelli-Carnazzo, personal communication, February 16, 2014).

Small Store Space. A small store space is considered insignificant; however, it prevents Cypress Sporting Goods & Trophies from matching competitors’ amount of sporting goods selection,

name-brands, and diversification of equipment. Many direct competitors have much larger store space, creating more power to differentiate products and services (G. Cutrufelli-Carnazzo, personal communication, February 16, 2014).

Inefficient Inventory Management. Cypress Sporting Goods & Trophies’ current inventory

management system is outdated and cannot compete with the commercial retailers threatening its growth and profits. Without an electronic inventory management system in place, the company is significantly less efficient at tracking all aspects of its inventories. This slows the company down,

while its direct competitors are speeding up by embracing technological advances (G. Cutrufelli-Carnazzo, personal communication, February 16, 2014).

No Online Access. Cypress Sporting Goods & Trophies’ lack of an online presence is the last and possibly most significant weakness. Almost every competitor, either direct, indirect, or

substitute, has an official company website that allows customers to at least browse the firm’s products and services. It cripples Cypress Sporting Goods & Trophies’ ability to compete with

the technologically-advanced competition, reduces the number of consumers the company serves,

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and decreases profit potential (G. Cutrufelli-Carnazzo, personal communication, February 16, 2014).

Opportunities.

Create Official Website. One of the most significant opportunities for Cypress Sporting Goods & Trophies is the creation of an official company website. The company’s current online presence is extremely weak compared to its direct competitors, and an official website would help the firm

compete more effectively. An official website could increase the company’s professional appearance, strengthen its marketing abilities, and offer a higher level of convenience to its

customers. Overall, this website would significantly increase Cypress Sporting Goods & Trophies’ ability to compete in the retail sporting goods industry because of its ability to capture market share (G. Cutrufelli-Carnazzo, personal communication, February 16, 2014).

Integrate Electronic Inventory System. Another significant opportunity, that Cypress Sporting

Goods & Trophies can take advantage of, is the implementation of an electronic inventory management system. An electronic inventory management system would dramatically increase operational efficiency and create more available time for employees to focus on other aspects of

the business. Also, it would reduce the risk of human error when making calculations and analyzing inventory data (G. Cutrufelli-Carnazzo, personal communication, February 16, 2014).

Official Batting Cage Lessons. A potential increase in the amount of batting lessons with knowledgeable hitting coaches could provide the firm with a moderate opportunity to create

profit. Cypress Sporting Goods & Trophies' batting cages are another attraction bringing new customers to the store and securing their loyalty for future purchases. In order to increase the

significance of the batting cages, the company would like to provide more official and consistent batting lessons. The most effective way would be to establish contracts with knowledgeable and/or professional batting coaches. This increases the batting cage services’ credibility and

value in the eyes of the consumer (G. Cutrufelli-Carnazzo, personal communication, February 16, 2014).

Threats. Increased Commercial Retail Competition. The most pertinent threat facing Cypress Sporting

Goods & Trophies is the increased competition from name-brand commercial sporting goods retailers, such as Sports Authority and Dick’s Sporting Goods. These commercial retailers have

both physical store locations and official websites where consumers can access for their sporting goods needs. Most direct competitors also offer a more differentiated product selection and cater to a broader range of consumer tastes in outdoor recreation. Each day that Cypress Sporting

Goods & Trophies does not make business decisions to upgrade its technology and inventory selection, the company falls even more behind. Customers turn to commercial retailers who can

provide the level of convenience and/or product selection they seek. This significantly threatens Cypress Sporting Goods & Trophies’ market share and potential growth (G. Cutrufelli-Carnazzo, personal communication, February 16, 2014).

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External Analysis

23

EXTERNAL ANALYSIS INTRODUCTION

The external analysis of the sporting goods stores industry, which Cypress Sporting Goods &

Trophies operates in, identifies opportunities and threats. It involves the general environment which consists of the driving forces. It also requires an evaluation of the competitive environment which includes the competitive positioning, key success factors, strategic group

analysis, supply chain positioning, and competitive forces.

GENERAL ENVIRONMENT

The general environment of Cypress Sporting Goods & Trophies consists of external forces that are out of the control of its management. These external forces, also known as driving forces, are

analyzed in the categories of political, economic, social, technological, environmental, and legal (PESTEL).

Driving Forces: PESTEL Analysis

The framework for examining these six segments of the external environment is known as

PESTEL analysis. Each category consists of factors that present opportunities and threats within each segment of the general environment (Ketchen & Short, 2013). Figure 2.1: Driving Forces’ Significance Chart, summarizes every element of the external environment and its relative

significance to the sporting goods industry. The political segment is of moderate significance, the economic segment is of high significance, the social segment is of moderate significance, the technological segment is of high significance, and the environmental and legal segments are

considered insignificant.

Driving Forces


Political X

Economic X

Social X

Technological X

Environmental X

Legal X

Figure: 2.1: Driving Forces’ Significance Chart

Political. The political segment is “the portion of the general environment that involves

governments” (Ketchen & Short, 2013). The federal, state, and local government that Cypress Sporting Goods & Trophies operates in provides a stable environment in which to do business

24

(World Bank Group, 2013). This stability is why the threat level for the political environment is insignificant, but the opportunity for employing a cheap workforce is significant. Health care and

social services that are subsidized by the government may help Cypress Sporting Goods & Trophies retain employees at a low wage (Dorfman, 2013). This is an opportunity for Cypress

Sporting Goods & Trophies because it allows them to cut payroll costs, while still enjoying a healthy workforce. Overall, the political environment is of moderate significance.

Economic. The economic segment is “the portion of the general environment that involves economic and financial conditions” (Ketchen & Short, 2013). The economy and consumer

spending holds a bright future for the sporting goods industry, with a 7% percent increase in 2012 for sporting goods sales (NSGA, 2013). According to industry experts, this trend is expected to continue into the future because consumers are “not afraid to spend on sporting

goods” (NSGA, 2013). Therefore, economic factors are a significant opportunity for Cypress Sporting Goods & Trophies.

Social. The social segment of the general environment “involves demographics and cultural trends” (Ketchen & Short, 2013). There is a social movement in the U.S. to reduce obesity and

encourage people to be healthier. The first lady, Michelle Obama, is leading the way with her “Get Active” and “Let’s Move” campaigns that focus on at least 60 minutes of outdoor

recreation per day (Let’s Move, 2014). As society works to stay healthy and active, children and adults need equipment to engage in sports. However, this trend of increased activity among consumers could change due to lifestyle and social pressures. Therefore, the social segment

poses an opportunity of moderate significance to Cypress Sporting Goods & Trophies.

Technological. The technological segment of the general environment “centers on improvements in products and services” that are the result of scientific advances (Ketchen & Short, 2013). The technological factors in Cypress Sporting Goods & Trophies’ external environment are

significant. There is an increasing trend for people’s “need to save time in today’s fast paced society” (Ketchen & Short, 2013). This trend is applicable to a consumer’s search for a sporting

goods retailer in his/her local area. A query in the search engine Google for Cypress Sporting Goods & Trophies returns only entries that customers have made in the Yellow Pages, Yelp, Map Quest, and Local Yahoo. All of the information that is found on these pages is consumer

generated, and contains conflicting information.

The online external environment is filled with proprietary websites that provide convenient and accurate access to information of competing sports retailers. In the sporting goods retail industry, an effective online presence is necessary to compete (Linton, 2014). Cypress Sporting Goods &

Trophies does not have a proprietary web presence. Therefore, the threat from the technological external environment is significant because consumers can easily find information on other

sports retailers, but not for Cypress Sporting Goods & Trophies. Environmental. The environmental segment is “the portion of the general environment that

involves the natural environment” (Ketchen & Short, 2013). As the global climate slowly changes, the weather is becoming more unpredictable and severe (Environmental Protection

Agency, 2013). All of the sporting equipment that Cypress Sporting Goods & Trophies sells

25

depends on moderate conditions outdoors. For example, a year of record rainfall would decrease Cypress Sporting Goods & Trophies’ sales because customers would turn to alternative sports or

entertainment that does not rely on fair weather. Therefore, the possibility of a long period of rainy weather in the future is a threat to Cypress Sporting Goods & Trophies. However, due to

the unpredictable nature of climate change, there is a chance of a period of drought instead of increased rain (Environmental Protection Agency, 2013). Overall, the environmental segment of the external analysis is insignificant.

Legal. The legal segment is the “portion of the general environment that involves laws and

courts” (Ketchen & Short, 2013). The legal environment that Cypress Sporting Goods & Trophies operates in, the California legal system, holds people and businesses responsible for his/her actions (World Bank Group, 2013). If a customer were to be injured in the batting cages,

then Cypress Sporting Goods & Trophies could be held liable. If an employee were to be injured using the embroidery or trophy machinery, then Cypress Sporting Goods & Trophies could also

be held liable. These risks expose Cypress Sporting Goods & Trophies to lawsuits, workers compensation contributions, and increased insurance premiums. With constant diligence of management, the likelihood of such an extreme event occurring is unlikely. However, if an

injury were to occur, the consequences could be severe. Overall, the legal segment of the external environment is considered insignificant.

Summary of Findings

Figure 2.2: PESTEL Analysis Chart, displays the key points, which are categorized as either

opportunities or threats, from each segment of the PESTEL analysis.

Opportunities Threats

Political • Subsidies for employees • Stable and predictable government

Economic • Growth in industry sales • Fluctuating economy

Social • Physical activity trends • Reversal of current

trends

Technological • Consumer’s online queries • No proprietary online

presence

Environmental • Fair weather • Unpredictability of

weather

Legal • Customer injury • Employee injury

Figure: 2.2: PESTEL Analysis Chart

Opportunities. Within the PESTEL analysis, the most significant external driving force, that is an opportunity for Cypress Sporting Goods & Trophies, is the economic segment. Whether the economy is strong or weak, it has a major and direct impact on Cypress Sporting Goods &

Trophies sales. Based on the positive outlook for the retail sporting goods industry, the economic environment is a beneficial driving force.

26

Threats. Within the PESTEL analysis, the most significant external driving force, that is a threat for Cypress Sporting Goods & Trophies, is the technological segment. The environment in which

consumers select a retailer to patronize is heavily influenced by the company’s online presence. Cypress Sporting Goods & Trophies’ technological external environment consists of an online

landscape that is comprised of sporting goods retailers with detailed and informative websites. Its lack of a proprietary website is a threat of high significance because it raises the search cost for consumers and leads them to competitors. Figure 2.3: PESTEL Analysis’ Significant

Opportunities and Threats, illustrates the most significant opportunities and threats discovered in the PESTEL analysis.

Figure 2.3: PESTEL Analysis’ Significant Opportunities and Threats

COMPETITIVE ENVIRONMENT

The competitive environment is “the dynamic system in which your business competes” (Mack, 2013). The competitive environment examines competitive positioning, key success factors, strategic group analysis, supply chain positioning, and competitive forces. Competitive Positioning

Competitive positioning is “positioning a business to maximize the value of the capabilities that distinguish it from its competitors” (Porter, 1980). Cypress Sporting Goods & Trophies functions inside the sporting goods stores industry, and can be located under the NAICS code 451110.

“This U.S. industry comprises establishments primarily engaged in retailing new sporting goods, such as bicycles and bicycle parts; camping equipment; exercise and fitness equipment; athletic

uniforms; specialty sports footwear; and sporting goods, equipment, and accessories” (U.S. Census Bureau, n.d.).

Key Success Factors. The key success factors that direct competitors in the sporting goods stores industry need to address, in order to remain competitive, are economies of scale, product variety,

cost control, and research and development. Figure 2.3: Key Success Factors, depicts Cypress Sporting Goods & Trophies’ and its direct competitors’ rank in the area of each important factor of success.

Opportunities

• Positive economic outlook for the retail sporting goods industry

Threats

• Lack of proprietary website

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Company Economies of

Scale

Product

Variety

Cost

Control

Research and

Development

Cypress Sporting Goods &

Trophies Low Medium Medium Low

Dick’s Sporting Goods High High High High

Big 5 Sporting

Goods High High High High

Sport’s Authority High High High High

Central Coast

Athletics Low Low Medium Medium

Figure 2.3: Key Success Factors Economies of Scale. An economy of scale exists when a company is able to save money by

spreading its input costs over a greater number of output units (Heakal, 2009). For example, when purchasing inventory from suppliers, the purchaser who requires a higher volume usually

will receive a lower price. Therefore, economies of scale will dictate that Cypress Sporting Goods & Trophies, as a small purchaser, will pay more than a large purchaser, such as Big 5 or Dick’s Sporting Goods.

The principle of economies of scale also applies to advertising (Heakal, 2009). For example, if

Cypress Sporting Goods & Trophies and Sports Authority were both to have a proprietary website created for $10,000, Sports Authority would see more return on investment on this advertising expense. This is because if a consumer were to search online for “sports equipment”

in a specific city, there is a good chance that Sports Authority would be returned in the search results. This would only be true for Cypress Sporting Goods & Trophies if that U.S. city were

local to the Monterey County. In this example, both companies incurred the same $10,000 advertising input cost from creating a website. However, Sports Authority can reap a greater reward because of economies of scale and the greater number of people who will be directed to

its website.

Product Variety. The product variety key success factor quantifies the number of products that

Cypress Sporting Goods & Trophies and its competitors offer to consumers. Cypress Sporting Goods & Trophies offers five product lines; therefore it is ranked as having a medium product

variety. Some of its competitors, such as Dick’s Sporting Goods, offer over 20 product lines (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014). Therefore, Dick’s Sporting Goods product variety key success factor is high. A company may attract more customers if it

has more product variety to choose from. Conversely, a company that carries fewer products may be able to provide consumers with more advanced, specialized knowledge and accrue a lower

inventory cost. Cost Control. Profit margins are directly affected by costs in all industries. A company must

create revenue, but also control costs and ensure there is a positive profit margin (Investopedia,

28

2014). Companies must find a way to lower costs, while maintaining a profit. Creating a unique cost control system based on specific company attributes will give firms a competitive advantage

in an industry. Distribution centers, efficient inventory management, and benchmarking are the most important factors in achieving a strategic cost control system. Distribution centers reduce

inventory costs and prevent a company from incurring unnecessary fees for rush orders when receiving goods. An efficient inventory system allows a company to record and analyze what items need to be ordered and what items have been ordered. This creates less confusion when

making company purchases and avoids spending money. Benchmarking allows companies to rank themselves among competitors in an industry in order to analyze which strategies are

profitable and which strategies are ineffective (James, 2009). Research and Development. In today’s modern world, technology creates significant advantages

throughout the business environment. “Research and development” refers to companies investigating modern technology and understanding its ability to either develop new products

and services or to enhance existing products and services (Investopedia, 2014). The Internet is an extremely useful resource for customers to post feedback online and company analysts can examine product or service reports to better address trending preferences. This allows a company

to efficiently stay up to date with customer preferences in product styles, price, and trends. Creating an official website is a company’s most effective method of providing consumers with

the highest level of convenience, information, and ability to provide feedback (James, 2009). Cypress Sporting Goods & Trophies is the only sporting goods store among its direct competitors without an official company website. Without an official and organized online

presence, the company is weak in the area of research and development.

Strategic Group Analysis. A strategic group is a set of competitors in the same industry that have similar characteristics and strategies, but also differ in important ways. A strategic group analysis of these groups provides valuable information and insight to business executives.

Understanding the similarities and differences of the strategies of each competitor increases a business’ ability to effectively compete in an industry (Ketchen & Short, 2013).

Figure 2.4: Strategic Group Map, analyzes Cypress Sporting Goods & Trophies and its four direct competitors based on two key success factors: product variety, and research and

development. These two key success factors have significant importance in the sporting goods stores industry. The key success factors are used to identify the main differences between the

five direct competitors.

29

Figure 2.4: Strategic Group Map Along the x-axis is the variety of products each sporting goods store is equipped with. The y-axis

shows the amount of research and development performed by each of the five sporting goods stores. For research and development, each of the sporting goods stores is rated by marketing and

online presence. If the company has an online presence and an effective marketing plan, it is rated high. If the company has one or the other, it is rated as medium. If the company is lacking both, then it is rated low on research and development.

Supply Chain Positioning

A supply chain refers to the “system of people, activities, information, and resources involved in creating a product and moving it to the customer” (Ketchen & Short, 2013). Figure 2.5: Supply Chain Map, displays where Cypress Sporting Goods & Trophies is located within the sporting

goods stores industry supply chain.

Figure 2.5: Supply Chain Map

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Raw Materials. The supply chain begins with raw materials. “Raw materials are basic materials that are modified into a finished good (Business Dictionary, 2014). In the sporting goods

industry these raw materials include leather, aluminum, wood, and many others. These raw materials are then modified into all types of sporting good products and equipment.

Manufacturers. Raw materials are purchased by and shipped to manufacturers. Manufactures take the raw materials and use machines to modify them into sporting goods equipment. After

the sporting goods equipment is made it is placed into inventory where it is held until it’s ordered, either from a wholesaler or directly from a retailer. Some of the main manufactures in the

sporting goods industry include: Rawlings, Easton, Wilson, and Nike. Cypress Sporting Goods & Trophies often buys equipment from manufactures directly (G. Cutrufelli-Carnazzo, personal communication, March 9, 2014).

Wholesalers. A wholesaler is “a person or firm that buys large quantities of goods from various

producers or vendors, warehouses them, and resells them to retailers” (Business Dictionary, 2014). Wholesalers serve as the middleman between manufactures and retailers.

Retailers (Cypress Sporting Goods & Trophies). A retailer is “a person or business that sells goods to consumers” (Business Dictionary, 2014). Cypress Sporting Goods & Trophies falls

directly under this category because it sells sporting goods equipment directly to consumers. Consumers. Consumers are the final step in the supply chain. The retail consumer is the person,

business, or organization that purchases products from the retail store. These would be considered Cypress Sporting Goods & Trophies’ customers.

Competitive Forces

The competitive nature of all industries, including the sporting goods store industry, is

influenced by five competitive forces. “The extended rivalry that results from all five forces defines an industry’s structure and shapes the nature of competitive interaction within an

industry” (Porter, 2008). Figure 2.6: Competitive Forces, displays the five competitive forces and the current level of

significance each have in the sporting goods store industry. These forces include the threat of new entrants, the threat of substitutes, the bargaining power of buyers, the bargaining power of

suppliers, and the intensity of competitive rivalry. “Understanding the competitive forces, and their underlying causes, reveals the roots of an industry’s current profitability while providing a framework for anticipating and influencing competition (and profitability) over time” (Porter,

2008).

31

Figure 2.6: Competitive Forces

Threat of New Entrants. The threat of new entrants is the probability of companies who currently do not compete in the sporting goods stores industry, joining and competing in the

future. To measure the threat of new entrants, several factors must be understood. These factors are: capital requirements, economies of scale, cost advantages, access to inputs, access to distribution channels, the need for product differentiation, switching costs, expected retaliation,

and government regulation (Ketchen & Short, 2013).

The barriers to enter the sporting goods stores industry are considered to have small significa nce, making it somewhat easy for a fresh start-up company to be born. “Initial investment factors to consider include the amount required for wages, six months of working capital, unforeseen

expenses, supplies and equipment inventories, insurance coverage and building remodeling or improvements” (Illinois Department of Commerce and Community of Affairs, 2004). With

enthusiastic determination and an understanding of what factors must be given attention, almost anyone can establish his/her own sporting goods store. However, to become a new sporting goods store in the industry that competes with and threatens the profits of the already well-

known established retailers can be difficult.

In order for a new entrant to stand out among already existing profitable sporting goods retailers, it must have an extremely efficient and effective marketing plan. The marketing plan should address whether or not the location of the new entrant can support the proposed business; the

existence of an unidentified market niche that may be exploited; the level of competition around

Competitive Rivalry

High

Threat of New

Entrants

Medium

Bargaining Power of

Customers

High

Threat of Substitutes

High

Bargaining Power of Suppliers

Medium

32

the location; the current customer base population, income, and growth trends; and competitive pricing strategies that already exist. These are all facets of the business owners or managers of a

new entrant should be aware of to develop a profitable firm (Illinois Department of Commerce and Community of Affairs, 2004).

In the Monterey County YellowPages, there are 104 businesses that classify themselves as some type of sporting goods retailer (YellowPages, 2013). YellowPages is “North America’s largest

local search, media and advertising company” (YellowPages, 2013). If the only barriers to enter and compete in the sporting goods store industry were initial start-up factors, the threat of new

entrants would be considered high. However, marketing and brand equity factors reduce the threat of new entrants to medium. This is because of the difficulty that a new entrant would face, in terms of capturing consumer attention that is already focused on existing companies’ products

and services.

Threat of Substitutes. According to Ketchen & Short (2013), “substitutes are offerings that differ from the goods and services provided by the competitors in an industry but that fill similar needs to what the industry offers. How strong the threat substitutes are depends on how effective

substitutes are in serving an industry’s customers” (p.77).

In the Monterey County, many physical sporting goods stores offer a variety of equipment for individual’s own specific choice of outdoor recreation. In fact, “the global retail sporting goods industry is highly fragmented” and “North America currently dominates this market” (Wood,

2012). Located in North America, Cypress Sporting Goods & Trophies is already operating in an industry that is difficult to enter and be successful in.

Sporting goods retailers offer all kinds of products for numerous types of recreation. “Sports, in general, are easily substituted with a large array of different activities. Thus, the threat of

substitutes is very high” (James, 2009). Clearly, the retail sporting goods industry’s threat of substitutes is considered to be high, due to consumers’ wide selection of where to spend their

money and what to spend it on. The sporting goods store industry is currently being threatened by variety stores attempting to

enter the industry. “Companies in this industry operate physical retail stores specializing in sporting goods, athletic and fitness wear, fitness equipment, and related products. Major

companies include Bass Pro, Big 5, Cabela's, Dick's Sporting Goods, Hibbett Sports, REI, and The Sports Authority (all based in the US)” (Hoover’s, a D&B company, 2014). However, “during the past two decades, the arena for sporting goods retailers has changed, with industry

players evolving into national chains that have considerable buying power. The rise in national sporting chain numbers has effectively created an opportunity for department stores and mass

merchandisers to enter the market and aim for a share of the sporting pie” (PRWeb, 2012). Therefore, not only are specialized stores focusing only on sporting goods equipment, threatening Cypress Sporting Goods & Trophies’ profits, but even large, well-known variety

stores, such as Wal-Mart or Target, have the ability to steal market share as well.

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Bargaining Power of Customers. Bargaining power of customers is one of the five major factors that shape the competitive structure of an industry. It refers to the pressure customers can put on

businesses in order to influence them to provide better products, more personable customer service, and most of all, lower prices. To determine whether or not the bargaining power of

customers is high, medium, or low, several factors must be analyzed. To address these factors, the following questions must be answered. These questions are: How many buyers are there compared to sellers? How easily can consumers find the same products for similar prices

elsewhere? Are there a wide variety of substitutes on the market customers can access? Finding answers to these questions gives competitors, of the sporting goods stores industry, a solid view

on the level of bargaining power competitors hold (Wilkinson, 2013). In 2012, it was estimated that the population of the Monterey County reached 426,762 people, or

just over 1% of California’s entire population (United States Census Bureau, 2014). With 104 sporting goods retailers in the same county (YellowPages, 2014), each store would only have to

serve just over 4,103 customers per year if everyone shopped for some type of sporting goods. That would only be just over 11 customers per day. Clearly, the number of buyers is considered small compared with the number of suppliers in the local sporting goods stores industry.

Analyzing consumers’ ability to find a range of prices for similar products can be simplified by

focusing on one specific popular product in the sporting goods stores industry. “A maker of baseball gloves for over 80 years makes Rawlings perhaps the most well-known brand-name” (Andover, n.d.). “Rawlings 12” Primo Preferred Series Glove currently sells for $329.99 on

Dick’s Sporting Goods official website (Dick’s Sporting Goods, 2014). The same glove is also listed on Sport’s Authority’s official website for $329.99 (Sport’s Authority, 2014). The

product’s popularity and availability on two direct competitor’s official sites reinforces this example’s validity. This example shows that consumers can purchase identical products from popular retailers for the same or similar prices. In the sporting goods stores industry, the

bargaining power of consumers is considered high because of the large number of retailers, substitute products, and similar pricing strategies.

Bargaining Power of Suppliers. The bargaining power of suppliers in the sporting goods stores industry refers to suppliers’ ability to put pressure on businesses through raising prices, lowering

product quality, and/or reducing the availability of products. Strong suppliers increase industry competition and decrease the profit potential of retailers. Weak suppliers decrease industry

competition and increase the profit potential of retailers. In order to determine whether or not supplier bargaining power is high or low, several factors must be analyzed. These factors include supplier concentration, how important a retailer is to a supplier in terms of volume, switching

costs of suppliers, differentiation of products, number of substitute suppliers available to retailers, cost control, and the threat of suppliers practicing forward vertical integration . Forward vertical

integration is when suppliers cut out retailers and sell products directly to consumers (Ketchen & Short, 2013).

In the sporting goods stores industry, “products are sourced from sporting goods manufacturers and wholesalers and then sold to the general public via retail stores” (IBISWorld, 2013). There

are many opportunities for sporting goods suppliers in the global market due to a high demand in

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athletic apparel, athletic footwear, and equipment. An increasing number of suppliers are entering the industry because of its significant growth. In fact, “the market is forecasted to reach

an estimated $266 billion in 2017 with a CAGR of 4% over the next six years (2012-2017)” (Wood, 2012). The increased number of suppliers reduces all suppliers’ bargaining power.

In the sporting goods manufacturing industry, only a “few sporting goods manufacturers have vertically- integrated operations” (IBISWorld, 2013). However, “vertically-integrated operations

allow operators to dominate the industry” (IBISWorld, 2013). The fact that some suppliers are practicing effective forward vertical integration increases bargaining power of suppliers in the

sporting goods store industry. Overall, the bargaining power of suppliers is considered to be medium.

Competitive Rivalry. Direct competitors in the sporting goods stores industry use advertising, new product offerings, and price reduction strategies to gain an advantage over other retailers.

Depending on how successful each competitor’s business strategy is within the industry, a certain level of rivalry is created. Rivalry intensity can be measured by understanding the industry’s growth rate, capacity, cost controls, level of product differentiation, and exit barriers.

For example, the lack of new customers entering an industry increases the need for firms to compete for the existing customers’ business (Ketchen & Short, 2013). The retail market for

sporting goods is highly competitive. Summary of Findings

After analyzing the five competitive forces, it is clear the threat of new entrants is medium, the threat of substitutes is high, the bargaining power of customers is high, the bargaining power of

suppliers is medium, and the competitive rivalry is high. Figure 2.7: Competitive Forces, displays Cypress Sporting Goods & Trophies’ current opportunities and threats, created by the five competitive forces affecting the sporting goods stores industry.

Figure 2.7: Competitive Forces Opportunities and Threats

Opportunities. The current level of bargaining power suppliers hold in the sporting goods stores industry creates an opportunity that can lead to Cypress Sporting Goods & Trophies’ success. As

the industry for manufacturing sporting goods grows, more manufacturers enter the industry to

Opportunities

•Negotiate with suppliers in order to reduce costs

• Increase market share through product differentiation

Threats

•Large variety of substitute products

•Suppliers practicing forward vertical integration

•Customers can choose from a large number of sporting goods retailers

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take advantage of the increasing demand. With more suppliers in the market, Cypress Sporting Goods & Trophies has more power to negotiate and compete for lower inventory costs. Sporting

goods suppliers understand that they can easily lose retailers’ business to the multiple direct competitors in the industry and must lower prices in order to maintain a steady cash flow. Product differentiation creates an opportunity for Cypress Sporting Goods & Trophies, because of the many types of sporting goods on the market that it currently does not offer in its store. The

firm currently serves customers interested in baseball, football, soccer, and field hockey equipment. Cypress Sporting Goods & Trophies can gain more market share by expanding its

product selection to other sports, instead of only catering to these four. This increases its ability to compete with its most direct competitors who are already selling differentiated sporting goods. Cypress Sporting Goods & Trophies could also use product differentiation to offer more models

of an already existing product, such as baseball gloves or bats. Threats. The retail sporting goods industry’s competitive forces create significant factors that threaten the health and success of Cypress Sporting Goods & Trophies’ business. Competitive

rivalry and substitute products in the industry are threatening Cypress Sporting Goods & Trophies’ ability to capture market share. Also, sporting goods manufacturers have learned they can enter the sporting goods retail industry and steal market share by practicing forward vertical

integration. The last threat comes from the high level of bargaining power consumers’ currently hold. The end consumer of sporting goods has the ability to switch retailers without incurring

significant costs, because of how similar sporting goods retailers’ pricing strategies are. Cypress Sporting Goods & Trophies must address these threats in order to remain competitive and successful in its industry. CONCLUSION

The external analysis of the retail sporting goods industry revealed important opportunities and threats from the PESTEL analysis and examination of the five competitive forces. Figure 2.7:

External Environment Opportunities and Threats Prioritization Matrix, clearly displays these important competitive factors found in the external analysis and the level of significance each

has in relation to Cypress Sporting Goods & Trophies’ business.

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Opportunities


Positive economic outlook for the retail sporting goods industry

X

Negotiate with suppliers in order to reduce costs

X

Increase market share through product differentiation

X

Threats


Lack of proprietary website

X

Large variety of substitute products

X

Suppliers practicing forward vertical integration

X

Customers can choose from a large number of sporting goods retailers

X

Figure 2.7: External Environment Opportunities and Threats Prioritization Matrix

Opportunities

Positive economic outlook for the retail sporting goods industry. The opportunity for Cypress

Sporting Goods & Trophies in the economy is significant. The current trend in the sporting goods industry shows continuous growth. Cypress Sporting Goods & Trophies can rely on the

current trend of the industry to support the increase of consumers who are in need for a sporting goods store. According to industry experts, this trend is expected to continue into the future because consumers are “not afraid to spend on sporting goods” (NSGA, 2013). Therefore,

economic factors are a significant opportunity for Cypress Sporting Goods & Trophies.

Negotiate with suppliers in order to reduce costs. The sporting goods industry has a large number of suppliers. Therefore, the opportunity that Cypress Sporting Goods & Trophies faces is moderate. The large number of suppliers allows Cypress Sporting Goods & Trophies to find the

best supplier for its needs. The increase of suppliers in the market limits the amount of pressure the supplier can put on Cypress Sporting Goods & Trophies. This gives the firm more power in

negotiations, allowing them to obtain the lowest costs. Increase market share through product differentiation. Cypress Sporting Goods & Trophies

has a significant opportunity with its current product line. Cypress Sporting Goods & Trophies offers only a limited amount of sport product lines in its store. With the vast amounts of sports

currently being played there is a significant opportunity for Cypress Sporting Goods & Trophies to expand its product offerings.

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Threats

Lack of proprietary website. Cypress Sporting Goods & Trophies faces a significant threat

associated with the use of technology. Currently, Cypress Sporting Goods & Trophies has not taken full advantage of the technology available to them. The company lacks a store website and

does not have a strong online presence. The lack of the online presence is a significant threat for Cypress Sporting Goods & Trophies, due to consumers not being able to find the store online. This results in a loss of potential customers who search for sporting goods stores online and find

competitors’ stores, but not Cypress Sporting Goods & Trophies’.

Large variety of substitute products. Cypress Sporting Goods & Trophies faces a significant threat from substitute products. The large number of sporting goods stores in the Monterey County results in a large selection from which customers can make their purchases. This

increases the potential of customers purchasing products from sporting goods stores, other than Cypress Sporting Goods & Trophies. With an increase in the number of sporting goods stores

opening, the threat of substitutes will remain significant. Suppliers practicing forward vertical integration. Cypress Sporting Goods & Trophies faces a

moderate threat from suppliers potentially using forward vertical integration. Major suppliers selling products directly to consumers and effectively eliminating the middleman, can have a

negative impact on Cypress Sporting Goods & Trophies. While the major suppliers would still provide products to Cypress Sporting Goods & Trophies, they would also be able to sell them at a lower cost directly to the consumer.

Customers can choose from a large number of sporting goods retailers. Cypress Sporting

Goods & Trophies faces a significant threat from the bargaining power of the customers. The large number of stores in the Monterey County area allows customers to choose where they decide to shop. This requires companies to make stores more attractive to customers in relation

to competitors’ stores. Cypress Sporting Goods & Trophies must better serve the needs of every customer to ensure they return, or else it risks losing them to competitors. The number of firms

in the industry that compete with Cypress Sporting Goods & Trophies also makes it hard for the firm to gain market share. This results in a continuous struggle to obtain customers with other stores constantly competing for an advantage by using advertising, offering new products, and

price cut strategies

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Internal Analysis

41

INTERNAL ANALYSIS

INTRODUCTION

The internal analysis examines Cypress Sporting Goods & Trophies’ resources and capabilities, value-adding activities, performance measures, and strategies. Analyzing these important factors

provides an in-depth look into what gives a company a competitive advantage in its industry. A firm then has the ability to choose the most strategic approach at gaining a leadership position by adjusting its business operations accordingly (Bamford & West, 2010). The section concludes

with an examination of Cypress Sporting Goods & Trophies’ current strengths and weaknesses discovered within the entire internal analysis.

RESOURCES AND CAPABILITIES

Organizations utilize resources and capabilities as a foundation for developing the most effective

and efficient operational strategies. These two factors are directly related, because resources, over time, create capabilities (Ketchen & Short, 2013). Resources

The resources section discusses both tangible and intangible resources. Within each type of resource, there are ordinary and extraordinary resources. The extraordinary resources are the most vital to Cypress Sporting Goods & Trophies. Figure 3.1: Tangible and Intangible Resources,

illustrates Cypress Sporting Goods & Trophies’ current tangible and intangible resources.

Figure 3.1: Tangible and Intangible Resources

• Building (location)

• Employees

• Investment capital

• Manufacturing machinery

• Batting cages

Tangible

• Product knowledge

• Technical skills

• Family environment

• Owners' relationships with business and organizations

• 40 years of history in Monterey county

Intangible

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Tangible Resources. Tangible resources can be seen, touched, and quantified. For example, a company’s physical assets, such as buildings, equipment, human resources, and capital are

considered tangible resources (Ketchen & Short, 2013). These resources often help the company provide services and are part of the company’s assets; they are often not for sale. Intangible Resources. Directly opposite of tangible resources are intangible resources, which are

resources that are extremely difficult to be seen, touched, or quantified. Examples of intangible resources would include a company’s relationships with suppliers, strategic alliances, intellectual

property, and organizational culture (Ketchen & Short, 2013). These resources are difficult to value because they are often created by the company. Extraordinary Resources. Tangible and intangible resources are determined to be extraordinary

if they are simultaneously valuable, rare, non-imitable, and relatively non-substitutable. The unique features of extraordinary resources make them extremely valuable to an organization developing a sustainable competitive advantage (S. Kurtz, personal communication, March 11,

2014).

Ordinary Resources. Tangible and intangible resources are determined to be ordinary if they have some of the following qualities: valuable, rare, non-imitable, and relatively non-

substitutable, but do not possess all of them. These resources are often valuable to a company, but they are resources that most companies in a given industry can also possess (S. Kurtz,

personal communication, March 11, 2014). Companies utilize a VRIST Analysis to evaluate their tangible and intangible resources, and

determine which resources can be considered extraordinary. In Figure 3.2: Tangible Resources VRIST Analysis, it identifies which of Cypress Sporting Goods & Trophies’ tangible resources

can be considered extraordinary. They are considered “extraordinary” resources if they possess three or more of the four criteria, or “ordinary” if they possess two or fewer of the four criteria.

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VRIST Analysis

Tangible

Resources Valuable Rare

Non-

Imitable

Non-

Substitutable Total

Building (location) X 1/4

Employees X 1/4

Investment capital X 1/4

Machinery X X 2/4

Batting cages X X X 3/4

Figure 3.2: Tangible Resources VRIST Analysis Tangible Resources

Building. The building Cypress Sporting Goods & Trophies occupies is considered an ordinary resource. The building is not rare, it is imitable, and it can be substituted very easily. The building, although ordinary, is valuable for Cypress Sporting Goods & Trophies because of the

location on N. Freemont St. The location is in a high-traffic area that provides Cypress Sporting Goods & Trophies’ great visibility for potential customers (G. Cutrufelli-Carnazzo, personal


Employees. Cypress Sporting Goods & Trophies’ employees are considered ordinary resources

because they are not rare, they can be imitated, and are easy to substitute. They are considered valuable because they are part of the company, but new employees can replace them after initial

training in retail that can be done in the store (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014).

Investment capital. The investment capital that Cypress Sporting Goods & Trophies has is

considered an ordinary resource. The amount of money that it has to spend on future investments is a valuable resource for a company. This provides potential to increase the business through having the capital to expand. However, investment capital is not rare, it’s imitable, and it is easy

to substitute (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014).

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Machinery. The machinery, three trophy design machines, embroidering machines and heat press, that Cypress Sporting Goods & Trophies have are considered ordinary resources. These

resources are very valuable to the success of Cypress Sporting Goods & Trophies, and they are used to produce products. The machinery is rare because of the limited number of competitors

that have the same machinery. However, they are very imitable since machines at home can be used to produce similar goods. The machinery is also very easy to substitute through a variety of different sources, such as online ordering (G. Cutrufelli-Carnazzo, personal communication,

February 4, 2014).

Batting cages. The batting cages at Cypress Sporting Goods & Trophies are considered an extraordinary resource. The batting cages are a valuable part of Cypress Sporting Goods &

Trophies business, since they provide the firm with additional revenue and opportunities to expand the business. They are a rare resource because of the limited number of batting cages in

the area. It is also hard to substitute the batting cages and the experience that they provide consumers. However, they are imitable because a customer can also go hitting on an outdoor field (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014).

Companies also utilize a VRIST Analysis to evaluate their intangible resources and determine

which resources can be considered extraordinary. In Figure 3.3: Intangible Resources VRIST Analysis, it shows all of Cypress Sporting Goods & Trophies’ intangible resources. Intangible resources are considered extraordinary resources if they have three or more of the four criteria, or

ordinary if they possess two or fewer of the four criteria.

VRIST Analysis

Intangible Resources

Valuable Rare Non-

Imitable

Non-Substitutable

Total

Product knowledge X X 2/4

Technical skills X X 2/4

Family environment (company culture)

X X X 3/4

Forty-year history X X X X 4/4

Owners’ relationships X X X X 4/4

Figure 3.3: Intangible Resources VRIST Analysis

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Intangible Resources

Product knowledge. Cypress Sporting Goods & Trophies’ knowledge of the products that they

sell is an ordinary resource. The knowledge that the employees possess is a valuable resource because this helps them promote and sell projects. It is also a rare resource with every employee having the full knowledge of the products and continuing to stay informed with the products that

they sell. However, it is easy to imitate and it is also easy to be substituted with different online resources now available (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014).

Technical skills. The technical skills that the employees of Cypress Sporting Goods & Trophies have, is considered an ordinary resource. They are valuable because of the benefit that they

provide Cypress Sporting Goods & Trophies by having employees with the ability to operate difficult equipment in the store. It is also rare for employees to have technical skills while

working in a small store. However, technical skills are easily imitable and easy to substitute (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014).

Family environment. The family environment that Cypress Sporting Goods & Trophies has created in the company is considered an extraordinary resource. The family environment is a

valuable resource because it gives the employees that work there the ability to perform under a favorable environment. It is also a rare resource because many companies are too large or not dedicated to making the environment feel like a family. A family environment is also not

imitable within a business environment, since it takes the owners of the business to establish a family environment. However, it is substitutable through a variety of other workplace

environments that may not have such strict rules.

Forty-year history. The forty years of history that Cypress Sporting Goods & Trophies has in the

Monterey County area is considered an extraordinary resource. The history of Cypress Sporting Goods & Trophies is valuable because it shows the many loyal years of service that have been

provided to the Monterey County area. It is rare for a company to have been established for that length of time in the same area. Forty years of history is also non-imitable and can’t be substituted in any way (G. Cutrufelli-Carnazzo, personal communication, February 4, 2014).

Owners’ relationships. Cypress Sporting Goods & Trophies has an extraordinary resource in the relationships that the owners have with people in the Monterey County area. This resource is valuable, rare, non-imitable, and is not substitutable. The relationship gives the firm a distinct

advantage over its competitors, allowing the owners to obtain business from other companies due to the relationship they have with other business owners (G. Cutrufelli-Carnazzo, personal


Capabilities

While resources determine what an organization possesses, capabilities determine what an

organization can actually do or perform to create value for its customers. In particular, a firm’s capabilities allow it to create value from extraordinary tangible and intangible resources

(Ketchen & Short, 2013). Cypress Sporting Goods & Trophies’ most significant capabilities stem from its extraordinary resources and can be seen in Figure 3.4: Capabilities.

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Figure 3.4: Capabilities

Batting cages. The batting cages are a very important resource to Cypress Sporting Goods &

Trophies. The batting cages provide an extension to the services that Cypress Sporting Goods & Trophies offer. The batting cages provide a current service that they can further utilize to increase the business. Cypress Sporting Goods & Trophies can offer more services through the

batting cages such as more hitting lessons, party events, and social gatherings. These increases in events will reach a broader audience and increase the exposure of Cypress Sporting Goods &

Trophies (D. Cutrufelli, personal communication, April 1, 2014).

Family environment. The environment that is created at Cypress Sporting Goods & Trophies is

an important aspect of the business. The family environment is important to Cypress Sporting Goods & Trophies employees because of the comfort that if creates for them on a working basis.

With an attractive family environment, Cypress Sporting Goods & Trophies can influence the attractiveness of the business to future employees. In addition, the environment can give the employees motivation to work to the fullest potential because of the trust that is associated with

the environment. In the end, the family environment will keep the talented employees working at Cypress Sporting Goods & Trophies (D. Cutrufelli, personal communication, April 1, 2014).

Extraodinary Resources Capabilites

Value-Adding

Batting cagesIncrease

services offered

Batting lessons and

events

Family environment

Improved work environment

Help retain talented

employees

Forty-year history

Creates solid relationships

Returning customers

Owners’ relationships

Create partnerships with local organization

Increase revenue

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Forty-year history. Cypress Sporting Goods & Trophies forty years of history provides a unique resource that can be taken advantage of. With the establishment being founded over forty years

ago and the employees being retained long term, customers that shop at the store develop relationships with the employees. The relationships created influence customers to return to

Cypress Sporting Goods & Trophies for future needs instead of the competitors that have recently opened shop around the area. The returning customers will continue to support the local store and it will continue to add on great years to the history of Cypress Sporting Goods &

Trophies (D. Cutrufelli, personal communication, April 1, 2014).

Owners’ relationships. The relationships that the owners, Joe and Debbie Cutrufelli, have created with many local businesses, gives the firm a distinct advantage. Personal relationships

allow other businesses to approach Cypress Sporting Goods & Trophies for their needs over the competitors because they know that the quality of service will be guaranteed (D. Cutrufelli,

personal communication, April 1, 2014).

Summary of Findings

An analysis of Cypress Sporting Goods & Trophies’ resources and capabilities discovered

strengths and weaknesses of the company. In Figure 3.5: Resources and Capabilities Strengths and Weaknesses, it displays these determined strengths and weaknesses.

Figure 3.5: Resources and Capabilities Strengths and Weaknesses

Strengths. Cypress Sporting Goods & Trophies resources of batting cages, family environment, forty year history, and owners’ relationships are considered strengths of the company because of the capabilities that they provide in gaining more business. The batting cages provide Cypress

Sporting Goods & Trophies with an opening to expand the offerings such as birthday parties, corporate events, and social gatherings. This expansion provides a potential increase in the

revenue for Cypress Sporting Goods & Trophies. The family environment that Cypress Sporting Goods & Trophies has created is enjoyable to work in and increases the probability of employees staying with the company (D. Cutrufelli, personal communication, April 1, 2014).

Cypress Sporting Goods & Trophies’ forty-year history is considered a strength because of the time it has provided for owners to establish relationships with members of the community. These relationships result in customers continuously returning over Cypress Sporting Goods &

Strengths

• Batting cages

• Family environment

• Forty-year history

• Owners' relationships

Weaknesses

• Building (location)

• Investment capital

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Trophies competitors. The relationships with local small businesses are also strengths because they make the company the first choice of companies looking for the products and services it

offers (D. Cutrufelli, personal communication, April 1, 2014).

Weaknesses. Cypress Sporting Goods & Trophies’ building is located on a busy street that provides major visibility. However, the building is limited in size, which results in a crowded

workspace and product displays. Investment capital is a vital part of Cypress Sporting Goods & Trophies because it allows the purchase of newer equipment that allows them to increase

production and stay competitive. It is a weakness because of the smaller volume of capital that is available for Cypress Sporting Goods & Trophies to invest compared to competitors in the area (D. Cutrufelli, personal communication, April 1, 2014).

VALUE-ADDING ACTIVITIES

Value-adding activities are identified and analyzed through a value chain analysis. A value chain

is a firm’s process of using its resources and operations to create the most value possible for both its internal and external stakeholders. An analysis of the value chain identifies the current value-

adding activities, which Cypress Sporting Goods & Trophies is performing in order to create a competitive advantage in its marketplace (S. Kurtz, personal communication, March 26, 2014). Value-adding activities are separated into primary and support activities. Figure 3.6: Value Chain,

illustrates Cypress Sporting Goods & Trophies’ current value chain.

Figure 3.6: Value Chain

Primary Activities

Primary activities are actions “directly involved in the creation and distribution of goods and services” (Ketchen & Short, 2013). Primary value-adding activities include inbound logistics, operations, outbound logistics, marketing and sales, and service.

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Inbound logistics includes the “arrival of raw materials” and inventory (Ketchen & Short, 2013). Merchandise and services’ raw materials are shipped from suppliers directly to Cypress Sporting

Goods & Trophies’ store location through the suppliers’ chosen third-party logistics company. Suppliers ship inventory via FedEx, UPS, or California Overnight. Cypress Sporting Goods &

Trophies’ inbound logistics are considered a low value-adding activity (D. Cutrufelli, personal communication, April 1, 2014).

Operations are “the production process of a good or service” (Ketchen & Short, 2013). Cypress Sporting Goods & Trophies engages in many forms of operations. After forecasting the amount

of inventory needed, it arranges, organizes, catalogues, and stocks inventory for sale within the store. The firm manufactures custom trophies and apparel. The trophies and apparel are unique to each order and are made based on customers’ specific requests. To provide quality assurance,

employees use their industry expertise to assist customers with their purchases. Cypress Sporting Goods & Trophies’ operations are considered a medium value-adding activity (D. Cutrufelli,

personal communication, April 1, 2014). Outbound logistics include how Cypress Sporting Goods & Trophies delivers its products to its

customers (S. Kurtz, personal communication, March 26, 2014). Cypress Sporting Goods & Trophies rarely ships products. For almost all transactions, the customers pick up custom orders

and goods in store. However, employees occasionally deliver orders in their own vehicles, and on their own personal time, to ensure customers receive their customized products in a timely manner. Cypress Sporting Goods & Trophies’ outbound logistics are considered a low value-

adding activity (D. Cutrufelli, personal communication, April 1, 2014).

Marketing includes “activities used to attract potential customers” and sales consist of influencing “them to make purchases” (Ketchen & Short, 2013). Cypress Sporting Goods & Trophies’ primary methods of marketing and advertising consist of sponsoring little leagues and

men’s adult leagues, printing flyers distributed at local sporting organization events, and word of mouth. In the past, the company has experimented with ads in local newspapers and on the back

of grocery store coupons, and television commercials. However, Cypress Sporting Goods & Trophies did not realize a significant enough return on investment from these methods and has decided to invest its money in other aspects of its business. Cypress Sporting Goods & Trophies’

marketing is considered a medium value-adding activity (D. Cutrufelli, personal communication, April 1, 2014).

Service is “the extent to which a firm provides assistance to its customers” (Ketchen & Short, 2013). Cypress Sporting Goods & Trophies’ staff members form a personal relationship with

customers. Returning customers are often recognized and are on a first-name basis with staff. Cypress Sporting Goods & Trophies’ relationships with customers allow it to honor product

returns past the stated deadline and to serve customers outside of normal business hours. This kind of personalized service adds emotional value to its products and services. Service is one of Cypress Sporting Goods & Trophies’ strongest assets and separates the firm from its direct

competitors. Cypress Sporting Goods & Trophies’ service is considered a high value-adding activity (D. Cutrufelli, personal communication, April 1, 2014).

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Secondary Activities

Secondary value-adding activities reinforce and strengthen Cypress Sporting Goods & Trophies’

primary value-adding activities (Ketchen & Short, 2013). Secondary activities include firm infrastructure, human resource management, research and development, and procurement.

Firm infrastructure includes “how the firm is organized and led by executives” (Ketchen & Short, 2013). Cypress Sporting Goods & Trophies uses the leadership of the Cutrufelli family to guide

its employees. This corporate culture enables the company to provide outstanding customer service. Cypress Sporting Goods & Trophies has an official organizational structure. However,

all employees are empowered to manage the store’s daily operations when the manager and owners are not present. Cypress Sporting Goods & Trophies’ firm infrastructure is considered a low value-adding activity (D. Cutrufelli, personal communication, April 1, 2014).

Human resources management “includes activities involved in recruiting, training, and

compensating employees” (Ketchen & Short, 2013). Cypress Sporting Goods & Trophies obtains employees by evaluating those who apply for a position in the store through an informal interview process. The company tends to hire within the owners’ social network. This often turns

into the hiring of family, friends, and applicants involved with the local baseball leagues. Once hired, employees are shadowed and trained until the manager and owners feel they are competent

enough to work alone. For example, Hilda Garlow applied for a job and was trained to work the embroidery machines by a previous employee who had the skillsets required to operate the machinery. Cypress Sporting Goods & Trophies’ human resource management is considered a

high value-adding activity (D. Cutrufelli, personal communication, April 1, 2014). Research and development refers to new product or service development, evaluation, and test

marketing (S. Kurtz, personal communication, March 14, 2014). Cypress Sporting Goods & Trophies has taken some action to increase its level of research and development in order to

better compete within its industry. For example, the Cutrufelli family recently visited a trophy exposition and purchased a modern laser engraving machine to increase the efficiency of its custom trophy services. The new laser engraving machine is expected to reduce the labor

required to create trophies in half. Cypress Sporting Goods & Trophies’ research and development is considered a medium value-adding activity (D. Cutrufelli, personal

communication, April 1, 2014). Procurement is “the process of negotiating for and purchasing raw materials” and inventory

(Ketchen & Short, 2013). For Cypress Sporting Goods & Trophies, this includes purchasing from suppliers of trophy blanks, blank apparel, and merchandise. Cypress Sporting Goods &

Trophies uses many suppliers. It chooses suppliers based on timeliness of delivery, reliability, price, quality, and products available. The schedule of ordering inventory revolves around the increase in demand for sporting products associated with the seasonality of sports. Cypress

Sporting Goods & Trophies’ procurement is considered a low value-adding activity (D. Cutrufelli, personal communication, April 1, 2014).

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Summary of Findings

Figure 3.7: Value-Adding Activities’ Strengths and Weaknesses, summarizes the identified

strengths and weaknesses from the evaluation of Cypress Sporting Goods & Trophies’ primary and secondary value-adding activities.

Figure 3.7: Value-Adding Activities’ Strengths and Weaknesses

Strengths. An analysis of the value chain reveals that Cypress Sporting Goods & Trophies procurement process is strength. Cypress Sporting Goods & Trophies has the ability to select from a wide variety of suppliers. Cypress Sporting Goods & Trophies has an effective supplier

selection process because there is a high level of competition among suppliers. This allows Cypress Sporting Goods & Trophies to obtain quality inventory at low costs, and in a timely

manner, in order to satisfy its seasonal demand (D. Cutrufe lli, personal communication, April 1, 2014).

Weaknesses. Cypress Sporting Goods & Trophies’ weakness within its primary value-adding activities is its marketing. Cypress Sporting Goods & Trophies’ marketing consists solely of the

sponsorship of local leagues and word of mouth. If Cypress Sporting Goods & Trophies were to lose a sponsorship, this would significantly reduce its marketing capabilities. The company has decided to invest in other areas of operations, which has left its marketing strategy in a fragile

state (D. Cutrufelli, personal communication, April 1, 2014).

PERFORMANCE MEASURES

Measuring the performance of an organization is determining its progress at achieving its vision, mission, and goals by conducting both a financial performance analysis and a non-financial

performance analysis. These performance analyses evaluate the effectiveness and efficiency of a firm’s business operations. A financial performance analysis examines a firm’s current and past

financial data to calculate and determine its financial health over time. The non-financial performance analysis researches what a company is actually doing in its operations that create its financial status and results (S. Kurtz, personal communication, March 26, 2014).

Strengths

• Procurement: Effective supplier selection

Weaknesses

• Fragile marketing plan

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Financial Performance Analysis

The financial performance analysis researches past and present financial data in order to better

understand its financial well-being. Liquidity ratios, efficiency ratios, leverage ratios, profitability ratios, and all of the graphic representations of these ratios are extremely useful

tools at completing an effective in-depth financial performance analysis (S. Kurtz, personal communication, March 26, 2014).

Liquidity ratios are tools that managers can use to evaluate their firm’s performance towards its short-term financial goals. Liquidity ratios include the current ratio and quick ratio. Efficiency

ratios are useful metrics that quantify accounts receivable, accounts payable, and inventory turnover throughout the fiscal year. Leverage ratios, such as the debt ratio, are used to evaluate a firm’s debt and financial obligations. Profitability ratios, such as return on assets (ROA),

examine how a firm’s costs correlate to its profits (S. Kurtz, personal communication, March 26, 2014).

This section examines the Sporting Goods Retail Industry’s financial data collected by the Risk Management Association (RMA). The RMA’s Annual Statement Studies is a respected source of

unbiased information for the comparison of financial data in specific industries. The ratios that the RMA produces are compiled from anonymized balance sheet and income statement data

(The Risk Management Association, 2013). Cypress Sporting Goods & Trophies did not make available the financial data that is required to

calculate these financial ratios. Therefore, the Financial Performance Analysis section is focused on industry data instead.

There are two different ratio charts: Figure 3.8: Financial Ratios of Companies Categorized by Assets, and Figure 3.9: Financial Ratios of Companies Categorized by Sales. Categorizing

companies based on these two criteria provides a clearer picture of industry trends. This can help Cypress Sporting Goods & Trophies to benchmark itself within its industry niche. Cypress

Sporting Goods & Trophies fall into the category of $0 - 500 thousand in assets, and the category of $0 - 1 million in sales.

The ratio charts in this analysis represent the median value from RMA’s data. Medians are used instead of an average to eliminate the influence of outliers. Medians “more accurately reflect the

ranges of ratio values than a straight averaging method would” (The Risk Management Association, 2013).

In Figure 3.8: Financial Ratios of Companies Categorized by Assets, it shows sporting goods stores industry data sorted by assets from the fiscal year beginning April 1, 2012. Cypress

Sporting Goods & Trophies falls in the category of $0 - 500 thousand in assets.

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Figure 3.8: Financial Ratios of Companies Categorized by Assets

Current Ratio. The current ratio, also known as the liquidity ratio, is a company's current assets

divided by current liabilities. The higher the current ratio is, the greater ability a firm has to pay off short-term debt. Companies in the $0 - 500 thousand in assets category had a median current ratio of 1.7% (The Risk Management Association, 2013).

Quick Ratio. The quick ratio, also known as the acid test ratio, is a company's current assets

minus inventories divided by current liabilities. This ratio removes inventory and other less-current assets to provide a “more conservative measure of liquidity than the current ratio” (The Risk Management Association, 2013). Companies in the $0 - 500 thousand in assets category

had a median quick ratio of 0.2% (The Risk Management Association, 2013).

Inventory Turnover Ratio. The inventory turnover ratio is cost of goods sold divided by average inventory. “This ratio measures the number of times inventory is turned over during the year” (The Risk Management Association, 2013). A high inventory turnover ratio could indicate that a

company is selling inventory efficiently and selling products successfully. However, a high inventory turnover ratio could also indicate that the company is not stocking enough inventory to

satisfy demand, which could result in missed opportunities to sell even more (The Risk Management Association, 2013).

Low inventory turnover could indicate that too much inventory is being ordered, which results in excess inventory expenses. Conversely, this could indicate a forecasting prediction that foresees

supply shortage, or a surge in consumer demand. Companies in the $0 - 500 thousand in assets category had a median inventory turnover ratio of 2.6% (The Risk Management Association, 2013).

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Debt Ratio. The debt ratio is total liabilities divided by tangible net worth. A low debt ratio indicates that a company has a greater capacity to borrow funds, and is more financially secure.

Companies in the $0 - 500 thousand in assets category had a median debt ratio of 3.9%.

Return on Assets Ratio. The ROA is net sales divided by total assets. The ROA ratio indicates how well a company is utilizing its assets to generate profit. Companies in the $0 - 500 thousand in assets category had a median ROA ratio of 2.7%. In Figure 3.8: Asset Ratios, it shows that as

a company increases its assets, its ROA tends to decrease.

In Figure 3.9: Financial Ratios of Companies Categorized by Sales, it shows sporting goods stores industry data sorted by sales from the fiscal year beginning April 1, 2012. Cypress Sporting Goods & Trophies falls in the category of $0 - 1 million in sales.

Figure 3.9: Financial Ratios of Companies Categorized by Sales

Current Ratio. The current ratio, also known as the liquidity ratio, is a company's current assets divided by current liabilities. The higher the current ratio is, the greater ability a firm has to pay

off short-term debt. Companies in the $0 - 1 million in sales category had a median current ratio of 1.9% (The Risk Management Association, 2013). Quick Ratio. The quick ratio, also known as the acid test ratio, is a company's current assets

minus inventories divided by current liabilities. This ratio removes inventory and other less- current assets to provide a “more conservative measure of liquidity than the current ratio” (The

Risk Management Association, 2013). Companies in the $0 - 1 million in the sales category had a median quick ratio of .2% (The Risk Management Association, 2013).

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Inventory Turnover Ratio. The inventory turnover ratio is cost of goods sold divided by average inventory. “This ratio measures the number of times inventory is turned over during the year”

(The Risk Management Association, 2013). A high inventory turnover ratio could indicate that a company is selling inventory efficiently and selling products successfully. However, a high

inventory turnover ratio could also indicate that the company is not stocking enough inventory to satisfy demand, which could result in missed opportunities to sell even more (The Risk Management Association, 2013).

Low inventory turnover could indicate that too much inventory is being ordered, which results in excess inventory expenses. Conversely, this could indicate a forecasting prediction that foresees supply shortage, or a surge in consumer demand. Companies in the $0 - 1 million in the sales

category had a median inventory turnover ratio of 1.9% (The Risk Management Association, 2013).

Debt Ratio. The debt ratio is total liabilities divided by tangible net worth. A low debt ratio indicates that a company has a greater capacity to borrow funds, and is more financially secure. Companies in the $0 - 1 million in the sales category had a median debt ratio of 9.7% (The Risk

Management Association, 2013).

Return on Assets Ratio. The return on assets ratio (ROA) is net sales divided by total assets. The ROA ratio indicates how well a company is utilizing its assets to generate profit. Companies in

the $0 - 1 million in the sales category had a median ROA ratio of 2% (The Risk Management Association, 2013).

Non-Financial Performance Analysis

The non-financial performance analysis evaluates an organization’s usage of performance

measures selected to determine its progress in achieving its vision, mission, and goals. These types of performance measures are also known as key performance indicators (KPIs). While KPIs can be both financial and non-financial measures, this subsection focuses only on non-

financial KPIs. A non-financial analysis creates a better understanding of an organization’s progress at implementing and achieving its overall strategic plan (S. Kurtz, personal

communication, March 26, 2014).

Currently, Cypress Sporting Goods & Trophies informally tracks its KPIs. Therefore, this strategic analysis provides a formal balanced scorecard in order to examine Cypress Sporting

Goods & Trophies’ non-financial KPIs. The formal balanced scorecard is created from the informal information provided by the firm’s upper-management regarding its ability to achieve its vision, mission, and goals. Cypress Sporting Goods & Trophies’ unique balanced scorecard

summarizes its effective actions when dealing with customers, managing human resources, developing internal business processes, and promoting learning and growth (S. Kurtz, personal

communication, March 26, 2014). In Figure 3.10: Balanced Scorecard, it provides a visual representation of the specific KPIs most significantly related to Cypress Sporting Goods & Trophies.

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Figure 3.10: Balanced Scorecard

Customer. One of Cypress Sporting Goods & Trophies’ most effective business operations is directly related to customer retention. Employees strive to treat every customer, both new and

returning, as close friends and family. This mindset influences employees to always strive to serve customers to the best of their abilities. Employees have extensive knowledge of the company products and ensure customers are making their best purchasing decision. Customers

have recognized this heightened level of service throughout the 40-plus years the company has been in business. This has resulted in generations of customers returning to Cypress Sporting

Goods & Trophies for their sporting good needs time and time again. For example, adults, who were once teenagers living in the Monterey County, shopped at Cypress Sporting Goods & Trophies for their baseball equipment around 15 to 20 years ago. Still living in the Monterey

County, those adults now have started families and continue to shop at Cypress Sporting Goods & Trophies for their children’s baseball equipment. Consistent valuable customer service has

clearly been a significant factor in the company’s success over time (D. Cutrufelli, personal communication, April 1, 2014).

Human Resources

-Efficient number of employees

-Low personnel turnover

-High employee Satisfaction

Internal Business Processes

-Labor productivity and growth

-Low administrative expenses per

employee

Learning and Growth

-Acquisition of laser engraving machinery

-High employee contact with customers

-Efficient training of employees

Customer

-Satisfaction/Loyalty

-Generations of customers

Vision

and

Strategy

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Human Resources. Cypress Sporting Goods & Trophies has few employees when compared to its direct competitors. However, this creates more strength than it does weakness. Maintaining a

small workforce makes employees feel more important to the business and establishes more personal relationships with returning customers. Customers are more likely to receive assistance

from the same employee on different occasions when shopping at the store. This experience creates a more comfortable environment for both parties and adds an emotional value to Cypress Sporting Goods & Trophies’ products and services (D. Cutrufelli, personal communication, April

1, 2014).

When hiring employees, upper management strives to make sure the candidates are not over qualified or under qualified for a position, and desire to stay with the company for a significant

amount of time. Cypress Sporting Goods & Trophies views hiring new employees as adding another member to the Cutrufelli family and effectively portrays this to each employee. For

example, upper management sees customers as almost always being right. However, if a customer is being overly argumentative or verbally abusing any employee, then owners or managers have no problem standing up for their employees and asking the customer to leave.

From a small number of fellow employees to a supportive family environment, all members of Cypress Sporting Goods & Trophies remain highly satisfied throughout their employment (D.

Cutrufelli, personal communication, April 1, 2014).

Internal Business Processes. The internal business processes of Cypress Sporting Goods & Trophies are important to its success and the most effective evolve significantly around

employees. Each employee has a specific title and job description, but this does not restrict them from assisting other employees with different responsibilities. Many times, employees will assist each other at accomplishing tasks to ensure customer demand is satisfied in a timely manner.

Throughout this process, employees constantly learn new areas of the business and have the ability to offer their own unique inputs to increase efficiency. Also, having a small, but efficient

workforce lowers administrative expenses or costs related to all areas of employee management. However, Cypress Sporting Goods & Trophies does not have a modern procedure in place to track and measure its efficiency. This is largely due to Cypress Sporting Goods & Trophies’

reliance on non-computerized systems (D. Cutrufelli, personal communication, April 1, 2014).

Learning and Growth. Cypress Sporting Goods & Trophies understands it must continue

developing its abilities as a business in order to achieve its vision, mission, and goals. One example of this is the company’s recent acquisition of a modern laser engraving machine that is expected to at least double the efficiency of creating custom trophies. Trophies are a very

important department of the business and significantly influence the firm’s level of success. The new machinery makes trophy development simpler and timelier, thus enhancing the effectiveness

of offering this type of service to customers (D. Cutrufelli, personal communication, April 1, 2014).

It is important that the training of employees to work with machinery or other aspects of business operations is as efficient as possible. Therefore, employees are trained through both

observational and shadowed hands-on learning methods to ensure comprehension before accomplishing tasks on their own. This training strategy reduces future errors that create potential risks harmful to the business’ success. Operations are intended to be as simple and

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efficient as possible in order to ensure training is completed quickly, but still effectively (D. Cutrufelli, personal communication, April 1, 2014).

Employees’ significant amount of contact with customers also increases Cypress Sporting Goods

& Trophies’ learning and growth. The more involved employees are with customers, the better their chances to understand and deliver the types of goods and services customers are looking for. Feedback from customers allows Cypress Sporting Goods & Trophies to learn the changes of the

market and adjust its operations accordingly (D. Cutrufelli, personal communication, April 1, 2014).

Summary of Findings

An analysis of Cypress Sporting Goods & Trophies’ performance measures, both financial and

non-financial, revealed more of the company’s significant strengths and weaknesses among its operations. In Figure 3.11: Performance Measures Strengths and Weaknesses, it illustrates these

specific strengths and weaknesses.

Figure 3.11: Performance Measures Strengths and Weaknesses

Strengths. The most significant strength found within the performance measure analysis for

Cypress Sporting Goods & Trophies is its human resources, which leads to a high level of customer retention. The reason that Cypress Sporting Goods & Trophies has such a high customer retention level is because of its outstanding human capital. Cypress Sporting Goods &

Trophies’ employees consistently build relationships with customers and provide excellent customer service.

Weaknesses. The most significant weakness found within the performance measure analysis for

Cypress Sporting Goods & Trophies is from within its internal business processes. Cypress Sporting Goods & Trophies does not use modern computer technology to track, measure, and

record its KPIs. This lack of computer information systems slows down the decision-making process and creates more room for human error.

Strengths

• Human resources

• Customer retention

Weaknesses

• Lack of computer information systems

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STRATEGIES

There are two different categories of strategies a company utilizes in order to remain competitive

within its specific industry. These are a corporate-level strategy and a business-level strategy (Ketchen & Short, 2013). This section discusses the type of corporate-level strategy and business-level strategy Cypress Sporting Goods & Trophies’ currently performs.

Corporate-Level Strategy

There are three different categories of corporate-level strategies that organizations can select once they know which industry both they and their competitors compete within. These are

stability, growth, and retrenchment (S. Kurtz, personal communication, April 2, 2014).

Stability. A stability strategy is for a corporation that has decided, “that it neither wants to grow substantially nor retrench, but wants to pursue a stable future” (S. Kurtz, personal communication, April 2, 2014).

Growth. Within the growth strategy category, there are four subcategories that an organization can choose from. One subcategory is focus, also known as a concentration strategy. This subcategory involves competing in one specific industry within an existing product niche or an

existing market niche. New market development is another possible growth strategy. “Market development involves taking existing products and trying to sell them within new markets”

(Ketchen & Short 2013). The third growth strategy subcategory is new product development, and it is represented by a company which introduces a new type of product in an already existing market. The fourth and final subcategory for growth strategies is diversification. Diversification

is when a company enters a completely new market with a completely new product (S. Kurtz, personal communication, April 2, 2014). Figure 3.12: Growth Strategy, illustrates the four

different subsections of a growth strategy.

Figure 3.12: Corporate-Level Strategies

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Retrenchment. The final category for corporate-level strategy is retrenchment. This is an appropriate strategy for a company that wants to reduce its size in order to remain successful by

narrowing its focus, as well as reducing its inventory and business assets. (Ketchen & Short, 2013).

Cypress Sporting Goods & Trophies’ Corporate-Level Strategy. Cypress Sporting Goods & Trophies considers itself to be employing the retrenchment strategy. The firm plans on reducing

sporting goods inventory and specializing in custom trophies and uniform services. These types of services allow the company to differentiate itself from its most direct competitors, and to

increase its potential to grow its profits (G. Cutrufelli-Carnazzo, personal communication, April 6, 2014).

Business-Level Strategy

The primary business-level strategies a company can utilize are: cost leadership, focused cost leadership, broad differentiation, focused differentiation, and integrated low cost and differentiation (Ketchen & Short, 2013). A cost leadership strategy is when an organization

offers its products or services with satisfactory quality, at a low price, to a broad market scope. A focused cost leadership strategy is similar in terms of quality, however, it requires organizations

to compete on price, focused around a more specific target market. A broad differentiation strategy is when a firm provides unique and desirable products or services at a premium price to a broad market. A focused differentiation strategy is similar in regard to products or services

with unique qualities and premium price, but products are sold to a more narrow market (Ketchen & Short, 2013). An integrated low cost and differentiation strategy represents a balance

of all four strategies, and is extremely difficult to maintain. These companies offer “substantially differentiated products or services at a relatively low price” (S. Kurtz, personal communication, April 2, 2014).

In Figure 3.13: Business-Level Strategies, it illustrates the different types of business-level

strategies and highlights the specific business-level strategy which Cypress Sporting Goods & Trophies currently utilizes, i.e. a broad differentiation strategy.

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Figure 3.13: Business-Level Strategies

The owners of Cypress Sporting Goods & Trophies believe that the firm is best described as using the broad differentiation strategy, because its customers prefer to pay a little bit more for excellent customer service, unique custom product offerings, and high quality items (G.

Cutrufelli-Carnazzo, personal communication, April 6, 2014).

Corporate- Level Alignment Analysis

An alignment analysis determines the degree to which the organizations 12 major characteristics align with the organizations current corporate-level strategies. The 12 key organizational

characteristics include vision, mission, goals, organizational structure, products/services, response to external driving forces, competitive positioning, supply chain positioning, response

to competitive forces, use of extraordinary resources and capabilities, value chain, and use of performance measures. These characteristics’ and their alignment with Cypress Sporting Goods & Trophies’ corporate-level strategy is represented in Figure: 3.14: Corporate-Level Strategy

Alignment.

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Figure: 3.14: Corporate-Level Strategy Alignment

High Alignment. Cypress Sporting Goods & Trophies; goals and objectives, competitive positioning, supply chain, response to significant competitive forces, and value chain are all

highly aligned with its corporate-level strategy of retrenchment. These are the firm’s strongest characteristics used to achieve a successful retrenchment strategy.

Moderate Alignment. Five characteristics are moderately aligned with Cypress Sporting Goods & Trophies corporate-level strategy. These characteristics are considered moderately aligned

because each has one area where it does not directly align. The vision, mission, and external driving forces are all very aligned with their corporate-level strategy, but focus around growth, which is contradicting to its retrenchment strategy. Use of performance measures are moderately

aligned because non-financial measures are directly aligned, but financial measures are not.

0

0.5

1

1.5

2

2.5

3

3.5D

eg

ree

of

Ali

gn

me

nt

3=Strong 2=Moderate 1= Weak 0= No Alingment

63

Low Alignment. Organizational structure, products and services, and use of extraordinary resources and capabilities have both similarities and differences when aligning with the

corporate-level strategy. Currently, Cypress Sporting Goods & Trophies organizational structure consists of a small workforce and could agree with retrenchment. However, the company has

intentions of hiring skilled instructors to perform batting lessons at its batting cages. The intention to hire more employees does not agree with the retrenchment strategy. Cypress Sporting Goods & Trophies has a significant amount of sporting goods inventory for its small

store location. This excess of products and inventory does not align with their retrenchment strategy. Its use of extraordinary resources also does not align. The limited use of the batting

cages aligns with the corporate-level strategy. However, the other extraordinary resources such as the owners’ relationships and family environment promote growth which is not in alignment.

In Figure 3.15: Business-Level Strategy Alignment, it illustrates how well Cypress Sporting Good & Trophies’ 12 characteristics align with its business-level strategy of differentiation.

Figure 3.15: Business-Level Strategy Alignment

0

0.5

1

1.5

2

2.5

3

3.5

De

gre

e o

f A

lig

nm

en

t

3= High 2= Moderate 1= Low 0= No Alingment

64

Business-Level Alignment Analysis

High Alignment. Eleven out of twelve of the key organizational characteristics are directly

aligned with Cypress Sporting Goods & Trophies business- level strategy of broad differentiation. This means that all eleven categories are directly aligned with serving unique and desirable

products or services at a premium price to a broad market. Moderate Alignment. Use of performance measures is the only characteristic that aligns in most

aspects, but not all. Cypress Sporting Goods & Trophies’ non-financial measures of performance aligned directly with the business-level strategy of a broad differentiation. However, the lack of

sufficient financial information does not effectively support with the firms business-level strategy and reduces the alignment rating to a moderate alignment.

Summary of Findings

This subsection lists and describes the various strengths and weaknesses discovered from

Cypress Sporting Goods & Trophies’ corporate-level strategy analysis, as well as its business-level strategy analysis.

Corporate-level Strategy Strengths and Weaknesses. In Figure 3.16: Corporate-Level Strategy Strengths and Weaknesses, the most important strengths and weaknesses established from

Cypress Sporting Goods & Trophies’ current corporate/organizational strategy are illustrated.

Figure 3.16: Corporate-Level Strategy Strengths and Weaknesses

Strengths. Cypress Sporting Goods & Trophies’ corporate-level strategy strength is its response

to significant competitive forces. The company intends to reduce its focus on selling sporting goods and put more of an emphasis on its custom trophy and uniform services. Many of Cypress Sporting Goods & Trophies’ competitors do not offer these unique services.

Strengths

• Competitive positioning by offering unique services

Weaknesses

• Intention to hire batting coaches

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Weaknesses. Cypress Sporting Goods & Trophies continuous pursuit of hiring batting instructors does not align with the firm’s retrenchment corporate-level strategy. The retrenchment strategy

requires Cypress Sporting Goods & Trophies to reduce the number of employees it has rather than hire more. This is because the company is attempting to reduce its product and service

offerings; therefore, it would not have a need for more employees.

Business-Level Strategy Strengths and Weaknesses. The categorizing of the significant

strengths and weaknesses that Cypress Sporting Goods & Trophies has are shown in Figure 3.17: Business-Level Strategy Strengths and Weaknesses.

Figure 3.17: Business-Level Strategy Strengths and Weaknesses Strengths. Cypress Sporting Goods & Trophies’ business-level strategy strengths relate to its

goals that focus on differentiation. Cypress Sporting Goods & Trophies’ goals are intended to increase the trophy services and batting cages, and are in alignment with the differentiation

business-level strategy. The differentiation of products and services offered gives Cypress Sporting Goods & Trophies a competitive advantage in the sporting goods industry.

Weaknesses. Cypress Sporting Goods & Trophies is currently viewed as a top provider of sporting goods equipment in the Monterey County. However, it practices a differentiation

strategy by offering unique services, such as custom trophies and uniform designs. The more the company differentiates its products and services, the higher the risk the company will lose its corporate image as a quality sporting goods equipment provider. Customers could begin to see

Cypress Sporting Goods & Trophies mostly as a custom trophy or uniform provider. While customers may still shop with Cypress Sporting Goods & Trophies for its unique services, they

may access one of its current direct competitors for sporting goods equipment. CONCLUSION

Throughout the internal analysis of Cypress Sporting Goods & Trophies, multiple internal strengths and weaknesses of the company were discovered. From the subsections’ summary of findings, all strengths and weaknesses are gathered and summarized in the internal analysis’

conclusion. In Figure 3.18: Internal Analysis’ Strengths and Weaknesses, it provides a visual

Strengths

• The ability to offer custom trophy and uniform services

Weaknesses

• Potential change in company image

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representation of Cypress Sporting Goods & Trophies’ strengths and weaknesses discussed in this conclusion.

Figure 3.18: Internal Analysis’ Strengths and Weaknesses

Strengths. The resources of batting cages, family environment, forty-year history, and owners’ relationships are considered medium-level strengths of the company because of the capabilities that they provide in gaining more business. An analysis of the value chain reveals that Cypress

Sporting Goods & Trophies’ procurement process is a moderately significant strength. Human resources are a significant strength because it facilitates customer retention. Customer retention

is a significant strength, because it increases sales.

Strengths


Batting cages

X

Family environment

X

Forty-year history

X

Owners' relationships X

Procurement:: Effective supplier selection

X

Human resources X

Customer retention X

Ability to offer custom trophy and

uniform services X

Competitive positioning by offering unique services

X

Weaknesses


Small store space X

Low investment capital

X

Fragile marketing plan

X

Lack of computer information systems

X

Potential change in company image X

Intention to hire batting coaches X

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The ability to offer custom trophy and uniform services is a significant strength, because many of Cypress Sporting Goods & Trophies’ competitors do not offer these unique services.

Competitive positioning by offering unique services is also a significant strength because it is aligned with the differentiation business-level strategy.

Weaknesses. Small store space is an insignificant weakness because it can restrict expansion. Low investment capital is a significant weakness because it hinders the purchase of new

equipment. Marketing is a significant weakness, because the firm’s only marketing channel is team sponsorships.

Potential change in company image is a moderate weakness, because the more the company differentiates its products and services, the higher the risk the company will lose its image as a

quality sporting goods equipment provider. Having the intention to hire batting coaches is an insignificant weakness, because the company is attempting to reduce product and service

offerings, therefore, it would not have a need for more employees.

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Possibilities and Recommendations

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POSSIBILITIES AND RECOMMENDATIONS

INTRODUCTION

After conducting an internal and external analysis of Cypress Sporting Goods & Trophies, multiple risks threatening the company and opportunities for improvement were discovered. The

following section discusses Cypress Sporting Goods & Trophies’ possible options at making its business more effective and efficient. First, this section analyzes Cypress Sporting Goods & Trophies’ level of alignment when comparing its business operations to its corporate- and

business-level strategies, in order to make a proposal for realignment. After strategic alignment, this section presents possibilities for improving Cypress Sporting Goods & Trophies’ strategic

competitive advantages and operational efficiencies. For each possibility, there are unique recommendations that present specific approaches to achieving them. This section concludes with predictions of how well the best recommendations can improve Cypress Sporting Goods &

Trophies’ competitive positioning within its industry and the potential value added to the firm’s products and services. STRATEGIC ALIGNMENT

Strategic alignment discusses the alignment of Cypress Sporting Goods & Trophies’ current business operations compared to its current corporate- and business-level strategies. If these factors do not align effectively, then recommendations for creating better alignment are given. In

the alignment analysis, there are charts illustrating the current level of alignment, as well as charts showing the possible realignment if the suggested recommendations are instituted. Overall,

strategic alignment focuses on ensuring Cypress Sporting Goods & Trophies’ business operations agree with its corporate- and business-level strategies as much as possible.

Corporate-Level Strategy

Currently, Cypress Sporting Goods & Trophies’ upper management believes that the company is practicing the corporate-level strategy of retrenchment (G. Cutrufelli-Carnazzo, personal communication, April 6, 2014). However, based on a completed strategic alignment analysis in

the internal analysis, Cypress Sporting Goods & Trophies’ current business operations do not align well with a retrenchment strategy. Therefore, Cypress Sporting Goods & Trophies has two

opportunities to improve its business processes. The company can either adapt its operations to better agree with a corporate-level strategy of retrenchment, or make no changes to its operations and adopt a corporate-level strategy of stability.

Out of the two options to better align its business processes, the most efficient transition could be for Cypress Sporting Goods & Trophies to implement a corporate-level strategy of stability,

rather than retrenchment. Cypress Sporting Goods & Trophies’ current operations reflect neither growth nor retrenchment, but rather the pursuit of a stable future. After instituting the corporate-level strategy of stability, six areas of Cypress Sporting Goods & Trophies’ business, that were

of low and moderate alignment, with a retrenchment strategy could immediately move to high alignment.

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Business-Level Strategy

Currently, Cypress Sporting Goods & Trophies is practicing the broad differentiation business-

level strategy (G. Cutrufelli-Carnazzo, personal communication, April 6, 2014). This business-level strategy is extremely appropriate for this type of business, since almost all of Cypress

Sporting Goods & Trophies’ areas of operation are in high alignment with this business-level strategy. Therefore, it’s highly recommended that if Cypress Sporting Goods and Trophies makes no changes to its operations, then it should keep the same business-level strategy of broad

differentiation.

Alignment Analysis

In this section both the current and recommended alignment analysis charts are presented. The

company’s corporate-level strategy is discussed first. As stated, current operations do not align well with Cypress Sporting Goods & Trophies’ corporate-level strategy of retrenchment. Figure

4.1: Current Corporate-Level Strategy of Retrenchment Alignment Chart, illustrates the specific areas of Cypress Sporting Goods & Trophies’ business that do not agree with a corporate-level strategy of retrenchment.

Figure 4.1: Current Corporate-Level Strategy of Retrenchment Alignment Chart

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It is clear, from Figure 4.1: Current Corporate-Level Strategy of Retrenchment Alignment Chart, that there must be adjustments to either the firm’s operations, or its corporate-level strategy in

order to create better alignment. It is suggested that Cypress Sporting Goods & Trophies continues its current operations and adjusts its corporate-level strategy to one of stability, not

retrenchment. Figure 4.2: Recommended Corporate-Level Strategy of Stability Alignment Chart, illustrates the improvement of alignment if Cypress Sporting Goods & Trophies moves from retrenchment to stability.

Figure 4.2 Recommended Corporate-Level Strategy of Stability Alignment Chart

The transition from retrenchment to stability has the ability to realign Cypress Sporting Goods & Trophies’ corporate-level strategy tremendously. Important aspects of the company’s operations,

such as its vision, mission, and products and services, all agree more with a corporate-level strategy of stability. This increase of alignment can significantly help Cypress Sporting Goods &

Trophies strengthen its competitiveness within its industry and sustain a long-term, profitable business plan.

Cypress Sporting Goods & Trophies’ current business-level strategy is broad differentiation.

After comparing the company’s operations with its business-level strategy, it is clear that the alignment among the two aspects is high. Therefore, it is recommended that Cypress Sporting

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Goods & Trophies continues practicing a business-level strategy of broad differentiation. Figure 4.3: Current and Recommended Business-Level Strategy Alignment Chart, illustrates how well

Cypress Sporting Goods & Trophies’ business plan supports a broad differentiation strategy.

Figure 4.3 Current and Recommended Business-Level Strategy Alignment Chart

After analyzing Cypress Sporting Goods & Trophies’ corporate- and business-level strategies, a few recommendations can be made. First, Cypress Sporting Goods & Trophies should continue its business operations, but change its corporate-level strategy of retrenchment to that of stability

in order to create better alignment between the two. Cypress Sporting Goods & Trophies should also continue practicing a business-level strategy of broad differentiation since the firm’s

operations are already aligned with a business-level strategy of broad differentiation. Also, a business-level strategy of broad differentiation provides the firm the best ability to compete within its industry.

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POSSIBILITIES AND RECOMMENDATIONS FOR IMPROVING STRATEGIC

COMPETITIVE ADVANTAGE

The possibilities and recommendations for improving strategic competitive advantage section discusses Cypress Sporting Goods & Trophies’ potential options to better compete within its industry. The company currently faces challenges that create possibilities for improvement.

There are diverse recommendations that propose specific actions which Cypress Sporting Goods & Trophies can implement in order to take advantage of its current opportunities. This section

concludes with what are thought to be the best recommendations Cypress Sporting Goods & Trophies to embrace and execute.

Possibility I: Increase consumer awareness of Cypress Sporting Goods & Trophies’ brand

The first possibility Cypress Sporting Goods & Trophies faces involves strengthening its marketing and advertising efforts. Although the company has been serving the Monterey County

for over 40 years and has established itself within the community as a top sporting goods provider, there is still great potential for increasing its brand awareness among consumers.

Currently, Cypress Sporting Goods & Trophies spends minimal capital in its marketing efforts, due to past experiences of not making enough return on advertising investments. While this has influenced the firm to put its attention on other areas of its business operations, marketing is still

extremely important and alternative methods must still be explored.

Recommendation I: Create an official company website. One recommendation for increasing consumer awareness of Cypress Sporting Goods & Trophies’ brand involves creating an official

company website where customers can browse and order products and/or services. In today’s modern world, the Internet is widely used because of its convenience and plethora of information.

Customers now have the ability to examine and purchase all types of business’ products and services without ever having to leave their own homes (The World Bank, 2014). Consumers can compare product or service offerings and prices of different companies in order to choose what

they believe to be their best purchasing decision. However, customers can only do this with companies that have already created such an online presence. All of Cypress Sporting Goods & Trophies’ direct competitors discussed in this strategic analysis

have up-to-date, functioning company websites that give customers all the information needed. Cypress Sporting Goods & Trophies faces the opportunity of investing in its own official website

that could bring its business into the modern age and increase its ability to generate more profit. The current employees of the company do not have the skill sets that allow them to develop and create a company website on their own. Therefore, the company must seek external assistance in

order to create an operational website.

There are many different website service providers, and depending on how complex a business

wants to make its site, there is a wide range of costs for doing so. The wide range of costs connected to website development “relates to the complexity of design, cost of custom photography, motion graphics, animation and interactive tools” a company wishes to integrate

into its own website (MacKechnie, n.d.). Websites simple enough to create, as well as professional enough to teach consumers about a company’s products and services, typically cost

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around $2,500 on the low end of the spectrum (MacKechnie, n.d.). Creating a feature within the website that allows customers to place online orders and make online purchases from the

company costs “less than $1,000 per year” (MacKechnie, n.d.). Along with minor maintenance fees throughout the website’s existence, this recommendation is fairly affordable, especially

when considering the amount of consumer attention it could bring to the company if implemented.

Recommendation II: Hire a marketing consultant/agency to develop an effective marketing

plan. Another recommendation for increasing Cypress Sporting Goods & Trophies’ brand awareness among consumers is to hire a marketing consultant or agency. The company must

seek out a consultant or agency that has the knowledge and skills to develop an effective marketing strategy. It could be too expensive for a small business like Cypress Sporting Good &

Trophies to create a full-time marketing manager position; therefore, this could be a short-term investment that could help the company understand the most profitable marketing investments. For most similar-sized businesses, marketing consultants cost around $2,000 to $20,000 per

month (Sheridan, 2013).

After working with a marketing consultant or agency for only a few months, the company could know when, where, what, and how it should spend its advertising budget. Cypress Sporting

Goods & Trophies can ensure its marketing efforts align with its corporate- and business-level strategies to ensure efficiency. Once the company is satisfied with the marketing knowledge it

has gained, it can discontinue its investments with the marketing consultant or agency and begin managing its marketing strategy on its own.

Selected Recommendation: Create an official company website. When comparing both

recommendations for increasing consumers’ awareness of Cypress Sporting Goods & Trophies’ brand, the recommendation for creating an official company website is the company’s best option. Despite future website maintenance fees and yearly charges that are incurred for selling

products online, an official company website could be a profitable one-time investment. This investment could create tremendous potential to significantly increase consumer awareness of

the company’s brand. Cypress Sporting Goods & Trophies has already excelled at creating personal relationships face-to-face with its customers. However, in today’s modern world, the company has the opportunity to establish those same kinds of relationships through an official

website that could reach a much broader range of customers. The firm can integrate its personality into its website and add its emotional value to its products and services over the

Internet, just like its employees do every day when working in the physical store location.

The creation and establishment of an official company website could also allow Cypress Sporting Goods & Trophies to implement and track certain key performance indicators (KPIs) to

measure its success. The first proposed KPI is market share, which is a key measure of competitiveness in an industry (Investopedia, 2014). If the company establishes an online

presence, then its advertising abilities could significantly increase and a broader range of customer demographics are more likely to be reached. When more customers become aware of Cypress Sporting Goods & Trophies’ products and services due to its website, the company is

likely to see an increase in sales. These sales generated from customers who have switched to

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Cypress Sporting Goods & Trophies as their sporting goods provider due to the firm’s new online presence. After instituting an official company website, Cypress Sporting Goods &

Trophies can begin measuring its market share by evaluating its sales levels compared to the rest of the sporting goods stores industry (Investopedia, 2014). The company can also gauge the effectiveness of its new website capturing market share by

tracking another KPI, customer online engagement. This KPI “refers to the engagement of customers with each other, a company or a specific brand, measured primarily by online

interaction” (Marr, 2012). In other words, it measures a firm’s effectiveness at reaching customers online. It is valuable for Cypress Sporting Goods & Trophies to be aware of the level and type of attention its company is receiving online. The company can measure its level of

customer online engagement by conducting a quantitative analysis of its website’s page views, search engine rankings, and click-through rates (Marr, 2012). It must also perform “a qualitative

assessment of the content of the views of, and conversations between, current and potential customers on blogs, discussion forums, etc.” (Marr, 2012) that discuss Cypress Sporting Goods & Trophies’ business. With statistical data regarding website attention and qualitative data

regarding consumers’ view of the company, Cypress Sporting Goods & Trophies can gain a better idea of which strategies or operations are profitable. It also gives the firm the ability to

become aware of weaknesses or threats and, to then address them appropriately. Overall, the KPIs, market share and customer online engagement, can help Cypress Sporting Goods & Trophies evaluate its performance at achieving its short- and long-term goals, its vision, and its

mission.

Possibility II: Establish a more concentrated product focus

Currently, Cypress Sporting Goods & Trophies orders baseball, football, soccer, field hockey,

and lacrosse inventory from suppliers to sell in-store. However, the most profitable aspects of its business are its baseball equipment sales, batting cage services, and its custom uniform and

trophy manufacturing (D. Cutrufelli, personal communication, April 1, 2014). Therefore, another possibility for improving the firm’s strategic competitive advantage could be the establishment of a more concentrated product and service focus. If Cypress Sporting Goods & Trophies focuses

its efforts only on its most profitable business operations, then the company could be more effective and efficient at reducing costs, adapting to economic or market changes, and generating

sales.

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Recommendation I: Short-term transition to a more concentrated product focus. The first recommendation for establishing a more concentrated product focus involves short-term methods

and strategies. In this instance, short-term is considered to be a time-frame within six months. Cypress Sporting Goods & Trophies could immediately stop ordering inventory for sporting

equipment in the areas of football, soccer, field hockey, and lacrosse in order to begin its transition to a more concentrated product focus. All football, soccer, field hockey, and lacrosse inventory already in-store for sale can then be discounted, so that it sells quickly and creates

more store-space for more profitable products and services. Discounting prices on this inventory can also send a message to customers that the store is beginning a transition to a more focused

sporting goods provider. Other marketing efforts should be focused only on promoting Cypress Sporting Goods & Trophies as a provider solely of baseball equipment, batting cages, and custom uniform and trophy services. This recommendation would also support the company’s

current corporate-level strategy of retrenchment, since it involves reducing inventory and business focus. However, it does not support a corporate-level strategy of stability, which aligns

better with Cypress Sporting Goods & Trophies’ current business operations.

Recommendation II: Long-term transition to a more concentrated product focus. The next recommendation for establishing a more concentrated product focus better aligns with a

corporate-level strategy of stability, but does involve a small amount of retrenchment. Cypress Sporting Goods & Trophies may have customers who rely on its business for their football,

soccer, field hockey, and lacrosse equipment. Therefore, an immediate cancellation of inventory orders in these areas could negatively affect the business’ customer loyalty. Customers may turn away from the business completely if Cypress Sporting Goods & Trophies abruptly discontinues

the products and services they need.

This recommendation focuses on a long-term transition to the concentrated product focus the

company desires to establish. In this instance, long-term is considered to be a time-frame of a year or more. Cypress Sporting Goods & Trophies can continue selling all of the same products and services it currently offers, but focus its advertising efforts only on baseball equipment,

batting cages, and custom uniform and trophy services. Over time, the company can establish itself with its customers as a more specific type of sporting goods provider, and then begin

discontinuing its football, soccer, field hockey, and lacrosse inventory. Eventually, Cypress Sporting Goods & Trophies’ brand image could become established as a more concentrated sporting goods provider, without reducing its level of customer loyalty.

Selected Recommendation: Long-term transition to a more concentrated product focus. The selected recommendation for establishing a more concentrated focus involves a long-term transition. Cypress Sporting Goods & Trophies’ current business operations do not align with a

corporate-level strategy of retrenchment; however, they do align with a corporate-level strategy of stability. A short-term transition to a more concentrated focus deals with retrenchment. A

long-term transition gives Cypress Sporting Goods & Trophies the opportunity to practice stability and accomplish its goals most effectively. Although the company is still performing a small degree of retrenchment, the more amount of time it takes to narrow its product focus, the

less recognizable it would be.

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Customers can begin to grasp the idea of Cypress Sporting Goods & Trophies’ narrowing its product focus throughout its transition, making them more comfortable with the change. Cypress

Sporting Goods & Trophies should use the transition period to also emphasize the fact that its ability to provide baseball equipment, batting cages, and custom uniform and trophy services can

be even more effective. With a more narrow focus, the company has less distractions and more available time to enhance its services.

Cypress Sporting Goods & Trophies can use its leaner business plan to achieve the most

customer loyalty and market share in the niche it wishes to compete in. These factors are directly related to the KPI of brand equity. Brand equity measurements help a firm understand the consumers’ perceived value of its brand. The company can measure its brand equity by

evaluating qualitative measures of its brand’s strength, favorability, and uniqueness, using methods such as “face-to-face consumer interviews or focus groups “(Marr, 2012). There are

also quantitative measures of brand equity, which involve “brand-tracking studies” that measure “brand awareness, usage, attitudes and perceptions” (Marr, 2012). Once Cypress Sporting Goods & Trophies begins a long-term transition to a more specific and unique brand image, these

measurements can be extremely useful at evaluating the firm’s performance in achieving its operational goals.

For each proposed possibility there are selected recommendations. If implemented, each recommendation could achieve the possibility of improving the firm’s strategic competitive advantage. These recommendations include specific KPIs that allow Cypress Sporting Goods &

Trophies to measure its performance. Figure 4.4: Selected Recommendations and KPIs for Improving Strategic Competitive Advantage, summarizes each selected recommendation and its corresponding KPIs.

Figure 4.4: Selected Recommendations and KPIs for Improving Strategic Competitive

Advantage

• KPIsSelected Recommendations

•Conduct market share analysis by comparing the company's sales to its industry's sales

•Measure customer online engagement levels by examining website's page views, search engine rankings, click-through rates, and consumer discussion forums

Create an official company website

•Evaluate brand equity through face-to-face interviews, focus groups, and brand-tracking studies

Long-term transition to a more

concentrated product and service focus

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POSSIBILITIES AND RECOMMENDATIONS FOR IMPROVING OPERATIONAL

EFFICIENCIES

Operational efficiency is defined as “the capability of an enterprise to deliver products or services to its customers in the most cost-effective manner possible, while still ensuring the high quality of its products, service, and support” (Webopedia, 2014). Operational efficiency can be

“achieved by streamlining a company's core processes in order to more effectively respond to continually changing market forces” (Webopedia, 2014). In order to make full use of its

strengths, Cypress Sporting Goods & Trophies must minimize waste, “while leveraging the resources that contribute most to its success” (Webopedia, 2014). The resources that contribute the most to Cypress Sporting Goods & Trophies’ success include its employees, value-adding

processes, and its brand name. Cypress Sporting Goods & Trophies can use these resources to become better aligned with its desired business- and corporate-level strategies.

Through the alignment analysis in the internal analysis, it was determined that Cypress Sporting Goods & Trophies can improve upon its inventory management and financial decision making.

For each of these two possibilities, there are two recommendations that describe how Cypress Sporting Goods & Trophies could improve its operational efficiency and take full advantage of

its resources. Possibility I: Improve the inventory management process

The first possibility is improving the inventory management process at Cypress Sporting Goods & Trophies. Cypress Sporting Goods & Trophies’ finite store space places limitations on how

much inventory can be stored and displayed. Not only does excess inventory take up valuable shelf space, it also increases costs and creates clutter. Cypress Sporting Goods & Trophies has been ordering and managing its inventory for over 40 years; however, there are still

improvements that can help the firm save money by improving its operational efficiency.

Recommendation I: Create an inventory manager position. The first recommendation is the creation of an inventory manager position. This could be a modification, or addition to, the current organizational structure. The new position of inventory manager could be assigned to an

existing employee, or Cypress Sporting Goods & Trophies could hire a new employee to fill this new role.

The duties of the inventory manager could be to receive, order, track, organize, and forecast demand for all inventory. This position could formalize and standardize Cypress Sporting Goods

& Trophies’ handling of inventory. The inventory manager could create procedures that could be used by all employees. This coordination could allow Cypress Sporting Goods & Trophies to be

more organized, and be more aware of what items it has on hand.

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Recommendation II: Establish a point of sale system. The second recommendation for improving the inventory management process is to purchase and adopt point of sale (POS)

accounting software and hardware. To implement this recommendation, Cypress Sporting Goods & Trophies could select a POS system, install the equipment, and then train its employees to use

the new system. Most POS systems run on a standard computer and cash register. The only specialized equipment that is needed is a bar code scanner. This basic set-up can cost less than $1,500 (Entrepreneur, 2014).

There are many benefits to using a POS system. A POS system could help Cypress Sporting

Goods & Trophies track seasonal trends, identify on-hand inventory, apply a promotional sale price to certain items, identify theft, and determine re-order requirements. The POS system could take some time to implement, but could quickly pay for itself with increased efficiency. A POS

system is something that Cypress Sporting Goods & Trophies could use to be more competitive. This recommendation could cut costs by approximately ten percent (Entrepreneur, 2014).

Selected Recommendations: Create an inventory manager position and point of sale system.

The selected recommendations to improve the inventory management process are to implement

both an inventory manager position and a POS system. The new position of inventory manager is a higher priority than a POS system. Once an inventory manager has been trained on the current

methods of inventory management, they can then assist with the implementation of a POS system. The inventory manager could master the new POS system, and then train all staff on its operation.

If the creation of an inventory manager position is the only recommendation that is adopted, then

the inventory manager can still effectively implement a procedure for inventory management. Even without a POS system, an inventory manager could improve the way inventory is handled. A KPI which could track more informed inventory buying decisions is the gross margin return

on investment (GMROI) ratio. The GMROI ratio is the gross margin divided by the average inventory cost. This ratio is useful when analyzing how efficiently Cypress Sporting Goods &

Trophies is moving inventory (Investopedia, 2014). It can also be used to help decide which products to keep or stop selling in order to stay aligned with its business- and corporate-level strategies.

Possibility II: Improve the internal financial decision-making process

The second possibility is to improve the internal financial decision-making process. Cypress Sporting Goods & Trophies faces many decisions that involve financial projections and accounting information. For example, when Cypress Sporting Goods & Trophies is deciding

which line of products to discontinue or expand, it is useful to perform a financial analysis. The following recommendations represent two different ways in which Cypress Sporting Goods &

Trophies can make more informed financial decisions.

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Recommendation I: Create a financial analyst position. This recommendation calls for the creation of a financial analyst position. This could be a modification of, or addition to, the

current organizational structure. The new position of financial analyst could be assigned to an existing employee. The employee who is given this position could be provided with specific

related training. The job functions of this new position should not be needed on a daily basis, so it is recommended to train an existing employee to do this job on an ad hoc basis.

The duties of the financial analyst could be to weigh the costs and benefits of every major decision facing Cypress Sporting Goods & Trophies. Cypress Sporting Goods & Trophies could

pay for the employee to complete an accredited financial training program. This method could be cost effective and a good way for Cypress Sporting Goods & Trophies to invest in its human capital.

Recommendation II: Hire a financial consultant. This recommendation is to hire a professional

financial consultant to conduct a financial analysis for major decisions, as needed. A financial consultant can cost about $50 per hour (Suttle, 2014). A financial consultant could be able to analyze Cypress Sporting Goods & Trophies’ accounting data to produce information, such as

the projected return on investment from a capital purchase, the profitability of operating batting cages, or cash flow analysis.

After working with a financial consultant for several weeks, Cypress Sporting Goods & Trophies can gain valuable information regarding any upcoming large purchases or decisions. However,

every time Cypress Sporting Goods & Trophies faces a difficult decision, it must incur the cost of paying the financial consultant.

Selected Recommendation: Create a financial analyst position. The selected recommendation to improve the internal financial decision-making process is to train an employee to fill the

position of financial analyst. This recommendation could be more cost effective than temporarily hiring a professional consultant, yet it could yield similar results.

A KPI which could track improved operational efficiency is the return on assets (ROA) ratio. To find the ROA ratio, divide net income by total assets (Investopedia, 2014). The financial analyst

could use this ratio to compare Cypress Sporting Goods & Trophies to relevant industry standards. The ROA ratio can also be useful when measuring how “efficient management is at

using its assets to generate earnings” (Investopedia, 2014). Figure 4.5: Selected Recommendations and KPIs for Improving Operational Efficiencies, displays the proposed KPIs for each selected recommendation.

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Figure 4.5: Selected Recommendations and KPIs for Improving Operational Efficiencies

CONCLUSION

After performing a thorough strategic business analysis of Cypress Sporting Goods & Trophies, sufficient data has been collected in order to better understand the company’s current status and

its opportunities for improvement. These improvements are intended to help the company better compete within its industry, gain more market share, and experience profits over an extended

period of time. Challenges which the company currently faces create the possibilities for improvement and for each possibility, there are different supporting recommendations. This section summarizes which recommendations are considered to be the most effective at creating a

sustainable competitive advantage for Cypress Sporting Goods & Trophies.

Improved Competitive Positioning

In the external analysis section of the report, Cypress Sporting Goods & Trophies and its direct competitors were ranked on a strategic group map according to two key success factors: product

variety, and research and development. In terms of product variety, Cypress Sporting Goods & Trophies was ranked low since it caters to only five different types of sports, offers batting cage

services, and manufactures custom uniforms and trophies. Cypress Sporting Goods & Trophies was also ranked low in research and development, since it has invested only a limited amount of capital into its trophy manufacturing and has scaled back its marketing strategy significantly.

Figure 4.6: Current Strategic Group Map, depicts where Cypress Sporting Goods & Trophies currently ranks in comparison to its four direct competitors, based on the criteria of product

variety, and research and development.

• KPIsSelected Recommendations

•Facilitate a more efficient work space

•Creating an inventory manager position is a higher priority than the point of sale system

Create an inventory manager position

•Conduct a GMROI ratio by dividing gross margin by inventory cost

•Compare costs and income from inventory using the GMROI ratio

Implement a point of sale system

•Derive a ROA ratio by dividing income by assets

•Measure how efficiently management is using its assets to generate earnings with the ROA ratio

Create a financial analyst position

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Figure 4.6: Current Strategic Group Map

It is proposed that Cypress Sporting Goods & Trophies increase consumers’ awareness of its brand. The selected recommendation is to create an official company website that can

significantly increase the company’s ability to capture market share by becoming more internet accessible to consumers. Cypress Sporting Goods & Trophies should embrace modern technology, research alternative capabilities, and develop its own official online presence that

can lead customers to its products and services, rather than to its competitors. It is also recommended that the company narrow its product and service focus to the most profitable

categories of baseball equipment, batting cages, and custom uniform and trophies. Cypress Sporting Goods & Trophies can still practice a business-level strategy of broad differentiation if it were to eventually discontinue selling football, soccer, field hockey, and lacrosse equipment,

due to its unique offerings like batting cages and custom uniforms or trophies. Having a more concentrated focus could give the business more time and attention by enhancing these specific

products and services. This approach could significantly increase the products’ and services’ value, quality, and consumer demand.

Considering these changes, Cypress Sporting Goods & Trophies can be compared to its direct

competitors on another strategic group map with the same criteria of product variety, and research and development. The company, having implemented the selected recommendations, is predicted to move to a more competitive position. Figure 4.7: Resulting Strategic Group Map,

illustrates the predicted repositioning of Cypress Sporting Goods & Trophies when being compared to its direct competitors in product variety, and research and development.

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Figure 4.7: Resulting Strategic Group Map Cypress Sporting Goods & Trophies would move to a high level of research and development

after implementing the recommendation of creating an official company website. The new website adds a completely new aspect of the business that involves modern day technology and

social trends. On the other hand, its product variety is still low, if not lower, because of the recommendation for establishing a more concentrated product and service focus. This is not necessarily negative, since Cypress Sporting Goods & Trophies can still offer unique, quality,

and valuable products and services, even if it stops selling football, soccer, field hockey, and lacrosse sporting equipment. Increased Value-Added

Cypress Sporting Goods & Trophies’ current value chain’s strengths involve human resources management and customer service. Therefore, these are ranked as high value-adding activities.

The company’s medium value-adding activities are its operations, marketing abilities, and research and development. Low value-adding activities include the firm’s infrastructure, procurement, inbound logistics, and outbound logistics. Figure 4.8: Current Value Chain,

highlights Cypress Sporting Goods & Trophies’ current low, medium, and high value-adding activities.

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Figure 4.8: Current Value Chain

Implementation of the selected recommendations for improving Cypress Sporting Goods &

Trophies’ strategic competitive advantages can result in the lesser value-adding activities moving towards higher value-adding activities. Figure 4.9: Resulting Value Chain, highlights Cypress Sporting Goods & Trophies’ low, medium, and high value-adding activities once the selected

recommendations are acted upon.

Figure 4.9: Resulting Value Chain

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With a new laser trophy engraving machine and official company website, Cypress Sporting Goods & Trophies’ research and development moves from a medium to a high value-adding

activity. An official company website could also boost the firm’s marketing strategy from a medium to a high value-adding activity, due to the level of brand awareness it could create

among consumers. A more concentrated product focus increases the efficiency of the firm’s operations and moves it from a medium to a high value-adding activity.

If the selected recommendations and supporting key performance indicators are implemented, resulting in a new competitive positioning and heightened value-adding activities, then it is

projected Cypress Sporting Goods & Trophies could obtain a sustainable strategic competitive advantage within the sporting goods stores industry.

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Appendix

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APPENDIX MEET THE TEAM

Jeff Owen is a business major in his final semester of school at California State University, Monterey Bay (CSUMB). While attending CSUMB he has obtained a 3.26 GPA while playing on the university’s

baseball team. While playing baseball for CSUMB he has achieved awards such as Dektronics All-West Region 1st team, NCBWA All-

West Region 2nd Team, Rawlings / ABCA Division II All-West Region 1st Team, Capital-One Academic All-District, All-CCAA 2nd Team, and ESPN Student-Athlete of the Week. After graduating with his

business degree from CSUMB, Jeff plans on furthering his education by beginning his master’s program in Sports Management. He plans on

using these two degrees to one day become either a general manager for a Major League Baseball team, or become an athletic director at a University.

Richard J. Guerrero III, is currently pursuing his

Bachelor’s Degree in Business Administration in the School of Business at Cal State Monterey Bay University. Early in

his career he has focused on learning the foundation of management. Throughout his college career he has competed collegiately all 4 years in baseball, showing great leadership

skills, obtaining the position as team captain for 2 years. He has shown the abilities to adapt to certain situations and has

thrived in growth every year. He currently holds a position at Avila Construction in Monterey, Ca. With that experience and previous construction estimating experience, Richard

plans on joining the team at PG&E while obtaining his MBA at Cal State Monterey Bay University.

Trevor Turner is currently in his last semester at CSU Monterey Bay,

finishing his degree in Business Administration. He started his college career at Sierra College, a community college, in Rocklin CA.

He Graduated from Sierra College with an A.S. in Business Management in 2012. To continue his success Trevor transferred to Monterey Bay. Along with going to school Trevor also works at

Starbucks where he improves his skill in communication, customer service, and leadership. At Starbucks he is in charge of others

employees and handling money. On top of working he has also developed his abilities in several internships that put him in a variety of situations that gives him experience. In the future Trevor will attend

graduate school to further his education in the business world. He

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intends to find a job in marketing or in a management position within a company. His goal is to get a job in the medical field where he sees many future opportunities to advance his career.

John Halligan is a student enrolled in the College of Business, California State University, Monterey Bay, pursuing a degree in General Business Administration. He is

also a waiter, bartender, and member of the catering staff for Bayonet and Black Horse Golf Courses’ Restaurant in

Seaside. John began his College education in 2009 and has completed several classes in areas of business such as, management, marketing, finance/accounting,

entrepreneurship, computer information systems, economics, and operations. His strengths are in management,

operations, and finance. He has worked with Bayonet and Black Horse Golf Courses since 2011 where he has been asked to complete a wide variety of tasks. John started with

customer service assisting guests with their golf reservations and has since then moved on to work as a waiter/bartender for the golf course restaurant. He is

now responsible for waiting tables during lunch hours, organizing catering event set ups, and leading the catering staff during the event. His current business interests include: operations, strategic management, and performance metrics.

Roy Farrens will be graduating CSU Monterey Bay this spring of

2014 with a degree in Business Administration. He currently works as an administrative assistant for Malcolm Enterprises, a

local company that owns and operates three different day spas in the city of Monterey. In the past, Roy has worked in retail for Staples, in foodservice for Woodstocks Pizza, and for government

at the Santa Cruz Port District. This work experience combined with classes such as marketing, finance, business law, and

information systems have prepared Roy to help you improve your small business.

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