Copyright 2002, Professor Jerome M. Katrichis


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Sports Authority Example


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D.      Environmental Climate


1. Technological


Technology plays an important role for those companies in the sporting goods business.  In order to maintain proper inventory in large corporations, such as Sports Authority, the technology must be able to meet the demands of the industry.  The sporting goods industry as previously stated, is very competitive; therefore, for one company to excel in their technology over another is a point to be desired.  At this time, it is assumed that no one has the specific advantage overall; however, state of the art inventory management and information systems occupied by the Sports Authority Corporation allow it to maintain leadership in the industry.  Each sporting goods store, regardless of size has its own technological advantages.  Larger corporations have the advantage of regional distribution centers that allow for proper distribution of product based on current customer needs.  Technological advances in information systems allow a player, such a Sports Authority to communicate with other stores in the U.S. to find out where certain inventory items may be available.  Purchasing, receiving, sales, and perpetual inventory data can be maintained on a daily basis.  Sports Authority’s merchandise planning system allows the merchandise for each store to be selected by the central buying staff in consultation with field management.  This system allows the company to manage its sales and inventory levels by store at the class level.  The company also uses an automated allocation system that allocates merchandise to stores based on sales and inventory at the SKU level.  Terminals and computers that allow for quick data entry and inquiry allow the employee more time to provide quality customer service.  Corporations may have certain perks that draw a customer into the store.  In June of 2000, Sports Authority introduced an in-store television network, providing a custom blend of sports news, product information, and celebrity tips. It is now being broadcast in 10 remodeled stores and in five new prototype stores.  Making the store “a learning or educational experience” as opposed to just a place to purchase merchandise is a strong selling point that is making a steady incline. 


2. Legal


Legal issues can ultimately protect a company. As an example, the Sports Authority is currently one of 33 defendants who has been served a lawsuit complaint in November 1998.  The complaint was based on legal theories of public nuisance and negligent entrustment of firearms and alleged that the defendant retailers sold firearms in Chicago. After two court dismissals and appeals, the outcome of the case is undetermined at this time.  In addition, there are other lawsuits pending against the company pertaining to its operations.  However, at this time, management predicts that the resolution will not have an effect on the Company’s liquidity or financial position.


3. Ecological


Ecological issues can also indirectly affect a business.  In a broad sense, if there was an energy shortage, the company would have a hard time competing for the lowest prices.  The rising costs of manufacturing and distribution alone would offset a company’s current business.  Manufacturers would pay top dollar to get the product to the consumer.  Either prices would increase, or shortages would occur.  In addition, the country in general is becoming more environmentally conscious.  Packaging of products is changing rapidly to focus more on a safe recycling environment.


4. Economic


Most industries are affected by a change in the economy.  The sports goods business as discussed earlier is pro-cyclical.  That is, when the economy is good, so are the product sales.  And vice versa, when the economy is down, sales will tend to slip.  Recessions are a very good example of when consumers tend to purchase less on the “luxury items.”  During a recession, consumers have less available personal income available for spending.  Data was not available at the time this section was written; however, it can be assumed that during the recession that occurred in the late 1980’s through 1991, consumer spending had decreased affecting the sporting goods industry amongst others.  In addition, the current recession in 3rd quarter 2001 is predicted to have an effect on consumer spending. Consumers will remain cautious, but will continue to search for value in the products or services that they encounter.


5. Social/Cultural


Social and cultural trends have an affect on the sporting goods industry.  Americans are becoming more health conscious and interested in outdoor activities.  Adults are becoming more involved in leisure sports.


The boom of the electronics industry has decreased physical activity and left individuals in front of the television as opposed to performing some type of physical activity, moving the American culture towards a “fat” mentality.  According to a study by the U.S. Center for Disease Control and Prevention, nearly one in five adult Americans, or 17.9% of the population, is considered obese, a 50% increase over the past decade. Today, there are more obese children than there have ever been. However, parents are becoming more aware and encouraging children to participate in organized sports.  Hence Sports Authority’s motto, “Get Out And Play!” 


In addition, preferences of sporting activities may differ between cultural groups. There must be diverse selection for the diverse population.


6. Demographics

Growth of the minority population is expected to increase to total 33% of the U.S. population in 2010.  It is estimated that the mature population, those over the age of 50, increased 14% last year. These types of changes in demographics require retailers in the sporting goods industry to evaluate market demands on a regular basis and react quickly to customer’s requirements. Retailers will be required to diversify advertising vehicles and media to reach all segments to the market.





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