Copyright 2002, Professor Jerome M. Katrichis



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Sports Authority Example

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IV.              Problems and Opportunities


A.     Key Problem Areas


Sports Authority currently faces various problems related to their existing strategies as well as industry related issues.  The corporation will be required to react quickly to alleviate lost revenues and profitability from these problems.  They will need to address each issue to maintain their standing as the largest full line sporting goods retailer in the United States.


1.      Costs


The External Situation Analysis states that there are high fixed costs related to occupancy and labor expenses for all sporting goods retailers.  These high costs require retailers to sell large unit volumes to maintain a profitable gross margin.  Sports Authority must evaluate their fixed costs and determine a plan to reduce them.  Labor wages and the number of employees must be evaluated.  Occupancy options for real estate purchases or leases must be analyzed to determine the lowest cost alternative.


2.      Expansion Strategy


A poor expansion strategy was a large contributor to net losses experienced in 1998 and 1999.  Sports Authority modified their strategy in 2000 and does not plan to open any new stores in the upcoming years.  Their expansion plans have only included renovations of existing stores.  This strategy, if continued, will negatively impact Sports Authority’s sales and market share.  They will need to reevaluate their expansion plans to incorporate new stores where a market need exists.  Store locations will need to be chosen wisely to avoid past mistakes.


3.      Product Mix


Sports Authority’s product mix indicates significantly low market share in the athletic footwear and apparel markets.  Their sales from these product categories are significantly lower (2% for footwear, 3% for apparel) than national averages for the sporting goods industry.  Sports Authority needs to modify their marketing efforts for these product categories to increase sales and market share.  Advertising, store displays, and selection offerings must be evaluated to determine the root cause of this poor market share.


4.      Economic Conditions


The sporting goods industry is pro-cyclical as it is heavily influenced by economic conditions.  When the economic is doing well, sales increase.  Conversely, when the economic conditions are poor, sales decrease.  The current U.S. economy has recently entered a recession in 2001.  Unemployment rates are on the rise, and consumers are spending less money on leisure items.  This poses a large threat to Sports Authority’s sales goals.




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