Dick’s Sporting Goods Case Analysis

Executive Summary Typically when you are given a case, there is a particular opportunity or problem identified in the case or in the discussion questions that will become the focus of your analysis – let’s assume here that Dick’s is thinking about getting into the gym business and establishing a national chain of full-service gyms Then you would briefly discuss the following: Major issue facing Dick’s Sporting Goods whether they should enter the gym business Summary of Dick’s current strategy and financial position Sell sporting goods apparel and equipment at higher than average margins; financially stable at the moment, good growth over the past few years Recommendations NO!

Business Model Full-line sporting goods retailer Focus on high-priced, brand name products Higher margins Excellent customer service First-class inventory management system

General Environmental Forces Political/economic – in current economy, consumers are looking for low prices; this is not Dick’s focus; new President seems to be a fitness fanatic – could encourage others to get interested Sociocultural – the US has become increasingly concerned about its health and ways to improve it, this could prove beneficial to Dick’s Each of these forces would help Dick’s from both a supplier of apparel and equipment as well as a gym

General Environmental Forces Demographic – an aging population that is much more health conscious than previous generations; the rise in obesity should encourage consumers to look for ways to combat it Legal forces – there is discussion of a bill that would allow taxpayers to deduct the costs associated with preventive health measures, such as exercise; there is also a campaign to promote physical activity guidelines Again, each of these forces could help their existing business as well as the proposed business venture

Specific Environmental Forces Suppliers – there are many suppliers of fitness apparel and equipment, but it is dominated by a handful (Nike, Adidas, Titleist, Reebok, etc.), these suppliers may have limited bargaining power over Dick’s Customers – Dick’s likely appeals to middle and upper class customers; however such customers are more willing today to shop for bargains, and they do have many choices, as shown below

Specific Environmental Forces Competitors – for sporting goods: Sports Authority (privately held), Cabelas, Hibbett Sports, Big Five, Wal-mart, and Foot Locker are among its key competitors; in addition, there are specialty sporting goods stores (NikeTown, Adidas stores, Reebok stores, etc.) – while Dick’s may be among the most profitable, it is important to realize that consumers do have many choices; Dick’s will not likely try to get in a price war to compete, but rather differentiate itself through its product selection and customer service For gyms: Gold’s, Planet Fitness, Bally’s, Curves, YMCAs

SWOT Strengths brand recognition Higher profit margins Customer service Inventory management Knows the sporting goods business!

SWOT Weaknesses Seasonal nature of business (4th quarter is crucial) No experience running a gym

SWOT Opportunities Dick’s strong financial position enables it to survive and grow during a tough economy An aging population interested in health The obesity crisis A President committed to fitness Congressional Activity related to health and fitness Some national gyms are experiencing financial and customer retention problems

SWOT Threats The economy Shift in consumer spending habits Competitors (Wal-mart) Starting up such a big venture could divert their resources and attention away from their core capabilities

Financial Analysis Strong growth in Sales and income over the past three years (Yahoo Finance) Strong cash position Higher than industry average profit margins (Yahoo Finance)

Gym Industry Analysis Include some stats on the key players and trends Gold’s Planet Fitness City Sports Clubs Bally’s Fitness Together!!! (YEA!!!)

Recommendations Do not enter into the gym market Quite competitive Could dilute their high-end brand image Not a core competency