Strategic analysis of Quarry Inc.'s indoor climbing industry position

¶ … Quarry, Inc.

A shall begin my attempt by specifying that our Company, Quarry Inc., has evolved a lot in the last period and has proved that the indoor climbing activities can give birth to a whole new prosperous industry. Just like any other new domain, it has gained many adherents, which have chosen this kind of sport because of their curiosity and of the controlled risk it implies.

Even though, this does not mean it will develop to even a greater stage by itself in the future. Besides the pluses this industry implies, such as the relatively low costs, the easiness of performing the trainings for the participants and the facility of managing a profile company, there are also many disadvantages, like the high rivalry the great power of the buyer and the high risks of the activity in itself. Therefore I propose a deeper analysis of the phenomenon generated by the indoor climbing activity and of our company in itself; since there is a need to comprise its strengths and weaknesses and to present some further developing strategies I will build up a series of mattresses which would summarize all these main points.

I will start with an external factor evaluation matrix, to which I will adapt the five competitive forces developed by Porter and I will present the advantages and the disadvantages they generated in the industry and their non-direct effect on Quarry Inc. Furthermore, I will build up an internal factor evaluation matrix, to which I will apply again Porter's criteria, thus anticipating their direct influence on our company by emphasizing the advantages and disadvantages we might encounter. The last step of my report is going to be represented by a SWOT matrix which would comprise the strong and the weak points of our positioning in the industry, based on the previous analyses.

As I have mentioned before, my attempt will start with the external evaluation matrix. This exercise of evaluation has the role to identify the opportunities and threats that exist in the nearby area of our company. The way to differentiate between the elements of an external evaluation matrix and the ones of an internal one - the strengths and weaknesses - is to ask if the debated issue would exist if the company would not exist. "Opportunities refer to favorable conditions in the environment that could produce rewards for the organization if acted upon properly. That is, opportunities are situations that exist but must be acted on if the firm is to benefit from them. Threats refer to conditions or barriers that might prevent the firm from reaching its objectives."

External factor evaluation matrix

Porter's forces

Opportunities

Threats

Supplier's power

Threat of substitutes

Barriers to entry

Buyer's power

Degree of rivalry

My analysis has begun with the first criterion identified by Porter, meaning the power of the supplier. As the surrounding industry can prove, our possibility of choice among suppliers is very limited, because we work in a relative new domain and there are not many companies that produce or would choose to produce the equipments we need, because of the risks involved, meaning that their products would not have a market place. Therefore our supplier's power is very strong, which could be a disadvantage for us because it can become a monopolistic company which could impose higher prices and diminish our freedom of choice. On the other hand, I could not identify any opportunity in the fact that we work with a powerful supplier.

The second force identified by Porter is the threat of substitutes. The indoor climbing could be provided with a lot of substitutes for the equipment, which might prove to be a real advantage on the market, but this could also lead to a great disadvantage represented by the potential high prices for these new equipments.

In what the barriers to entry are concerned - Porter's third force - there are not many, because there are not high costs which would generate the appearance of a new company in the field, therefore it is quite accessible. Thus this is preceded by a big threat, represented by the high competition. Once again, I could not identify any advantage in this.

The forth force of Porter is the buyer power, which is decisive in the indoor climbing industry. One might say that this is a characteristic of all the other industries, but it should be kept in mind that the power of decision of the buyer is very high, since there are many sports he can choose, or he might rather prefer the indoor climbing, just because it is healthier - since it is an outside activity - and, for the adrenaline seekers, it implies more risks. As it could have been predicted, this high statute of the buyer can not lead to any advantage.

The last criterion is represented by the degree of rivalry in the field. Since it is a new domain of interest, the indoor climbing industry is very accessible, in the sense that such a business would not come with high costs and, on the other hand, the field has proven to be successful, because of its originality. The degree of rivalry is high, with new companies entering a low-cost, potentially high profit industry.

The Internal Analysis of strengths and weaknesses "focuses on the internal factors that give an organization certain advantages and disadvantages in meeting the needs of its target market. Any analysis of this kind should be market oriented/customer focused, because strengths are only meaningful when they assist the firm in meeting customer needs. Weaknesses refer to any impediments a company meets when developing or implementing a strategy." Just like in the case of the external factor evaluation matrix, I developed an analysis based on the Porter's five competitive forces.

Internal factor evaluation Matrix

Porter's forces

Strengths

Weaknesses

Supplier's power

Threat of substitutes

Barriers to entry

Buyer's power

Threats - 4

What it seems obvious is that we succeeded to identify six strengths in our internal evaluation and only three weaknesses. On the other hand, on the external plan, the number of threats seems to be bigger than that of the opportunities. Thus the opportunities I have identified are the continuous appearance of substitutes for the equipments our company is using, the relative accessibility of the domain it activates in and the success of the industry, generated by its novelty and originality. Having these in mind, I might say that the continuous flow of substitutes will lead to higher profits in the future that it has until now, because, as I have mentioned above, the indoor climbing industry is a new domain of interest for people. Despite this fact, the accessibility of the field might turn into a real threat in the nearby future, because it will certainly lead to the appearance of competitors on the market, a thing which might also affect its success, because the domain would become familiar for many people and its originality would not be anymore a point of attraction.

The threats I have identified are the possible appearance of monopoly in the case of our supplier, the growth of prices once with the appearance of substitutes, the enforcement of the competition, because of the accessibility of the industry and the great power of the buyer which will remain continuous, in my opinion, both in the present and in the future. On the other hand, the growth of the power of our supplier seems more threatening in the present because in the future other equipment producers might appear, once with the development of the industry. Both the growth of price because of the of substitutes and the appearance of new competitors seems to be more threatening in the future, because we are talking about a new field of interest.

On the internal plan the situation seems to be different because the number of strengths - the fame of the supplier, the increasing of the clients' number, the accessibility we have encountered when we entered the industry and the increasing of the company's profit and its possibility of becoming a successful brand or even a monopoly on the market - is greater than that of the weaknesses. Thus the continuous growth of the power of the supplier might be more beneficial for us in the future, just as the increase of the number of clients, which would be produced by the appearance of substitutes and the low degree of rivalry, even though this could be a real threat in the future.. On the other hand, the accessibility of the domain might turn into a disadvantage in the future, because it will certainly lead to the appearance of new competitors. In comparison with this, the weak internal points which seem rather to affect us in the present is the buyer power, because of which we have already reduced the costs, the rest -the danger of becoming dependent on our supplier, the higher costs involved by the appearance of suppliers- seem to be rather future concerns.

All in all, the SWOT Matrix shows equality between the advantages and disadvantages of activating in such a field. That is why I conclude by saying that there are neither great dangers but nor extraordinary gains. What we can do in exchange is to continue these brainstorming sessions and new ideas are going to occur for sure.