The purpose of this memorandum is to determine the appropriate grand strategy for a Golf Center and Country Club company in the United States. The company in question has a significant number of strengths, such as an excellent image, high market share, and high-quality personnel. However, the organization requires strategic direction, as it lacks a comprehensive view of the market and the industry. This report will investigate the present opportunities and risks as well as the attractiveness of the sector and determine the appropriate strategic approach.
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Opportunities and Threats in the Golfing Industry
As a sport, golf primarily appeals to males with a secure income and a stable schedule. The activity requires a considerable amount of time, and so it is necessary to organize golf outings in advance. Furthermore, golf is a group game that can double as a social event and be accompanied by other outdoor activities, such as picnics. As a result, golf has a well-established consumer base but has difficulty expanding the market beyond it.
The “Golf Courses” (2018) report supports this statement by claiming that the industry has been experiencing slow gains in participation. It states that recent course development has been overambitious and that some businesses have had to close because of the enthusiastic construction that was not met with appropriate demand. “Golf Courses” (2018) describes attracting new players as the biggest challenge for the industry, although it also states that the market will experience moderate growth in the near future due to the growing corporate profit and the resulting increase in the disposable income of the middle-class workers.
According to “Golf Courses” (2018), the smallest courses and clubs are dependent on local customers for their survival. This insight does not necessarily apply to the company reviewed in this report, as it is an influential player in the market, but new customers are likely to look for an outlet that is reasonably close to their location. Furthermore, the report states that golf participation benefits from increased leisure time, such as that afforded by retirement, which is not a factor the company or the industry can control. Overall, the golf centers and country club industry do not appear to display significant growth potential or suggest the existence of opportunities that can be used to expand the market.
The GE/McKinsey Matrix Applied to the Golfing Industry
The McKinsey matrix is used to evaluate the industry attractiveness and the competitive strength of a company or product. According to Kosov, Akhmadeev, Osipov, Kharakoz, and Smotritskaya (2016), it consists of nine segments arranged in a three by three square. The horizontal axis represents the competitive strength of a product or company in the sector, and the vertical one stands for the attractiveness of the segment itself. After the assignment of a value based on the numeric representation of the fulfillment of specific criteria to the horizontal and vertical positions of the target product, it can be placed in one of the nine squares, with the bottom left representing low potential and the top right meaning significant opportunities.
The attractiveness of expanding the golf industry can be considered low due to its weaknesses. The segment can secure long-term profits, as it has a persistent user base. However, it struggles to attract new customers, and as a result, the potential volume of sales does not justify the construction of new courses. Furthermore, the expansion has significant market risks, as displayed by “Golf Courses” (2018) and its statements that companies have had to close down after attempting to construct new infrastructure.
The company’s competitive strength in the sector, however, can be considered high. The organization is a dominant player in the industry, and its numerous advantages secure a superior competitive position compared to many other companies in the field. As a result, the initiative to expand the business is placed in the bottom right square of the McKinsey matrix. The square does not display a low potential for the venture, but it is not high, either.
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Model of Grand Strategy Clusters Applied to the Golfing Industry
The model of Grand Strategy as described by Phadtare (2010) consists of four quadrants separated by the competitive position and market share axes. A company can be placed in one of the four based on its relation to these two factors, and the model would then suggest appropriate strategies to take. The company reviewed in this report can be considered to have a strong competitive position and experience slow market growth.
This evaluation places it in the fourth quadrant of the model. According to Phadtare (2010), the model recommends two strategies: conglomerate diversification and liquidation. The former is an expansion of the company’s business into a mostly unrelated area through an acquisition or merger, and the latter is the dissolution of the company with a subsequent redistribution of its assets. As liquidation is not conducive to the growth of a company, my recommendation would be to use the conglomerate diversification strategy.
The golf industry is struggling to attract new customers, and past attempts to construct new courses have sometimes led to the closure of the companies that attempted it. The McKinsey matrix has determined that expansion does not have a high potential, and the Grand Strategy Clusters model suggests liquidation or conglomerate diversification as the appropriate strategies. My suggestion would be to adopt a passive “Hold” strategy in the sector and consider branching out into other business areas.
Kosov, M. E., Akhmadeev, R. G., Osipov, V. S., Kharakoz, Y. K., & Smotritskaya, I. I. (2016). Socio-economic planning of the economy. Indian Journal of Science and Technology, 9(36). Web.
Phadtare, M. T. (2010). Strategic management: Concepts and cases. Delhi, India: PHI Learning.