I originally wrote this article, “SWOT analysis” in February 2004.
case study by Nairn and Strickland (2003) of the Élan Boat Company is
used to identify the strengths and weaknesses of the company and the
opportunities and threats within the external environment of the
company. According to Nairn and Strickland,
professional water-skier, World Champion, V.S. Champion, and Pro-Tour
champion, was resting on the dock after a slalom training run one
afternoon when a call came through on his cell phone. Jay Blossman, his
high school tennis partner and now politician, was on the other end.
Out of the blue, Jay announced to Ben that he was buying American
Skier, the competition ski boat company owned by financially troubled
American Performance Marine. Ben instantly knew that Jay had found
himself a great boat and suspected that he was getting a great deal in
buying the company, but he also realized that while Jay was an
excellent tennis player, Jay lacked the necessary insider knowledge
about building, marketing, and selling ski boats. Excited and eager to
be involved in this rare opportunity, Ben was on the next flight to New
Orleans to meet Jay and look into the situation.
As Ben took the
tour of the American Performance Marine plant in Kentwood, Louisiana,
he learned that the company had recently filed for bankruptcy. Ben
concluded that with his firsthand knowledge of the waterskiing industry
and the boatbuilding capabilities that lay before him in the Kentwood
plant, he and Jay ought to be able to resurrect the ailing company.
With all the enthusiasm and high hopes of an entrepreneur entering the
industry of a sport he loves, Ben Favret dove headfirst into building
ski boats. In keeping with this excitement and attitude, Ben renamed
the company Élan Boats. The word Élan means ‘vigorous spirit and
The purpose of this report is to identify the
firm's key capabilities and trends within the macro environment to
develop a clear strategy for the Élan Boat Company.
Design School Model is the strategic framework for the analysis.
External and internal appraisals are carried out. Key success factors
within the external environment and the distinctive competencies of
Élan are identified.
Opportunities exist for Élan if water
sports receive greater publicity and because the profitability and
customer service of the marketleaders is unsatisfactory. . The success
of the company is threatened by a declining market (which is highly
cyclical), the competition's established dealer networks, a poor
powered watercraft safety record and suppliers locked into the industry
Élan's strengths are it's brand names of 'American
Skier' and 'Ben Favret'. The company's weaknesses are its projected
profitability and liquidity.
The seven conclusions and recommendations of this report are:
Consider changing the position of the new plant, in 2004, from
Covington to a location within the Great Lakes area, where demand is
(2) Investigate rationalization of the company's
product range with a view to reducing the product line from eight to
one, two or three variants.
(3) Raise manufacturing efficiency
and lower overhead costs to increase gross margins from 30% to 40% and
net profit from between 1% and 5% to 10%.
(4) Increase the liquidity of the company to allow for depressed sales until an economic upturn in the U.S. economy.
(5) Reconsider the company's distribution channel philosophy of selling directly to customers without a dealer network.
Develop a close supplier relationship with a top engine manufacturer
who has both good performance and customer service records.
(7) Continue to associate Élan with safety, and actively promote activities which improve the safety of Élan's customers.
are many schools of strategic management thought and they can be
grouped as being either Prescriptive or Descriptive. Within the
Prescriptive Group are the Design School, Planning School and
Positioning School. Mintzberg (1990:112) illustrates the Design
School Model, and (applied to Élan Boats) it can be described as having
components, and these are briefly described below.
examination of the external elements will influence Élan's strategy
options. This involves investigating customers, competitors, market and
the environment. Where the environment is political, economic, society,
technology and ecology considerations.
Threats and opportunities in the environment
external appraisal will reveal the opportunities that Élan can exploit
and the threats it faces. Opportunities can be regarded as positive
trends and threats are negative trends.
Key success factors
success factors are competitive assets or competences that Élan need to
compete successfully in the power boat industry. An absence of
strategic necessities would be a
weakness and possession of strategic strengths will give advantage to Élan.
examination of Élan's employees' skills, resources, innovations and
financial position will disclose how the company may be constrained by
it's capabilities and resources.
Strengths and weaknesses of the organization
activities that Élan does well will be identified as strengths from the
internal appraisal. Any lack of resources or activities that Élan does
not do well will be identified as weaknesses.
Distinctive competencies or assets
competencies are the activities that Élan does exceptionally well. It's
strategic assets are brand names or customer base that is strong,
relative to Élan's competitors.
responsibility is Élan's obligation, beyond that required by the law
and economics, to pursue long-term goals that are good for society.
describe how the company's managers establish, promote and practice
Élan's values. The building of team spirit, influencing marketing
efforts, shaping of employee behaviour and guidance for managerial
decisions and actions are examples of the main purposes of managerial
Creation of strategy
alternative strategies need to be developed for Élan Boat Company for
evaluation. These strategies should take advantage of environmental
opportunities and exploit the company's strengths.
Evaluation and choice of strategy
of the criteria used for selection of a strategy from alternatives are
scenario consideration, sustainable competitive advantage pursuit,
organizational vision and objectives consistency, feasibility and their
relationship to the other strategies of Élan.
Implementation of strategy
For Élan to succeed, the chosen strategy must be implemented and this involves
converting strategic alternatives into an operating plan.
to Nairn and Strickland (2003: 178), Favret and Blossman have the
following mission statement for the new company, Élan:
mission of Élan Boats is to be hyper efficient in the manufacturing and
marketing of Inboard Runabout Boats for recreational and competitive
water sports enthusiasts. Élan Boats is dedicated to building long-term
relationships with customers through superior training and customer
support. We will do business consistent with the definition of the
company's name. Élan - vigorous spirit of enthusiasm. Synonyms: Style,
Confidence, Flair, Elegance, Flamboyance."
believes that an offensive attack on the major competitors is the best
option and that Élan was "gunning for, and will take down MasterCraft,
Correct Craft and Malibu". Nairn and Strickland (2003:179) quote Ben as
wanting Élan to be the "true market leader in profitability, quality,
manufacturing cost efficiency and, eventually sales."
Identification of Key Success Factors
cost advantage, through cost efficiency, would be a strategic strength
to any power boat manufacturer and Nairn and Strickland (2003:179)
state that none of the industry leaders were particularly
cost-efficient. A boat builder who was superior at servicing their
customers would also have a strategic strength. A strategic
necessity is effective promotion.
Current performance assessment
and Strickland (2003:180) report that, as of 2000, Élan Boats had 30
clients. According to the FAQ page of Élan's website, the company has
spent thousands of hours and dollars reconditioning their moulds,
updating their facility and equipment. The FAQ page also quotes Ben
Favret as saying, "getting boats built for factory demos and dealer
sales was our first problem. We had to fully hire, train and manage an
entirely new production team. That combined with dealing with vendors
who were sceptical slowed us down this year. Our production was backed
up through August and now we have caught up. That hurt because we could
not make a strong sales effort this summer. Our Team Élan members have
been very helpful in working with us to do demos and let other people
experience our boats."
and Strickland (2003:179) quote Ben Favret as saying that he wanted
Élan to be "the true market leader in profitability and manufacturing
cost efficiency". Élan needs gross margins and net margins (after tax)
in excess of 40 percent and 10 percent respectively, to achieve this.
Acceptable liquidity is also required.
Industry stage and trends
current stage of the power boat industry in it's half-century history
and current trends amongst the 17 manufacturers will influence Élan's
chances of success.
Market trends and segmentation
If the market is expanding and demand within Élan's targeted segment is buoyant then this would be favourable to the company.
and some of it's competitors have boat model features that are designed
to cater for customer preferences for wake form and control. However,
customer preferences are
not fixed and change over time.
and Strickland (2003:179) report that "Élan planned to bypass boat
retailers and sell directly to the end user". However, this strategy
appears to have changed as the FAQ page of Élan's website, states that
Élan are making their first run at setting up their dealer network now
and completing the few remaining Team Élan openings.
HCA (Human Capital Assessment)
Favret did not purchase American Performance Marine as a going concern
and, therefore, did not acquire any human capital with the purchase.
Nairn and Strickland (2003:178) note Ben’s thoughts that, because of
his own connections in the industry, [he had] the ability to recruit
top talent in manufacturing, sales, and marketing". This he
subsequently did and the FAQ page states that he recruited; a general
manager with 22 years expertise (Mary Travis), a sales and development
manager with 17 years experience (Darren Landry), and a top fibreglass
consultant (Rick Delone).
Élan's distinctive competencies are mainly strategic assets as, when the case study was
the company had only been trading for 10 months. These strategic assets
include the 'American Skier' and 'Ben Favret' brand names.
An analysis of competitors such as Mastercraft, Classic Craft, Malibu and Infinity will reveal their strengths and weaknesses.
situation analysis is made using the external and internal analyses of
Mintzberg's Design School Model. Condensed opportunities, threats,
strengths and weaknesses are described.
(a) World Games include waterskiing and wakeboarding.
(b) ESPN X-Games and the Gravity Games include wakeboarding.
(c) Gravity Games drew 370,000 spectators and high TV ratings.
(d) New Cable Parks are a way to introduce potential new boat buyers.
(e) Gulf Coast customers targeted in Texas, Louisiana, Mississippi, Alabama.
(f) Better service, delivery, sales force efficiency with regional advertising.
(g) Élan plans to sell directly to the end user, bypassing boat retailers.
(h) Under marketed competition ski boat segment to be targeted.
(i) "Free week of ski school" to be offered to water skiers and wakeboarders.
(j) Élan had 30 customers in 2000 and projected 50, 60, 72 in '01, '02 '03.
(a) MasterCraft has high overheads due to large facility, marketing, etc.
(b) Correct Craft sales fell 17.2% in 2000 due to poor marketing, competition.
(c) None of the industry leaders are particularly cost efficient.
(d) Leaders vulnerable to unhappy buyers, sliding profits, excess capacity.
(e) Ben wants Élan as market leader in profitability, quality, cost and sales.
(f) Élan will achieve cost advantage by revamping it's activity cost chain.
(g) Élan aim to offer a better boat than the competition at a lower price.
(h) Competitive offensive aimed at rivals who service customers poorly.
(i) Objective to win disenchanted customers with service oriented company.
(a) U. S. is largest boating I water skiing nation in the world.
(b) Estimated that waterskiing interest will double if it becomes Olympic event.
(c) Boating industry held approximately 200 boat shows annually across U.S.
(a) International Water Ski Federation lobbying IOC hard.
(b) Cruise control and driver videotaping have allayed IOC's concerns.
(c) Waterskiing came very close to being included in the 2004 Athens Games.
(d) IWSF is now focusing it's sights on the 2008 Games in Beijing.
(e) Ben anticipates investing in a new facility in Covington Industrial Park.
(f) Team Élan launched to get qualification for Regional and National events.
(a) A 2001 sales decline would mean fewer people trading up in 2002 to 2005.
(b) Excessive customer dissatisfaction with overpriced/underperforming boats.
(a) Technology and innovation accelerate in economic downturns.
(b) MasterCraft has exclusive Gravity Games towboat provider 3 yr. contract.
(c) Indmar has exclusive customization program with MasterCraft and Malibu.
(d) Indmar has private label with MasterCraft for electronic fuel ignition.
(e) Indmar has considerable name recognition and brand awareness.
(f) Indmar is visble at grassroots waterskiing competitions.
(g) Customer loyalty to MasterCraft, Malibu and Correct Craft is entry barrier.
(h) Three industry leaders have large dealer networks and scale economies.
(i) Three industry leaders have greater supplier bargaining power.
(a) Waterskiing participation fell 18°J'o from 7.2 M in 1998 to 5.9 M in 2000.
(b) Motor boating and waterskiing are ranked 13th and 40th for participation.
(c) Boating industry suffers during periods of economic decline.
(d) Decline in recreational boater numbers accelerated in 2001.
(e) PWC sales fell 54°J'o from 200,000 in 1995 to 92,000 in 2001.
(a) Spare money is not used for boat-related expenses during recessions.
(b) Income restrained households will depress prices if opting out of boating.
(c) Waterskiing as an Olympic sport has been delayed over driver concerns.
(d) PWCs had a bad reputation with boaters & law enforcers from rowdiness.
(e) There were 83 fatalities associated with PWCs in 1997.
(f) There were 506 deaths and more than 11,000 injured in the last decade.
(g) PWC injuries are six times greater than motor boat injuries.
(h) Blunt trauma is the leading cause of PWC related deaths.
(i) Many new regulations are imposed on PWC use because of bad record.
(a) Ben knew Jay had found a great boat and a great deal in buying company.
(b) Company had been building to highest possible standards since 1975.
(c) Company had earned a reputation for quality, product perf. and innovation.
(a) Company purchased at low price, giving low overheads and no debts.
(b) Élan Boat company was started with a low capital expenditure.
(c) Inherited R&D, shaping and mold design can cost in excess of $400,000.
(a) American Skier is over 600 Ibs. lighter than any other boat on the water.
(a) Ben Favret is excited and eager to be involved in this rare opportunity.
(b) Ben Favret has first hand knowledge of the waterskiing industry.
(c) The Kentwood plant is already constructed with boatbuilding facilities.
(d) Ben has entrepreneur enthusiasm entering industry of the sport he loves.
(e) Ben renamed the company Élan, meaning vigorous spirit and enthusiasm.
(f) Ben is a professional water skier and World, US, and Pro-Tour Champion.
(g) Jay Blossman is a politician and high school tennis partner of Ben Favret.
(h) Ben has the ability to recruit top talent in manufacturing, sales, marketing.
(i) Ben will make history as the first professional skier to buy a boat company.
(j) Élan's facility in Kentwood had capacity for 150 units a year.
(a) Projected 1 % I 5°k after tax net income contradicts Élan's profitability goal.
(b) Projected 29.5% gross margin conflicts with Élan's profitability goal.
(c) Projected current ratios of 1.5, 1.7,2.1 give liquidity concerns.
(d) Projected acid test ratios of 0.6/ 0.66 for 2002/2003 cause for concern.
(e) Diminishing cash flow from operations too low to cover current liabilities.
(a) American Marine had been unfocused, poorly managed, undercapitalized.
(b) American Skier plant closed it's doors in Jan '01 and filed for bankruptcy.
(c) American Skier had high debt, high production costs, poor management.
(d) Élan prevented from strong sales effort because of backlogof work.
(a) Jay Blossman lacks necessary insider knowledge about ski boat industry.
(b) Ben Favret fully hired, trained and managed entirely new production team.
The critical issues for the Élan Boat Company are:
(1) Long-term demand for personal watercraft is declining.
(2) American Skier and Ben Favret brand names are Élan's strategic assets.
(3) Élan's profitability and liquidity are cause for concern.
(4) The personal watercraft industry performance is highly cyclical.
(5) Competitors have established dealer networks.
(6) Suppliers have exclusive agreements with competitors.
(7) Poor safety and a bad user reputation influence PWC demand.
CONCLUSIONS AND RECOMMENDATIONS
Boat Company is operating in the U.S. PWC market that has been
contracting since 1996. The Kentwood plant is not located within the
highest demand area of this market. If the plant is to be relocated in
2004, as stated by Nairn and Strickland (2003:180), then a location
within the Great Lakes area should be considered.
Skier' is the brand name that end-users recognize. It is doubtful as to
whether Élan Boat Company benefits from having three varieties of this
model and five more boat varieties in the Volante and Eagle ranges. The
design, tooling, set-up and material costs for these eight product
variations should be analyzed. This may reveal that Élan's product line
should be reduced to between one, two or three product varieties.
profitability is at variance with it's mission statement and Ben's goal
to be the "true market leader in profitability…” is not reflected in
projected gross margins of 29.5% and net margins (after tax) of 1 % to
5%. These figures need to be a minimum of 40% and 10% respectively.
This could be achieved by increasing manufacturing efficiency and
reducing overheads. Élan's projected assets may cause liquidity
problems as most are in the form of inventory and the cash flow from
operations does not cover current liabilities. Inventory levels
and the amount of working capital should be investigated.
demand for personal water crafts, as luxury goods, is reduced when the
U.S. economy is on the downside of the economic cycle. This means that
Élan should have sufficient financial reserves to support the company
until the economic upturn, and they should look at the sensitivity of
Élan's finances to reduced sales during this period.
Strickland (2003:179) state that "Élan planned to bypass boat retailers
and sell directly to the end user." This would be done through
advertising. Dealers are used to sell personal watercrafts
because it is the type of product that potential customers prefer to
see in reality so that they can touch it, sit in it and walk around
it. It is recommended that Élan should re-appraise their
distribution channel strategy.
Indmar is the most popular engine
and this supplier, naturally, has created close relationships with the
market leaders. As Élan had less than 1/6% of
the competition ski boat market in the second quarter of 2001,
according to Nairn and Strickland (2003:171), it is possible that the
market leaders may not regard Élan as a serious threat and a supplier
relationship between Élan and Indmar may be possible.
historical safety associated with personal watercraft use influences
sales. Élan promote safety on their main web page and offer ski
schools. This is a good strategy and it is recommended that this should
be built upon.
'Frequently asked questions', Élan Boat Company. Retrieved: from http://www.elanboats .com/elanfaq.htm.
Mintzberg, H. 1990, ‘Strategy Formation - Schools of Thought', in J.W. Frederickson (ed) Perspectives on Strategic Management, Harper Business, New York.
Nairn, F. & Strickland, A.J. 2003, 'Élan and the competition ski boat industry', in Thompson & Strickland (Eds) Strategic Management Concepts and Cases, 13th edn, New York: McGraw-Hill pp. C-153 - C-183.