Harvard Case - Summer Swim Academy: Expansion Options
"Summer Swim Academy: Expansion Options" Harvard business case study is written by Melissa Jean. It deals with the challenges in the field of Entrepreneurship. The case study is 7 page(s) long and it was first published on : Sep 29, 2017
At Fern Fort University, we recommend that Summer Swim Academy (SSA) pursue a strategic expansion plan focusing on organic growth through geographic expansion into new markets. This strategy involves leveraging existing infrastructure and expertise while minimizing financial risk. We advise against pursuing mergers and acquisitions or leveraged buyouts at this stage, as they carry significant risks and require significant capital investment.
2. Background
Summer Swim Academy is a successful swim school operating in a single location. The owners, John and Mary, are considering expansion options to capitalize on the growing demand for swimming lessons. They are evaluating three potential avenues: acquiring a competitor, opening a new location, or partnering with a local YMCA.
The case study highlights the following key challenges:
- Limited capital: John and Mary have limited financial resources available for expansion.
- Risk aversion: They are risk-averse and prefer a gradual, controlled growth strategy.
- Desire for control: They want to maintain control over the business and its operations.
- Strong brand reputation: SSA enjoys a strong reputation for quality instruction and customer service.
3. Analysis of the Case Study
To analyze the expansion options, we employ a strategic framework that considers market analysis, competitive analysis, financial analysis, and risk assessment.
Market Analysis:
- Growing demand: The demand for swimming lessons is increasing due to rising health consciousness and safety concerns.
- Target market: SSA?s target market includes children and adults seeking swimming lessons for recreational or competitive purposes.
- Market segmentation: The market can be segmented by age, skill level, and specific needs (e.g., competitive swimming, water safety).
Competitive Analysis:
- Competition: SSA faces competition from other swim schools, community centers, and YMCAs.
- Competitive advantage: SSA?s competitive advantage lies in its strong brand reputation, experienced instructors, and personalized instruction.
- Competitive landscape: The competitive landscape varies depending on the geographic location.
Financial Analysis:
- Financial statements: SSA?s financial statements provide insights into its profitability, cash flow, and capital structure.
- Capital budgeting: SSA needs to evaluate the financial viability of each expansion option through capital budgeting techniques like NPV and IRR.
- Risk assessment: SSA needs to assess the financial risks associated with each expansion option, including market risk, operational risk, and financial risk.
Risk Assessment:
- Market risk: The expansion plan should consider potential changes in market demand, competition, and economic conditions.
- Operational risk: SSA needs to evaluate the operational challenges associated with expanding into new markets, including staffing, logistics, and marketing.
- Financial risk: SSA needs to assess the financial risks associated with expansion, including debt financing, cash flow management, and profitability.
4. Recommendations
We recommend that SSA pursue a phased expansion strategy by opening one new location in a nearby, underserved market. This strategy offers the following advantages:
- Controlled growth: A phased approach allows SSA to gradually expand its operations while mitigating risks.
- Leveraging existing infrastructure: SSA can leverage its existing infrastructure, including its brand, training programs, and staff, to reduce costs and accelerate growth.
- Minimizing financial risk: Opening one new location requires less capital investment than acquiring a competitor or pursuing a leveraged buyout.
- Testing the market: Opening a new location allows SSA to test the market and refine its expansion strategy before committing to further expansion.
5. Basis of Recommendations
Our recommendations are based on the following considerations:
- Core competencies and consistency with mission: Expanding into new markets aligns with SSA?s core competencies and mission of providing quality swimming instruction.
- External customers and internal clients: The expansion plan addresses the needs of both existing and potential customers while providing opportunities for staff growth and development.
- Competitors: SSA?s expansion strategy aims to create a competitive advantage by offering a differentiated service in underserved markets.
- Attractiveness: The financial analysis indicates that opening a new location is a financially attractive option with a positive NPV and a reasonable ROI.
6. Conclusion
SSA should pursue a phased expansion strategy focusing on organic growth through geographic expansion. This strategy offers a balanced approach to growth, minimizing financial risk while leveraging existing resources and expertise.
7. Discussion
Other Alternatives:
- Acquisition: Acquiring a competitor could provide immediate market access but carries significant financial and operational risks.
- Leveraged Buyout: A leveraged buyout would require significant debt financing and could lead to financial distress.
- Partnership with YMCA: Partnering with a YMCA could provide access to a wider customer base but could limit SSA?s control over its operations.
Risks and Key Assumptions:
- Market demand: The success of SSA?s expansion plan depends on the continued growth of the swimming lesson market.
- Competition: SSA needs to monitor competition in new markets and adjust its strategy accordingly.
- Financial resources: SSA needs to secure adequate financing to support its expansion plan.
8. Next Steps
Timeline:
- Year 1: Conduct market research, identify potential locations, develop a business plan, and secure financing.
- Year 2: Open the new location, hire staff, and implement marketing and promotional campaigns.
- Year 3: Evaluate the performance of the new location and consider further expansion opportunities.
Key Milestones:
- Market research and analysis: Complete by Q2 of Year 1.
- Business plan development: Complete by Q3 of Year 1.
- Financing secured: Complete by Q4 of Year 1.
- New location opened: Complete by Q2 of Year 2.
By implementing this phased expansion strategy, SSA can achieve sustainable growth while maintaining its strong brand reputation and financial stability.
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Case Description
In October 2016, the founder of Summer Swim Academy-a provider of swimming lessons and lifeguarding services to families in Burlington, Ontario-was reflecting on the organization's second full season of operations. The founder had been providing services in Burlington for the past six years and had been operating the business formally under the Summer Swim Academy brand for the past two years. She wanted to evaluate the possibility of expanding her business, either geographically or to a year-round operation, in order to achieve a profit goal of $50,000. To determine whether this goal was attainable, she needed to assess geographic and service-delivery expansion options for Summer Swim Academy.
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