RESPONSE

Table of Contents

Lavender Sports Group: Emergent Opportunity Development 2020

Business Needs 4

Analysis of Situation 4

Option 1. Golf Wearables: GPS Watch Production 6

Option 2. Home Gym Training System Production 8

Option 3. Entry Level Tennis Racquet Line 9

Recommendations/Evaluation 11

References 12

Appendix 14

Emergent Opportunity Development 2020

Business Needs

Lavender Sporting Goods (LSG) has identified that current market penetration levels within the sporting goods industry currently offer a unique opportunity to increase revenues and profits by exploiting a newly developing market niche in the “safe” sporting genre. As COVID-19 has indelibly changed how we all interact on a daily basis with each other, it has also created a segment of the population that embraces activities that are engaging the desire to exercise in a safe environment. We have particularly identified three sports and exercise activities within our industry and expertise whose activities use equipment that corresponds precisely towards developing this new market.

The three project proposals were conceived to produce the following strategic objectives:

· Increase revenues annually, over the next five-year period, by 10% annually.

· During the next five years reduce operational expenses by an average of 3% annually.

· Ensure that the project deliverables have minimal environmental impacts whenever feasible.

· Align benefits for the local community with strategic objectives.

There are several anticipated risks that apply equally to each of the proposals that are made in this emergent opportunity development case. First, in all new product development projects, the primary risks include demand for the product and competition, as these are inherent in any industry where sales drive revenue. This makes effective planning, marketing, costing, and timely consumer delivery critical to increasing the odds of successful market penetration on sustainable sales growth. Several measures will be discussed that will apply to the specific project proposals as they will require some different criteria to evaluate each, but some basic tools will be employed across each as basic indicators of delivery milestones and analytic cautions when altering tactics when challenges to the original project proposals plan become evident.

The categorical break down below examines the risks and mitigations that are innate to our small firms retailing new product development project proposals, including:

Option 1. Golf Wearables: GPS Watch Production

The first project candidate is golf watch R&D and production. Golf is an ideal sport and leisure during the COVID-19 pandemic for it being a contactless activity. The sport is currently played by more than 25 million Americans, which is approximately 7.5% of the United States population (American Heart Association, 2020). Furthermore, despite the pandemic, the number of golf rounds played in the United States had a 25% increase in July 2020 when compared to the same month in 2019 (National Golf Foundation 2020). It is predicted that we will observe a steady rate of increase in the number of golfers worldwide; providing an entry-level golf wearable device to the market is expected to bring significant revenue to the company.

A marketable golf watch should have the following capabilities: basic watch functions, Global Positioning System (GPS), simple fitness tracking sensors, connection to Bluetooth/WiFi, a screen size no less than 1-inch, long-lasting batteries, user-friendly interface, and accompanying mobile apps. The most recent golf watches currently available today also have smartwatch capabilities; however, our company will not be competing against other companies’ flagship watches. The project would be focused on introducing a line of cheap, affordable, and entry-level golf watches to the market to minimize production cost and to target entry-level golfers. We anticipate that this project will increase our annual revenue by 10% for the next five years. The R&D and operational costs per device manufactured are projected to be $100 and $50, respectively.

Although the wearable device concerned with our project would not be as powerful as other companies’ products, many constraints and dependencies still remain due to high levels of technologies and complicated regulations associated with GPS, software, and wireless functions. Our choice of the global navigation satellite system (GNSS) is the United States’ GPS, which utilizes L1 1.575.42 MHz frequency. The downside of using this system is its precision deviation up to 5 meters (Rainham, Krewski, McDowell, Sawada, & Liekens, 2008) and the company’s lack of knowledge in building a wireless GPS receiver. Therefore, it is recommended that Lavender Sports Group establish a partnership with a wireless communication company during the research and development phase. Another concern for the project is the company’s limited software engineering capabilities. This issue can be easily resolved by acquiring a software development team specialized in mobile applications.

Another potential risk is poor product viability. The electronics market tends to have very dynamic consumer demands due to frequent updates in technology, designs, and regulations. It is consumers’ beliefs and current trend that a wearable device will have an upgraded version every two years, thus R&D and manufacturing cost will remain as variables.

Option 2. Home Gym Training System Production Exercising at home has become more and more popular due to the COVID-19 pandemic and the variety of fitness equipment available for individual and family use. The Lavender home fitness equipment fits the need and creates a homework-out routine that fits into your schedule. With a home gym, you plan your exercise routine into your program rather than trying to manage your schedule around getting to the gym. Having your home gym gives you the freedom to train when you want to work out, whether it's when the kids are off to sleep, during your favorite television program, or bright and early before the rest of the family is awake. The Lavender home exercise equipment provides a different variety of health and wellness benefits and creates a chance to make fitness a family affair.

The fitness equipment market worth an estimated $ 12 billion in 2019, and it is expected to grow an average of 4 percent each year till 2026. The industry is an ever-changing landscape and thriving as one of the world’s largest and fastest-growing industries. However, with the COVID-19 pandemic currently affecting fitness clubs, the market is expecting a surge in-home fitness equipment in the coming year, and a diversion from the fitness centers. Also, a rise in obesity has seen the demand for fitness equipment increase over the years. To establish a successful launch of the Lavender home exercise equipment, we estimate the sales price of each home fitness equipment to cost $2,500. And we anticipate 1 million Lavender home equipment to be sold, which will generate a revenue of $2.5 billion in the year of launching and after that, an estimated 15 percent increase in sales. The R&D cost for each home fitness equipment is $800, while the operational and administrative expense is $400, which brings the estimated total cost for each home equipment to be $1,400.

The Lavender home fitness equipment is a smart work-out machine that provides blood pressure and heart rate monitoring features for its user and gives a body max index chart that aligns with the age and physical strengths of the user. This machine keeps a record of every progress made by the users for analysis and helps the user set a goal. The ultimate goal of the Lavender home fitness equipment is to allow users to monitor their health, such as; weight loss, heart strength, and improve joint flexibility.

Option 3. Entry Level Tennis Racquet Line

The last option submitted for development is a line of entry-level tennis racquets. The sport has been identified as an emerging market because of its natural disposition toward social distancing. “The global tennis racquet market size was valued at USD 351.8 million in 2018” (Grand, 2020). Further growth from now until 2025 was projected at 12% with the largest concentration of sales (51%) occurring here in America. These figures reflect studies conducted before COVID-19 had begun to change the sports inductees’ landscape. With the inception of this pandemic and the naturally social distance confirmation of the sport, a significantly larger market share within the industry are likely. For example, the data obtained from Tennis Australia’s online court booking system indicates, “Tennis Clubs across WA have experienced unprecedented growth in court bookings, with comparative data showing the growth of more than 140% across the 21 West Australian Book-a-Court venues for the month of May” (Jones, 2020). And, here in the U.S. “Aaron Mullennix is the director of tennis at Charlotte City Tennis, and says he's been getting calls from experienced and rookie players (creating a) spike in popularity amid COVID-19” (Jones, 2020). Tennis Sees Spike in Popularity Amid COVID-19

Our proposed construction for the racquet would be carbon fiber. In general tennis, racquets are largely constructed using this material, “As of 2018, carbon fiber held the largest share of 79.3% in terms of revenue. This product has gained significant popularity among consumers due to its lightweight property. Carbon composites allow managing the distribution of weight around the racket more accurately.” (Grand, 2020)

One of the leading deterrents those new to the sport is the average price of a racquet. The range starts at around $50.00 for a low end fully carbon fiber model to $350.00 for the most advanced frame models. There are advantages to introducing a new line of carbon-fiber racquets to compete in the marketplace now because 1) the technology is well known enough that replication of the existing technologies is much simpler than when they were introduced back in the early 1990s (High-Tech 2004), 2) the material required to produce is readily available in manufacturing, and 3) the basic design and manufacturing process are also well known, employing techniques already used by Lavender sports in our carbon-fiber fishing poles, skateboards, and aftermarket bicycle parts. (High-Tech 2004)

The risks in this option are more related to marketing, as competition abounds. However, by employing a targeted marketing campaign aimed at sports that are likely to have new consumers who are looking for budget-conscious options, we believe we can build a consumer base in the entry-level market with an eventual target to grow with them as they improve into more advanced racquet options. Creating customer loyalty with racquets has proven to be a solid technique, as brand loyalty in the tennis apparel and equipment industry tends to be high.

Additionally, the risk may also be considered in the project delivery timeline, such as designing, producing, advertising and market release schedules need to be designed to gain market segments as soon as possible in an effort to leverage as many entry-level consumers as possible while the sports trend in growth continues.

Recommendations/Evaluation

The Home Gym System is the most viable option for the company to pursue; the product scored the highest in all the categories that were essential in the company’s strategic goals. The initial team will include a production and design team of two individuals, one project manager and a project accountant. The main role of these individuals is to create a plan for a successful product through proper research and development.

The success of the product will be measured by the number of Home Gyms sold as well as the overall contribution of the product to the company’s profit margin. The appropriate mitigation of risks associated with the production, marketing, and financing will also heavily influence the success of the product. These risks will be monitored through frequent updates as the project progresses.

References

Simplified Scoring Model

Lavender Sports Group looked at three options to add on to the company’s portfolio of products to contribute to the company’s strategic goals. Our simplified scoring model is based on the current business market, financial success, and the overall fit into the business’ portfolio. The final weighted score was determined by weighing four different categories to measure which product fits into the company, then the project with the highest score was selected. The Home Gym system scored the highest in Return Of Investment (ROI), Company Fit, and Revenue. It is expected that The Home Gym System will be an invaluable addition to the company’s portfolio.

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