SCHOOL OF BUSINESS MANAGEMENT

NARSEE MONJEE INSTITUTE OF MANAGEMENT

STUDIES, MUMBAI

CLASS TEST I
Group Assignment

Submitted by: Team 2

Abhay Sharma - D016

Avinash Sharma - D021
Vanshika - D026
Rahul Pillai - D028
Shrey Raj - D033
Shubhang Arora - D039
Sweta Sanganeria - D062

Submitted to
Prof. Aarti Punjabi

Submitted on
21-02-2021
SITUATIONAL ANALYSIS

RISE, a $50 million American climbing gym with 35 branches in the US and 3 international
branches in the UK and Singapore is looking further into expansion. However the UK market is
not doing as well as the Singaporean market. In the midst of the expansion plan, RISE suffered a
PR crisis after a climber at the Liverpool gym sued the chain due to an accident. While the
climber withdrew his lawsuit, the management is still trying to figure out the root cause behind
the low performance of their UK branches.
Classes at Liverpool operate at 50% capacity and the market did not double its month-on-
month sales, raising questions on the model being used by RISE. Presently, each gym is
expected to recoup 20% of initial capital expenditure within the first year and cover operating
costs within 2 years. It should be acknowledged that keeping the same, rigid parameter of
success for every country might also pose a problem for the organization. Sites are selected on
the basis of language, population and number of competitors. English should be the primary or
the dominant secondary language. City-plus-suburb populations exceeding 2 million should
have a maximum of two existing climbing gyms; populations of more than 1 million should have
just one existing gym, and a population of more than 400,000 people should have no rival gyms.
However, their current model lacks the behavioral and psychographic aspects of their target
market. The UK prefers football, rugby, cricket, and various other sports over climbing.
Moreover, during winter, people prefer not to step out, and hence, lower revenue is expected.
This aspect makes it clear that RISE needs to focus more on educating their market on climbing
since their target market shows a lack of interest in their business. It also highlights the fact that
they are not undertaking intensive market analysis before entering the market. Additionally,
with the leadership of RISE being avid climbers themselves, their love for the activity might lead
to GroupThink, not allowing them to view their expansion strategy from multiple perspectives.
With RISE’s plans to expand to Amsterdam, Dublin and Manchester as well as rivals such as
Kilimanjaro and Triple Peaks looking to expand into Europe, the team needs to go back to the
drawing board to review their international expansion plans.

PROBLEM STATEMENT
What should be the future expansion strategy of RISE?

OPTIONS:
1. Continue with the current expansion strategy
2. Pause on international expansion
3. Shift the goals and the model to a portfolio approach
CRITERIA:
1. Attuning to local demographics
2. Competitive advantage
3. Alignment with financial goals

EVALUATION OF OPTION

Option 1 : Continue with the current expansion strategy

RISE’s standard expansion plans have failed to provide them rich dividends beyond the US and
Singapore market. They are unable to recoup their standard 20% initial investment goal in few
markets like Cardiff and Liverpool. Moreover, this strategy to some extent ignores the
demographic and social factors. The UK market has been less receptacle to climbing than the
Singapore market. Thus, a thorough analysis of the market is of prime importance when
entering a new market. This strategy will also give RISE a competitive first-mover advantage in
certain markets.

Option 2: Pause on international expansion:

RISE has seen varying growths in different international markets with the UK location going
extremely slow while the Singapore site doubling sales every month, thus creating a case for a
hold on international expansion. It might be competitively detrimental to them as their near
rivals Kilimanjaro and Triple Peaks may seize the opportunity to get a first-mover advantage in
Europe. Moreover, the company’s financial performance in the UK market has not been much
impressive.
The people’s interest varies from country to country and extrapolating the behavioral needs
based on one specific market is not strategically sound. So, pursuing a global expansion without
understanding the needs and interests of people market-wise is not suggestive. However, The
company can opt to focus on its key markets and spend resources to achieve the maximum in
US and Singapore markets.

Option 3: Shift the goals and the model to a portfolio approach

The company needs to be more flexible in its overseas expansion strategy. Their current
strategy for selecting a market has been to look out for an English-speaking market with a
suburban population of more than a million with a couple of existing competitors in climbing
spaces or gyms. But to succeed in each market they need to adopt a portfolio approach with
customized plans for each country’s market rather than a one size fits all approach thereby
neutralizing the competitive advantage of the local players.
Also, each market matures at a different rate depending on the local demographics, behavioral
attributes & awareness. Thus, the financial goals need to be more in sync with the market
realities of that specific region and they can’t simply expect to recoup 20% of their initial capital
investment and operating costs within a year & two respectively. Thus, in a portfolio approach,
the timeline to achieve the financial goals would directly depend on the market maturity.

RECOMMENDATION
The company should pursue the portfolio model as it caters to the different demographic needs
and provides a competitive edge.

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