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University of Central Florida

10-K Integration Project: MarineMax Inc.

Dasha Karpovtsev

MAN 4720, Section: 0017

Professor Boettcher

September 29th, 2015

PESTLE

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1. Political

“Changes in federal and state tax laws, such as an imposition of luxury taxes on new boat pur-chases, increases in prevailing tax rates, and removal of certain interest deductions, also influ-ence consumers’ decisions to purchase products we offer and could have a negative effect on our sales”. Pg. 28

It became evident how the implementation of luxury taxes can heavily influence the sales of the

company, illustrating a price sensitivity notion within the customer market. Due to the political

nature of fluctuating luxury taxes, tax rates, and interest deductions, the customer may find him

or herself contemplating on whether to spend the extra money, further alluding to boat prices be-

ing both elastic and prone to adverse federal tax policies. A direct example of this predicament

occurred during 1991 and 1992, when the federal government enforced a luxury tax on recre-

ational boats with costs over $100,000, causing a noticeable negative change in the consumer’s

buying habits and sales (pg. 28). This foreshadowed how an increase of taxes on the boats was

able to make such an impact on the customer’s perception of product’s need and purchase, influ-

encing their overall consumer decision buying process.

2. Economic

“General economic conditions and consumer spending patterns can negatively impact our oper-ating results. Unfavorable local, regional, national, or global economic developments or uncer-tainties regarding future economic prospects could reduce consumer spending in the markets we serve and adversely affect our business”. Pg. 24

As previously mentioned in the luxury tax example on page 28, there seems to be a high price

elasticity for boats, exemplifying how even the smallest increments of economical change can

impact the consumer’s purchasing power. Whether it may be due to a recession, an increase in

prices, or general shifts within market trends or demand, a consumer may be less likely to pur-

chase the company’s products if their spending habits are influenced by economical predica-

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ments. It’s the notion how one possible economical uncertainty or condition could create a nega-

tive chain reaction within the company, creating a strong link between the consumer’s confi-

dence within the market environment in relation to their overall spending habits.

3. Sociocultural

“This strategy also recognizes that many existing and potential customers who reside in North-ern markets and vacation for substantial periods in Southern markets will prefer to purchase and service their boats from the same well-known company”. Pg. 7

There seemed to be a trend that customers that either vacationed or lived in the South preferred

to purchase or service their boats more than individuals that only resided up north. This of course

can be attributed to both the weather and geographical conditions for owning a boat, illustrating

the fact that Florida generated approximately 49%, 51%, and 52% of of revenue during the years

of 2012-2014 (pg.45). This could also explain why the company’s executive offices are all lo-

cated in Florida (pg. 5), as well as why environmental conditions such as hurricanes (predomi-

nantly affecting the Florida area), have caused more issues in obtaining and implementing boat

insurance (pg.27).

4. Technological

“Utilizing Technology Throughout Operations. We believe that our management information system, which currently is being utilized by each of our dealerships and was developed over a number of years through cooperative efforts with a common vendor, enhances our ability to inte-grate successfully the operations of our dealerships and future acquired dealers. The system fa-cilitates the interchange of information and enhances cross-selling opportunities throughout our company”. Pg. 9

The company is currently using a management information system that integrates the aspects of

efficiency and spreadability, enhancing its overall productivity within their daily operations. The

system impacts a multitude of disparate operational levels, ranging from inventory, receivables,

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and financial reporting, all the way to budgeting and sales management. It’s the idea of intertwin-

ing all these facets into one collective database, and having the ability to facilitate both financial

and operation data through such a technological approach. The company has also implemented

online marketing through www.MarineMax.com, where customers are able to learn all about

their company and products, as well as drive traffic to various social networking sites (pg.7). The

company is adapting to the changes of consumer behavior, and taking advantage of direct online

purchases, leads, product engagement, factors that are becoming more profitable for their sales.

5. Environmental

“Weather and environmental conditions may adversely impact our operating results. For exam-ple, drought conditions, reduced rainfall levels, excessive rain and environmental conditions, such as the BP oil spill in the Gulf of Mexico, may force boating areas to close or render boating dangerous or inconvenient, thereby curtailing customer demand for our products”. Pg. 32

Due to the nature of using and sustaining a boat, environmental conditions and regulations are

important factors in both the company’s sales and operating results. Whether there may be excess

flooding, oil spills, or a shortage of rainfall, all these possible predicaments can directly influ-

ence the consumer’s decision in acquisition and upholding of the product. If environmental con-

ditions do not permit the use or need for a boat, or it is deemed both too dangerous and inconve-

nient to use, than customers may turn away from such a proposition. The company also takes

into consideration the need of investing and ameliorating in their boat’s engines and carbon foot

print, since environmental laws and regulatory agencies such as EPA, are constantly requiring

higher standards and qualifications for both recreational boats and facilities (pg.11).

6. Legal

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“Our manufacturers generally maintain product liability insurance, and we maintain third-party product liability insurance, which we believe to be adequate. However, we may experience legal claims in excess of our insurance coverage, and those claims may not be covered by insurance. Furthermore, any significant claims against us could adversely affect our business, financial condition, and results of operations and result in negative publicity”. Pg. 22

With any sort of product that may potentially create injury or damage, the aspect of liability in-

surance can both considered both a benefit and a constraint. As mentioned, if legal claims from

third parties are over the insurance coverage offered, than this may create both financial and op-

erational issues for the company. If the excess payouts and reimbursements are made, than this

may cause an increase in both insurance premiums and coverages, adversely affecting the con-

sumer’s perception of whether or not to acquire such a costly insurance. Lastly, with any sort of

lawsuits and liability cases, there is the chance of obtaining negative publicity, which could po-

tentially hurt the brand image and customer perception of the safety and functionality of the

products.

Porter ’ s Five Forces

7. Current Competitors and Rivalry

“We operate in a highly competitive environment. In addition to facing competition generally from non-boating recreation businesses seeking to attract discretionary spending dollars, the recreational boat industry itself is highly fragmented and involves intense competition for cus-tomers, product distribution rights, and suitable retail locations, particularly on or near water-ways”. Pg. 32

The company elucidates on the notion that they do face a lot of competition, primarily with sin-

gle-location boat dealers, which compromise of national specialty marine stores, sporting good

stores, and catalog retailers for example (pg. 32). Some of the threats they experience from com-

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petitors is that they have a multitude of financial and marketing resources to penetrate the mar-

ket, as well as a strong presence in their targeted market boating shows (pg. 23). In retrospective

though, MarineMax illustrates having a strong nationwide foundation, intertwining their effec-

tive use of management information systems, marketing and sales capabilities, as well as market

adaptability, as means of standing out amongst their competitors.

8. Threat of New Entrants

“There is significant competition both within markets we currently serve and in new markets that we may enter. In addition, several of our competitors, especially those selling boating acces-sories, are large national or regional chains that have substantial financial, marketing, and other resources”. Pg. 23

As stated within their current industry stance, there is an already abundant number of both boat-

ing and non-boating businesses they are currently competing within, as well as the aspect of

strong competition if they were to enter a new market. They did not specifically allude to any

new competitors entering or taking over the industry, but did however mention their goals in

identifying new markets to obtain distribution rights or constructing suitable facilities in order to

focus on their company’s internal growth (pg. 31). Therefore it does not seem clear if they have

established plans on acquiring new locations or product offerings or are experiencing new busi-

ness entrants, but they have considered the threat of even more competition if they were to enter

a new market.

9. Suppliers and their Bargaining Power

“Manufacturers generally establish prices on an annual basis, but may change prices at their sole discretion. Manufacturers typically discount the cost of inventory and offer inventory fi-nancing assistance during the manufacturers’ slow seasons, generally October through March. To obtain lower cost of inventory, we strive to capitalize on these manufacturer incentives to take product delivery during the manufacturers’ slow seasons”. Pg. 16

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MarineMax purchases most of their boat inventory directly from manufacturers (pg. 15), which

can be considered both a pro and a con in regards to pricing and products. The company engages

with a multitude of disparate manufacturers, which essentially provides a strong foundation for

constant re-stock of inventory and availability, as well as lower switching costs. The company

also takes advantage of the “slow seasons”, in which in tries to acquire its boat inventory at dis-

count, since the con is that manufacturers establish pricing within annual intervals. Also, Marine-

Max did enter into a multi-year agreement with both Brunswick and Azimut-Benetti Group, but

still has the rights to sell any product lines or competing products, taking away some of the bar-

gaining power away from the supplier in essence.

10. Buyers and their Bargaining Power

“We purchase substantially all of our new boat inventory directly from manufacturers, which al-locate new boats to dealerships based on the amount of boats sold by the dealership. We also ex-change new boats with other dealers to accommodate customer demand and to balance inven-tory”. Pg. 15

If we analyze the disparate threats and factors involved in acquiring, using, and sustaining a boat,

then it becomes evident how much power the buyers have in regards to the industry demand. As

mentioned previously, the industry is highly fragmented and competitive, therefore the buyer

will have low switching costs, industry information, and high price sensitivity to such products.

There is also a threat of integration when it comes to laws and regulations, for example, where

certain states that require a license to operate a recreational boat, which in essence may discour-

age potential first-time buyers (pg.22). Lastly, the question of product liability may also come

into play, distinguishing the extra costs of boat insurance or increased insurance premiums, influ-

encing the customer’s fluctuating demand for such an expensive product.

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11. Threat of Substitute Product/Services

Though the 10k does not mention any specific types of product or substitute threats, I surmise

that potential substitutes would depend on the purpose of the boat acquisition in the first place. If

the boat is used for more of a transportation method, than the notion of air travel could be a pos-

sible alternative, if environmental conditions such as flooding or oil spills inhibit the use of

boats. On another hand, if the product is viewed in terms of luxury or pleasure, then perhaps a

sports vehicle or vehicles in general could be looked upon as a substitute for those recreational

attributes.

SWOT

12. Strengths

“We believe that our full range of services, no hassle sales approach, prime retail locations, pre-mium product offerings, extensive facilities, strong management and team members, and empha-sis on customer service and satisfaction before and after a boat sale are competitive advantages that enable us to be more responsive to the needs of existing and prospective customers. We strive to provide superior customer service and support before, during, and after the sale” Pg. 1

The company heavily emphasizes on their core attributes, which intertwine the aspects of mass

marketing through both traditional and digital media outlets, disparate product offerings and

sales approaches, as well as a focus on constant market expansion. The company has also capi-

talized on outperforming the industry through the means of effective management systems and

retailing strategies, illustrating an increase in their overall industry market shares (pg.46). It

seems that MarineMax strength’s consist from a collaboration of both financial and operational

processes, along with decentralized approaches within both their management and target mar-

kets. Finally, one of their key strengths was also becoming one of the largest retailers nation-

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wide, which further exemplified their notion of expansion into new markets with a competitive

approach outlook.

13. Weaknesses

“Turmoil in the credit markets and weakness in the retail markets may interfere with our ability to remain in compliance with the covenants of the credit facility and therefore our ability to uti-lize the credit facility to fund operations”. Pg. 51

As mentioned within the previous concepts, economic conditions may cause a lot of predica-

ments for the company, directly affecting both their financial and operational processes. In this

case, the financial aspects of cash and credit are directly influenced by both the credit market and

retailer markets, foreshadowing that notion of customer influence on demand. For example, dur-

ing the most recent recession, the company was even competing from banks when it came to liq-

uidating repossessed boats (pg. 32). The weakness then becomes MarineMax not being able to

potentially fund operations due to low collateral levels, portraying the sensitivity of the com-

pany’s financial facets.

14. Opportunities

“In addition to pursuing growth by acquiring boat dealers, we intend to continue to pursue a strategy of growth through opening new retail locations and offering new products in our exist-ing and new territories”. Pg. 31

The company has been focusing on both identifying and acquiring new markets, elucidating on

various growth strategies that could potentially be implemented. MarineMax is also interested in

establishing additional retail facilities in both new and existing markets, focusing on reaching out

to new customers through innovative retail strategies as one of their goals (pg.8). Such innova-

tive retail strategies would intertwine the use of online marketing through their direct company

website, as well as the use of social media platforms and online engagement. Their opportunity

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for geographic expansion would also include opening new retailer locations as well as possible

product extensions, which they believed could ameliorate their competitive advantage.

15. Threats

“Increased global cybersecurity vulnerabilities, threats and more sophisticated and targeted cy-ber-related attacks pose a risk to the security of our and our customers’, suppliers’ and third-party service providers’ products, systems and networks and the confidentiality, availability and integrity of our data”. Pg. 37

As with any new form of technology, there are always threats and risks associated within the in-

ternal and external environments of a company. The presence of management information sys-

tems as well as online marketing and softwares have created threats to the company’s cus-

tomers’, suppliers’, third-party service providers, and general networks collectively (pg.37).

This would allude to the issues of privacy, data integrity, and sensitive customer information,

which could then all become prone to cyberattacks and online malfunctions. Though the online

marketing and system databases have ameliorated the company’s use of spreadability and effi-

ciency, there are still possible consequences of litigation, protection costs, and possible damage

to the brand’s reputation as well (pg.37).

16. Competitive Strategy

“Pursuing Strategic Acquisitions. We capitalize upon the significant consolidation opportunities available in the highly fragmented recreational boat dealer industry by acquiring independent dealers and improving their performance and profitability through the implementation of our operating strategies”. Pg.8

“We believe we are regarded as an attractive acquirer by boat dealers because of: (1)  the his-torical performance and the experience and reputation of our management team within the in-dustry; (2) our decentralized operating strategy, which generally enables the managers of an acquired dealer to continue their involvement in dealership operations; (3)  the ability of man-agement and employees of an acquired dealer to participate in our growth and expansion through potential stock ownership and career advancement opportunities; and (4)  the ability to offer liquidity to the owners of acquired dealers through the receipt of common stock or cash”. Pg.8

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MarineMax’s business strategy emphasizes on pursuing strategic acquisitions, where they would

be incorporating their distinct values and market strengths, in order to establish a level of differ-

entiation within the industry. As mentioned within the statements above, there would be four

main characteristics that the company would implement in order to achieve this form of differen-

tiation, ranging from the decentralization of their operating strategies and historical experience,

all the way to liquidity and the growth expansion of their products and locations. (pg.8) This

would explicate their strengths by allowing their suppliers and customers to see their company’s

unique internal and external processes, alluding to even their management information systems

and technological ameliorations within the company for example.

The key differentiation drivers would be those facets of even further expansion and ac-

quisition after becoming one of the largest retailers, as well as identifying new markets and prod-

uct extensions that the company could possibly invest in. As stated, MarineMax believes in capi-

talizing on significant consolidation opportunities within the highly fragmented market (pg.8), as

well constantly exemplifying emphasizing on their human capital, best practices, and business

operations as means of standing out. Their strategy also notes the importance of their operating

strategies, since they feel it is a major element when it comes to their differentiation approach.

This approach seems to compliment their current goals and opportunities towards expansion,

with the reinforcing notions of new market entry, product demand, and technological market

adaptation, found within the 10k. In essence, their differentiation strategy seems to compliment

and support their current competitive position within the company, tying in their various

strengths and opportunities as a basis for further growth and expansion.

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Works Cited

MarineMax Form 10-K. (2014). Retrieved September 29, 2015.