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Tough Mudder Scaling Dynamics After Early Traction Case Solution
Tough Mudder was a joint venture which started as a business course competition and later transformed into a company which created the opportunity for mud run series, obstacle courses and endurance events which were speculated to churn a large number of audience. The brand message quickly got spread across the national population initially, and soon there was a wide fan following. The number of events held nationally and internationally rapidly escalated by manifolds with participants belonging to various age groups and professional characteristics.
However, after a few years, the company began to experience a decline in participation owing to several factors such as market saturation, competition, declining innovation as well as organisational challenges. The company had expanded internationally in a rapid fashion but was unable to grow itself according to the wide-ranging operations. Further to this, competitors like Spartan Race and Warrior Dash were emerging to take away company sales by offering similar value propositions. The quick geographic expansion incurred a natural barrier due to competition and limitations in scaled operations. In addition to this, the company experienced several unfortunate experiences such as the death of a participant during a running marathon, the opening of a lawsuit filed by a British obstacle course company who accused Tough Mudder of imitating the concept and departure of one of the two managing partners. These problems were compounded by dwindling growth of the company.
Following questions are answered in this case study solution
Theory of Competitive Dynamics
Theory or Leadership
Theory of Performance and Appraisal Assessment
Conclusion and Recommendations
Case Analysis for Tough Mudder Scaling Dynamics After Early Traction
The owner of the company adopted several ways to reignite participation in the endurance events. These included non-competitive and non-time events, competitive and timed events, new event formats, progression into television and media, extending sponsorships, launching of boutique branded gyms and introducing performance and lifestyle apparel for customers. One of the steps lingering idea in the mind of owner included the potential merger with Spartan Race as it expected to produce vast cost savings and revenue synergies as the company would be able to get larger access to new demographic group. In addition to this, the company was receiving several offers to be bought by larger companies which made the owner evaluate what the best suited for the company was. The decision remained unmade if there was a need to focus on operations and make strategic re-structuring decisions or there was a need to promote the brand instead.
2. Theory of Competitive Dynamics
When it comes to the obstacle course competitions, the market is quite new but has been rapidly growing. Obstacle course champions are now recognised professionals who spend time, money and resources to bring themselves up to par to compete. Spartan race, American Ninja Warrior, Warrior Dash and Tough Mudder are industry leaders. In 2012, headed by Will Dean, Tough Mudder raked in over $70 million and is the undisputed industry leader (Kissick & Foster, 2018).
2.1. Competitive Advantage
With the competition coming to a head, Tough Mudder has been required time and time again to reinvent its obstacle courses to not only prevent its repeat customers from getting bored but also to stay ahead of the competition. Not only do they need to create new obstacles but they need to be marketed in such a way to allow them to capture the attention of obstacle course participants globally. Will Dean have been known to invest heavily in the company’s research & development department which is equipped with all the industry knowledge, alongside any insider information and safety criteria that need to be met and a hefty budget which can go up to a million US $ just to create new obstacles. These obstacles are then mixed in with current obstacles to allow for a new level to be brought into the obstacle courses by Tough Mudder (Tough Mudder, 2019a).
2.2. Unique Selling Point
The Unique Selling Point of Tough Mudder which has helped define its customer base as well as a competitive advantage is the fact that all Tough Mudder events, races and courses are defined as a "Shared Social Experience" instead of what other competitors call their offerings: races. While this may seem insignificant, this branding has helped Tough Mudder build a reputation as not a competition but an experience to be enjoyed with others: challenging your mental and physical capabilities as an individual and as a team. The Tough Mudder experience is famous for testing dedication, perseverance and determination. Another aspect which Tough Mudder has employed to set itself apart from the competition and truly ring in the Shared Social Experience feel is the addition of free cold beer at finish lines, costumes contests amongst participants and live music. Coupled with these amenities are barbers that grant you the coveted Mohawk and tattoo artists where you can get yourself branded as a dedicated Tough Mudder. By doing this, Will Dean has allowed it events to transcend from athletic competitions to a Counter-Cultural event (Bomey, 2018).
2.3. Beating Out the Competition
To gain and keep an edge over competitors, Tough Mudder has fought hard to win the social media game – at times causing competitors to call out Will Dean for unethical marketing. However, Dean's expertise lies in his ability to engage the audience with a focus on maintaining a social vibe about its events. All firms keep their R&D departments on their toes; however, Will Dean pushes them to articulate their ideas and test them out before the competition can even think of them and roll them out under quite contained conditions to avoid leakages of their secrets. Being a late mover to a competitive obstacle course challenge is being too late even to play – the customer base is limited to repeat purchases by adrenaline junkies who bring their various groups along to share their experiences with. By not offering to their need to overcome new challenges, product offering will become redundant and too easy causing them to pull out and take business elsewhere (Fan, 2018).
The official slogan of Tough Mudder is "Probably the Toughest Event on the Planet" which sets the offering apart from that of competitors: by not being completely ruthless along the likes of Death Race and Tough Guy and not being purely for competition purses such as American Ninja Warrior and Spartan Race, Tough Mudder events bring about a sense of community and love for extreme sports with a sense of brotherhood and group pride. With Tough Mudder, you can be sure that the atmosphere created by Dean and the obstacle courses constructed by the entire Tough Mudder team (Research & Development, Supply Chain, Marketing, Operations and Finance) can transform the views on obstacle courses to something more colourful and community oriented. This fact is one of the larger factors that have allowed Tough Mudder to retain the leader spot in the competitive obstacle course industry (Fan, 2018). In essence, the competitive strategy of Tough Mudder is one where they are aware of changes in the competitor’s offerings while ensuring that their unique brand of activities is not sacrificed. The challenge in maintaining a revolving set of activities is that the activities need to be transferable from one location to another and weather friendly based on the various locations that Tough Mudder holds its events in.
3. Grand Theory
Tough Mudder is different from a normal organisation in the sense that it is a more fluid organisation than most. The team needs to relocate to operate and run events in new locations while maintaining their New York offices as their base. The New York offices are where the non-moveable departments such as Research and Development stay. The Tough Mudder organisation has a very flat non-traditional setup, one which is specially catered to the type of offer being provided to the participants; the structure is made up of the following departments (Tough Mudder, 2019b):
Events (planning, management)
3.1. The Strategists
The person behind the Grand Theory at Tough Mudder is the co-founder Will Dean who is responsible for setting the tone and direction of growth of Tough Mudder along with co-founder Guy. These two founders have a lot of investment going into research & development which is a statement to the fact that nearly 500,000 participants paid from $95 to $200 each per event. These events are not only local to the US but are now conducted globally (Stoddard, 2013). Mr. Dean has created a culture that is dynamic, fun and rewarding – something which mirrors the true essence of Tough Mudder into the daily office regime. However, the culture at Tough Mudder is one where not everyone is happy: the job entails a lot of travelling and many at times staying at the sites where the events are taking place. Mr. Will Dean has worked hard to create a functional structure where there is a high level of centralisation which is the key to maintaining integration and a high level of control over activities that are high risk ones in case anything goes wrong. The other key aspect is that there is a high level of collaboration between the teams which leads to a higher degree of management visibility on the issues and processes on the ground. This type of functional structure is best suited for the product offering by Tough Mudder (Lapowsky, 2013).
3.2. Internal Cultural Activities
Tough Mudder is home to 110 employees, and rarely they're all in one place: the company has operations in the UK, Germany and Australia and is having events in various locations one after the other. Mr. Dean has clearly stated at various opportunities that as company size changes the management style also needs to evolve: for him, it has gone from being a manager of a small sized business to a leader of a company established globally (Tough Mudder, 2019c). A leader needs to worry about the two main aspects of an organisation overall health: culture and strategy. To maintain the quirkiness of their product offering within their organisation, Tough Mudder employees engage in an activity termed the "Tough Mudder University" once a month where whoever is in New York attends. The activity is an 80-minute discussion in which a related Harvard Business Case Study is discussed, analysed and similarities are drawn to Tough Mudder’s business proposition and the changing market needs. By doing this, Dean asserts that the employees get a changed perspective of how various things may impact business and gain a good understanding of how to stay ahead of such challenges (Lapowsky, 2013).
3.3. Management relations
Mr. Dean has on many occasions accepted the fact that he and co-founder Mr. Guy do not have a lot of interaction with both of them being busy in their area of expertise. However, they do sit down for dinner once a week to discuss the happenings of the daily grind at Tough Mudder and share their insights. In such a corporate culture, it is important to have someone of trust, someone whose personality is completely understood and can be relied on to make the correct decisions that no one else can make. This kind of understanding has been developed between Guy and Dean since high school and has translated wonderfully into the corporate culture at Tough Mudder (Lapowsky, 2013). All employees, partners and stakeholders understand that Mr. Guy and Mr. Dean are one and dealing with either of them are as good as dealing with both of them. This kind of a deep understanding has allowed Tough Mudder to develop into an obstacle course offering that no one else can replicate (Bloomberg, 2019).
3.4. Employee Culture
Each Tuesday is an award staff meeting where Kaizen Ninja Awards are presented to the employees making the most strides in their dealing internally and externally. Anyone who goes above and beyond their call of duty is recognised and rewarded (Tough Mudder, 2019d). The hiring process is also driven by Dean: who likes to mentally challenge the interviewees using questions such as “Are you a farmer or a hunter?” which go right down to a person’s core personality traits (Tough Mudder, 2019e). The team treats its participants as a challenge as well ensuring that their offices have enough space to test out obstacles and ensuring their safety. The obstacles are judged on a variety of factors: level of difficulty, participant reactions, safety measures, changes to make them more successful. Tough Mudder has an experienced medical team present at each event and emergency vehicles that can safely transport people to hospitals if the need arises: however, in its complete run, there have been very fewer casualties and no death with over 500,000 tickets sold (Lapowsky, 2013).
4. Internationalisation Theory
4.1. The Potential for Internationalization
Internationalisation is a process of designing the products and services in a way that it meets the requirements and needs of the users in a number of countries or can be made flexible to do so. The process of internationalisation does not have to be physical as it can also mean altering the website so that it could be read in more than one language (Knight & Liesch, 2016). Global companies like Tough Mudders exhibit large potential for internationalisation as it is a useful way of gaining access to larger markets by leveraging the brand name.
4.2. Methods to Internationalize
There are several ways in which Tough Mudder can join the foreign markets including equity and non-equity modes. Given the growing markets for individuals who like to test their endurance levels, the company can grow internationally by delving into export and import. From all the available modes of international expansion, export and import services capture the lowest level of risk but at the same time misses the market control over international boundaries (Knight & Cavusgil, 2015). This mode will allow Tough Mudders to use the well-known brand name to penetrate unfamiliar markets without having to incur fixed expenses in the form of a physical office, additional human resources and administrative expenses. However, the company will have to give up control over how the products and services reach the new market which may impact the brand image if not handled properly. The use of an agent to manage export and import services will also add several layers of mismanagement and time to deliver services (Marano, Hitt, Arregle, & Essen, 2016).
Licensing is another crucial internationalisation strategy for Tough Mudders through which the company can extend licensee patent, copyrights, patent rights, trademarks and the general knowledge about processes and services (Attig, Ghoul, & Boubakri, 2016). The licensing agreement will allow Tough Mudders to enable a third party for producing tough Mudders products and conduct endurance events and market these within the directed territories by paying licensor’s fee as royalties to Tough Mudders. The sales made in an international region will provide an incentive to the international public authorities to facilitate new technologies, expertise and knowledge to flow into new regions (Knight & Liesch, 2016).
Franchising business is another popular internationalisation strategy which can be adopted by Tough Mudders to expand its presence internationally. The advantage of allowing franchises to be developed into foreign territories will allow Tough Mudders to be directly involved in the development and in the control of activities which are conducted as part of the operations (Boermans & Roelfsema, 2016). The company will in return be paid with royalty fees from the franchisers for the rights provided under the trademark. If the trademark is provided, Tough Mudders can employ firms to use the products and services by independent companies and also use the business process and systems.
A similar strategy to franchising is the joint ventures through which Tough Mudders require new ventures to buy equity position as well as handling of operations so that the arrangement works like a partnership between the parent and the host country. The advantage of this approach will be that the joint venture will be able to get better control of the operations and gain access to local markets than through any other internationalisation agreement (Ciravegna, Kuivalainin, & Kundu, 2018). Strategic Alliance is not a feasible option for the company as the nature of products and services offered does not require a massive exchange of technologies and procedures which would provide an edge in the market place. Similarly, direct investment is not an appropriate option for internationalisation as this arrangement requires 100% ownership of the host market which will be a giant leap for Tough Mudders as the company cannot absorb the level of operations and costs involved in the acquisition of new market. In addition to this, the regulatory, social and political challenges will be too big for the company to handle at one time (Knight & Cavusgil, 2015).
4.3. Global Strategy or National Strategy
However, Tough Mudder needs to be mindful of certain things while implementing any of the feasible internationalisation strategies. Using a global approach in expanding internationally will not be sensible approach as the nature of target market suggest that the fitness and endurance appeal may differ across the markets and individual may prefer a different level of mud runs at different locations (Attig, Ghoul, & Boubakri, 2016). This implies that the same format of operations must not be adopted instead the strategy must be tailor-made as per the local tastes and preferences so that the company can gather a large crowd of followers at one place. This calls for a multi-domestic strategy where the domestic environment of every territory needs to be evaluated, and the service and products must be customised so that the target market finds them to be relevant (Boermans & Roelfsema, 2016). This approach nevertheless will bring huge costs to the company as Tough Mudders will require massive research and development activities to establish the needs and wants of each target market and how to reach them in the most optimal manner.
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