analyze the case below as follow:
- Problem definition ;what the CEO has to tackle
- Sources of the problem ;internal and external factors
- Strategic options ;2-3 options to solve the problem
- Strategic choice ;select one option (evaluate framework and reason for choice)
SINGAPORE HOTEL ROOM RICARDO CEO MARGO COO CHARLIE HEAD OF BUSINESS DEVELOPMENT KIAN WHILE VISITING THE THRIVING ASIAN MANAGER. OUTPOST OF HIS CLIMBING GYM CHAIN, LIVERPOOL ASCENDANCY, RICARDO LEARNS OF TROUBLE ELSEWHERE EMILY EAD OF PROGRAMMING CASE STUDY RICARDO RUIZ COULDN'T fall "I wouldn't have called if it asleep. It was his third trip to weren't serious." Singapore-he'd initially come Ricardo snapped out of his Did We Expand to scout locations for the first fog. "What's wrong?" he asked, Asian outpost of his climbing-gym his heart racing. Had something Too Quickly? chain, Ascendancy; had returned happened to his family? Was there for the grand opening a year ago; a company crisis? and was there now to check on scendancy Liverpool," ..... operations. But the 23-hour flight Margo said, referring to the by Simon Greathead from Raleigh, North Carolina, via company's second UK location, San Francisco hadn't gotten any which had opened three months easier, and the founder and CEO earlier. "A novice climber didn't still found the jet lag brutal tie in correctly, fell from 15 feet He had just given up and hurt his back, and is suing us for gotten dressed when his phone $4 million." rang. It was Margo Little, Ascen- 'Didn't he sign the waiver?" dancy's COO. "Of course he did. Our HBR's fictionalized case studies present problems "You remember I'm in Singa- lawyers say it's a ridiculous claim faced by leaders in real companies and offer solutions from experts. This one is based on the Ivey Publishing pore, right? And it's the middle of and will be thrown out. But it's Case Study "Circus Trix: The Ups and Downs of the night here?" Ricardo said in all over the press. He says we International Expansion" (case no. W16832-PDF-ENG), a teasing tone. The two were not didn't adequately warn him of by Simon Greathead, Case Lawrence, and Jonathan only colleagues but old friends the danger or give him enough Richards, which is available at HBR.org. and climbing partners. instruction." 2 Harvard Business Review November-December 2019 Illustrations by RYAN GARCIAFOR ARTICLE REPRINTS CALL 800-988-0886 OR 617-783-7500. OR VISIT HBR.ORG \"But we follow the exact same procedures in every gyrn\"after 10 years, Ascendancy had 35 thriving ones in the United States, plus three international locationsi-\"and we've never had a problem before." \"I know. We're highghting that fact with reporters and on social media. I called to get you to sign off on a statement. But I'm worried that Liverpool will take a big hit. Maybe Cardiff too. Given how slow out of the gate those gyms have been, we can't afford a PR crisis.\" She hesitated, and then spoke again. \"Honestly, Ric, I'm starting to think maybe we came at the UK too fast.\" \"What do you mean?\" the CEO asked. \"This is one incident.\" \"Yes. But it's another warn- ing sign. Why haven't our UK marketing campaigns worked as well as the U.S. ones? Why aren't sales doubling month to month like they're doing in Singapore? Why aren't we getting the same inuencer traction we have every- where else?2 And why on earth would any reporter think that a guy who fell because of his own carelessness deserves a story? I don't understand this market.\" Ricardo ran a callused hand through his hair. He'd been wor- ried about the UK gyms too. That's why he hadn't slept on the plane: P&L review. \"Let's focus on the problem at hand-damage control,\" he said. \"Send me the statement, and I'll review it ASAP. I'll also book a ight to Liverpool. It sounds like I should be on the ground there. You too. We'll discuss the bigger picture then.\" Ricardo ended the call. He felt sick, and it had nothing to do with jet lag. After all of Ascendancy's domestic success and the recent win in Singapore, had the team grown overcondent about its ability to conquer new markets? A HEATED IIISAEHEEMEIIT Ricardo was still in Liverpool a week later. The climber had withdrawn his lawsuit following reports that he had previously injured his back in a nightclub brawl and had tried to sue on that occasion, too. But the gym still wasn't attracting the crowds the team had counted on. Experience Ricardo had called a meeting at the gym with Margo, who was also still on-site; Charlie Saperstein, the head of business development, who was Skyping in between visits to potential locations in Amsterdam; and Kian Chambers, whom they'd hired to oversee Ascendancy Liverpool. Ricardo turned to the local manager rst. \"Kian, you know this market best. What do you think is going on?\" He sensed the young man's hesitation and gave him an encouraging nod. \"Please speak frankly.\" \"Well, like I said when we started, climbing is just catching on here} My mates and I have been doing it for years, but most lads my age do footie or rugby or cricket for sport, and the tness people are used to just treadmills and machines. We've got to edu- cate them, right? Plus, it's winter; when it's dark by afternoon, people don't get out as much. Even the athletic ones settle down for a pint at home or at the pub. And I know the lawsuit is over, but I think it created a bit of a scare and maybe some worries that this big American company was more interested in making a few quid than providing a quality experience. We get lots more questions about safety now, especially from mums. It's gotten even harder to ll the youth classes.\" Ricardo grimaced. Young adults, teenagers, kidsthey were Ascendancy's bread and butter. Case Study Classroom Notes 1. The US. commercial ciimbingrgym industry grew by neariy12% in 2018, with the launch of 50 new venues, according to Climbing Business Journal. Should Ascendancy try to match that pace? 2. How might business tactics need to shift for different geographic areas? 3. England now has over 75 ciimbing gyms in more than 60 cities Harvard Business Review 3 Nor/emberDecember2019 Experience WE JUST NEED TO I'VE ALSO FOUND ASCENDANCY LIVERPOOL. THE FOLLOWING WEEK GIVE IT MORE TIME. TWO AMAZING SITES IN AMSTERDAM . ..0 MAYBE WE SHOULD HIT PAUSE ON OUR INTERNATIONAL CLIMBING IS JUST EXPANSION. CATCHING ON HERE. WE'VE GOT TO EDUCATE PEOPLE ABOUT IT, RIGHT? CLIMB! KIAN, YOU KNOW THE UK MARKET BEST. WHAT'S YOUR TAKE? MAKE SURE WE UNDERSTAND THE RICARDO CONFERS WITH HIS TEAM MARKETS WE'RE ENTERING Charlie jumped in. "We knew "We can't open another gym there "That's not how we operate," there would be challenges. But soon enough. I've also found two Margo said, bristling. "Each gym 4. Are these we picked Liverpool precisely amazing sites in Amsterdam. needs to recoup 20% of its initial criteria because climbing gyms are new There's a huge advantage to capital investment within a year adequate? What other data might there, because it's not saturated being a first movers-making and cover its operating costs Ascendancy take with competitors, because we sure people get to know climbing within two.6 We're not on pace into account? could start and lead the trend just through our walls and equipment to do that here." She gestured like we did in our U.S. cities." and classes. We just need to give at the three-story expanse of 5. Some studies When the executive team had Liverpool more time." undulating gray across from have shown that a company can begun its international push, Cardiff too?" Margo chimed the table where the group sat. gain a significant the criteria for site selection in. "The numbers there are just Only two climbers were on it, advantage by had been simple: The company as bad." gripping Ascendancy's signature being the first looked for markets with English 'They're not bad-they're just neon holds. big player in its as the primary or the dominant not quite as good as we typically "That's how we've done it in sector or geog- raphy, through secondary language and with see," Charlie replied. the past," Charlie answered. "But technology city-plus-suburb populations of Ricardo frowned. "Not quite as we've gotten some bad press here. leadership or more than 2 million and two or good" was unlikely to satisfy the When you're working in new the acquisi- fewer existing climbing gyms; chain's private equity investors. countries, different issues crop tion of prime populations of more than 1 million 'With the growth we're up. Maybe we need to be more resources. But experts note that and just one existing gym; or seeing in Singapore, and with the flexible with our overseas oper- first movers have more than 400,000 people and no success of the new Providence ations-shift the goals and the a mixed track gyms.4 Liverpool, with more than and Nashville gyms-and maybe model to a portfolio approach."7 record, and often 2 million residents in the metro- Amsterdam, Manchester, and "Or maybe we should hit it is followers politan area and only two small Dublin next year-we can make pause on our international who succeed in the long term. climbing centers, had fit the bill. up for the slow start in Liverpool expansion-take a little more "That strategy is working in and Cardiff," Charlie said, his time to understand the markets Singapore," Charlie continued. enthusiasm undimmed we're entering," Margo retorted. 4 Harvard Business Review November-December 2019FOR ARTICLE REPRINTS CALL 800-988-0886 OR 617-783-7500. OR VISIT HBR.ORG \"Perhaps consider more factors than language, population, and competitors, and start way earlier on the education and outreach that Kian talked about. This is a $50 million company now. Why would we change the model that's gotten us to this point? It's the aggressive growth plan we should be rethinking.\" \"And let rivals like Kilimanjaro and Triple Peaks pass us?8 They're looking at Europe too.\" \"I get the urgency, Charlie,\" Margo said. \"But I don't think we need to move quite as fast as you're suggesting.\" Ricardo had never minded having his team engage in heated debates, but he saw that Kian was starting to look uncomfortable. \"OK, you two,\" he said. \"It's clear where you stand. Charlie, go ahead to your next meeting. Margo, we have a plane to catch. And Kian, let's get you back out on the oor.\" As Margo took calls from vari- ous local managers on the way to the airport, Ricardo replayed the earlier discussion. He couldn't imagine telling the board that he wanted to change the company's accounting practices to allow for more-modest single-gym targets, nor could he see suggesting that the global strategy they'd approved the previous year needed to be completely revamped. Neither was a good option. KIDS IJN THE WALL What Ricardo loved most about climbing was that it required so much focus you couldn't think about anything else. Toe on this foothold, hand on that jug, nd another hold, stretch for the next grip. He was on one of the tough- est routes at Ascendancy Raleigh and was ahnost to the top. Ifit was a choice between climbing and lunch, he always chose the former and ate a few energy bars at his desk. Suddenly he heard cheering from below. It was the rst day of his lcids' December school break, and his wife, Emilywho was also Ascendancy's head of program- mingShad brought them in for an afternoon of climbing. \"Just in time!\" he shouted as he grasped the nal hold and slapped the top of the wall. The kids continued cheering as he rappelled down and high-lived him on the ground. \"Can you stay and watch for a bit?\" Emily asked. \"Sure.\" Ricardo smiled; his enthusiasm for the sport had rubbed off on the family long ago. \"Fifteen minutes here, a quick shower, then on to my next call.\" Once the kids were tied in and climbing, Emily turned to busi- ness. She had taken the day off, but the company's UK challenges were worrying her, too. 6. is this a reasonabie per-location h u rdie rate? 7. What are the pros and cons of changing the individuai- location ROi requirements? 8. How much should Ascendancy worry about competitors? 9. With his Wife as head of programming and an old friend as COOboth aiso enthusiastic climbersdoes Ricardo have enough diversity on his executive team? Harvard Business Review 5 NovemberDecember2019 Experience "What's the latest on Liver- pool? The last I heard from Kian, classes were still at 50% capacity." "It's slow," Ricardo answered. "Is it fallout from the lawsuit? Or are the English less into climb- ing than we thought?" Ricardo hesitated. "I'm really not sure. We've upped the market- ing. Kian is working his connec- tions. But it's just not picking up." "And Cardiff?' 'Slightly stronger. But not like here or Singapore." "What's going on with Amsterdam?" Charlie just emailed. He's negotiated two potential con- tracts. He wants me to visit this week, sign one this month, prep the site this winter, and start construction in the spring.' 'Are you comfortable moving that quickly?" Ricardo looked at his seven- year-old son, who was already high up on the wall. Mateo was a risk-taker, trusting his gut and usually ascending in record time. Maya, 10, was more cautious. She climbed at about half Mateo's pace but never slipped or fell In climbing and in business, Ricardo had always been like Mateo. But he was starting to won- der if under Ascendancy's current circumstances, Maya's str made more sense. 6 Reprint Case only R1906X SIMON GREATHEAD is a professor at Brigham Young Should Ricardo press on with or pull back University's Marriott School of Business. from his international expansion plans? 6 Harvard Business Review November-December 2019
