CREATING A KART CLUB 1
CREATINGA KART CLUB
GroupMembers: Jianwei He 0664455
Weijie Li 0743041
Wenhao Xing 0727537
Shiyi Hu 0695301
When a new product is developed, it is advisable to conduct ananalysis of the potential market to determine the feasibility of thecommodity. The project involves creating a kart club in Ontario, butthe market assessment shall include reviewing secondary data. Theinvestigation focuses on analyzing the category, consumers,competitors, external business environment, and the profitability ofthe firm. The market size for kart racers appears to be large inOntario due to their high population and a large number ofindividuals in the middle and upper-income groups who can affordentertainment services. The market segment for the kart club can bedivided into demographic and behavioral segments. The populationcategory highlights the age of the consumers and the level of incomeof the Ontario population while the behavioral part focuses on thepurchasing decisions of the target customers such as benefits, usagerate, and readiness to buy. The kart club business has potentialcompetitors who have been grown from providing fun for families andfriends to developing professional kart drivers and hosting nationalcompetitions of kart racing. The important marketing environmentalvariables that create opportunities for the kart club are the stablepolitical conditions, the growing economy, technological revolution,and the socio-cultural factors that determine the attitudes ofconsumers.
1.0 Introduction 4
2.0 Detailed findings and marketing management implications 5
2.1 Category Analysis 5
2.2 Consumer Analysis 7
2.3 Porter’s Analysis 9
2.4 Competitor Analysis 11
2.5 PEST Analysis 13
2.5.1 Political Factors 13
2.5.1 Economic Factors 14
2.5.3 Socio-cultural Factors 14
2.5.4 Technological Factors 15
3.0 Limitations 15
4.0 Recommendations 16
5.0 Conclusions 17
When starting anew business, entrepreneurs are required to assess their businessenvironment. The analysis enables them to determine the viability oftheir business idea. Canada has been identified as a market potentialfor starting a kart club in Ontario. A kart club can be developed asan indoor or outdoor game that provides motorsports entertainment topotential customers. One of the objectives of the research is toidentify a suitable place (about 7000 square meters) for establishingthe racing club. Another goal is to obtain a professional buildingdesign and road construction group to facilitate the completion ofthe company. Thirdly, the research seeks to buy kart to test thetracks, and finally, post a hiring advertisement including thewebsite about the services offered, security, management andmaintenance of the karts. The research design that shall be appliedis the review method that entails exploring current literatureregarding the creation of a kart club. The analysis of secondary datais an ideal method as it allows one to save on time since with moderntechnology the information is accessible over the internet. It is asuitable research method as it is cheap and allows the researcher toanalyze the evolution of some of the issues that have beencontinuously surveyed such as economic indicators like the populationof a region. The market assessment shall be conducted using secondarydata to complete the category, consumer, Porter’s, competitor andPEST analysis. Each of the analysis shall identify its implicationsto the karting business in the entertainment industry. Arecommendation on whether the kart club should be introduced inOntario shall be made depending on the findings of the marketingreport.
2.0 Detailed findings and marketing management implications2.1 Category Analysis
The categoryanalysis for creating a kart club in Ontario shall focus on themarket size, growth potential, seasonality of the business, and thelife cycle of the kart club. According to Ontario’s Ministry ofFinance fact sheet, (2016), the current population of Ontario isaround 13.7 million, which is 38.5% of the population of people inCanada with an average annual growth of 1% in 2005-2015. The highpopulation provides a large potential market for the kart club thatentrepreneurs can explore. The ASN and other associations involved inorganizing the karting competitions argue that thousands of Canadacomes out to participate in the variety of programs offered by thevarious kart clubs in the region annually (Canada, 2014). The remarksimply that the Ontario provides a big market size for potentialinvestors into the karting business. Kart racing has developed sincethe manufacturing of the first race car in 1956 (Olney, 2013).Although most individuals considered it a motorsport that wasregulated by the international and national sporting organizations,their perceptions were changed when kart racing was discovered to bean income-generating economic activity. An analysis of the Canadianpopulation suggests that more than 50% of Canadians belong to themiddle and upper-income groups (Ontario Ministry of Finance, 2016).The statistics indicate that most of the citizens are more likely tospend their earnings on leisure activities during holidays. It alsopresents potential market growth for the entertainment industry asmore residents are working hard to join the middle and upper-incomegroups, which imply that the population of people demanding the kartclubs services is likely to increase. Besides, based on people’spreferences, some are likely to stay indoors while others may decideto engage in outdoor activities, and kart racing serves as oneappropriate plan to explore. It allows people to have fun as a teamor as a family.
Determining theseasonal nature of a business is also another aspect of analyzing thecategory of business. Operating a kart club has been identified as ahighly seasonal venture that is characterized by periods of boom andrecession. However, the various business cycles depend on whether thekart club has an indoor or outdoor track. The weather conditions inCanada contribute to the seasonal nature of the kart club businesssince it is most favorable for the month of May to October since itis summer (Olney, 2013). The citizens in Ontario tend to indulge inmore outdoor activities during this period, which requires the kartclub particularly those with an outdoor track to schedule their racesat this time. Kart clubs tend to experience increased businessactivity as compared to other months when the weather is unfavorable,and people prefer remaining indoors (P2R Karting Inc., 2016). Thetotal area of Ontario is 1,076, 395 square kilometers where 917, 741island (Ontario Ministry of Finance, 2016). The size of Ontarioprovince suggests that the area is suitable to establish alarge-scale playground of 7000 square meters.
The categoryanalysis of creating a kart club also focuses on the life cycle ofthe kart club. According to the life cycle stages theory, aproduct/service undergoes four stages introduction, growth,maturity, and decline levels upon its inception into the market asoutlined in the diagram below.
An analysis ofthe Ontario market shows that introducing a kart club in Ontarioresults in initial low sales level as the industry adjusts to the newentrant (Canada, 2014). The management has to invest in creatingawareness about the existence of the business. During the growthstage, the kart club shall witness increased sales as people visitthe club to participate in racing activities. The growth stage iscrucial in determining the future of the business as it affects theperception of consumers. The management strives to ensure thatcustomers are satisfied beyond their expectations so that they canbecome loyal and recommend the club to other people. In the maturitystage, the kart club has high sales level, which makes competitionfrom other kart clubs in Ontario fierce. The management may need tomake improvements to remain relevant and maintaining theircompetitive advantage. However, if the competition is too stiff, thesales level shall fall due to the low demand in the decline stage.Based on the product life cycle of kart clubs, it is crucial for themanagement to ensure they overcome the competition pressure since thebusiness can endure any of the stages at any time.
2.2 Consumer Analysis
The analysis ofthe potential customers of the kart club shall focus on identifyingthe target users and their needs by segmenting them into thedemographic and behavioristic market segments. The demographicsegment comprises of buyers who are categorized based on their ageand income. Age is a significant factor that owners of kart clubstake into consideration when determining their target market.Although kart racing is said to be a sport for everyone, there is anage limit for the participants. Some of the kart clubs allow childrenwho are above seven years while others permit only those who areabove eight years (Lerner, 2004). Most organizations have put theupper age limit for sixty years. The age restrictions are aimed atensuring the security of the drivers who participate in the sport aspossessing the ability to make informed choices regarding the tracksand understand the technicalities of the karts. Therefore, whencreating a kart club, the target market shall be individuals who areaged between 7-60 years old. The demographic segment also focuses onpeople who belong to the varying income groups in Canada. Since mostpeople in Canada belong to the middle and upper-income groups, kartracing provides an opportunity for those in the lower income toimprove their standard of living by engaging in kart racing as anoccupation (Lerner, 2004). It is argued that most of the professionaldrivers who compete in the international karting races have learnedand enhanced their skills from kart clubs. Therefore, the kart clubin Ontario can aim at providing learning lessons at a low cost toindividuals in the different income groups who wish to participate inmotor racing in both the international and national platforms.
The consumeranalysis also focuses on the behavioristic market segment thatdepends on the actual behavior of customers when purchasing a productor a service. The variables that buyers consider are the benefits,usage rate, brand loyalty, user status, readiness to buy, and theoccasions. The customers living in Ontario are likely to access thekart club for various reasons. Some of the target consumers may seekto spend their leisure time while others may require the learningservices of the kart club (Canada, 2014). The usage rate of the kartclub also depends on the number of scheduled races that the kart clubshall organize in their schedule. Additionally, for those customerswho require the training shall be provided with different programsthat need them to be at the club depending on their convenience andthe age. The young children especially those below fifteen years mayneed accompanying by their guardians when they attend the club forthe learning while those who are seven and cannot reach the pedalswith their feet may need to get into the kart with an adult. Theenterprise also takes into consideration that majority of theirpotential consumers may be busy during the week because of work andschool. Hence, they try to schedule most of their races during theholidays and the weekends to meet their varying needs at theirconvenience. The club also takes into consideration the user statusof their customers. Some of them could be regular drivers of kartswhile others could be exploiting the karts for their first time.Hence, the kart club needs to develop a training program that shallideally enable the different status of their consumers to enjoy theircircuit driving at the tracks. Consumer behavior is also highlydetermined by the price and quality of the product/service. The kartclub needs to base its pricing strategies on the market prices ofother kart clubs within Ontario while at the same time ensure theyprovide high-quality products. Organizations that focus on the twoattributes are likely to achieve competitive advantage if they manageto deliver quality services and lesser prices. The kart club shouldaim at implementing the strategy to improve its competitive positionin Ontario.
2.3 Porter’s Analysis
Porter’sanalysis shall focus on determining the profitability of creating akart club in Ontario using the five forces model. The model allowsthe company to understand the strength of its position in the market,which allows the management to take favorable steps for the business.It examines a business based on the supplier power, buyer power,competitive rivalry, threat of substitution, and the threat of newentry. The supplier power determines their influence on theirbusiness because they have enough strength to control the business,they can easily affect the prices of products and services that couldhave an impact on the entire enterprise operations. The kart club mayrequire suppliers to provide the vehicles for the sport. Forinstance, Rental Kart is a company that hires the vehicles tobusinesses organizing the corporate events and competitions (RentalKart, 2016). The kart club in Ontario may require hiring the vehiclesfrom Rental Kart in circumstances where they are expecting a highnumber of clients at their premises. Alternatively, if the cost ofpurchasing a kart appears to be high, the company may begin by hiringthe vehicles as they save funds to purchase their equipment. Duringsuch a period, Rental Kart shall have a higher supplier power of thekart club.
The buyer powerfocuses on their ability to influence prices based on the size of themarket, the significance of the product/service as well as thecapacity to switch to other sellers. The model argues that the moreinfluential the buyers are, the higher their ability to dictateprices to the seller. According to the Richmond Go Karts, the pricescharged vary depending on the duration a client spends on the kart aswell as the type of kart they are driving. For instance, the pricelist at the Richmond Go Karts is the standard single or double kartprices are charged at $12.75 for a minimum of ten minutes, theperformance Kart prices are $15 for every ten minutes, the groupstandard kart prices for a minimum of ten people are charged at $10whereas the group performance kart prices that are set for companyevents range from $140 for ten rides, $405 for 30 rides, and $650 for50 rides (Richmond Go Karts, 2016). The company also provides specialprices for occasions and public holidays such as father’s day andCanada day respectively. Many people prefer engaging in kart racingduring weekends and holidays in Ontario, which implies that theservices provided by the kart club are essential in the entertainmentindustry in Canada. The kart club needs to set up the prices fortheir products and services within the range of the market price toavoid granting the buyers the power to control the business byswitching to other kart clubs in the region.
The model alsoidentifies the number of potential competitors because if they offersimilar products and services to the target market, they are likelyto diminish your power in the industry for both suppliers andcustomers. Several kart clubs have already been established inOntario that are likely to provide stiff competition. They includethe Simcoe Kart Club, Goodwood Kartways, Sudbury Kart Club, CameronMotorsports, Innisfil Kart Club, and the Point Pelee Karting Clubs.Some of the businesses have been operating for an extended period andhave managed to develop their brand. However, the kart club canovercome the rivalry by developing good relations with itsstakeholders as well as ensuring they deliver quality services. Thecompetitors also pose a high threat of substitution for creating akart club because the products and services are similar, which makesit easy for customers to shift to other sellers hence, weakening thepower of the business. The market structure of kart clubs in Ontarioappears to be a perfect competition where there are no restrictionsfor the players, and their number is unlimited. The perfectcompetition market structure weakens the position of the kart club inthe market because new competitors can quickly join the industry thuslimiting the firm from enjoying economies of scale.
2.4 Competitor Analysis
It is essentialfor an entrepreneur to undertake a competitor analysis duringstrategic planning as it enables them to obtain adequate informationabout their rivals. They can then apply their findings in predictingtheir behavior in the industry and determine ways of utilizing theinformation for the advantage of the business. Analyzing thepotential competitors of the kart club using Porter’s frameworkshall entail determining their objectives, assumptions, strategies,and capabilities. The four aspects enable an entrepreneur tounderstand the abilities and the driving force of their rivalcompanies. One of the primary competitors is the Goodwood Kartwayswhose objective is to promote sporting and provide a foundation fornurturing careers in the motorsport world (Goodwood Kartways Inc.,2015). The company assumes that it is essential for driver resumes toindicate their participation in the firm’s events in their journeyof becoming Canadian heroes in the race tracks. Its strategy is tohold a variety of sporting events where racers from Ontario, Canada,and the USA participate and interact. It also hosts beginners andveterans thus providing entertainment and recreational activity forfamilies and employees willing to participate in teamwork. The clubhas operated for the last forty years, which serves as a strengthsince it has managed to provide a track record of its successes inbuilding a brand loyalty among its new customers (Goodwood KartwaysInc., 2015). Therefore, Goodwood is likely to pose stiff competitionbecause of its excellent performance, and since it is aimed atengaging in corporate social responsibility activities byparticipating in charity events and conducting scholarship programs,the kart club may consider a similar approach.
The WaterlooRegional Kart Club (WRKC) also poses as a primary competitor to thenew kart club in Ontario. The organization is aimed at providing asafe environment for families and friends to have fun as well asconduct kart racing competition for their members. The company’sstrategy for achieving its objectives is obtaining many sponsors tofund their events so that the contest fees can be affordable to asmany families and friends. The sponsors then get to advertise theirproducts and services to the people who attend the racing events,which create a win-win situation for the kart club and businessorganizations. The company assumes that when they reduce the cost ofparticipating in their sporting events, the organization shallregister a high number of members. However, the Waterloo RegionalKart Club needs to understand that the decisions regarding the formof entertainment people wish to be involved in during their leisuretime does not always depend on the money one is willing to spend.One’s hobbies, duration, and personality are also quiteinfluential. The WRKC is capable of organizing successful racingevents in Ontario such as the Championship series. Such events arelikely to pose a stiff competition for developing kart clubs becausemany people prefer to be involved with firms that have displayed asuccessful record. WKRC is also a potential competitor because of itsmany years in the karting club business that provides it withadequate experience to make informed decisions. However, the kartclub can obtain the competitive advantage by targeting new driverswho wish to be trained on kart racing. Providing them withprofessional training allows the firm to nurture young talents anddevelop careers, thus enabling the company to market itself among theOntario community (Waterloo Regional Kart Club, 2016).
2.5 PEST Analysis
The investigationof the external business environment shall focus on the political,economic, socio-cultural, and technological factors in Ontario thatare likely to affect the operations of a kart club in the area.
2.5.1 Political Factors
Ontario providesa politically stable environment for business to conduct itsoperations. Ontario province is in the Canadian federation that isgoverned by the country’s constitution and the political leadersexercise democracy in their ruling. The government has developedvarious business laws and regulations that managers are required toobserve when conducting their activities within the nation. Some ofthe provisions need the owners to have permits and licenses to ensurethey operate legal businesses. Other rules dictate the amount oftaxes they are required to remit to the government. The politicalenvironment in Ontario is also stable and the amendments to thebusiness laws are made when it is crucial, but with the aim ofproviding a better environment for the entrepreneurs (Canada, 2014).The legislative changes are done through a procedural process asdictated in the constitution where debates are facilitated by theHouse of Commons before being passed to the Senate to review thedecision of the elected members. Hence, the political situation isdeemed favorable for creating a new kart club.
2.5.1 Economic Factors
The current realGross Domestic Product (GDP) growth of Ontario is estimated to be at2.6% that implies that the economy of the region is moderate(Ontario’s Ministry of Finance fact sheet, 2016). The area alsorelies on exports as the source of income, which contributes toimproved performance in the international market, low interest rates,and low oil prices. The reduced interest rates are favorable forcreating a kart club as it allows the owners to obtain financing frombanks to acquire the essential resources and materials forestablishing the firm. Besides, kart clubs can organize nationalevents that encourage attendance from international professionaldrivers who may motivate the young people seeking to pursue a careerin kart racing. Ontario is also experiencing a low population growthrate of 1% that means the rate of unemployment shall remain low(Ontario’s Ministry of Finance fact sheet, 2016). Therefore, it canbe argued that there are no economic factors that may negativelyimpact the kart club. The management only needs to remain preparedfor a recession period because the economy keeps fluctuating.
2.5.3 Socio-cultural Factors
As earliermentioned, Ontario is experiencing a low population growth rate. Thedemographics may not have an adverse effect on the kart club since itmarkets people between 7-60 years. Ontario also has a high populationof vulnerable groups who are affected by social issues such aspoverty, racism, and disabilities. The government has beencollaborating with international organizations to address theproblems. The kart club can participate in such ventures byundertaking such projects as part of their corporate socialresponsibility as it could enhance their public image within thearea. Besides, the kart races can improve socialization among friendsand family, which can serve as an essential platform for people fromvarious racial backgrounds to interact and promote unity within theregion. Ontario also has a significant population who belong to themiddle and upper income groups that indicates they can afford toaccess entertainment in kart clubs during their leisure time (Lerner,2004). The shifts in attitude among people can affect the kartingbusiness because if individuals decide to explore different form ofshows, the firm shall experience reduced sales that are unfavorable.
2.5.4 Technological Factors
Developing a kartclub requires the company to utilize various types of technologies tofacilitate efficient delivery of services to their clients. Forinstance, the organization shall need to determine the most suitablecommunication technology to implement such as developing a companywebsite where people can obtain adequate information regarding theirevents, and the variety of products and services available. Othercommunication technologies can be via the social media channels orintroducing follow-up buttons that customers can use to obtainrelevant information. The kart club may also require adopting moderntechnology to enhance the level of security in its firm. A companysuch as Paladin Security offers both manual and software modes oftechnology that includes guards, dogs, CCTV cameras, access controland alarm systems (Paladin Security, (2015). The kart clubs need highlevel of security since they obtain personal information from theirclients that they are required to safeguard. Despite determining themost suitable technology, the kart club needs to consider the highrate of technological revolution that results in making somediscoveries obsolete. Adopting technologies that become obsoletequickly results in wastage of resources. Ontario governmentencourages innovation among its citizens, but firms need to implementonly technological practices that are permitted by the state.
During theresearch study on creating a kart club in Ontario, some of thedifficulties encountered included lack of adequate data. Thesecondary data that is available regarding introducing a particularproduct or service in a geographical region such as Ontario islimited to the features of the new commodity. Therefore, if thetarget market belongs to a different market segment with the firm’sproduct, it becomes difficult to complete the market assessment.Another limitation is that some of the available secondaryinformation could be outdated. For instance, when analyzing thepotential competitors, the research focused on firms that have beenexistence in the industry for an extended period because they canprovide adequate information regarding the industry due to theiryears of experience, but not all of their data is reliable since itcould be outdated and inapplicable in the current business world.Besides, the market structure of the kart club has been identified asperfect competition one, which makes it free for firms to enter andexit. Therefore, some of the secondary data might be misguidingbecause the companies that survive the industry might provide biasedinformation to discourage other organizations from joining themarket, and minimizing potential competition.
The assessment ofthe market conditions in Ontario shows that creating a kart club is aviable business idea. However, it is recommended for the managementto participate in corporate social responsibility as it enhances thepublic image of the company and attracts potential clients.Additionally, when determining the suitable location for building theclub, the management needs to find an area that is easily accessibleby their target consumers. The environment should be comfortable andrelaxing as most individuals seek to enjoy their holiday as most ofthe customers are likely to be families and friends since the agecategory is between 7-60 years. Companies that are already in thekarting business who pose as potential competitors do not indicatewhether they buy or hire their karts. However, the management needsto consider the costs of hiring and purchasing before making the mostsuitable decision that may not affect the operations of the club.Another recommendation is selecting the most appropriate technologyfor the company that facilitates communication and provides amplesecurity. The analysis of the external business environment indicatesthat Ontario is a potential opportunity for business growth, buttechnology plays a crucial role in achieving the desire of the kartclub because it connects the world to become a small village.
The karting gameis indeed a popular game that is easily affordable. From the findingsof the market assessment it can be concluded that the kart club cangain a large market size, but it needs to ensure the needs of itstarget customers are satisfied, and it concentrates on profitmaximization during the peak season of the business. The consumeranalysis discovered that the kart market can be divided into thedemographic and behavioral segments. The Porter’s analysis foundthat the kart club has a higher supplier power, low buyer power, butstrong competition rivalry, threat of new entry and substitution.Hence, it needs to derive strategies for overcoming the stiffcompetition. The competitor analysis discovered that rival companieshave an excellent profile in the industry. The PEST analysisindicated that Ontario is a favorable business environment with astable political and economic environment. Thus, the region issuitable for creating a kart club.
ONTARIO FACT SHEET MAY 2016
Land and Fresh Water Are (in sq. km.)
Freshwater 158, 654
Total Area 1,076, 395
Total Land in Census farm (%) 5.6
July 1, 2015 13, 792, 052
% of Canada 38.5
Average annual Growth, 2005-2015% 1.0
Life Expectancy (years), 2010
Labor Force (000s),2015 7,426
Employment (000s), 2015 6,923
Job Creation, 2015 45,300
Unemployment rate, 20156.8%
GDP ($ millions, nominal) 747, 790
% of Canada 37.7
Primary household income ($million) 508,286
% of Canada 38.2
Primary household income per capita ($)
CPI Inflation, 2015 1.2%
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