Non Stop Yacht

Context

Non Stop Yacht S.L. (NSY) provides e-commerce service to the mega-yacht industry. It serves professionally crewed motor yachts and sailing yachts world wide. This industry includes captains, owners, crew, managers, agents, builders, repair companies, brokers, consultants and the rest of the support industry. NSY sells products from suppliers world wide - arranging for local delivery whenever possible, as well as provide information and act as an independent method of information exchange between similar service/product providers.

Founded by Paul Metcalf and based in Barcelona Spain NSY was originally launched solely as an internet business. NSY grew rapidly, achieving sales of US$200,000 in its first year. However second year sales were below investor's expectations. As performance continued to fall short of expectations and no real growth in sight, investors began to grow restless and placed substantial pressure on Metcalf to improve the company's performance. This pressure led Metcalf to consider a variety of business models that would enable him to capture value for the company.

In desperation to save his business Metcalf wanted to revisit whether he had chosen the appropriate business model to capture value from the NSY concept. In doing so he would need to look at the strategic positioning of the company and the relative advantages and disadvantages of pursuing strategic alliances with other key players in the mega yacht industry.

External Analysis

The mega yacht industry is targeted as a hobby related to the immensely wealthy and although the world was smack in the midst of a global recession the yachting industry saw continued growth because of the high net worth of individuals and corporations with excess cash reserves.

The term mega yacht is used to describe both the typical mega yacht (any yacht over 45 meters) and the super yacht. The difference between the two is generally a combination of length and amenities.

In 2002, consultants estimated that demand in the worldwide market would continue to increase by 6 percent per year and even more in the near term outlook. As of 2003 the mega yacht industry consisted of approximately 5000 mega-yachts with prices ranging from $10 million to well over $50 million and another 5000 super yachts. Economic activity in the mega yacht industry was estimated at $1,035 million world wide of which $383 million was attributed to new builds and the remaining $652 million attributed to the maintenance, refitting, and repair sectors.

The impact of mega-yachts on local markets was significant. South Florida, the U.S. leader in ports of call for mega-yachts, saw a significant portion of the $9 billion per annum recreational marine industry. Economic impacts of the mega yacht industry included purchases of goods and services, as well as maintenance, repairs, refittings and docking fees from local marinas and boatyards.

Americans purchased 45 percent of all mega and super yachts, up from 10 percent the previous decade to 12 percent in 2002. These owners typically spent 6-10 weeks a year on their yachts and made them available for charter during the rest of the season. When the yachts were not used during these times they were usually moored in port, in dry storage or in dock for repairs. Operating expenses for a yacht typically costs an owner around 10 percent of the yachts value per year.

At any time there were about two dozen specialty yacht builders in the world constructing mega-yachts. They usually take between one and three years to build. The following chart shows the percentage of mega-yachts built by country.

It was calculated that about 482 yachts were being built in 2002 for 2003, a 4.7 decrease from the previous year. Although these sales were down, related services such as repairs and refits saw continued growth. Growth in the industry led to increases in the number of yacht builders and in 2002 signs of consolidation appeared.

As with yacht builders, there were also about a dozen yacht management companies providing services to the yachting industry. The leading sector of this market was the management of charter services. This services helped mega yacht owners recoup some of their investment costs. A typical mega yacht charter could range from $50 thousand to $584 thousand per week

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Mega-yachts were transient sea craft that sailed frequently from port to port and the range of products required to service these vessels was so great, that suppliers were located around the world.

Analysis indicated that market shares for suppliers were distributed among the following regions.

Although there were numerous suppliers of spare and replacement parts, supplies and equipment were often needed on a last minute basis. Locating spare or replacement parts in a timely manner was often an extremely daunting task for crews. Also an issue was the difficult task of relaying by telephone the correct part needed. The key barriers to this task included language, parts knowledge, correctness of measurements, locating manufacturers and distributors and payment. This often led to the receipt of the wrong part. Also most parts suppliers did not have online catalogs. They typically only had paper catalogs which were only updated on a yearly basis. The following lists are the three categories of boat parts and the four main suppliers to mega-yachts. Within these divisions were several thousand parts, supplies and equipment from which to choose.

There were three main categories of boat parts:

1. Spare parts

2. Consumables and stock spares

3. Upgrades and refits

The four main suppliers to mega-yachts included:

1. Commercial/Industrial

2. Consumer Products

3. Small Yacht Products

4. Dedicated Suppliers

As the industry matured, more standardization and consolidation