PMI/ACA/03/ASC(14)/001

Rev. No.:0

PGSM
ASSIGNMENT COVER

SECTION A:

PERSONAL PARTICULARS

(PLEASE USE BLOCK LETTERS)

Programme

MBA PGSM

Module Subject:

STRATEGIC MANAGEMENT

Module code:

MGT 610

Name of Lecturer:

MR ASOKAN

Assignment title:

ASSIGNMENT 2 THE ROBERT TRENT JONES GOLF TRAIL

(2000-2500 words)

Assignment
Submission date

Name of Group
Members

13 SEPTEMBER
2014

LIM YOU BANG

Extension date agreed

(Written approval from
Mantissa office)

Actual Late submission

date

Explanation for Late

submission (if
applicable)
Interim mark awarded

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Student Signature ___________________________

Date

13 SEPTEMBER 2014

1.
In This Case Study of The Robert Trent Jones Golf (RTJG) Trail, we will analyse
why the stakeholders of RTJG would be motivated to invest in continued growth of the
trail. In order to do that, we will discuss about the strength and weaknesses of the
existing RTJG Trail, in which we will further highlight the challenges ahead for the
management in order for the Golf Trail to go further and achieve a new milestones for
the prestigious Golf Trail.
In order to motivate the stakeholder, it is important to understand the basic
background of RTJG so that we can analyse the strength and weaknesses in order the
determined whether a continued growth of expansion is a needed action plan in order to
recover the downturn situation as currently faced. (1) RTJG is opened in 1992 and has a
21 world-class public golf course, it is located on 8 sites and funded by Retirement
Systems of Alabama, it is managed by SunBelt Golf and designed by Robert Trent
Jones, a legendary golf architect, soon after being built, this trail has evolved to be one
of the major economic engine and tourism in Alabama with 10 years of proven and
continual success.
Continued growth of RTJG trail is necessary for the stakeholders given the
following reasons, RTJG of Alabama is deemed Natural beauty, which one of its major
advantages is the foothills of the Appalachian Mountains providing great scenery.

(2)

Meaning to say in long term basis, it will make Alabama a better place for citizens and
visitors, other than that, a continued expansion will leads to the transformation of the
state into a worlds top golf mecca.
This also indicates that watch tourism and corporate business grew exponentially
and further contribute to Alabamas economy as a whole, as mentioned earlier, it will
expand tourism and recruit new businesses and industries as well as retirees to the areas.

Strengthening the states economy and add to the quality of life for all Alabamians as a
whole.
Although the golf courses themselves are only considered marginally profitable as
compared to the huge $25 billion of Alabama retirement system, however the overall
trail initiative and accompanying hotel development served as one of the masterpiece of
a successful effort to boost tourism and attract new businesses and industries to
Alabama, bringing about a billion dollars to the state in between year 1995 and year
2005. Indeed, the RSA had become one the largest hotel developer in the state. (3) The
benefit it brings to the state is unable to be evaluated solely from the point of view of
profit and accounting.

2.
As per question one, upon convincing the relevant stakeholders to funds the
expansion, the next step is to look into how to finance the expansion in a way that the
stakeholders will be satisfied. Given the downturn of the golfing environment as a
whole, at that time, main focus at RSA was to make growth of existing customers and
potential customers, while at the same time the diversification of assets of the state
pension fund.
There are many different ways to grow the funds, one of it is using the revenues the
company is currently generating, but at a certain stage, these sources of cash are usually
no longer adequate or appropriate, hence we will then have to evaluate the pros and
cons of using these ways of financing to finance the expansion. Expansion could be
financed through several ways, for instance, through retained earnings, to fuel its
continued growth, at times company needs an investment of a significant quantity of
capital, the most conservative way to do this is through retained earnings, but like any
financing option, it has its pros and cons. (4)
When the CEO took over the management of the trail, he saw a good problem, he
soon realize that RJTG is lacked of upscale hotels for visitors to stayed when they
played the Trail, hence he took action and soon enough his betting works for him and It
started to make money for the trail, he do so by adding more treasure to the Trail, which
is to build more courses and partnering with Marriote to add a splash of luxury to stay
and play packages. He further acquired the historic Grand Hotel in Point Clear and
renovated the 2 courses at Lakewood Golf Club. It soon became the centre for 3 major
professional tournaments.
RSA strong and long-term growth record have benefited the economics of
Alabama and have accrued to various stakeholders, Bronner defended ETIs strategic
efforts to help a relative poor growth state. And Diversification of portfolio provides a
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strategic buffer to counter the downturns in the equities markets. Stakeholders would be
satisfied given that this move will benefit them in long term as well as bring positive
development to the area.
This investment vehicle by the CEO is able to boost tourism at the area, as well as
attracting more retirees to the area to play luxury golf with economic price, as well as
to make economic growth at Alabama. (5) It turn out to be true when it became a success,
Bronners vision was beyond typical when he saw golf as the investment vehicle that
could spur an economic and tourism renaissance in Alabama, His Vision includes
simultaneous construction of network of championship courses at 7 different sites in
the scenic areas of Appalachian foothills of North Alabama to Mobile Bay in the Gulf
of Mexico.
His move was well accepted by the stakeholders as it does not just grow RSA, but
the state of Alabama as a whole, creating more chances for the people inside and
outside the great Golf Trail.

3.
There are 3 main strategies that have been taken into action to help achieve the
current success of the trail, as a result of these strategies, the trail managed to capture
the hard-core golf tourist market in the US who traditionally travelled to South Carolina,
North Carolina and Florida through its market penetration practice. (6)
In order to penetrate the market, RTJG had done it differently, for instance it
focusing on three (3) major strategies which is listed as per below:
I. New high-end segmentation strategy The Upscale Trail
II. Targeted regional marketing & promotions
III. New course development:
a) Florence 2 new courses (36 holes)
b) Birmingham a new course, plus hotel conference near existing Oxmoor
Valley site
As we can see from the above, strategy I & II is aiming at increasing utilization of
existing facilities. Meaning to say to make to maximize the usage of current facilities
and grow its existing base.

(7)

And due to relatively high fixed cost structure of golf

courses, the increasing growth in utilization rate of existing facilities should be able to
yield higher disproportionately higher profits.
Meanwhile strategy III is aiming at expanding the number of course offerings
which will have a positive impact on the Trails return on investment in long term basis.
However, utilization rate has to be at or above existing Trail courses and the
cannibalization of rounds had to be minimal.

In its market penetration exercise, RTJG had make a significant move in order to
capture the market, as such, they priced their green fees at of what most golfers
expected to pay at a world-class courses, This attractive rates and Trail experience had
quickly made the trail a popular spot to travel to and spending more time on it given the
number of holes and golf course which is good enough for them to feels like they are
playing on different course at times, which also indicates each times they travelled
there, they will spend at least a week to finish off all the holes at the 8 different courses.
Apart from the market penetration strategy, the Co-Marketing Relationships within
a variety of firms in the travel industry is also one of the strategies that had been
beneficial for the trail, this is done through its advance support structure which
instituted a Toll-free reservation call centre, as well as a web site to provide a one-stop
service for all lodging and golf reservation. (8)
Others promotion advantage of RTJG is the ownership of media giant, therefore
the promotional fees for the trail are almost at no cost, while the trail was able to receive
preferred advertising placement for free and have a huge base to target at given the
500-mile radius of Alabama. Most of its promotion is done through Raycom Media,
which have 36 TV stations in 19 states, while on the papers, Community Newspaper
Holdings, Inc (CNHI) help the trail to published daily and weekly in more than 200
communities, which in turn had helped them to increase growth rate of rounds played
by 3-4% every year.
As a result, the trail is hailed by many magazines, as such Golf Digest had quoted
best thing ever done for public golf. While North West Airlines quoted true to its
mission, the Trail accomplishes an unlikely parlay: championship golf shot through
with an egalitarian vibe. This unique golf experience attracted tourists from 40 states
by the end of year 2001, from year 1993 to year 2001, rounds played at the Trial
increased from 180,000 to 500,000 annually. And tourism increased from $1.8 billion
industry annually to $6.2 billion in 2001 50-60% of all rounds at the Trail came from
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out-of-state golfers. The trail had unexpectedly become the catalyst for bringing
business to retirees to the state, and pumping millions into the economies of scale.

4.
As per the case studies, there are numerous pressures affecting the RTJG Trail
internally and externally, it is important to identify these pressures in order for the
future planning or expansions work to be smooth. Finalize decision on course
expansion.
Midst of golf industry slowdown, RSA and SunBelt Golf developed ambitious
long-term growth strategy, directed towards total number of rounds played on the Trial
as well as a $30million course expansion plan. This plan of expansion receives negative
responses from stakeholders given that the industry is slowing down and the
stakeholders is in doubt as this move might further hurt the profitability of the trail as
whole.
Nevertheless we shall analyse the challenges internally and externally faced by the
trail in continued growth and we will be further discussing it as per following:I. High-end segmentation strategy
II. Increasing regional marketing and promotion efforts
III. $30 million expansion Constructing 2 new course development in Florence and
Birmingham to solidify the Trails competitive position during a down market
As we can see above, Item no I & II is no doubt an action plan needed to be done in
order to improve the trails situation as a whole. A high end segmentation strategy and
increasing regional marketing and promotional efforts indicates that the trail will target
high net worth players who are willing to spend and buy golf packages and most
importantly willing to travel to the amazing golf trail few times a week just to play a
game and maximize their package usage.

(9)

This move will also improve the

customers quality as a whole given that this bunch of high net worth customers are
normally bundled together will their colleagues, business partners or even families
9

when they visit the facilities and the trail could further offer different packages in order
to suits the needs of each identified bunch.
However, item III for the expansion of golf trail is in serious reconsideration as the
stakeholder are uncertain of the this move given that they deemed to see it as high risk
and any wrong move might just cost the current downturn situation to be worsen. Hence
it is important for the management to convince and motivate the relevant stakeholders
in order for them to buy the idea of continual growth, which in this case we are talking
about expansion of 2 new trails in order to establish a global branding for RTJG and
strengthen its market position.

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5.
Given that the expansion of the trail is smooth, in no time, the RTJG Trail will be
able to attract its existing and potential customers in long term. As such, let us study the
industry trends that are going through decade of strong growth given way to
recessionary pressures.
Although Mr Mark Galloway of Galloway Golf Consultancy quoted that the Golf
industry was severely overbuilt, and the demand never kept up with the pace of
construction. Statistics however shows that from year 1986 to year 2001, there is a 20%
increase in no of courses from 13,353 with 19.9 million golfers with average 150
courses per year to 17,108 with 26.7 million golfers with 400 courses per year.
At the beginning of year 2000, there is 524 new courses, in which 87% is open to
public, at the end of year 2000, there is a total of 707 courses under construction, and
over 1,000 in the planning stage. And although in year 2001, there is 2000 news courses
being opened, it is however the lowest in 15 years of golfing industries, and had
softening in demand, given a relatively 2.4% decrease in no of rounds played.
RTJG however chooses to expand at this time give the following points and/ or
potentials it sees. As such golf industry is going through cost containment and cost
cutting. With this expansion, RTJG is targeting a new bunch of Golfaholics, people
who loved the games but who dont necessarily have the connections or money to play
the countrys more exclusive courses, also targeted is golfers who made annual golf
trips to such destinations as Hilton Head, Myrtle Beach, South Carolina, as well as
average golfaholics will often play 36 holes a day and spend 8 hours a day on the golf
course.
This move turn out to be successful in year 2001, where there is 17,108 courses, in
which 72% is opened to the public, and number of golfers grow to a tremendous 26.7
million people, having 6.3 million avid golfers (play 25 or more rounds per year), and
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almost all of them are tourist golfers who spent nearly 69% more per party per trip than
vacationers overall.
The Tourists markets had attracted not just local players, but also players from all
around, as an example, players from North, Mid-west and South-west came to play the
trail and they are comprises of Professional golfers, Average golfers, Amateur, Ladies,
as well as Juniors. (10)

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