The main arguments for Sunseeker not changing its long-standing strategy include:

Question

What will be an ideal response?

Answer 1

? The considerable evidence of its past success deriving from continuity and consistency
? Anticipated medium and long-term rising demand, not only from established markets for high
quality, high value yachts, but also from the BRIC nations and other pockets of wealthy, status-
seeking demand around the world
The main arguments for change include:
? Vulnerability arising from dependence on a single demand segment that can be extremely volatile in
the short term
? Increasing competition from the biggest worldwide players and potentially from new enterprises in
the BRIC nations to meet local demand
? The age of the CEO with whom the present strategy is associated (raising unanswered questions
about succession planning).
Each of the options for strategic change has pros and cons. Becoming a public company is not really a
strategy, but a means to acquire new sources of equity funds for future investment and expansion. What
that expansion might be remains a crucial question. Moreover, as many entrepreneurial individuals and
families have found (e.g. the Haas family that owns Levi Strauss Inc. and Sir Richard Branson, founder
of the Virgin empire) publicly-owned enterprises dilute and may even eliminate their control, sometimes
with disastrous consequences.
Sunseeker has developed an enviable reputation as a prestige supplier that has moved progressively
‘upmarket’ over many years, so a more ‘downmarket’ could significantly damage its perceived high
status. It would probably require investment in different production facilities to enable it to compete on
price with other high volume, budget suppliers. Global leadership in high value yachts is a strategy more
consistent with its history, its skills and present status, though it too has risks. A merger could provide
greater scope and scale, but many questions over ownership and future management would need to be
settled. To be acquired by a much bigger, resource-rich enterprise wishing to diversify might be even
more plausible, although Braithwaite would need to be convinced.
Factual update on subsequent developments
The case describes the circumstances just prior to the global financial crisis. In 2008 Sunseeker featured
in the Sunday Times top 100 list of most profitable private companies. The global financial crisis from
mid 2008 quickly changed that. Many yacht owners’ wealth depended on their financial investments,
which suffered badly. Survival for the yacht companies was the main priority as industry sales declined
substantially to mid 2010 (see: an article by Tom Bawden at Guardian Online 29/12/2010).
Sunseeker invested £6.8million in a key sales distributor, resulting in a 2008/9 loss of 9.1million. The
distributor later entered voluntary liquidation and was bought by two other Sunseeker distributors. In
June 2010 a consortium of investors bought Sunseeker International for £25m, including £40m of debt
refinancing, with Braithwaite still at the helm. Can he (and will he want to) retain control of the
enterprise and what will happen if he goes?
Fairline, owned by private equity investment house 3i, also saw its sales drop from £132 million in 2008
to £90-100 million in 2010 when it was thought only to be breaking even. Princess Yachts, was sold in
June 2008 to a consortium headed by Bernard Arnault, the French billionaire who runs the LVMH luxury
goods empire, saw its pre-tax profit fall from £26.6 million in 2008 to £18.4 million in 2009.
By late 2010 a modest recovery seemed a possibility in 2011, although fears of ‘double-dip’ recession
remained. Yachts are purchases that can be deferred, especially if one wishes to avoid being labelled as a
‘fat cat.’Still, there are hopes in the industry that the worst is over and that the boat manufacturers are
starting to enjoy a period of greater stability.