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Value Chain Activities and Assessment Essay and Presentation

I’m working on a business presentation and need an explanation to help me study.

just do Value Chain Activities and Value Chain Assessment , two parts.please have oral script for me

URBAN AXES: FIRST MOVER IN US EXPERIENTIAL ENTERTAINMENT
Early in 2017, when Chief Financial Officer (CFO) Krista Paton reviewed the 2016 financial performance
(Exhibit 1 and 2) of her fledgling company, Urban Axes, she could not believe the numbers. Started as a
“side hustle” by Paton and partners Shaun Hurley, Stuart Jones, and Matt Paton in 2016, Urban Axes was
the first axe-throwing entertainment venue in the United States. The business opened in one Philadelphia,
Pennsylvania, location in September 2016 and by late December 2016 had already far exceeded the
financial modeling Paton had designed to identify low-, medium-, and high- performance earnings
objectives.
Paton and her co-founders had some big decisions to make. Given the enormous early acceptance by
customers, the earnings potential of their unique business model, and a first mover position, what options
did Urban Axes have for expansion? How quickly should they make their move? Would Urban Axes be a
career bullseye and generate enough earnings for them to quit their day jobs and go all in on axe
throwing?
AN UNLIKELY ENTREPRENEUR
In many ways, CFO Krista Paton, age 34, (at this time Krista Poll. She and Matt Paton married in 2016)
did not fit the entrepreneur’s profile. As an undergraduate, she explored many areas of interest that began
with computer science and ended with a degree in Spanish and Modern Languages with minors in
international business and computer science. While an undergraduate, Paton worked in retail nearly full
time for mobile phone service provider SPRINT before moving into its internal audit department.
Exposure to auditing led to Paton’s pursuit of an MBA in finance, which in turn led to her first job in the
finance department of the international consumer goods company, Procter and Gamble (P&G). Paton’s
initial P&G position in Cincinnati earned her recognition as a high potential (“hi-po”) employee. A series
of promotions within a variety of product lines followed, including roles as Senior Internal Auditor,
Bounty Financial Analyst, Customer Team Finance Manager, Canada Household Needs Finance Leader,
Gillette Upstream Finance & Strategy Manager. Promotions involved transfers, in 2011 to Philadelphia
and in 2013 to Toronto, Canada. Paton attributed her rapid growth at P&G to intellectual curiosity,
something she felt came naturally to her. “I like to look at a question, form a hypothesis, and then collect
and use data to prove or disprove those assumptions. That was a behavior P&G really encouraged and
valued in its employees.”
As a “hi-po” woman in finance, Paton was excited to be part of a large company with rich opportunities
for travel and career advancement. She also capitalized on P&G’s mentoring. Early on she identified a
senior female executive whose leadership style she admired and wanted to emulate. Her mentor was
“strong and decisive, but also a very good listener. In meetings she was a little less loud and more
reserved. She asked thoughtful questions, considered the information, and then made clear decisions. I
thought she was everything you want a leader to be.”
Thinking back on her early successes at P&G, Paton recalled telling a coworker, “I intend to be a P&G
lifer. I really like working for The Man.” However, the postings to Philadelphia and Toronto had
unintended consequences, and set the stage for a reluctant entrepreneur to make a dramatic career change.
Review copy submitted to NACRA 2020, online. Not for reproduction or distribution.
A BIRTHDAY PARTY GIVES RISE TO BUSINESS OPPORTUNITY
When Paton moved to Toronto in 2013, axe throwing1 as indoor experiential entertainment was just
starting.2 Participants would throw axes at a wooden target and attempt to “stick” the axe for points,
scoring more if they hit the bullseye. Paton was part of one of the first social groups to celebrate a friend’s
birthday party by throwing axes together. She recalled thinking “this was so much fun it must exist in
U.S.” She did some quick research, discovered it did not exist yet in the US, and said to her thenboyfriend, Matt Paton, “This would go great in Philly.” She and Matt Paton called two friends, Shaun
Hurley and Stuart Jones, both Australians with successful careers in IT, who flew to Toronto to check out
the opportunity. Hurley and Jones immediately shared Krista Paton’s excitement about launching axe
throwing in the US. (See Exhibit 3 to review the profiles of each partner.)
Paton’s first move was to contact the lead axe throwing organization in Toronto to learn if it had plans for
US expansion and would consider partnering with Paton’s group. The organization claimed it already had
US expansion plans. Paton’s enthusiasm cooled as she asked herself, “What do we know about running
an axe business? Let’s keep thinking about it.”
Paton recalled that after an especially bad day at an unrewarding job, one of her potential partners
announced to the group, “I’m doing this. Are you in or out?” The Toronto organization had not made any
movement into the US, so Paton’s friends started looking for real estate in their target Philadelphia
market. Very shortly thereafter, Urban Axes was born.
“We all approached Urban Axes as something we’re going to dip our toe in,” Paton recalled. The
planning and supervisory responsibilities were divided among the partners. As the only woman and the
only American on the founding team, Paton experienced some professional and cultural struggles. Matt
Paton, Shaun Hurley, and Stuart Jones were all Australian men with IT backgrounds and had previously
worked together. They shared a cultural outlook, an easy going temperament, and a history as colleagues
and friends. Paton jokingly described the three as “basically all the same guy.” As the only partner with a
financial background, Paton tended to think differently about the business challenges and solutions. What
made the partnership work, however, was a shared set of values about business integrity and a willingness
to keep a dialogue going to resolve any differences.
Paton described their balance of power and method for conflict resolution this way, “At the end of the day
we have the same fundamental beliefs and goals. We recognized we’re on the same side. We want to do
things correctly. That was a lucky thing that we shared common values since it is not something you can
really know about someone until you work with them. A lot of times we’d say let’s keep talking about it.
Eventually we’d get to a vote, which is not very Australian.” Voting was rarely needed, Paton said, but it
worked for the partners as the most equitable method of finalizing decisions.
Gender played a conscious and important role in Urban Axes initial concept. In many stories and cultures,
the stereotypical lumberjack wielding an axe was a strong, burly and usually bearded man.3 To avoid
biases and appeal to all genders, Paton served as the face of the company. In addition, the group hired a
woman as their first general manager to launch the Philadelphia location and manage day-to-day
operations. “We made conscious choices about me being the face of the company,” Paton stated. “We
wanted Urban Axes to be inviting and approachable. We wanted to avoid the stereotype that axe throwing
is only for bearded, tatted dudes in their 30s. We wanted to be welcoming to all genders and ages from the
very beginning.” To reinforce this image, Urban Axes managers and staff represented a mix of genders
1
Axe throwing started as a sport in 2006 in Toronto, Canada.
BATL. 2020. “A Brief History Of The Axe And Axe Throwing”. https://batlgrounds.com/history-of-axethrowing/#:~:text=Back%20in%202006%2C%20a%20group,creation%20of%20a%20worldwide%20sport.
2
3
Samuel, R. & Thompson, P. R. (1990). The Myths We Live By. London: Taylor & Francis. pp. 132–6.
and appearance, hired for personality and customer service aptitude. The positioning worked, and Urban
Axes quickly attracted a broad mix of customers, from corporate events to bridesmaid celebrations.
EXPERIENTIAL ENTERTAINMENT INDUSTRY
While still a small segment of the overall entertainment industry, the experiential entertainment segment
was growing. The size of the location-based or “experiential entertainment” industry was expected to
grow to USD 17 billion by 20234. Attracted by the growth potential, many businesses that were originally
focused on selling only goods had modified their business model to include location-based experiences.
Companies like Baskin Robins5 and Taco Bell6 were investing in location-based experiences via
museums, hotels, and other initiatives.
Perhaps better known in this segment are trends such as escape rooms7, jewelry/bead making shops,
ceramics decorating stores and bigger brands like Top Golf8, Punch Bowl Social9, and Dave & Buster’s10.
Their target audience tends to be millennials, with men and women often dividing by type of
entertainment. The size of the location based experiences industry was 218.6 million USD in 2015 was
expected to grow at a compound annual growth rate (CAGR) of 32.1% from 2019 to 2025.11
The United States Census Bureau stated that the estimated number of US millennials in 2015 was 79.41
million people (Exhibit 4). The data further showed that millennials were the largest generation by
population in the US.12 As the largest generation currently in the American workforce, millennials would
soon reach their prime earnings years. This generation commanded an annual consumer spending power
of an estimated USD $1.3 trillion. A study by Harris Group analyzed the spending habits of millennials
and discovered that 78% of millennials preferred to spend money on experience over goods.13 Spending
on concerts tickets, athletic events or cultural experiences was becoming increasingly popular.
The study also found that 69% of millennials experienced FOMO.14 They dedicated about 59% of their
income on experiences and the remaining 36% on goods. With the rise in social media like Facebook,
Twitter, or Instagram, it was important for millennials to maintain their social identity and regularly
update their social status. Creating, sharing, and capturing pictures of memories was very important. It
helped millennials in finding like-minded individuals and in creating a sense of community, especially
while sharing experiences such as unique forms of entertainment. The rise in this trend supported the
growth of businesses such as Urban Axes that offered distinctive, fun, location-based experiences.
4
Liquid Media Group Ltd. 2019. Liquid Media Selects Romans from Mars to Headline YDX VR Experience Across 14 Arenas. Globe news
Wire. https://www.globenewswire.com/news-release/2019/11/14/1947507/0/en/Liquid-Media-Selects-Romans-from-Mars-to-Headline-YDXVR-Experience-Across-14-Arenas.html
5
Baskin Robbins. 2018. “Baskin-Robbins Unveils Next Generation “Moments” Store Design”. https://news.baskinrobbins.com/news/baskinrobbins-unveils-next-generation-moments-store-design
6
Gross, Michelle. 2019. “Taco Bell’s New Hotel ‘The Bell’ Is Now Open”. Forbes.https://www.forbes.com/sites/michellegross/2019/08/08/tacobells-new-hotel-the-bell-is-now-open/#2735a36865a3
7
The Escape Game. 2018. “The Escape Game Blog”. https://theescapegame.com/blog/what-is-an-escape-room/
8
Topgolf is a global sports entertainment company headquartered in the United States. Company website: https://topgolf.com/us/
9
Punch Bowl Social is a place for people to gather their friends and families to have a good time enjoying great food, drinks, and entertaining
games. The company has several locations in U.S. Company website: https://punchbowlsocial.com/
10
Dave & Buster’s is an American restaurant and entertainment business. Company website: https://www.daveandbusters.com/
11
Grand View Research. 2018. “Location-based Entertainment Market Size, Share & Trends Analysis Report By Component (Hardware,
Software), By End Use (Amusement Park, 4D Films), By Technology, By Region, And Segment Forecasts, 2019 2025”.https://www.grandviewresearch.com/industry-analysis/location-based-entertainment-market
12
U.S. Census Bureau. “Total U.S. Population by Age and Generation – 2015”. Grafiti. https://beta.grafiti.io/facts/22437-us-population-agegeneration-knoema-com
13
Harris Group. 2016. “Millennials – Fueling the Experience Economy”. Eventbrite. http://eventbrites3.s3.amazonaws.com/marketing/Millennials_Research/Gen_PR_Final.pdf
14
Acronym for fear of missing out.
The consumer price index for urban consumers in the US was 210 in 2010 and has risen steadily to 240 in
2016. (Exhibit 5)15 The Consumer Price Index (CPI) is a measure of the average change overtime in the
prices paid by urban consumers for a market basket of consumer goods and services. According to the
2015 American Community Survey, median household income for rural households was $52,386, about
4.0% lower than the median for urban households, $54,296. About 13.3% of people in rural areas lived in
families with incomes below the official poverty thresholds. The poverty rate for people in urban areas
was 16.0%.16 This showed that the standard of living in urban areas was higher than rural areas.
Philadelphia was the most populous city in the state of Pennsylvania. The city had more than 100 colleges
and more than 340,000 students and was ranked fifth in the country for the number of college students.
Attracted by lower rents and more affordable lifestyles, many young New Yorkers were moving from
New York City to Philadelphia. According to the US Census, an average of 3,500 New Yorkers moved to
Philadelphia each year between 2006 and 2010.17
FIRST MOVER AXE THROWER: BUILDING A BUSINESS AND A BRAND
Considering the extensive corporate experience of the partners, it might be assumed they would have
conducted a sophisticated market analysis or feasibility study before launching Urban Axes. Not so.
According to Paton, “We weren’t giving up our day jobs– this was a side hustle. We could limit our risk.
If a lot of things had gone differently, we might not be here today. If we had to personally guarantee a
long-term lease, for example, that might have changed things.” As Paton remembered their start-up
planning process, the team developed a marketing plan, detailed financial models for low-, medium-, and
high-performance targets, and general operating principals derived from the observations they conducted
at axe throwing venues in Toronto. They decided not to conduct market surveys of potential customers
since even their closest friends gave them skeptical responses. “What we kept hearing when we ran the
idea by people was ‘really, you’re going to do that?’” Paton laughingly remembered. “We’d say, ‘trust us.
You’re going to love it’ and we were right.”
Paton’s extensive finance experience proved to be invaluable preparation for building Urban Axes. “It
gave me a great understanding of many aspects of business. I got to see anything related to numbers,
which is really everything. How much do we spend on marketing? Why did we choose those programs?
Are they good investments? How does our supply chain work? I was involved with tax complexities,
vendor negotiations, customer relationships – those were all things I had exposure to over the years which
gave me a very broad business understanding.”
The financial models Paton built started with a base case to cover costs and make a little side money.
Most of the fixed costs were predictable. The one big unpredictable variable was how many people would
want to pay money to throw axes. Their approach to risk mitigation meant the founding partners retained
their day jobs, set limits to their capital investment exposure, built contingency plans into their business
plan, and entered into an initial lease agreement that did not require a personal guarantee.
Statista. 2020. “Consumer Price Index (CPI) of all urban consumers in the United States from 1992 to 2019”.
https://www.statista.com/statistics/190974/unadjusted-consumer-price-index-of-all-urban-consumers-in-the-us-since-1992/
16
Bishaw, Alemayehu and Posey, Kirby. 2016. “A Comparison of Rural and Urban America: Household Income and Poverty”. U.S. Census
Bureau. https://www.census.gov/newsroom/blogs/random-samplings/2016/12/a_comparison_of_rura.html
17
Lubrano, Alfred. 2019. “Are flocks of New Yorkers moving to Philadelphia (and what does it mean if they are)?”. The Philadelphia Inquirer.
https://www.inquirer.com/news/new-york-philadelphia-real-estate-curious-philly-fishtown-20190611.html
15
THE URBAN AXES EXPERIENCE IN PHILADELPHIA
For their first location, Paton and partners selected a 6,000 square foot former industrial building in the
gentrifying neighborhood of Kensington in Philadelphia. The site combined several key location factors:
enough space to install multiple target lanes, a mix of commercial and residential properties, and easy
access. The rough, authentic look of the space proved an attractive compliment to axe throwing.18
Since it was in a residential neighborhood, the hours of operation and occupancy limits had to both
comply with zoning and meet the approval of the neighborhood association. As a novel business type,
Urban Axes applied for a permit under the nightclub licensing rules. Finding an insurer willing to
underwrite such an unfamiliar business posed steep challenges as well, especially since Urban Axes
offered a BYOB19 option, requiring all customers to show proof of age 2120 or older. Both from an insurer
and a potential customer perspective, safety concerns posed an early and serious obstacle to acceptance.
Mixing axes and alcohol seemed like a reckless idea. Paton’s team knew that safety had to be a top
priority in the design and implementation of their plans.
The customer experience was loosely based on the Canadian model, adapted to US entertainment norms.
Each group of 6-12 guests received a coach to stay with them through their 2.5 hours of training and play.
The training began with safety. All rules within the business were carefully designed with customer and
staff safety as their number one priority. The partners knew that any injuries would spell the end of their
business.
Coaches, who were hired based on personality since no one had experience as axe throwers, demonstrated
to customers how to hold and throw the axe to score points on a bullseye-style target, similar to but much
larger than a dartboard. The coaches’ performance became an early differentiation for Urban Axes.
Coaches were trained to make the guest experience safe, unique, memorable, and fun. Training
represented a significant expense for the business. Each new hire completed 60-80 hours of rules and
safety training based on Urban Axes original training manual. Next trainees “shadowed” an experienced
coach and gradually assumed a larger role under their supervision before taking on their own guests.
Paton noted that her three Australian partners brought their cultural values to the company structure. They
designed a compensation package generous in comparison to most service industry jobs. The Urban Axes
package for all staff included living wages, benefits such as health insurance for all full-time employees
and a type of quarterly “profit sharing” plan. The partners chose to invest in employees with the goal of
attracting and retaining high-quality employees, minimizing turnover, and ensuring a consistently highquality customer experience. Originally staff were not allowed to accept tips though eventually tipping
became optional for customers.
The key to building a one-of-a-kind business was word-of-mouth marketing, based on a superior
customer experience. Urban Axes wanted its guests to feel just as Paton had when she went to that
Toronto birthday party-“This is so much fun, you just have to do it.”

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