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Shearwater
Adventures Ltd.
Overview
Sitting in his office in Victoria Falls, Zimbabwe, one of the most picturesque locations on earth, Allen
Roberts found himself thinking back to the mid 1990’s when his career as a photographer in Zimbabwe
was a great fun adventure, and money was plentiful. Now, in 2018, as CEO of Shearwater Adventures,
Ltd, the dominant, integrated, adventure travel company in Victoria Falls, Zimbabwe, he was contemplating the
optimal strategy for his company.
Shearwater’s early strategy had been differentiation, however, competitors had swiftly caught up to this strategy.
Roberts realized that the addition of new adventures to competitors’ portfolios was not expensive, and there
were locals who could copy Shearwater’s adventure offerings, or create new adventures. In order to separate
Shearwater from the competition, Roberts decided that Shearwater would become vertically integrated. The
diversified company offered transportation, hotel/accommodations, various activities/adventures, retail outlets,
and restaurants in Zimbabwe, and activity/adventures and transportation in neighboring Zambia and Botswana.
Shearwater offered a full range of activities for a broad range of customers. The majority of the activities were
located in Zimbabwe, Zambia, and Botswana. For the adventuresome, Shearwater offered bungee jumping,
whitewater rafting, elephant rides, and ziplining. For leisurely travelers, Shearwater offered helicopter tours,
sunset cruises, gentle hikes, and incredible safaris. For travelers seeking additional thrills, Shearwater would
connect their customers with third-party operators to go fishing, horseback riding, and much more. The
Roberts recognized some bright signs on the horizon for Shearwater: the revolutionary Prime Minister Robert
Mugabe had been overthrown, the country’s hyperinflation was over and tourism was up 5 percent. There were,
however, some concerns, as competition was increasing, pre-bookings of activities were low, and the new
Zimbabwean government and economy were entering a period of uncertainty. Roberts believed that Shearwater’s
ability to increase pre-bookings of adventures as a defense against its competitors, and to use its existing capacity
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to increase customer usage of its adventures was vital. CEO Roberts recognized that although Zimbabwe offered
many opportunities, astute leadership and sound strategic planning would be required for his company to thrive
and increase its market share and profitability.
There is sufficient detail in the case for students to evaluate:
■ Shearwater’s vertical diversification strategy
Suggestions for Using the Case
This new case on the African adventure industry should generate considerable student interest and provoke a
lively, interesting class discussion of Shearwater’s multi-country operations and the optimal way for Shearwater to
structure its multi-country diversification strategy. Also, what changes, if any, should Shearwater’s management
take to improve the combined profitability from each of its five business units. This is a quite interesting issue,
given the large variance in customers served among the geographic locations and business units, the different
The Shearwater Adventures, Ltd. Is probably best assigned after you have covered Chapters 1–8, but it can be
successfully used after students have read just Chapters 3, 4, and 5. The topics covered in Chapters 5 and 6 are
pertinent to student identification and assessment of Shearwater’s strategy and competitive approaches. With
Shearwater’s multi-country market, the material in Chapter 7 regarding competing in foreign markets comes
into play as well.
Shearwater is a great case for drilling students in (1) applying the tools of analysis covered in Chapters 3 and
4, (2) identifying and evaluating a company’s strategy, (3) evaluating an unrelated diversification portfolio,
(4) identifying strategic issues/problems that merit top management attention and then (5) proposing action
recommendations to resolve these issues/problems. The case provides an opportunity for class members to
In our experience, it is quite difficult to have an insightful and constructive class discussion of an assigned
case unless students have conscientiously made use of pertinent core concepts and analytical tools in preparing
substantive answers to a set of well-conceived study questions before they come to class. In our classes, we
expect students to bring their notes to the study questions to use/refer to in responding to the questions that
we pose. Moreover, students often find that a set of study questions is useful in helping them prepare oral
team presentations and written case assignments—in addition to whatever directive question(s) you supply for
these assignments. Hence, we urge that you provide students with assignment questions—either those we have
provided or a set of your own questions—for all those aspects of a case that you believe are worthy of student
analysis or that you plan to cover during your class discussion.
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To facilitate your use of assignment questions and making them available to students, we have posted a file of
the Assignment Questions contained in the instructor resources section of the Connect Library for the 22nd
Edition
Utilizing the Guide to Case Analysis. If this is your first assigned case, you may find it beneficial to have
Video for Use with the Shearwater Adventures Ltd. Case There is a 2018 YouTube video entitled
“Responsible Tourism: Interview with Shannon Stowell, CEO—Adventure Travel Trade Association (ATTA)”
Suggested Assignment Questions for an Oral Team Presentation or Written Case Analysis. The
Shearwater Adventures, Ltd. case is quite well-suited for written assignments and/or oral team presentations.
Our suggested assignment questions are as follows:
■ Shearwater Adventures, Ltd.’s CEO Allen Roberts has employed you as a consultant to assess
the company’s overall situation and recommend a set of actions to improve the company’s future
prospects. Please prepare a report to Mr. Roberts that includes: (1) an assessment of Shearwater’s
strengths, weaknesses, opportunities and threats, (2) an identification of the incremental contributions
of Shearwater’s business units, (3) an evaluation of Shearwater’s financial and operating performance
Assignment Questions
1. How would you characterize Shearwater’s competitive strategy?
2. Prepare an analysis of Shearwater’s internal situation. What are its resource capabilities and strengths? Its
resource deficiencies and weaknesses? What competitive opportunities and threats exist?
3. What is your assessment of the general financial condition of Shearwater?
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Teaching Outline and Analysis
1. How would you characterize Shearwater’s competitive strategy?
Students should identify the evolving strategy of Shearwater, from its beginning, offering only adventures,
to the diversified company whose business units have different competitive strategies.
2. Prepare an analysis of Shearwater’s internal situation. What are its resource capabilities
and strengths? Its resource deficiencies and weaknesses? What competitive opportunities
and threats exist?
Shearwater’s resource strengths include:
■a high degree of vertical integration, including accommodations, transportation, activities, retail
and restaurants
■excellent locations
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Competitive Opportunities:
■expansion of Shearwater product line/operations to additional attractions
3. What is your assessment of the general financial condition of Shearwater?
Students will provide varying levels of analysis for this question, ranging from one assessment of Shearwater,
to multiple evaluations, looking at each country and business unit individually. We believe that the best
response to this question is an evaluation of each country and each business unit, and then a resulting
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TABLE 1. Liquidity and Leverage Ratios ($ in 1,000s)
Zimbabwe Zambia Botswana
Current Ratio 1.33 1.0 2.27
Working Capital $1,572 $0 $446
Turning to the operations, a striking problem was the operating loss in the accommodations business unit in
2017. From case Exhibit 4, the operating costs of $311,733 were over 60 percent greater than the amount of
sales and other income ($190,698), which produced a negative (63 percent) operating profit (loss) margin,
TABLE 2. Shearwater Consolidated Statement of Operations ($ in 1,000s)
Transportation Activities Accommodations Shops Cafe
Sales $2,217 $14,182 $191 $1,172 $2,101
Operating Costs $1,724 $10,912 $312 $958 $1,941
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4. What is your assessment of the incremental contribution of each of its present business mix
in Zimbabwe, Zambia, and Botswana?
Students should examine the profitability (including the cost structure), customers served, and the relative
contribution of each geographic operating unit to Shearwater. This will provide students an opportunity to
practice financial calculations.
TABLE 3. Shearwater Business Location Analysisa ($ in 1,000s)
Zimbabwe Zambia Botswana
a Data from case Exhibit 2
b Number of guests X Average revenue
c Number of guests X operating costs per guest
d Revenue – Operating costs
There were striking differences in the business mix among Shearwater’s geographic business locations. The
café/dining business sector, which is the largest in terms of customers served, was located exclusively in
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TABLE 4. Shearwater Customers and Profit by Country and Service—2017
Service Zimbabwe Zambia Botswana Total Business
Unit Customers
Transport 68%a13% 18% 146,908
Accommodation 100% 8,635
Activities 81% 5% 14% 149,240
Retail 100% – – 30,612
a Percent of total customers in each business unit
b Business unit customers as percent of customers in each geographic area
c Number of customers times profit per guest (Avg. Revenue – Operating Costs/guest from case Exhibit 2).
Total combined operating profit = $4,813,728
Examination of Shearwater’s five SBU operations (case Exhibit 4) indicates further differences. Activities
was by far the largest in terms of sales and profits, contributing $3,270 (81 percent), of Shearwater’s total
profit in 2017, however the unit served only 29% of total customers (Table 5). Transportation contributed
$493,000 (12 percent) to Shearwater’s combined operating profit and served 28 percent of the total
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TABLE 5. Shearwater Consolidated Statement of Operations ($ in 1,000s)
Transportation Activities Accommodations Shops Cafe
Sales $2,217 $14,182 $191 $1,172 $2,101
Operating Cost $1,724 $10,912 $312 $958 $1,941
Operating Cost as % of sales 78% 77% (163%) 82% 92%
5. What strategic issues confront Shearwater and its prospects for growth in revenues and
profitability?
Students will identify a broad range of strategic issues facing Shearwater, and many will have merit. We
believe that any list of strategic issues should contain industry differences, variance in contribution of the
business units, the need to increase pre-bookings, and the financial conditions across the business units.
The most pressing strategic issues that faced Shearwater were the differences in the industries in which
it operated, the great variance in profitability of the business units and geographic locations in which it
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6. What recommendations would you make to Shearwater management to improve the
company’s performance? Your answer should be supported by your analysis of the company’s
strategic situation.
Students will present numerous recommendations for Shearwater, but their answers should include
recommendations for increasing pre-bookings, the use of social media, resolving the accommodations
problem, and feasible expansion plans.
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sell its activities to a somewhat “captive” audience. If Shearwater transportation could increase the percent
of travelers that it picks up at airports, it could reduce the threat of locals and others selling activities to
travelers arriving without bookings. Increasing airport shuttle service may be a very good approach. Although
Epilogue
There was nothing new to report about Shearwater Adventures’ performance at the time this note went to press.