A Strategic Analysis of Stageworks Theatre with recommendations for improvement

The following is a comprehensive analysis of the external environment of the theatre industry in the US and locally in the Tampa Bay Area in which our client company, Stageworks Theatre, operates. We will discuss the industry’s dominant economic characteristics, which include market size, growth rates, economies of scale, competition, and overall industry profitability. Next will be an in-depth analysis of the competitive forces in the industry by examining the tenets of Porter’s Five Forces Model. This model discusses the potential threats associated with new entrants into the industry, substitute products, supplier and buyer power, and helps to determine how these potential threats characterize the amount of rivalry among all competitors in the industry. At this point we will look specifically at the local market in which Stageworks operates and determine how it compares in market share, profitability and overall attendance. With the help of strategic group maps we can visualize, using the key success factors for the industry, any opportunities that would allow Stageworks to gain market share and further increase its profit margins. Finally we will provide an in-depth analysis of the technological, social, and economic drivers that have the potential to change this industry fifteen years into the future.

Market Size and Growth Rate

The market size of the Theatre Companies and Dinner Theatres (Theatre Companies) industry, NAICS code 711110, is $7,746 million as of 2013 (AnythingResearch, 2014). Growth in the industry is essentially stagnant when compared to 2012, which was $7,740 million (AnythingResearch, 2014). Florida’s theatre industry accounted for $311 million of this total in 2013 (AnythingResearch, 2014). The entire nonprofit arts and culture industry is much larger, with $153.2 billion in economic activity per year; including $61.1 billion in spending by organizations, $74.1 billion in event-related spending, and generating $22.3 billion in government revenue (Americans for the Arts, 2013). In 2012, there were 3,260 total Theatre Companies in the U.S., down slightly from 3,290 in 2011 (U.S. Census Bureau, n.d.). There were 147 Theatre Companies in Florida in 2012, down slightly from 150 in 2011 (U.S. Census Bureau, n.d.). In the Tampa – St. Petersburg – Clearwater area, there were 20 Theatre Companies and Dinner Companies in 2012, up slightly from 18 in 2011.
The entire nonprofit arts and culture industry maintained 4.1 million jobs in 2013 (Americans for the Arts, 2013). Theatre Companies accounted for 65,278 paid employees in 2012 (U.S. Census Bureau, n.d.). Annual payroll for the Theatre Companies industry was $2 billion in 2012, an average of $30,760 per paid employee (U.S. Census Bureau, n.d.). The average size of each Theatre Company, in terms of paid employees, is rather small, at approximately 20. It should be noted that many of these firms are nonprofit, and there are hundreds of volunteers that have not been accounted for in this number.
This industry is in the mature stage of the industry life cycle, and as such, is characterized by growth in line with the overall economy (Edwards J. , 2012). Industry value added, which is used to measure an industry’s contribution to the overall economy, is projected to grow by an average annual rate of 3.2% over the next 10 years, which is in line with the general economy, at an average annual rate of 2.7% over the same 10 years (Edwards J. , 2012). This slow or low growth implies intense competition for firms in the industry.

Scope of Competitive Rivalry

The scope of competitive rivalry for Theatre Companies is narrow or focused. Many small firms exist throughout the United States, thus consumers have many local options for entertainment. Consumers do not need to look beyond their region in order to find multiple theatre companies. This characteristic dictates that the scope of competitive rivalry is more regional than national.
In March 2012, there were 20 Theatre Companies in the Tampa Bay Area, and a total of 147 in Florida (U.S. Census Bureau, n.d.). The total size of this market in our local area also suggests fierce competition among the existing theatres, and with low barriers to entry, as discussed below, makes this industry very competitive, especially within regional areas.

Entry/Exit Barriers

The Theatre Companies industry is highly fragmented, allowing many small firms to compete. The low barriers to entry increase this competition even further. Being that many firms in this industry are nonprofit, donations of buildings and theatres is commonplace, essentially eliminating any substantial economic barrier to entry. The nonprofit segment often receives government funding, in addition to corporate or private donations. This cash influx minimizes start-up costs thus reducing barriers to entry further. It must be noted that nonprofit firms fiercely compete for the limited funds and grants offered by the government, as well as having to overcome the rigorous application process to obtain 501(c)3 status.
Web technology is increasing in the theatre industry. This technological change has given enterprising firms an advantage by lowering traditional barriers to entry even further. The prevalence of web technology and social media has made it easier for consumers to learn about events, share information about events, and purchase tickets online or via their mobile devices. Theatre companies have also been able to capitalize on web technology, reaching more consumers at a much lower cost. Use of the internet has allowed firms to promote their talent locally and nationally by advertising and affordably targeting more potential consumers, which has resulted in many new firms entering the industry. Another characteristic that has lowered barriers to entry is the fact that property values in the U.S. have diminished greatly, encouraging new firms to take advantage of inexpensive real estate and invest in venue ownership (Edwards J. , 2012).
The barriers to exit in the theatre industry are almost non-existent. With buildings that are donated and rents subsidized by the local government, a theater company can close its doors without needing to sell off expensive assets or highly technical equipment. These extremely low barriers to exit contribute to the competitiveness in this industry, especially at the local levels.

Product and Customer Characteristics

A theatre company’s season runs from September through April, which only provides about six months of earned income for the theatre. The performing arts products, plays and theatrical performances, are discretionary activities to the local consumer and are driven by real household disposable income. During the great recession of 2009-2011 the level of gifts, donations and grants that were available to the theatre industry were greatly diminished and as a result the industry growth rate was stagnant. As per capita disposable income and corporate profit began to increase, new opportunities for growth have emerged and local theatres are seeing an increase in their attendance rates.
Firms in this industry also rely on other sources of revenue besides ticket sales. Concession items such as food and beverages, and merchandise sales are key products that must be capitalized upon for firms to succeed due to their high profit margins. Revenue from these operations makes up about 15.8% of the total industry’s revenue (Edwards J. , 2012). Advertising or corporate sponsorship is another alternative avenue for firms to earn revenue in this industry, and should be considered for firms struggling to work within their budget constraints. The amount of income from advertising and corporate sponsorship is about 12.7% of the industry’s total revenue (Edwards J. , 2012). Common forms of advertising or corporate sponsorship include signage, promotional programs, venue naming rights, on-site representation and the sale of online ad space (Edwards J. , 2012). Donations, gifts, and grants for nonprofit players in the industry make up about 40% of industry revenue, with private donations accounting for 90% (Edwards J. , 2012). The National Endowment for the Arts is the major government program that provides funding to nonprofit theatre companies at the national level.
Consumers in this industry are characterized with having high levels of disposable income. Disposable income fluctuates with changes in interest and tax rates, employment levels and the household savings rate (Edwards J. , 2012). Consumers tend to be influenced by publicity and positive reviews. Scale economies come into play here as companies with large promotion dollars can create significant public awareness for their events. Additionally, consumers of theatrical performances are fairly price sensitive and frequently compare the price of attending a show to other, less expensive entertainment options, especially during a recession. Theatrical fans are also influenced by the uniqueness of the event. If popular artists or performers have previously been on hiatus, consumers will be attracted to their return.

Capacity Utilization and Resource Requirements

Theatre operators must make the most of their facilities by selling out events and renting their venues to third-party companies during the off-season. Because the industry’s earned income period from plays and performances is only about six months out of the year, there is an opportunity for them to capitalize on the ‘unused’ space during the rest of the year, thereby supplementing the revenue that is generated from ticket sales. Better capacity use creates lower per-unit costs and allows companies to offer consumers more affordable tickets to events (Edwards J. , 2012).

Industry Profitability

Concert and Event Promotion industry profit margins, measured as earnings before interest and taxes, are expected to average 8.4% of revenue in 2014 (Edwards J. , 2012). This low level of profit margin reflects the fact that half of all establishments are nonprofit (Edwards J. , 2012). Smaller nonprofits, such as Stageworks, aim to record an operating surplus in order to steer any unexpected revenue towards its investment holdings or increase its assets. Profitability has rebounded from what it was five years ago, 6% of total revenue. This was primarily due to an increase in disposable income as employment returned to pre-recession levels.

Although industries may look different from one another, the underlying forces that drive profitability are quite similar. In 1979, Michael E. Porter published “How Competitive Forces Shape Strategy” which described what would eventually become an analytical model known as Porter’s Five Forces (Porter, 2008). It is this model that helps us analyze the theatre industry of interest to us today. In the sections that follow, we will explore each of the five forces and look for insights into what factors contribute to success in the industry, and what factors make success more difficult. The completed model delivers a message that will shape and inform the most successful strategy for Stageworks Theatre in the future.

Figure 1: Porter, 2008

Porter's Five Forces

Threat of New Entrants

When we consider the threat of new entrants entering the industry, three broad areas of concern need to be addressed: barriers to start up new theatre groups, consumer loyalty to a particular brand, and the scale of the existing firms compared to the new firm. Each of these three areas is unique and can have a distinct impact on firms that already exist in the industry. By exploring each of these three broad areas of concern, a new, more intelligent understanding of this threat is obtained.
The ability to open a new firm exists in almost any industry at any given time. The American way supports this notion that we are free and encourages us to follow our will. It makes sense then that a new firm may open and challenge the industry for the existing customers and market share. The theatre industry has very few barriers that would prevent this from happening. Almost anyone can open a 501(c)3 theatre as long as it meets the IRS’s requirements. Making this even more concerning is the lack of a technological barrier that would discourage entry. Theatre companies have been performing for thousands of years with little more than a script and a voice to deliver it. This first broad area of concern should be alarming to existing industry constituents.
The second broad area of concern draws our attention to the likelihood that existing customers are fickle when a new theatre enters the industry. Some industries have strong brand loyalty. In those industries, brand loyalty can act as a barrier to entry that would discourage any new entries due to perceived challenges in gaining market share. In our industry brand loyalty appears to be low. Research has shown that although there are select few percentage points of customers who are highly dedicated to live theatre, a much higher percentage are simply interested in the entertainment provided and not the manner in which it is delivered. One such study exploring repurchase intention in the performing arts industry quoted a customer who remarked that for her it was about “cheap seats” (Hume, Mort, & Winzar, 2006) to entertain her kids and nothing more. Because loyalty is weak, an entry barrier is not present and therefore may encourage new entrants. This second broad area of concern is, much like the first area above, considered high.
The third broad area of concern highlights considerations that vary with the size of the existing firms in the industry compared to the new entrant. If the existing firms are large in scale, it may follow that those firms would have a cost advantage in areas of expense such as raw materials, overhead, or rent. In this industry, however, those economies do not appear to be prevalent. One small area that may deliver a slight scale advantage to existing firms in the industry is advertising. Existing firms have spent dollars in the past to develop its brand among consumers in its markets. If a new entrant happens to be smaller in size or have less available resources, advertising could be considered a barrier to entry. Advertising expense is small (<10% for Stageworks in FY2013 (Stageworks, 2014)) though in comparison to larger expenses that these firms have such as acting talent. Theatre companies are able to source their talent a number of ways. One of the favored approaches is to utilize the local union. The union controls the wages for the talent which therefore limits the impact of scale on this large expense category. In a similarly large expense category we find distribution of the product. For theatre companies, distribution occurs primarily through a single location in their theatre. A 2012 study conducted by the National Endowment of the Arts concluded that 12.3% of adults who attended a performing arts event did so in a theatre, concert hall, or auditorium. However, an even larger percentage, 15.4%, did so outdoors in a park or open-air facility (National Endowment for the Arts, 2013). This conclusion serves to point out that having a large established infrastructure may not equate to having larger attendance. In these ways, this broad area of concern has mixed levels of threat. The slight scale advantage that may be delivered by advertising (lowering the threat of a new entrant) is offset by the neutral advantage offered by wages and distribution resulting in an overall low to moderate concern.
Now that these three areas of broad concern have been more thoroughly investigated, we have learned that there is an elevated threat of new entrants to the industry constituents. Of utmost concern to the industry are the areas of brand loyalty (lack of) and ease of entry (low technology needed, obtaining nonprofit status). We will come back to this conclusion later as we summarize the overall findings of the Five Forces Analysis.

Threat of Substitute Products or Services

Substitute products are those products that a consumer can utilize to fulfill the same need from a different industry. In order to determine and assess the threat of substitute products, we first will discover what needs are being fulfilled and then look at what possible substitutes exist to fulfill those needs. We will then carry on assessing the benefits and drawbacks of the possible substitutes as well as any relevant switching costs that may exist.
The live theatre industry is diverse and serves many different demographics in many different parts of the country. Consumers attending live theatre performances seek to fulfill a wide array of needs. The strongest drivers are with consumers who feel that “it is about feeling the music in your soul” (Hume, Mort, & Winzar, 2006). This is the primary need being fulfilled by Stageworks. There are also secondary needs that may prove to be just as important to consumers. These include cultural education, support for local artists, and pure socialization with other consumers.
The needs listed above are served well by the theatre industry, and it has developed a relatively large consumer base that depends on these needs. In 2012, roughly 19.5 million adults attended a non-musical play (National Endowment for the Arts, 2013). This large audience is constantly being courted by competing industries to redirect their disposable income. Likely substitute industries for these consumers might be restaurants, comedy clubs, and movie theatres. Any of these options fulfill the consumers’ needs for a similar price. The drawbacks and benefits of these substitutes are a matter of personal preference for each consumer. Each consumer determines for himself what type of event he wants to attend on any given night. For the majority of the country, where cultural options (ballet, opera, live theatre, music) are plentiful, the switching costs are very low. A consumer, with almost no notice, can choose to see any one of many shows without penalty. Even consumers, who like to see local theatre because it supports local artists, can find a substitute musical performance or ballet with equally local talent.
The threat of substitute products to the live theatre industry has been shown and explained. Substitute products are easily obtainable with little or no cost of switching to the consumer. Because of this, the threat of substitute products is high and should be addressed in Stageworks’ future strategy.

Threat of Suppliers

Suppliers have the ability to assert pressure on an industry if the conditions are right. In the industry of live theatre, primary suppliers are those that contribute key inputs to the major work output of producing plays to generate revenue. Examples of these inputs include actors, directors, producers, script writers, and critics.
Assessing the threat of these key suppliers begins with determining their collective size. There are an estimated 93,000 producers and directors in the United States (Bureau of Labor Statistics, n.d.). The number of actors is slightly smaller at 63,000. The difference between the actors and the directors/producers is that the actors are covered by a collective bargaining agreement. There are also a number of non-union (non-professional) actors which are not likely to have been captured in this survey. Survey results for script writers are not available, but are estimated to be far less than either of the groups previously mentioned. Theatre critics typically number at least one per major news outlet.
Of these groups, the only significant threat possible is from the actor’s union. The labor union for the actors controls two key aspects of the theatre’s business: labor costs and labor availability. Should the theatre industry move in a direction not coincident with the actor’s union approval, the union may apply pressure to the theatre industry to shift directions. Although this pressure could be a challenge to the industry, it is not believed to be likely, and therefore is only a low to moderate threat (Hartley, 2014).

Threat of Buyers

A buyer threat can occur in industry when downstream consumers are able to apply pressure or threaten the way that an industry does business. In the live theatre industry, buyers are individual patrons who are not grouped as a collective unit. Upsetting a particular buyer may cause them to select a substitute product, but it is highly unlikely that a particular buyer can affect a large enough group to significantly impact revenue. Research done in Australia in 2003 suggested, “only a small percentage of persons who claim to be interested in the performing arts attend regularly,” (Hume, Mort, & Winzar, 2006) which lessens the threat of buyers further. Buyers are small in collective numbers; they do not provide a regular or consistent revenue stream to the theatre. For these two reasons, buyers present a low threat to the theatre industry.

Competitive Position of Rivals

The competition among rivals in the local theatre industry is very important to analyze and understand in order to design and implement a successful strategic business plan. Porter’s Five Forces primarily determine the amount of rivalry that firms in an industry maintain. The fifth force, Rivalry Among Existing Firms will be explored in the following section. The intensity of rivalry in a particular industry can be characterized by three main factors, which are (1) Industry Competitive Structure, (referenced in Industry’s Dominant Economic Traits), (2) Demand Conditions, and (3) Height of Industry Exit Barriers (Tompson G. H., 2013).
Rivalry among competitors is the threat the industry firms impose on each other. The threat is elevated if any of the following conditions are true: the firms in the industry are numerous, the size of the market is declining, the firms in the industry are similarly sized, or exit barriers are weak or nonexistent (Tompson G. H., 2013). Industries with some or all of these conditions are industries where rivalry is likely fierce. The live theatre industry does exhibit some of these conditions. The most recent information from the National Center for Charitable Statistics reports that there were 6,575 theatres in the industry as of June of 2014 (The Urban Institute, National Center for Charitable Statistics, 2014). This total is up from 3,933 in 2005 and is an increase of almost 300 theatres per year. Within that time period, from 2008 to 2012, the number of U.S. adults who attended a live non-musical play dropped by 12% per year (National Endowment for the Arts, 2013). There are more theatres competing for less audience. National information on the size distribution of the theatres in the industry was not available but we know that locally Stageworks has four main competitors. Two of these are similar in size (in terms of revenue) to Stageworks, while the other two are much larger. In terms of exit barriers, there are very few if any for the smaller firms. These firms rent or borrow their production space, have very few tangible assets, and have small staffs, which enable exit from the industry quickly, and with little cost if needed.

Demand Conditions

For the performing arts industry as a whole, the number of Americans attending live performances and purchasing recorded performances has been growing consistently over the years (The Florida Orchestra, n.d.). The largest growth area in the arts has been in the non-live arts market, both recorded and broadcast performances (The Florida Orchestra, n.d.). The main driver of non-live arts performances is due to the rising costs of attending live performances and the preference for home-based leisure activities. While the population as a whole has been attending more live performances, the increase in attendance can be attributed to population growth and the increase in education levels. Although education levels are expected to rise in the future, the outlook on the performing arts demand is expected to decrease due to the fact that many Americans want to have flexibility in their leisure activities (The Florida Orchestra, n.d.).
Utilizing public information for nonprofit theatre companies, The Tampa Bay area performing arts industry growth rate is -6.22% from 2009-2011 as can be seen from the data below (Guidestar, 2012). The data also displays revenue for each year, total revenue for the Tampa Bay market for the 4-year period, and the market share for each theatre company.

Table 1:
Tampa Bay Theatre Market
2008 2009 2010 2011 4 Yr. Revenue Totals
Stageworks $362,673 $349,688 $495,038 $409,109 $1,616,508
Straz $30,106,476 $31,037,465 $26,701,319 $26,605,586 $114,450,846
FL Orches. $8,336,708 $10,478,410 $9,911,185 $8,736,692 $37,462,995
Jobsite $144,801 $153,678 $78,403 $148,126 $525,008
Palladium $4,313,729 $2,155,302 $1,986,259 $2,614,870 $11,070,160
$164,600,509
**The public data for two of Stageworks’ competitors (American Stage Theater and Freefall Theater) is either incomplete or missing for certain years. Therefore, we did not incorporate these two theaters in our financial/market share analysis.

2008-2009 2009-2010 2010-2011 3 Yr. Geometric Avg
Stageworks -3.58% 41.57% -17.36% 12.80%

Straz 3.09% -13.97% -0.36% -11.63%
FL Orches. 25.69% -5.41% -11.85% 4.80%
Jobsite 6.13% -48.98% 88.93% 2.30%
Palladium -50.04% -7.84% 31.65% -39.38%
-6.22%

Percent of Market Share (Tampa Bay)
Stageworks 0.98%
Straz 69.31%
FL Orchestra 22.69%
Jobsite .32%
The Palladium 6.73%

As stated above, the demand for performing arts in the Tampa Bay area has been on the decline over the past couple of years while favoring alternative types of more flexible entertainment options. The Straz Center, which is the largest and most known performing arts company in the area, dominates the market with an almost 70% market share and has by far the largest amount revenue. The Straz is well positioned in the market due to its scale and the Broadway shows that the company brings to the area. The Florida Orchestra is the second largest nonprofit performing arts company in the Tampa Bay area, with over 22% market share. The Florida Orchestra primarily offers musical concert programs and has a high number of season ticket holders and also offers group ticket discounts. The Palladium Theatre has the third largest market share in the Tampa Bay area at nearly 7%. Jobsite Theater is a performing arts theater that is in residence at The Straz Center. Jobsite is the smallest of all of the theaters in the Tampa Bay market with 0.32% of the market share. Jobsite’s programming consists of small performing arts shows with local actors from the Tampa Bay area. Jobsite offers season tickets with flexible scheduling, group discounts, and the “Rock Star Experience” which consists of tickets for all shows and special programs that are not open to the public. The Palladium primarily offers musical concert programs with bands providing most of their performances and has season ticket holders and group ticket sales. Stageworks’ market share is the second smallest in comparison to its rivals in the Tampa Bay market with less than one percent. Stageworks’ programming primarily consists of small comedic shows that are produced by the company themselves. Stageworks prides itself on the fact that most of the actors are local which supports the acting community. Stageworks is a small niche theater company that has recently received numerous accolades such as a 2013 GreatNonprofit award and Creative Loafing’s 2014 Best of the Bay, Best Actress and Best Director awards. Although Stageworks is the smallest performing arts company in the area, the company also has the highest potential for growth and expanding its customer base.

Height of Industry Exit Barriers

Exit barriers in the performing arts industry are small and few. Most nonprofit performing arts companies enjoy government sponsored leases that are favorable to the performing arts companies. For example, Stageworks currently has a 60-year lease with the local government with an annual payment of one dollar. Most performing arts companies do not have many tangible assets except for show props and technology for the shows. These small nonprofit companies are able to exit the market quickly if needed, with very little cost. The low industry exit barriers also indicate that competition in the industry is intense and likely to continue in the future.

Strategic group maps identify the most important competitive characteristics in an industry. The characteristics also identify factors that distinguish competitors from each other (Tompson G. H., 2013). Two strategic groups exist within each group map. For the first map below, we compared name recognition of each performing arts company with the amount of donations that were given to each company. The Straz Center and The Florida Orchestra have the highest name recognition as well as the largest amount of donations. In 2011, The Florida Orchestra’s donations totaled $6,456,424 while The Straz Center had donations of $5,435,374. These two performing arts companies make a strategic group. The Palladium Theater has the third largest amount of donations in the Tampa Bay market at $1,102,855 in 2011 and also the third highest name recognition. Stageworks and Jobsite make up the last strategic group. Jobsite had donations of $32,662 in 2011 while Stageworks had donations of $9,844 during the same period. Jobsite has almost the same name recognition as Stageworks in the Tampa Bay market (Guidestar, 2012). The Straz Center and The Florida Orchestra will continue to be positioned high on both axes in the future, and The Palladium will also continue to rise on both axes. Jobsite will develop its name recognition (measured by our team) and donation base in order to grow. To stay relevant in the Tampa Bay market, Stageworks must direct its efforts to soliciting donations from patrons and businesses around the Tampa Bay area. Stageworks must also improve its marketing and advertising efforts in order to move up on both axes. It is evident that Stageworks and Jobsite are the two performing arts companies that are in a position of weakness. As you can see from the map below, there are clusters comprised of the different theatre companies in the Tampa Bay area. The white spaces in the map indicate that there is room for improvement: moving up and right on the map. Naturally, there are two large white spaces on the top left and bottom right. These two white spaces are not ideal positioning for any company, as it would denote high name recognition along with low donations solicited and high donations solicited with low name recognition, respectively. Stageworks’ main focus should be improving its position on name recognition and the amounts of donations that are donated to the company. Stageworks has ample opportunity to capture a higher level of name recognition and donations. Srageworks should strive to be positioned with Palladium on the strategic group map pictured below.

Strategic Group Map

The second strategic group map compares the number of season ticket holders to ticket prices for each company. Although the number of season ticket holders was not available as of this writing, logical assumptions were made to conclude that higher revenue was generated by higher numbers of season ticket holders. Again, The Straz Center and The Florida Orchestra dominate the strategic map. The Straz Center’s ticket prices are the most expensive and range from $40–$95, (The Straz Center, 2014) with the largest number of season ticket holders. The Florida Orchestra also has a high average ticket price of $45, and they have the second largest number of season ticket holders. The Palladium offers its tickets from $14 – $45 depending on the performance and has the third largest amount of season ticket holders (The Palladium Theater , 2014). Jobsite has the lowest average ticket price of $25, and the least number of season ticket holders (Jobsite Theater, 2014). Stageworks’ average ticket price of $30 makes it the second least expensive in the Tampa Bay market while also holding the fourth largest number of season ticket holders (Stageworks Theater, 2014). In the future, all of the performing arts companies in the Tampa Bay market would like to increase the number of season ticket holders while keeping the ticket prices affordable, in other words, move up along the Y-axis. Jobsite and Stageworks are again in the position of being the weakest competitors in this market. These two theatres are probably the most competitive group in the industry due to their small scale and niche performances, and the fact that they compete for the same audience increases the competitive rivalry. The white spaces in the group map below also highlights opportunities for improvement: moving up and to the right. Of course, filling the white space to the far right is not a sought after area because it means high prices with low season ticket holders. The clusters in this map indicate that the larger, more well-known performing arts companies have a relatively higher ticket price and larger number of season ticket holders, which coincides with the name recognition and the size that attracts more highly visible performances. Again, Stageworks has opportunity to capture more market share of season ticket holders and move into white spaces above and to the right of where they currently reside. The white spaces show that there are opportunities to gain in terms of the number of season ticket holders and the ability to charge higher ticket prices as Stageworks grows in the Tampa Bay market.

strategicgroupmap2

“…key success factors (KSFs) are the behaviors, competencies, or characteristics that are required for companies to stay competitive in an industry. The absence of KSFs indicates that a company will not stay competitive for long” (Tompson G. H., 2013).

Theatre Industry

Stageworks Theatre falls under the theatre industry that is the organization’s primary activity and revenue stream. One classification is the Concert & Event Promotion in the US sector is defined as an “industry [that] creates, manages, and promotes live performances and events” (Edwards J. , 2012). As a small community theatre, Stageworks accomplishes each of these functions. Key success factors for this industry are:
• Reputation
• Promotions
• Committed Employees
One key success factor in the theatre industry is the institution’s reputation. No matter how much a business may be struggling, its history and reputation will still drive customers to see shows. A study done on French “theatrical institutions” supports the importance of a theatre’s reputation. Regression model analysis was carried out on the detailed data to analyze the variables that drive theatre attendance. Overall results showed that “the most reliable sign of quality remains the reputation of the theatrical institution” (Urrutiaguer, 2002). The study also proved that critical reviews and the reputation the media tries to create for a production does not drive audiences away (Urrutiaguer, 2002). This supports the conclusion that even a bad review will not stop customers from attending a theatre that has built a strong reputation over the years. Not only does reputation affect attendance, but it also influences fundraising. It is difficult to find donors who will back a theatre that does not have a decent reputation. Patrons want their names to be associated with prestige, as well as a recognizable and honest institution—all of which stems from a theatre’s reputation. Having faithful donors in turn helps foster a theatre’s reputation and gives that organization an edge over its competitors.
Another key success factor in the theatre industry is promotions. Customers need to be aware of the entertainment that is available to them and the plays that will be put on, so promotions becomes necessary to attract audiences. The first form of promotions can be traced back to the Middle Ages when playhouses announced performances by strolling processions of musicians and performers through the streets. Promotions evolved into the form of posters, and now social media plays the biggest role. Making people aware of the theatre and shows gets them through the doors. It has always been essential to spread the word about a performance and now it is even more important with the rise of other show options, such as movie theatres and at-home movie/TV experiences. Promotions also communicates the importance of supporting local businesses by demonstrating that sometimes the best forms of entertainment are not imported or on tour, but right in the neighborhood.
Having committed employees is another key success factor in the theatre industry. Employees need to be devoted, talented, and hardworking to give a theatre an edge. This encompasses employees that work on both the business side and the artistic side. Without a good artistic director to pick the right material, actors, or give the right direction, it is not possible to produce good quality plays. Fine performances are a main reason the audience is motivated to come back. In fact, the first thing theatre majors in college are taught is the importance of commitment to their jobs. If the actors, light technicians, producers, costume designers, ticketing office, etc. are not devoted to their jobs and not working their hardest, it affects the overall performance and the theatre’s standing against its competitors.

Non-Profit Industry

In addition to the theatre industry, Stageworks falls under the non-profit industry, as it holds the 501(c)3 designation from the IRS. This industry has its own key success factors:
• Board Involvement
• Diverse Revenue Streams
• Charitable Giving
Board Involvement – The non-profit’s board is a critical component to its success, as the board helps focus the organization’s direction. GuideStar highlights two main responsibilities of a board: support and governance (Green, 2012). “In the role of ‘supporter’ board members raise money, bring contacts to the organization, and act as ambassadors to the community” (Green, 2012). By performing these duties, board members are essential to brand awareness of an organization and help drive revenues through donations or participation in events and activities. Through governance, the board supports and complements the skills of the organization’s executive director and employees, evaluates the executive director in accordance with the organization’s mission and vision, and ensures that the organization is abiding by all legal and regulatory guidelines. Having an inactive board can be very costly by missing out on a free medium for networking, soliciting donations, and overlooking organizational waste.
Diverse Revenue Streams – Contrary to the belief of some, non-profit organizations cannot subsist on donations alone; a successful organization must have diverse revenue streams. Two options for organizations in this industry are grants and earned income, that is, income stemming from the sale of goods or services. Being dependent primarily on donations and grants can be problematic as Grant Space explains “factors like increasing competition and a flagging economy have caused income from grants and individual donations to level off” (Knowledge Base, n.d.). Benefactor Group continues, “larger organizations can weather the changing tides of philanthropy, but smaller organizations with fewer revenue streams get rocked by the waves more visibly” (Navigating the Seas of Giving, 2014). Plus, donations and grants are oftentimes one-time occurrences. Earned income provides a safety net, allowing non-profits “to meet growing needs and to better sustain their operations over the long term” (Knowledge Base, n.d.).
Charitable Giving – For all organizations, donations are integral. After all, it’s how the organization earned its tax-exempt status. Unfortunately, consumer trends toward charitable giving fluctuate. Giving USA’s annual report on philanthropic giving nationwide in 2013 showed increases in total donations by individuals, foundations, and bequests as compared with 2012; however, contributions from corporations were down almost two percent (Navigating the Seas of Giving, 2014). Meanwhile, giving to education, human services, health, public society benefit, arts/culture, and environment/animals increased versus 2012, while foundations and international affairs received fewer donations (Navigating the Seas of Giving, 2014).
Financial contributions are just one source of giving; other support can include in-kind donations and donation of time, i.e. volunteering. Donation of time can be just as important to non-profits as tangible donations considering non-profits’ small staffs and constrained resources. While Giving USA’s report paints a positive picture for financial giving, the outlook for volunteering is not as optimistic. According to Jonathan Lever of YMCA USA, “based on our findings from 2010 to 2014, the percentage of people who planned to volunteer time or expertise to a worthy cause or organization dropped from 57 percent to 41 percent” (Lever, 2014).

In order to make the appropriate recommendations towards the progress of Stageworks Theatre, it is essential to reflect on what the theatre industry will look like in the years to come. There are numerous facets of Stageworks to consider when forecasting the future of this industry. The changes in the theatre world itself, in the future development of Tampa Bay through its promotion of the arts, and potential changes in the way donations are collected. The theatre industry has already been affected by recent changes in people’s culture and interests. With advancement in technology and entertainment now accessible from the palms of consumers’ hands, the question of whether the theatre will become obsolete is already being addressed. Ten to fifteen years from now, the theatre will have the necessary tools to thrive, morph into a whole new art form, and grow beyond the next century.

Technology Changes

New and interesting changes are already taking place in the theatre world. Critics say drastic amendments are necessary for the theatre to survive in this day and age, especially when competing with other forms of entertainment. Moreover, the digital age has spawned a new type of audience, one that is less attentive and more intrigued by cheaper and more convenient electronic entertainment. The average age of Broadway Theatre-goers is 48 years old, which clearly demonstrates the younger generations’ lack of interest (Lambert, 2012). The adoption of technology into productions will be a key component to their future success, especially with the development of more advanced technology.
Cutting edge developments are already emerging. The National Theatre in London has recently installed a new NTLive system that allows the theatre to broadcast their productions live to movie theatres around the world. Equipped with cameras, sound booths, and their own sound mixing engineers on hand, the show and the actors’ voices are recorded in real time like a production of the Academy Awards. Not only is this system revolutionary, it is a way to make a unique theatre production instantly available to any theatre fan in the world, and it turns theatre into something more relevant and accessible. People living in cities or towns where the theatre does not exist now have the opportunity to see known actors perform in the classics from half way around the world. The theatre raised money through grants, government support, sponsorships, and by making agreements with unions to renegotiate the royalties for their performers (Towey, 2014) proving that with the right support, this technology is possible in any theatre house. Expanding the scope of the theatre through technology is the future of the industry. Theatre companies must not be conquered by technology, but find ways to use it to their advantage.
Alan Schneider wrote an article in April of 1984, making a prediction about what the theatre will look like in five to fifteen years. He envisioned great technological change with self-propelled lasers and computerized holograms (Eyring, 2009). Although holograms now exist and have been used in concerts, Schneider was mistaken about the incorporation of these tools in the theatre. It is a brilliant idea, showing a hologram of Marilyn Monroe in a newly adapted version of “Some Like It Hot”; the novelty would get people of all ages through the door. The application of other technology like digital backgrounds projecting images of faraway lands, beaming in actors on stage from the other side of the country for “special guest appearances” for instance, are all ground breaking ideas that would sell seats. The problem is to get the right funding for these types of installations, especially for smaller theatres. Schneider also fostered the idea that people will go to the theatre if they are stimulated to do so. And to accomplish this, theatres must “invent the future” but learn from their past success (Eyring, 2009). And he is absolutely right, people these days love innovation and that is what the theatre must provide. Hence, Schneider provided some valuable insight all those years ago, and his predictions are still valuable to help contribute to the change of the industry today.

Societal Changes

Craig Lambert, writer for Harvard Magazine, quoted Tina Packer, founder of the Shakespeare and Company theatre group in Massachusetts saying that non-profit theatres are in an even tougher situation since we live in a world guided by “‘[p]eople who think everything needs to be determined by the marketplace [and] have no understanding of art’”. Hence, in a time where non-profit theatres need to be subsidized to survive, those prospects are harder to acquire. Some believe cooperation amongst theatres is the future. Having them work together, share rights on projects and co-produce works, rather than compete with each other (Lambert, 2012). This concept is a decent one, especially in light of theatres now broadcasting their plays around the world. Perhaps cooperation between theatres would help in that aspect as well. Theatre companies can sell each other the rights or make an agreement for distribution, instead of broadcasting in movie theatres. This same article by Lambert claims that theatre companies need to give people something to come back to the theatre for, prompting the evolution of what it means to go to the theatre. Also opening up the definition of what the theatre is; reevaluating the length of a performance, how to make the space more creative, and how to make it a unique experience. The article gives an example of a theatre that has been reinvented as a nightclub theatre (Lambert, 2012).
The American Repertory Theatre in Cambridge, Massachusetts is an example of a theatre that has been transformed into a disco-themed, avant-garde, nightclub experience. Artistic director of the theatre, Diane Paulus sees the theatre becoming an experience comparable to a rock concert one day. She believes in more boundary-blurring experiences and audience participation. Her repertoire is impressive, having directed numerous “Broadway blockbusters as “Hair,” “The Gershwin’s Porgy and Bess” and “Pippin””, hence, this is the perspective of someone who knows the industry and has achieved great success. Unlike many critics, she perceives change as a positive thing and an opportunity for the theatre world to evolve. Her Midsummer Night’s Dream production was saturated with disco balls and edgy costumes, and the show turned into a disco party at the end of the night. Such a different and entertaining take on Shakespeare is bound to attract a younger generation. Furthermore, they also established a special promotion where the audience members could come back with a friend for free, which is a smart sales tool, to attract and introduce new faces to the theatre (Wolfe, 2014).
Integration of the audience into a production is another new change in theatre. It is bound to be incorporated into other theatre houses, and will mark the future of the industry. In Washington DC, a production called “Shear Madness” has been a raving success, and seats are being sold out every week. The play is an interactive murder mystery and the audience is prompted to vote for major plot twists. In essence the audience creates the storyline and affects who the murderer is at the end of the play. In addition, the producers update their material frequently so that audience members get a unique experience every time. This type of novelty is what customers want, and has brought back the true spirit of the theatre. Going out to share a personal experience and create a special exchange that no television can provide is an integral part of the future development of the industry.
Stageworks Theatre has also been working with at-risk children for approximately fifteen years by using live performances to teach concepts like empowerment, anger management, and disease prevention. This is one area in the industry that may also grow. The theatre can be involved not only with children, but senior citizens looking for a place to socialize and give them purpose. In addition, theatre companies could open the doors to other groups with addiction issues that need to be vanquished, like Alcoholics Anonymous. By working with the theatre company, addicts can focus on positive emotions and find new ways to express themselves through the arts. Like any of the arts, theatre is an outlet for creativity, so why not let people bring their hardships to the table and contribute in the conception of shows about their issues? They could perform for other people with similar problems in order to help them overcome their difficulties, making the theatre a part of the rehabilitation process. This would create an ongoing cycle of people helping each other and spark an interest in the theatre at the same time.

Economic Changes

In order for economic change to occur, the government should increase its support for the arts and provide some funding. President and CEO of the Straz Center Judy Lisi wrote a letter to the Tampa Bay Times in August and pointed out that “the cultural tourist travels in search of a more complete, more fulfilling experience, patronizing museums, theatres and historic locations” and “Tampa Bay has developed into an impressive cultural hub that includes the Dalí Museum, Mahaffey Theatre, Ruth Eckerd Hall, the Palladium, the Chihuly, the Ringling Museum, Florida Orchestra, Tampa Theatre…” hence, she urges “all the convention and visitor bureaus of the Tampa Bay region to pool resources and invest in a tourism campaign that unites all the arts assets that so enrich the experience of coming to the communities in our region” (2014). Not only does the Bay Area stand behind its arts, but another campaign like this would prove the government’s support, and perhaps prompt even more grants to help the theatre thrive.
Other initiatives like power2give.org are “Tampa Bay’s new funding platform for local arts programs” (Arts Council, 2014). It is a site where nonprofits can post any project that requires funding, and allows the community to choose which projects they support by donating money. The program is partnered with organizations like Bank of America to help manage the donations. Associations like these can be such an asset for theatre companies, and especially nonprofits like Stageworks. This is one reason why the future of the theatre industry is safe. With the government and local communities supporting the arts, the future looks bright.
The methods used to give donations at the theatre can also change in the future due to improved technology. Now that everything can be accessed from mobile devices, it can be simple to create applications that allow people to donate money from their seats at the theatre. Stageworks’ artistic director shared that she makes an announcement after the show about how donations are essential to its future existence. In the future, people could donate immediately right as she makes the announcement using the app on their mobile devices. They could even work it in as part of the play, turn it into a skit at the end of the show, or project advertisements for the app before the show starts. Since our civilization has latched onto anything that gives immediate satisfaction, why not make donating money that easy as well?
Simply because technology has changed and people’s interests have shifted, does not mean the end of the theatre industry. On the contrary, like John Lithgow said in regards to the future of this trade, “anything could happen” (Lambert, 2012). Theatres must take advantage of advancements in technology, government grants in favor of the arts, and launch the industry into the future by creating a whole new experience that is not attainable through a computer screen. Changes have already started to occur in certain theatres and the success proves that people will keep going to the theatre if something is entertaining enough. In other words, the theatre will evolve into something original and provide the audience with an imaginative experience for the senses.

The Theatre Companies and Dinner Theatres market is overall in a state of maturity, with growth just keeping up with the economy as a whole. Companies in the mature growth stage of an industry usually experience high competition among other firms both nationally and locally. The scope of competition is narrow for theatres, as companies only compete with each other in a small geographic region. This, along with extremely low barriers to entry and exit, contributes to the high level of competitiveness for existing theatres. Using the Porter’s Five Forces model we illustrated the threats that are present in the theatre industry. Because of factors like the threat of new entrants, substitute products available at very low switching costs, and high rivalry among competitors, Stageworks is experiencing fierce competition in the local theatre district of Tampa. The single greatest concern for Stageworks should be the lack of brand preference by their consumers.
By defining the key success factors in this industry it allowed us to use strategic group mapping to determine opportunities within the local theatre district. The first map directly supports the single greatest concern for Stageworks as stated above. Name brand recognition and the feeling of loyalty to the theatre will provide Stageworks the ability to increase their levels of donations, volunteers, and attendance during the season, which will increase their level of market share and profitability.
Finally, we discussed the drivers of industry change by looking at what will happen to this industry in the future. Technology will allow theatre companies to digitally broadcast their plays to people around the globe by teaming up with movie theatres that will invite audiences to watch live performances. This advanced technology will allow theatre companies the ability to reinvent the way consumers think about live performances. By turning the theatre into a complete experience and allowing the audience to be physically involved in the outcome of the performance will forever change the way society perceives this industry. Technology will again come into play economically by providing the consumer the instant ability to donate to the theatre as they are watching the performance. And increased government grants and the ability to secure them will pave the way to more funding and the ability for the local theatres to not only survive, but to thrive.
What follows will be a comprehensive investigation of Stageworks Theatre’s internal operating environment. We will use tools such as Value Chain Analysis, Financial Analysis, and VRIO Analysis to identify strengths and weaknesses of the firm. Each of these tools looks at the company from a slightly different perspective in order to develop a complete understanding of Stageworks’ operations.
Value Chain Analysis assesses the linkages between primary and secondary activities as well as external linkages with clients and suppliers. This analysis is unique because it considers the value added activities a company performs. The outcome of the analysis is an activity by activity understanding of how Stageworks delivers value to its customers as well as identification of any weaknesses that are present.
Financial Analysis will be performed next. Financials are important to a firm because they help us understand how a company converts revenue into income. The historical financials will be compared with the current year and any trends will be identified. A common size income statement as well as a balance sheet has both been prepared for consideration. Analysis will be presented and explained in detail.
Finally, a VRIO analysis will be completed. VRIO analysis examines the resources owned or controlled by the firm. Each of Stageworks’ key resources will be identified and explained, as well as rated in four categories explained elsewhere in this report. VRIO is a key analysis because it informs Stageworks about which of their resources may be key strategic advantages contributing to a sustained competitive advantage over its competitors.

Value Chain Analysis

Value Chain analysis is a chronological depiction of all the activities an organization uses to produce its products and services (Tompson G. H., 2013). The value chain shows the linked set of activities in the organization’s business model to generate a profit (Tompson G. H., 2013). The first step to analyzing Stageworks’ value chain is categorizing the work into two types of activities: primary and support activities. Primary activities are those that create revenue and profit for an organization, whereas support activities are those that provide the systems and infrastructure in order for the primary activities to function (Tompson G. H., 2013). After the primary and support activities have been categorized, analysis continues by investigating the strengths of the links between each activity. Finally, analysis concludes with determining whether or not the relationships that exist at the beginning and end of the value chain can be improved.

Figure 4: Value Chain

valuechain

Support Activities

Support activities for the organization will be discussed first in order to provide details of the systems and processes in place that enable the primary activities to function. Stageworks’ support activities can be described as follows: governance – the oversight of the theatre by its board of directors; administration – management functions of HR, accounting, finance, and technology; fundraising – efforts to garner resources from government, foundations, corporations, individuals, payments in kind, and subsidies; and finally outreach – the efforts to build bridges with the communities in which it operates. These activities sustain, or hold together the primary activities (Preece, 2005). Each of these individual activities should provide value to the organization, but when these primary and support activities combine, they form an interconnected chain-like relationship, in order to contribute to the overall viability of Stageworks.
Governance at Stageworks is provided by the Board of Directors, who oversee the organization’s operations and the Producing Artistic Director, Karla Hartley. There are approximately 16 members who meet every fourth Monday of the month. Some members of the board at Stageworks are very “hands on” and committed to the organization. In an ideal world, the organization would have the resources to hire more staff, which would allow the board members to focus on oversight and advocacy. However, being understaffed has required some board members to contribute more of their time and resources, including managing operations instead of simply oversight. For example, Linda Scarrit, a board member, is the head of the Marketing Committee, and has been burdened with marketing operations and must devote a significant amount of time on the organization’s daily marketing tasks. Another part of the board’s role is in advocacy, fundraising, and filling the theatre. Chris Brown, another board member, coordinates the season’s opening night by arranging the pre-event, the live entertainment, and sponsoring the purchase of the event’s marketing collateral through his law firm. Stageworks’ board is spending effort on primary operations activities instead of focusing it on governance, fundraising, and oversight activities. Focusing on these more strategic secondary activities would provide much more value to Stageworks.
Administration at Stageworks represents the management of functions like human resources, accounting, finance, and technology. Hartley is Stageworks’ sole full-time employee and must spend the majority of her time on primary activities such as programming, personnel and production. This leaves many administrative duties unfulfilled. The organization has been able to justify hiring part-time employees for 15 hours per week, and it currently has seven part-time workers. Accounting at Stageworks is done by a PhD in English, with no formal accounting training using Quickbooks. The financial analysis in the following sections will reveal that there are errors in this activity for the organization. While many marketing functions are performed by the board, it is also overseen by Hartley, whose time could be better spent. Through this analysis, the administration support activity has been shown to provide moderate value.
Fundraising at Stageworks refers to all its efforts to garner resources from external entities, such as governmental grants, funding from private foundations, corporate or individual sponsorship, donations, and/or subsidies. Administration and the Board of Directors play central roles in fundraising activities through solicitation; while the programming and production motivates external support. Ms. Hartley makes announcements before and after the plays requesting donations for the organization. Stageworks has failed in the opportunity to reach large donors in the area such as David Straz and Frank Morsani. Several committee members in the organization feel that the firm does not make enough requests for donations, nor do they feel that it has a proper plan in order to justify donors who want transparency from the firms to which they donate. Some recent success has been had though, as the theater was recently able to acquire Raymond James as a sponsor. In summary, the fundraising activity from some sources has recently improved, but Stageworks staff believes much more could be done to improve value in this area.
Outreach at Stageworks includes efforts to build relationships within the community in which it resides. Stageworks Theatre is located in the Channel District of Tampa, which is a Community Reinvestment Area. When property taxes hit a certain level, anything above a specified value gets reinvested back into the community. However, this reinvestment can only be used for special events. Linda Scarrit, head of the Marketing Committee, thinks this money is best suited to invest in signage that will be visible to passersby on Kennedy Boulevard. Currently the signage sits inside a courtyard where traffic on Kennedy Boulevard cannot see it. A barrier to this idea is the concern that the location of the new sign may create a problem with the condominium association that Stageworks shares the building with. Stageworks also wants to start creating events that bring residents from the surrounding community to the theatre. Stageworks resides in a luxury condominium building filled with urban professionals who are traditionally not fans of the theatre (McNay, 2014). There are many other condominiums and apartments in the local area filled with younger residents. Developing an effective strategy to bring the local community into Stageworks will require a departure from Stageworks’ current ineffective approach. In summary, the outreach support activity at Stageworks has been shown to provide little value.

Primary Activities

Stageworks’ primary activities can be described as follows: programming – the selection and overall interpretation of artistic work; personnel – procuring actors, set designers, and playwrights; promotion – communicating the event and admitting the audience into the theatre; and finally production – the physical requirements for rehearsal and performances. These four activities are the building blocks of the performance and must occur in some form for any performing arts event to take place (Preece, 2005).
Programming at Stageworks is accomplished by the Producing Artistic Director, Karla Hartley, who is the only full-time employee. Hartley’s main role is to select and provide the overall interpretation of the artistic work. Finding actors and scripts is included in this activity, as well as providing artistic direction and seeking new plays. This is done in consultation with the Board of Directors—who are a part of the support activity of governance. The programming activity is the primary activity which provides value. This activity requires experience and artistic creativity in order to be successful and contribute to organization viability. Hartley has won numerous awards for her work as a Producing Artistic Director over the years, which proves that value is created in this activity in the value chain. The next activity in the value chain, personnel, is also overseen and completed by Hartley, who is able to transfer her expertise to this aspect as well.
The procurement of personnel at Stageworks is the second primary activity and also provides value. Personnel include actors, set designers, and playwrights, who are critical to the organization’s programming because without them, the productions would not be possible. Hartley sources local artists who are familiar with the theatre. The actors are independent contractors and are part of a close-knit community. They all know each other, and have been working together for a long time. Hartley uses Theatre Tampa Bay to hire actors, which is a networking organization for theatres in the area. The organization allows Hartley easy access to personnel through an online portal, bi-annual casting calls, and other networking events. Theatre Tampa Bay aims to promote, connect and support professional theatre in the Tampa Bay region (Theatre Tampa Bay, n.d.). Talented personnel provide value and are an important piece for organizational viability.
Promotion is the third primary activity in the Stageworks value chain, it pertains to how Stageworks drives its audience into the theatre. The marketing budget is limited and the effort inconsistent, however Stageworks has goals for improving this activity. These goals begin with working with a branding firm to create a new brand and getting street signage in the Channel District. Stageworks Currently advertises in Creative Loafing, Tampa Bay Times, The Tampa Tribune, and on WUSF 89.7 radio. Stageworks also performs infrequent email marketing. Very little publicity is created by the theatre; it relies on art critics to write about it. Stageworks believes that social media is important, but has no social media strategy in place. The theatre also hopes to cultivate relationships with local hotel concierges by inviting them for a complementary show viewing. These complementary show viewings should drive additional ticket sales from the hotel guests. Finally, the Board of Directors is leveraged to advocate on the organization’s behalf, by promoting the theatre and shows. This activity is the weakest link in the value chain, although it seems that Stageworks realizes this and has hired the branding firm to increase value in this activity.
Production is the fourth and final activity in the value chain and consists of the performance space; i.e. the theatre and the sets. Production also encompasses the work, the planning, the rehearsing, and presentation of the plays. The work Hartley performs in programming and procurement of personnel comes together in the production activity. In other words, the culmination of all the previous activities forms the value for this aspect of the value chain. Each of these primary activities works in coordination with one another and any breakage in the links negatively impacts the result.

Value Chain Summary

Through this analysis, Stageworks’ support activities have been shown to provide value, but there is also more value to be achieved. Promotion has been identified as the weakest primary activity, which explains why Stageworks’ is struggling. The support activities at Stageworks must be improved in order for the firm to be viable. The organization must develop effective and sound standard operating procedures for each support activity so that part-time staff and volunteers are able to perform the work efficiently and without confusion. The daily accounting activity is one area that is not being executed efficiently. Analysis has discovered major errors in the financial statements, which will be discussed in the financial analysis. Outreach is another area where little value is being created as the organization has low levels of brand awareness as noted by Scarritt’s and Diez-Diaz’s 2013 report. Administration must have clearly defined roles in order to reduce duplicate work. Once basic operational processes can be developed and well documented, the firm will be able to reach viability in order to execute its mission.

Income Statement

The Income Statement was reformulated into a common size income statement from Profit & Loss reports that were provided by Stageworks for the fiscal years ending June 30, 2011 through June 30, 2014. Please refer to Appendix A for the numerical analysis of Stageworks’ Income Statement. Below, the company Income Statement data will be analyzed by the way of Ratio Analysis, Trend Analysis, Vertical Analysis, Horizontal Analysis and Year-over-Year Percentage Changes in income statement figures. Due to the fact that our team was furnished with missing line items and incomplete financial statements, we have not included the following items on our consolidated financial statements; Interest Expense and Depreciation & Amortization. In the Ratio Analysis section, the Times Interest Earned calculation will be estimated.

Ratio Analysis (Appendix, Table 1)

This section will discuss profitability ratios such as Operating Profit Margin (OPM), Net Profit Margin (NPM), and Times Interest Earned (TIE).
The OPM’s from 2011, 2012 and 2013 were -0.71%, -6.36% and -2.95% respectively. In 2014, the company earned a positive OPM of 8.92%. Although Stageworks’ OPM seemed to suffer the greatest in 2012 and 2013, it made a strong comeback in 2014 by increasing revenues and keeping expenses stable. NPM shares almost the same results as OPM, but with taxes included in the calculation. The NPM in 2011, 2012, 2013 and 2014 was -0.71%, -6.50%, and -3.84% and 8.35% respectively. 2014’s NPM demonstrates that Stageworks is increasing its market share with revenues and keeping expenses low. Due to the fact that Stageworks provided our team with limited information (such as interest expense), an estimated interest expense was used. From 2011 through 2013, Stageworks did not have any debt and, therefore, no interest expense. In fiscal year 2014, Stageworks took on debt in order to build-out the new theater. Interest payments now totaled around $1,000 per month so the TIE for 2014 is estimated to be 3.25. TIE is useful and helpful for Stageworks to monitor how many times it can pay its Interest Expense in a year.

Trend Analysis (Appendix, Table 2)

From 2011 through 2014, Stageworks experienced increases in Earned Income and In-Kind Income while Special Events Income and Unearned Income were more sporadic. Total Revenue steadily increased every year indicating strong growth – a positive economic trend for the company. Operating expenses also had a strong positive trend from 2011 through 2014 indicating that the company was spending its resources in order to sustain its growth. Increases in expenses are common as a company continues to grow with its revenues. Gross Profit was negative in 2011 (-$1,956), 2012 (-$20,288) and 2013 (-$10,734) while the company managed to earn a positive net income in 2014 ($38,989).
Stageworks had a small negative Gross Profit in 2011, which decreased significantly in 2012 and 2013, indicating that revenues were not increasing in the same proportion to expenses. In 2014, Stageworks was able to dramatically increase revenues while holding expenses near the same level as 2013, which contributed to a positive Gross Profit. Taxes for 2012 ($425.68), 2013 ($3,224.29) and 2014 ($2,502.41) have increased due to an increase in the number of employees as well as rental income that is taxed when Stageworks rents the space out for events. Taxes display a moderately positive trend. Net Income is quite similar to Gross Income and was negative from 2011 through 2013, while in 2014 the company earned a positive net income. Net Income also has a positive trend.

Vertical Analysis (Appendix, Table 3)

Vertical Analysis measures each line item in the income statement as a percentage of Total Revenue. Analysis from Table 3 in Appendix A shows that the majority of the revenue is derived from either Earned Income items such as box office, concession sales, space rental or Unearned Income such as fundraising, sponsors and government contributions. It is also apparent from this analysis that Stageworks is quite dependent on the Unearned Income portion of revenue consisting primarily of donations.
For 2011, 2012 and 2013, operating expenses exceeded the total amount of revenue by 101%, 106% and 103% respectively. In 2014, the first year where Stageworks had positive margins in the analysis, expenses amounted to 91% of Total Revenue. As expected for most companies, Theatre Personnel (employee salaries and actor salaries) account for the largest operating expense. The second largest expense is the Occupancy expense, which comprise of items such as insurance, in-kind theater rent and utilities. The third largest expense is the Marketing Expense. In 2011, 2012, 2013 and 2014, the Marketing Expense accounted for 10%, 12%, 15% and 9% respectively. In 2014, the Marketing Budget decreased by 6% of total revenue. This is a great example of Stageworks keeping its costs down while increasing revenues. Operating Profit and Net Income share the same characteristics. In 2011, 2012, 2013 and 2014, Operating Profit was -1%, -6%, -3% and 9%. Net Income for the same time period was -1%, -6%, -4% and 8%. Both metrics show that from 2011 through 2013, Stageworks earned negative profit, and in 2014 the company turned the corner and has positive Operating Profit and Net Income.

Horizontal Analysis (Appendix, Table 4)

Horizontal Analysis measures the percent change year to year utilizing a base year, which in our case is 2011. For Total Revenue, Stageworks realized a 16% increase in 2012, a 33% increase in 2013 and a 58% increase in 2014. Overall and as stated earlier, Stageworks realized strong Total Revenue Growth from 2011 through 2013. Total Expenses also consistently increased from 2011 to 2014. Using the 2011 base year figure of $276,068, 2012 experienced an increase of 23%, 2013 had an increase of 36% and 2014 had an increase of 44%. In a similar fashion, Operating Profit and Net Income had similar characteristics in this analysis. Using 2011 Operating Profit of -$1,955.98 as our base year, Operating Profit decreased further in real terms by -959% in 2012, and in 2013, when compared to 2011, the decrease was only -449%. However, for 2014 Stageworks was able to increase its profits from 2011 by a 1,965% increase in real terms. Using 2011’s Net Income figure of -$1,958 as the base year, it can be seen that Net Income and Operating Profit are moving in the same directions and by the same percentage amounts. This further illustrates the trend that Stageworks is increasing their revenue while holding expenses the same year after year. Horizontal Analysis is a great way to analyze the increases or decreases for any Income Statement line item from a base year to the more recent years.

Year-over-Year Percentage Changes (Appendix, Table 5)

The Year-over-Year Percentage Change analysis is used to determine the increase or decrease in the Income Statement’s line item from year to year. 2011 Income Statement figures are used as the base year in these calculations. Using 2011’s Total Revenue of $274,113, 2012 had an increase of 16%, 2013 had an increase over 2012’s Total Revenue by 14%, and 2014 had an increase of 20% over 2013’s Total Revenue. From this analysis, it is clear that Stageworks experienced significant revenue growth year-over-year. Operating Income and Net Income also shared similar characteristics year-over-year. Operating Profit in 2012 decreased in real terms by 937% over 2011, while in 2013 it increased an additional 47% from the negative 2012 figure, although in real numbers it was still an overall loss. By 2014, the operating profit had increased by a whopping 463% over 2013’s figure and current fiscal year projections continue on the upward trend. The same analysis and trend holds true for Net Income, using 2011’s Net Income figure of -$1,955 as the base year. Net Income in 2012 experienced a 959% decrease over 2011’s figure, while Net Income in 2013 increased 33% over 2012’s figure. Net Income in 2014 resulted in a 361% increase over 2013’s figure. Year-over-Year Percentage Change analysis is useful and allows Stageworks to monitor its performance or changes in any Income Statement line item on a year-to-year basis.

Balance Sheet

Stageworks Theatre also provided copies of its balance sheets for fiscal years ending June 30, 2011 through June 30, 2014. Continuing in Appendix A with tables 6 through 9, the analysis includes a side by side comparison of the four years and then continues with vertical, horizontal and year over year changes that are similar in structure to the income statements analyzed above. Tables 10 and 11 are corrected versions of the four year balance sheet and income statement that have been adjusted for items not included in the originals. Additional notes and details regarding these changes can be seen on each table individually. It became apparent during the interviews with the client that relevant information was completely missing from the statements, and the information was significant enough for us to add it into the statements so that a more relevant analysis could be conducted. Additionally, some aspects of accrual accounting are not being followed in accordance with Generally Accepted Accounting Principles (GAAP), as can be seen in the Fixed Assets portion for 2014 and the mishandling of the vehicle on the balance sheet, where the vehicle was removed from Fixed Assets but the accumulated depreciation remained on the books. Due to this and other items, some necessary clarifications of the balance sheet need to occur.
Contracted Services Receivable shows the activity for space rental for other than theatre productions where the customer has already rented and used the space but has not yet paid Stageworks. Pledges Receivable include any season pass that has been reserved but not yet paid for, and Grants Receivable should reflect the amount of government grants that have been applied for and approved but have not yet been paid to Stageworks. The Inventory account is one of the first accounts that should be researched further. Based on the information gathered, the inventory was just removed from the balance sheet in 2013 when the new version of the accounting software was installed. In the Prepaid Expenses section, the Prepaid Royalties account holds the amounts that have been paid by the theatre to playwrights and other artists to perform the play on its stage. As soon as the play is booked, the royalties are set aside using this account. As of 2013, the Prepaid Liability Insurance account is no longer being used, as these items are being expensed in a single transaction for the year. In 2014, the theatre began using a software program called Patron Manager, and the $2500 shown here is the payment for that program which should be amortized monthly over the course of the upcoming fiscal year. The Undeposited Funds account is a temporary holding account for checks that have been recorded in the books but not yet deposited into the bank as of the date of the balance sheet. The final item in the current assets section that needs additional clarification is the Exchange account. The bookkeeper for the client had no knowledge of this transaction, nor what it represented.

Vertical Analysis (Appendix, Table 7)

The vertical analysis of the balance sheet reports each amount as a percentage of either the Total Assets or the Total Liabilities. By studying the common sized balance sheet we can compare the client’s financial stability and performance to other companies in the same industry or to itself by studying the trends in each account as it changes from year to year. For example, the Cash account in 2011 represented almost 50% of the Total Assets, but by the year 2014 that percentage changes dramatically to about 9% of Total Assets. Another account with a huge change in balance is the Building account, where in 2014 the balance in that account represents almost 80% of the Total Assets. Referring to Table 1 in Appendix A, it can be seen that the ratio of Return on Assets moves from a negative number in 2011 through 2013 to a positive 8.45% by fiscal year end 2014. This ratio helps to determine how well the assets are providing revenue for the firm.
Looking back at Table 1 and the Asset Turnover ratio it is apparent that the addition of the building in 2014 made a very large impact on the amount of Revenue that each dollar of Assets generates. However, in 2014 this ratio is still a respectable 1.01, meaning every $1 in assets is generating $1.01 in revenue. The trend of revenues increasing at a steady rate will only enhance this ratio in the future. Another very telling ratio is the Return on Assets, which compares Net Income to Total Assets. Looking at the trend line for ROA in Table 1 the ratio changes from a negative percentage to a positive percentage by the end of fiscal year 2014. Therefore, assets are now making a positive impact on Net Income and that is confirmed by the investment in the building, the increase in Revenue, and the ultimate positive impact on the bottom line.
Another vital area to analyze in the Vertical Balance Sheet is in the liability section. The total amount of Current Liabilities increases at an alarming rate from 2011 through 2013, ending at 150% of Total Assets. The ratio that helps to understand the impact of higher liabilities than assets is the Current Ratio (Table 1, Appendix A). This ratio represents how many times the Current Assets will pay for the Current Liabilities, or those due within the next twelve months. Most firms would want to see this ratio at 1.00, so in this case, Stageworks would only be able to pay about 70% of their current liabilities, if all were to come due within the next year. This is not an ideal situation and is something that should continue to be measured with the goal of increasing this ratio to at least 1.0.

Horizontal Analysis (Appendix, Table 8)

The Horizontal Analysis of the Balance Sheet uses a base year to which all other years are then compared. In this analysis, 2011 is the base year and the percentages represent how much the item has changed from year to year to help discover trends in the accounts in order to better understand the impact of those changes to the overall profitability of the company. Total Assets and Total Liabilities increased at the same rate of almost 570% over 2011 due to the purchase of the building. However, by the end of 2014 Current Assets have increased by 47% while Current Liabilities increased by 86%. A closer look shows the Accounts Payable account increased by 331% over the base year which indicates that Stageworks is purchasing more items on credit but not readily paying those balances on a timely basis. Potential donators could see this increase as a red flag that the company is not using its assets to its best ability.

Year-over-Year Percentage Changes (Appendix, Table 9)

By studying the Year-over-Year percentage changes, a company can determine the fluctuations in the accounts that make up the Balance Sheet starting with a base year and then analyzing how the balances in those accounts change from year to year. Referring to Table 9, there is a roller coaster effect where an increase in an asset or liability account in the second year is off-set by an even greater decrease in those accounts in the third year. By the end of fiscal year 2014, the overall results are positive increases over fiscal year 2013, most notably the Cash, Grants Receivable, and Prepaid Royalties accounts contributing to the 157% increase in Total Current Assets for 2014. This indicates that Stageworks is doing a better job at keeping cash on hand and securing government grants and additional donations. Using this analysis a company can make better predictions for the next fiscal year and set goals using ‘what-if’ scenarios. Goal setting provides direction for the firm and allows managers to better determine how the company is being managed by comparing goals to actual results at the end of the next fiscal year.

Corrected Balance Sheet and Income Statement (Appendix, Tables 10 & 11)

As stated earlier in this section, the Balance Sheet was actually missing some material assets from activity that had occurred over the past 3 years but not included in the financial statements that we were initially given. Knowing about this information would dramatically change the analysis and the overall profit position of the firm and therefore should be included in this analysis. Referring to Table 10 in Appendix A, and noting the changes in Fixed Assets, Long Term Liabilities and Equity, it can be seen that the company has a greater amount of assets than what was originally reported. The financial ratios that have changed can be seen back in Table 1, where the ROA remains a negative number over the four year period as Total Assets are dramatically higher than Total Revenue. In this version, the company is not utilizing its assets to the best of its ability and as of now is actually losing money on its investment in the new theatre. A positive note here is the trend from year to year is moving in the right direction as the percentage moves closer to a positive number. Additionally, the current ratio has improved from .70 to .88, meaning that if all of its current liabilities came due at once, the company would only be able to cover 88% of them. This is still not an acceptable number, but again it’s moving in the right direction.
There were also some noteworthy changes to the income statement as can be seen in Table 11 of Appendix A. The firm had not been recording the interest payments for the line of credit or the loan for the building reconstruction and therefore expenses were understated. Making the necessary changes to the original income statement provided a clearer picture of these expenses and their impact to the bottom line of the company. It is now clear that net losses have occurred over the past four years rather than an actual profit in 2014. The write-offs and depreciation that were missing have now been included as well, and detailed information regarding these changes can be seen in the notes section of the table. Looking back at Table 1 and the ratios, there have been significant changes to the Leverage Ratios. By correctly adding the investment in the assets to the balance sheet, the firm is now not so heavily in debt as indicated in the Leverage Ratios in the top portion. Investors and donators will use this information to make a more informed and sound decision.

The VRIO, or resource-based view of the firm is the final part of the internal analysis. This “suggests that a firm’s success is ultimately attributed to the ownership of key resources, not because of the firm’s products or services” (Tompson G. H., 2013). This section will examine Stageworks’ resources in four categories: human, physical, organizational, and financial. These resources will identify current sources of competitive advantage for the firm, as well as potential sources of competitive advantage that should be leveraged.

Step 1: Identify Resources

After meeting with the client, the following resources were identified “as the foundation for the company’s strategy” (Tompson G. H., 2013).

Financial

Stageworks’ first financial resource is having low administrative costs; the company has only one full-time employee and seven part-time employees. This lowers the cost of salaries, as well as benefits that full-time employees command. The full-time employee is Karla Hartley, the theatre’s Producing Artistic Director, whose responsibilities include oversight of all elements of each play the theatre puts on. The part-time employees include four office staff, one maintenance worker, and two educational outreach professionals. In addition to the paid employees, Stageworks’ operations are supplemented by its board and volunteers. The board is comprised of 16 Tampa Bay area professionals, many of whom donate their services and skills, eliminating the cost of outsourcing these functions. Volunteers are utilized during performances as ushers, ticket takers, and concession workers to further reduce costs.
The Channel District’s Artistic Development Plan is another distinctive resource for Stageworks. The way the theatre acquired the space is quite unique. When a building of a certain magnitude is built in the Channel District, a contribution must be made towards the public arts. As a result of the plan, Mercury Advisors, the developers of Grand Central, subsidized the rent for Stageworks Theatre. This allows for Stageworks to only incur $1 a year lease, effective indefinitely. Rather than using their resources to purchase their own space, Stageworks board members were able to invest $1.2M to build-out the theatre. They still owe $350,000 on the loan taken out for the transformation.

Human

As mentioned above, Karla Hartley serves as the theatre’s Producing Artistic Director. With more than 25 years working in the theatre industry, her experience is an invaluable asset to Stageworks. Her reputation has garnered considerable publicity, which increases the theatre’s brand awareness. In fact, last year Creative Loafing gave her a rave review saying “she’s the person most likely to be born on Krypton,” because of her incredible capacity to excel in all aspects of theatre production. Additionally, Ms. Hartley has worked at the Straz Center for the Performing Arts Jobsite Theatre and American Stage Theatre, giving her experience and inside knowledge of Stageworks’ competition.
Another critical resource in the non-profit industry is the board of directors, and as such, they serve as an advantage to Stageworks. In addition to volunteering their time and expertise to reduce costs for the organization, the board members use their influence in the community to advocate on the organization’s behalf. Luckily, Stageworks has several active and accomplished board members. These members go above and beyond for Stageworks. For example, Chris Brown is in charge of organizing opening nights. He brings in live entertainment and even gets his law firm to sponsor print materials like posters and brochures. Linda Scaritt is another one of the theatre’s board members. She volunteers her time and oversees all of the organization’s marketing functions. Given the organization’s budget constraints that preclude them from hiring more staff, Stageworks relies on its board members to supplement what its staff does not have the capacity or time to accomplish.

Physical

For most of the company’s recent existence, it rented space from Jobsite Theatre at the Straz Center for the Performing Arts. Operating under the auspices of a competitor was not an ideal situation for Stageworks, so the organization began raising money for its own space. In August of 2011, Stageworks finally relocated to the Channel District. In addition to greater brand recognition in having its own space, donors can see their money being put to good use and now Stageworks has the flexibility to extend the duration of high demand shows.
The theatre has 99 seats, which may be considered a challenge to some. However, this can be considered a resource because it provides the audience with an intimate setting. They can form a stronger emotional bond with the actors onstage than they would be able to at other theatres in the area. After the show, the audience gets access to the actors to further strengthen that connection. Moreover, having fewer seats means fewer seats to sell and easier to sell out shows. This is especially significant with the limited supply driving demand. Those sellouts help to show the donors and the community that Stageworks is thriving.
The theatre’s location in the Channel District has turned into prime real estate. The area used to be a warehouse district for artists, but lately it has been booming. It will transform even more now that Tampa Bay Lightning owner Jeff Vinik is putting in efforts to revitalize the area. In fact, Stageworks is trying to find a way to connect with him to promote the arts and culture in the Channel District. Plus, the Channel District is a reinvestment area. This means that when property taxes hit a certain level, anything beyond that gets reinvested back into the community. In other words, Stageworks Theatre gets some of that money back to use for special events. Linda Scaritt shared that the theatre is trying to get approval to invest these funds in new street signage to increase awareness of the theatre’s presence in the district. The theatre is hard to see from the street, so the board members believe new signage would help draw in foot traffic and make the site easier to find.

Organizational

Stageworks’ mission is “to provide the highest quality professional theatre which respects, ignites and celebrates the human spirit while challenging the thresholds of intolerance and insensitivity.” The organization adheres to this mission by putting on plays that challenge boundaries. This distinctive mission statement makes it one organizational resource.
Stageworks theatre’s community outreach is another organizational resource. In addition to the performance part of the organization’s business, Stageworks has a charitable component where they offer educational workshops for at-risk youth. Stageworks has tracked the at-risk youth it serves and has shown a correlation between participation with the organization and improve academic performance. This charitable work also gives Stageworks its 501(c)3 designation and helps Stageworks secure more donations, as well as a leg up when applying for grant funding. No other theatre appears to have a similar program.
Stageworks is the oldest theatre group in Tampa, with more than 30 years in existence, an accomplishment of which the organization is enormously proud. This is especially impressive considering that it survived the recession, where many other theatres did not. This gives the theatre added brand recognition in the area and credibility as a sustainable organization. This is particularly valuable when soliciting donations and grants.
Perhaps the lengthy tenure of the organization has contributed to its unprecedented access to local playwrights. This is the final resource uncovered for Stageworks. It has greater access to new work from local playwrights than any other theatre in Tampa. This gives Stageworks first choice on adapting these works and adding them to its season schedule. Stageworks offers a program called Stagewrights where local playwrights meet twice a month at the theatre with scripts that are read by volunteer actors then critiqued by the group. Furthermore, the organization is working on a partnership with the Gorilla Theatre, a national organization that solicits scripts from kids 17 and younger, which will give Stageworks access to these scripts.

Step 2: VRIO Analysis

Financial

Having low administrative costs is valuable because keeping costs low makes the organization more profitable. It has contributed to Stageworks remaining in business for 30 years, where many competitors have not. This is not rare though, because it is very common in the industry for non-profits and theatres to have small operating budgets and therefore few employees. It is also not inimitable because competitors could easily reduce administrative costs by reducing staff or keeping staff low by instead relying on volunteers. The organization is exploiting this resource by keeping people part-time in order to spend financial resources on other aspects of the theatre. The organization has used the savings from administrative costs to invest in the theatre’s physical appearance, actor salaries, and production costs. To sum up, having low administrative costs is valuable, is not rare, is not inimitable, and is being exploited by the organization. This resource gives the organization competitive parity, which just means that it is on par with competitors.
The practically nonexistent lease expense, as a result of the Artistic Development Plan, is valuable because it is another means of keeping operating costs low in order to earmark more funds for other aspects of the theatre. It is rare because few other theatres have the connections to obtain space that was donated, that costs only $1 a year, and in such a prime location. It is inimitable for the same reasons. The organization is exploiting the resource by putting the money saved from rent into other things, particularly the build-out that transformed the space into a theatre. To sum up, having a $1 yearly lease is valuable, is rare, is inimitable, and is being exploited by the organization. This resource gives the organization a sustainable competitive advantage over competitors. Hence, it is a unique resource that gives the theatre an edge over its competitors and Stageworks will be able to exploit it in the long run.

Human

A highly renowned Producing Artistic Director is extremely valuable because organizations are hard-pressed to find someone with the experience, skills, critical acclaim, ideas, and contacts in the industry. Ms. Hartley has been crucial in overcoming an unexpected threat for Stageworks. The transition from a theatre run by founder Anna Brennan, who wavered in her decision to retire, to one operated by Hartley was delicate. She was left lingering for her current position during Anna’s indecision. The theatre’s main customer base might not have appreciated the change in management, and might have misconstrued the substitution as the board of directors pushing Anna out. Hence, Hartley’s patience through this situation, decision to not take a job at another company, and ultimate talent in production helped Stageworks get through this situation and ultimately get the acclaim it deserves. It is rare to find someone with all of Hartley’s assets, which makes her inimitable because it would be very costly for another organization to bring in someone this proficient. The organization is definitely maximizing Hartley’s talent through publicity and giving her full creative freedom to make the theatre and productions what they are today. To sum up, Stageworks’ Producing Artistic Director is valuable, is rare, is inimitable, and is fully being utilized by the organization. This means that Hartley is a sustainable competitive advantage, most likely the organization’s primary competitive advantage.
Having several involved board members is valuable in its advocacy of the organization in the community. The board provides the ability for the theatre to benefit from their volunteered time and skills. It is not rare because every non-profit organization theoretically has a board comprised of qualified individuals that advocate on the organization’s behalf and volunteer their time and skills. It is also not inimitable because it generally is not difficult to procure qualified individuals to donate their services and serve on a board. The board is being exploited by the organization because it is mobilizing its board members as a way to keep their staff and administrative costs low. To sum up, the board is valuable, is not rare, is not inimitable, and is being exploited by the organization. This means that the board is a competitive parity.

Physical

A dedicated theatre space is valuable because it affords Stageworks opportunities that it did not have when housed under Jobsite Theatre. Having sole rights to the theatre allows Stageworks to respond to unexpected situations. For instance, if a certain play is selling out, Stageworks has the opportunity to add dates and extend the show’s stay. They would have to know by the first opening weekend because actors may have booked other jobs, yet, being proprietor allows Stageworks the right to make these kinds of decisions, making this a valuable resource. Conversely, this resource is not rare because many competitors own their own space. It is inimitable however, because for those competitors that do not own their own space, it would take a significant amount of capital to imitate. As previously mentioned, Stageworks pays more of a ceremonial rent amount—$1 is practically nothing—and the locale is the theater’s for the foreseeable future. Thus, the space is Stageworks’ and it did not have to spend hundreds of thousands of dollars to acquire it. No other theatre in Tampa has benefited from such a deal. The organization is exploiting this resource, not only by adjusting show schedules, but also by renting out the theatre for events during the six months when they are not in production. This allows the company to earn revenue from the space even when the season is over. This is not something Stageworks was able to do when it rented space at Jobsite, seeing as how it had to pay rent itself and the space could not be rented out. To sum up, owning its own space is valuable, is not rare, is inimitable, and is being exploited by the organization. This gives Stageworks a comparative parity in the industry.
Being located in the Channel District is valuable because it could be considered one of the fastest growing areas in Tampa. It is becoming one of the most expensive residential areas and it is becoming a center for entertainment. It is rare because so far, Stageworks is the only theatre in the Channel District. It is inimitable because as the area continues to grow, rent in the area will follow and thus be unaffordable for non-profits and other small theatres. It is being exploited by the organization because Stageworks has been working to cultivate relationships with the other businesses in the area as a means of increasing brand awareness. To sum up, its location in the Channel District is valuable, is rare, is inimitable, and is being exploited by the organization. This means that The Channel District is a sustainable competitive advantage. It is a resource Stageworks is definitely capitalizing on and will continue to do so. Linda Scaritt mentioned they are considering increasing the price of tickets in the future, and a more prestigious neighborhood will allow them to do that.
Having a 99-seat theatre is valuable because it provides an intimate community feeling. It has allowed Stageworks to assemble loyal customers over the years. It helped them keep the doors to the theatre open despite the recession, and the development of newer forms of entertainment. Stageworks’ direct competitors tend to have 100-150 seats; this is not rare because many other theatres are comparably small. In fact, Jobsite has 100-120 seats and they also have the ability to move around the chairs, so the seating design and number of people it accommodates can be modified to fulfill the requirements of the show. It is not inimitable because having a smaller theatre is not as costly as a larger theatre would be. Hence, it would be easier to open a small theatre than one similarly sized to the Straz Center. The number of seats is not fully exploited by the organization because this message of an intimate community feeling is not clearly communicated to the public. This analysis indicates this resource has comparative parity.

Organizational

The organization’s mission statement is centered on challenging intolerance. This is valuable in helping guide the organization’s operations, for example the plays it produces, and the charitable work it performs. It is rare because this message is different from competing theatres’ mission statements. It is focused on making a difference in the community and pinpointing unfairness, while Stageworks’ competitors tend to address themes that are mass appeal and have more art-centered mission statements. Part of Jobsite’s mission statement for instance reads, “Jobsite Theater is dedicated to the creation of socially and politically relevant theater and the pursuit of performing it to the broadest possible audience. Jobsite has established and will continue to evolve a collective of like-minded artists, creating a supportive environment where artists of all disciplines may experiment, hone, and apply their skills in a professional laboratory environment” (Jobsite Theatre, 2014) . Stageworks’ mission statement is not inimitable because it would be neither costly nor difficult to implement a similar statement. It is being exploited by the organization because it guides its operations. It influences the types of scripts Hartley chooses and therefore, the subject matter that is put into production, and ultimately, the kind of audience the theatre attracts. Its unique themes provide audiences with the opportunity to see a different type of play. However, Stageworks could exploit it even more. To sum up, the mission statement is valuable, rare, not inimitable, and is being exploited by the organization. This gives the organization a temporary competitive advantage, so Stageworks should keep taking advantage of this resource as much as it can in order to use it as a marketing tool.
The organization’s charitable work is valuable since it benefits the community, positively impacts donor solicitation, and secures grant funding. Hence, it has contributed to the theatre’s survival through the years. It is rare because no other competitor is involved with this type of charity work. Jobsite, for instance, partners with 501(c)3 organizations to help them get exposure and get the community involved with them (Jobsite Theatre, 2014). Thus, Jobsite works as a liaison between other non-profits and its clientele; they do not actually perform charity work themselves. Moreover, Stageworks Theatre’s charitable arm can be considered inimitable because the process to earn a 501(c)3 designation is lengthy, complicated, and costly. Running a theatre on its own is already a full-time enterprise, so few owners want to supplement that with the extra obligations that come with running a 501(c)3. The community outreach program is being exploited by the organization because Stageworks uses it as a means of promoting donations and grant funding. They also integrate the theatre, acting, and performing as a creative outlet to get at-risk youth involved in something beneficial for its well-being. In summary, the charitable work Stageworks is involved in is valuable, rare, inimitable, and is being exploited by the organization. This means the charitable work is a sustainable competitive advantage which also demonstrates how well Stageworks upholds its mission statement, not only by challenging intolerance onstage, but by challenging it offstage as well.
Being the oldest theatre in Tampa is valuable because it gives Stageworks credibility and brand awareness in the area. It is rare given the amount of turnover among theatres over the 30 years of Stageworks’ existence. It is not easy for small theatres like these to survive for so long, maintain the ability to produce quality work, and keep receiving acclaim for its work. This resource is inimitable because so long as Stageworks is in existence, no other theatre can claim the same honor. It is being exploited by the organization as it is in the process of celebrating its history through the painting of a mural in the theatre lobby. However, Stageworks is not using its heritage to its full advantage. They are not marketing themselves as the oldest theatre in Tampa and because it has been around for so long, the locals should be aware of its existence. Yet, people that are interested in the arts and have lived here their entire lives do not know about Stageworks. Therefore, it is valuable, rare, inimitable, and is being somewhat exploited by the organization. This gives the organization a sustainable competitive advantage, but Stageworks is not utilizing it to its fullest potential.
Having access to playwrights is valuable because it gives the organization access to new, locally written material before any other theatre. Hartley’s contacts in the industry and publishing houses help give Stageworks first choice of scripts. Furthermore, the theatre’s long-term history in Tampa makes them well-known in the theatre community and helps it get scripts as well. Having access to playwrights is rare because local material is hard to come by. This ability to have first pick of material is not something anyone else has access to; it is the result of years of working together with writers, knowing the right people, and building relationships over time. It is not inimitable however, because other organizations could implement similar programs like Stagewrights in order to increase relationships with playwrights. And while some playwrights may be loyal to Stageworks, they are not legally bound to work exclusively with the organization. Access to playwrights is exploited by the organization because Stageworks sometimes elevates these scripts to the main stage. The main stage is usually reserved for nationally recognized plays that people are already familiar with, just played by local actors and produced by Hartley. In summary, access to playwrights is valuable, rare, not inimitable, and is being exploited by the organization. This gives Stageworks a temporary competitive advantage for this resource.

Step 3: Summary Table

A thorough discussion of Stageworks’ core resources has been investigated. The table below summarizes the findings of the earlier investigation. The columns of the table are defined as:
Resource: This is the resource discussed as part of Step 2: VRIO Analysis. The letter in parentheses signifies the type of resource that was investigated. F – Financial, H – Human, P – Physical, O – Organizational.
V?: Answers the question “Do a firm’s resources and capabilities enable it to exploit opportunities and/or neutralize threats?” (Thompson, 2010)
R?: Answers the question “How many competing firms already possess these valuable resources and capabilities?” (Thompson, 2010)
I?: Answers the question “Do firms without a resource or capability face a cost disadvantage in acquiring or developing it?” (Thompson, 2010)
O?: Answers the question “Is a firm organized to exploit the full competitive potential of its resources and capabilities?” (Thompson, 2010)
Competitive Implications: This column notes the strength of the firm’s competitive position.

Table 12: Summary of VRIO Analysis

Resource V? R? I? O? Competitive Implications
Low Administrative Costs (F) Y N N Y Competitive Parity
Artistic Development Plan (F) Y Y Y Y Sustained Competitive Advantage
Hartley (H) Y Y Y Y Sustained Competitive Advantage
Board of Directors (H) Y N N Y Competitive Parity
Dedicated Theatre Space (P) Y N Y Y Competitive Parity
Channel District Area (P) Y Y Y Y Sustained Competitive Advantage
99 seats (P) Y N N N Competitive Parity
Mission (O) Y Y N Y- Temporary Competitive Advantage
Charity Work (O) Y Y Y Y Sustained Competitive Advantage
Access to Playwrights (O) Y Y N Y Temporary Competitive Advantage
Oldest Theatre in Tampa (O) Y Y Y Y- Sustained Competitive Advantage

Step 4: Suggestions

This analysis has shown that Stageworks theatre has several competitive advantages over its competitors. Stageworks’ low cost lease, the Producing Artistic Director, a premium location in The Channel District, its involvement in charity work, and being the oldest theatre in Tampa are all competitive advantages for Stageworks. In other words, numerous characteristics set this theatre apart from its rivals. Stageworks has everything it needs to thrive and be profitable; location, the right people, the right material, and history. Yet, this theatre is still struggling.
Having low administrative costs is a resource that is neither rare, nor inimitable. It is virtually impossible to make it inimitable because anyone can find ways to lessen the burden of administrative costs. In order to keep administrative costs low, the company can amend its bylaws to put a cap on the number of staff members hired, salaries, and hours of employment. This would probably be rare in the industry; however, this might limit the organization’s growth. Thus, Stageworks should look at ways to reduce administrative costs beyond just staffing.
Stageworks’ board of directors is not rare and not inimitable as board members are a common thing for non-profits and businesses in general. What could make this theatre’s board rare however, are the types of members involved. The board currently encompasses a vast range of professionals. However, it could benefit from having an actor from the community as part of the board, so that someone who understands what it is like to work in the theatre is represented. That person could bring a different perspective and new ideas that would help Stageworks flourish. Stageworks could also benefit from having an accountant on the board to help review the theatre’s finances. Moreover, a renowned alumnus that used to perform at Stageworks, that got some recognition and became renowned as a result of Stageworks, came back to become a member of the board. Their clout and notoriety could definitely bring attention to the theatre and that person could also bring back the experience they acquired after leaving Stageworks, helping the theatre to develop. Signing an exclusivity contract so that person could not serve on any other board would make this inimitable.
As previously mentioned other theatres own their playhouses, so the fact that Stageworks owns its own space is not rare. If Stageworks were to own every theatre in the world, ownership of a theatre by another organization would be considered rare. However, this is not feasible, so attempting to transform this resource into one that is rare is a wasted effort.
VRIO analysis demonstrated that having only 99 seats was not rare, not inimitable, and not organizational for Stageworks. This resource is common to most small theatres, and the intimate community-feel that is created by Stageworks’ performances can be acquired in any other small theatre. Therefore, it is not easy to set this resource apart from competitors. However, Jobsite has managed to make its limited seating rare by putting in movable seats, so it can change the number of seats depending on how many it needs. That is a unique way of taking advantage of seating. Stageworks cannot do the same thing, it would be impossible because its seats cannot be altered. To make its seating rare, Stageworks could invest in technology to attach to its seats. Interactive technology could allow the audience to participate in the plays. Not only would it give the theatre an edge over its competitors, but it would make its seating situation rare as well. Stageworks would be the only theatre with this technology. To make it inimitable, it would have to make it proprietary. Stageworks should work with a university technology department to help it develop this at a cheaper rate. Stageworks can capitalize on its intimate seating by communicating it in its marketing.
Clearly communicating its mission statement is something else that Stageworks should improve upon. It is already implementing it in its organization, in its work, and in its community outreach, yet it is not doing a sufficient job of communicating this to its audience. The mission statement is written in the playbill distributed at plays. However, it does not acknowledge that it is successfully upholding its mission statement. The person making announcements about donations and season tickets before and after the play should give an update on its community outreach. Stageworks should add a page in the playbill about its work directly under the mission statement. Stageworks should also add the mission statement on its website. It will be hard to make this mission statement inimitable unless Stageworks decides to apply some sort of copyright or trademark to it. That would stop any other theatre from coming up with the exact same mission statement; however, they could still come up with a similar premise. So making the mission statement inimitable would be harder to do.
One of Stageworks’ other main advantages is that it has special access to playwrights, giving the theatre first pick in available scripts. One way to make this resource a source of sustainable competitive advantage would be to ensure that its rivals do not get a chance to imitate this by creating its own relationships with playwrights. This can be achieved by creating some sort of exclusivity contract between Stageworks and the playwrights. Stageworks should secure the rights to certain script-writers or sign agreements that give Stageworks the exclusivity or the ability to pick first in order to make this existing relationship more concrete, and upheld by official documentation. Giving exclusive rights seems less feasible, as playwrights cannot survive by just selling their work to one theatre. This would sever them from the rest of the theatre industry and sabotage their careers. However, securing first options to scripts is more feasible than exclusivity contracts.
It has been established that Stageworks, being the oldest theatre in Tampa, is one of the theatres’ competitive advantages, yet it is failing to fully exploit this concept. Currently, Stageworks is not marketed as the oldest theatre in Tampa. Its logo looks very modern, but there is no indication of its longstanding history. Therefore, Stageworks should incorporate statements such as, “Tampa’s Oldest Theatre,” “Since 1984,” or something similar on its logo, under its signage on its door, in order to celebrate its heritage. Stageworks is embarking upon a new relationship with marketing company Peak Bieti, which will help it rebrand and start marketing more efficiently. This is a perfect time to incorporate the notion of being the oldest theatre into its strategy.
Incorporating these changes will help the theatre thrive and take full advantage of its resources. Having access to a low cost lease, a talented Producing Artistic Director, a premium location in the Channel District, its involvement in charity work, and being the oldest theatre in Tampa, are all competitive advantages for Stageworks. These resources make this theatre unique. Acting on the changes recommended above will transform the competitive parity and temporary competitive advantage resources into sustained competitive advantage resources. Stageworks has everything it needs to be a thriving company; it simply needs to use its resources more effectively.

A comprehensive investigation of Stageworks Theatre’s internal operating environment has been presented. We used tools such as Value Chain Analysis, Financial Analysis, and VRIO Analysis to identify strengths and weaknesses of the firm. Each of these tools looked at the company from a slightly different perspective in order to develop a complete understanding of Stageworks’ operations.
Value Chain Analysis assessed the linkages between primary and secondary activities as well as external linkages with clients and suppliers. This analysis revealed that Stageworks has weaknesses in most of its support activities as well as several primary activities. As discussed, it should focus on developing and documenting key operating procedures so that the Board of Directors can apply more focus toward fundraising and strategic oversight. Failure to address these weaknesses will result in continued frustration.
Financial Analysis was performed next. Income statements and balance sheets were analyzed for trends. Glaring weaknesses were apparent in its accounting practices resulting in incomplete information. Attempts have been made to correct some of the shortcomings and an adjusted balance sheet was presented. Stageworks is at risk for making decisions based on faulty information. A bright spot was identified through this analysis as well. Stageworks has increased their revenue while holding expenses relatively flat. This success has resulted in positive net income in 2014 after three previous negative net income years.
Finally, a VRIO analysis was completed. VRIO analysis examined the resources owned and controlled by the firm. The analysis identified five resources that help to continue a sustained competitive advantage. These five resources combine to form the comparative advantage that Stageworks must use to grow. The strongest of these five is their Producing Artistic Director, Karla Hartley. Hartley is the key to many aspects of their recent success. The remaining six resources that were investigated must be developed further to become sustained competitive advantages. Developing them will be a continuous process that will be difficult to achieve. Recommendations on how to develop these resources were presented in detail.
All three analyses that were conducted highlighted areas of concern as well as areas of strength. Taking action on these areas would be a formidable challenge for any firm. However, action must be taken in order to enhance its viability for long term success. Stageworks has a proven value chain, the financial ability, and the right resources to build on pass successes and take them into the future.
We have developed three detailed recommendations so that Stageworks can improve organizationally, operationally and strategically. Recommendation 1 defines the ideal organizational structure for Stageworks and clearly defines responsibility for its staff. There should be an emphasis on keeping employees engaged and productive in their roles to avoid overloading other staff and board members. Empowerment and ownership of roles should be encouraged. Also, recommendations will be provided in order to increase board of director’s involvement. We’ll discuss strategies to utilize PatronManager to boost firm productivity and efficiency with an emphasis on investing the time to properly learn PatronManager. We’ll show how Patron Manager has been used successfully by other organizations and also show how Stageworks can use it for future success. We’ll describe changes that Stageworks needs to make in order to become more proficient using the software.

In recommendation 2, we’ll show how Stageworks can use its financial statements in order to plan for the future and assist with budgeting and donations. We’ll also show how financial statements will help with fundraising efforts and procurement of government grants.

Finally, recommendation 3 will demonstrate branding and promotional strategies in order to increase marketing ROI and increase brand awareness, which will ultimately lead to increased revenue. We’ll demonstrate how Stageworks can leverage social media to reduce marketing expenditure and increase engagement with newly defined target audiences. A guerilla marketing technique will be recommended so that Stageworks can take advantage of a local untapped market in its community at little to no cost. Finally, a co-branding strategy will be described in order to generate demand amongst its neighbors in the Channel District.

This paper has demonstrated that Stageworks has enough resources and competitive advantages to be a successful enterprise. It has the legacy and capacity to be a leader in Tampa’s non-profit theatre industry. However, this is not likely to happen unless Stageworks manages to strengthen its professional competencies. This requires defining an organizational culture in which employee roles are evaluated and reassigned if necessary, the board of directors’ involvement increases, and all members of the organization focus intensely on their duties. Once the members of the organization are refocused on their key roles, they will need a business process to help them work together. Fortunately, Stageworks has already invested in such a system. PatronManager® is a Customer Relationship Management (CRM) system the theatre recently installed; it is designed to enable communication between groups of coworkers and also combine information from ticketing, donations, and marketing. Its purpose is to simplify these routine tasks and connect the data to enable a company to function at its highest level. Requiring employees and volunteers to use PatronManager® to fulfill the tasks assigned to them will help make PatronManager® and the overall operation of the theatre run more efficiently. Defining and enforcing the organizational structure while using existing business process systems will help address Stageworks’ internal weaknesses such as the board of directors, its financials, and its questionable accounting practices.

Defining the Organizational Structure

Stageworks’ Staff

Each client meeting conducted with Stageworks was enlightening and brought new perspective on the challenges ahead. From the very beginning, it was clear that everyone present was committed to the mission of the organization. What wasn’t so clear was the responsibility of each member of the committee, and how they fit in with the overall ongoing organizational process. For example, we met Linda Scarritt, Secretary of the Board of Directors, who explained how she was leading the effort on remodeling the lobby. Typically the secretarial role is focused entirely on ensuring that communications in the organization are effective and complete, not running a construction project. We also met Peggy Huey, Managing Director, who informed us she was personally responsible for bookkeeping, PatronManager® administration, and budgeting. At the same time she was focusing most of her attention on preparing a particular grant that was in the process of being reviewed. Huey seemed to be overextended and later it was discovered that other members of the organization were not leading the tasks stated above, as they should. Huey should be managing these tasks, not completing them herself. Karla Hartley, Stageworks’ Producing Artistic Director, was acting as resident website guru, while at the same time trying to recruit new talent as well as the next award-winning script. Here again, is another example of a key member of the team, and the theatre’s strongest competitive advantage, operating outside her personal core competency areas. Other members of Stageworks’ management attended that first meeting too, each with equally confusing roles and contributions. While these cross-functional roles may make sense in a small organization with very limited personnel resources, they do not make sense for Stageworks if it plans to grow.
Although Stageworks currently operates with a limited number of part-time staff and only a single full-time staff member, it already has most of the resources it needs to fulfill its daily operating activities. Supplementing the staff members with support from the well-qualified Board of Directors can fill the gaps and ensure a high-performing team. This change will require a large mental shift in the current management’s operating concept. Current management should visualize the key activities necessary to run the business and then compare each employee’s skills and experience with those activities. Refer to Table 14 in the Appendix where a sample organizational chart is presented. Each major activity is listed in the first row at the top of the chart. Each activity is the title for a column extending beneath it. Placing the current staff members onto the matrix-like chart reveals an interesting lesson. Six out of the six part-time employees align nicely with their existing assignments. This is a good sign, but was not expected following the experience of the first team meeting described above. Stageworks has appropriately identified skills in each available employee and assigned each of those employees a role. However, more emphasis should be focused on keeping each of those employees engaged and productive in their role to avoid overloading other members of the team.
Two activities remain unaddressed on the organizational chart. The first unaddressed activity, Accounting/Finance, is currently being performed by Peggy Huey. Instead of distracting the Managing Director from her other duties, another employee should be assigned to help out. In fact, there is a member of the existing staff that has expertise in this area. Owen Robertson, Technical Director, happens to have experience with bookkeeping. Owen Robertson may be able to provide support in that area until another candidate can be located. The second unaddressed activity is the Fundraising/Donor Management position. This role is also currently being performed in large part by Huey, the Managing Director. Again, other members of the Stageworks’ team appear to have experience in this area. However, this time, support will need to come from the Board of Directors. Two members of the Board, Andrea Graham and Joanne Nelson have special knowledge of these activities. Graham has fundraised for Stageworks in the past, so she is a natural fit to provide support. Nelson works at a consulting firm specializing in grant writing for non-profit organizations. Graham and Nelson can fill in this role until an appropriate permanent candidate is identified.
Each of the broad activities in the organization has been identified and assigned to responsible people. What’s left is to ensure that they understand their roles and manage their performance. It is critical that each member on the organizational chart is allowed, in fact encouraged, to take ownership of their roles. It is only possible for this to happen if the staff is provided encouragement, coaching, and enough latitude to succeed. Two key employees are responsible for these important management tasks. Karla Hartley, Producing Artistic Director, will manage and mentor the employees assigned to the production and outreach portion of the company. Peggy Huey will be responsible for the balance of activities in the company. Hartley and Huey should work together and communicate often to be sure that their objectives are aligned and on the same schedule. Since they are both key management employees, they should also be in constant communication with their advisors, the Board of Directors.
Once Stageworks embraces clearly defined organizational roles and assigns each role to a responsible person, it will be transformed. The functional model where members are spread too thin and asked to focus on tasks that are not core competencies will cease to exist. It will be replaced by a model, which communicates well and is more productive because each member is focusing on areas where they have personal strength. The Stageworks organization will become the professional theatre production house that its Board envisions.

Board of Directors

Stageworks has an ideal Board of Directors for its business. It is comprised of professionals from a variety of fields that all have the necessary skills to advise the theatres’ staff in their daily operations. Stageworks needs to change the culture of the organization and get the Board involved. The theatre has successful professionals at their disposal, yet is not going to them for advice. Based on the information we could gather on the experience of each of the individual members of the board, each key activities of the company is covered. In Table 14 in the Appendix, the members of the Board have been assigned to each major aspect of the business. Part of building professional competencies for Stageworks is having the right employees perform the right jobs, while also having the proper Board members available to assist them with these tasks.
We discovered that Simone Barefield appears to be smartly positioned as board president. Barefield is CEO of Gans, Gans, and Associates; a business consulting firm with specialty in Human Resources, Information Technology, and Management. This is the kind of person Stageworks would benefit from hiring to review its organization to help it move forward. Stageworks should take advantage of Barefield’s knowledge and experience; her expertise as a CEO implies that she has the skills to guide any of Stageworks’s departments, and she should make sure the organization works together as a cohesive unit.
Anna Brennan, founder of Stageworks, is the perfect person to act as a consultant for the theatre production and community outreach aspect of the business. Considering she started the business and ran it for years, she is a good person to consult on theatre operations. Lyra Blizzard Logan is a Harvard law graduate, therefore we placed her in the community outreach section of the organization, perhaps she has valuable contacts Stageworks could benefit from. Frank Jakes and Spiro Verras are both attorneys with an affinity for theatre, while Jakes also acts. We grouped them both to offer advice in the production aspect of the business if necessary. Theresa D’Aiuto Sokol is a vocal specialist and Jeffrey Gavin Lyle a hair salon founder, we placed them in the production area as well, since their skills directly relate to theatre production. If Stageworks ever has an issue in these areas, it has the ideal resources to consult.
Stageworks’ finances are a source of serious problems for the company that could be easily resolved considering Anna Diaz-Diez has in-depth accounting experience and Keith Brown, who is already the Board’s Finance Chair, is the Senior Vice President of the Bank of Tampa. Diaz-Diez and Brown should be able to look at the company’s finances and inform Stageworks on proper financial statement protocol. Only the bookkeeper, the Managing Director, Diaz-Diez, and Brown should be advising on the financial statements of the theatre.
In the fundraising and donor management department, Stageworks has members with vast experience. Joanne Nelson has a proficiency in education and grant consulting, with a concentration in non-profit grants. Nelson is particularly qualified to help the theatre acquire grants, so she should be consulted in the process. Andrea Graham has been responsible for attracting donors in the past so she should also be consulted. Finally, John George has a background in construction, therefore, should be consulted on any construction and renovation projects, since he has the necessary knowledge and contacts in the industry to get Stageworks the best results for the best price. We listed George under fundraising and donor management for his contact resources.
Linda Scaritt and Chris Brown are both currently helping with marketing and are currently some of the most active board members. Brown has contributed by organizing opening night events and being responsible for posters and other print materials. We also discovered that Jane Levin, although currently working for a real estate company, has past experience in retail marketing. She would be the ideal board member to consult for marketing ventures, especially those regarding ticket sales.
Finally for client relations, we listed Keith Ladd as the ideal advisor since he lives in the building with close proximity to Channel District residents. Karol Desort is a past client relationship manager. Desort is the ideal board member to counsel Stageworks regarding client relations, since she has client relations experience. And Norma Caltagirone is a psychology professor at HCC. Not only would she be an asset if any issues with clients did arise, but she would also be very helpful to introduce and communicate strategy to Stageworks’ employees and board. Through our different interactions with the members of the company it is very clear that there is discord in the organization that could be resolved with a clearly defined organizational structure. The staff would benefit from reducing the amount of dissention among the management team by learning what positions their skills allow them to fulfill, commit to those roles, and then support each other.
These changes will help improve the company’s internal weaknesses with the board as well as its financials. It will allow for each employee to utilize their strengths to build a stronger business unit, which will allow Stageworks to grow and gain market share, as it will finally be able to develop and exploit its competitive advantages.

Use PatronManager® to Boost Productivity

Stageworks’ staff will benefit greatly with a better-aligned Board of Directors. However, simply aligning advisors with staff is not enough. There must be a set of standard processes that tie the whole organization together. Without these processes, employees will be forced to create work-arounds, will be forced to duplicate efforts, and could miss potential opportunities. Fortunately, Stageworks recently decided to invest in a CRM solution called PatronManager®. The premise of the system is to combine ticketing, fundraising, marketing, and relationship building with the clients, within one system to help the company reach its fullest potential. If used properly it will eliminate the double work that has been happening. Hence, Stageworks must build their overall professional competencies in PatronManager®. PatronManager® should be leveraged to its full potential in order to boost productivity and drive future success.

Overcome Issues, Capitalize on the System

From talking to Stageworks employees, PatronManager® has been difficult to master. Stageworks is having issues with the basic functions of the program and as a result, is not obtaining any of the program’s benefits. However, from the research we have done and observation of other users’ feedback, the system is very efficient. Hence, there is obviously a disconnect somewhere. To help clarify this point, the following is a description of the program’s main benefits, as well as reviews from the PatronManager® users, and a breakdown of other ticketing systems available for theatres. This will show that Stageworks must find a way to understand the system and make it work. Moreover, PatronManager® is a new system, is a new way of thinking and integrating functions, and requires a new business strategy. Stageworks cannot implement the old way of doing things to a new system, they need to change and adapt around PatronManager®. This is upheld by Adrien Finlay of the Alexandria Symphony Orchestra who allowed the system to alter their operations, “PatronManager® has really changed our business model. We continue to be amazed at what is possible, and how we have been able to make our business operations more convenient both to staff and our patrons” (PatronManager®, 2013).
PatronManager® is an effective integration system that will help Stageworks solve some of its weaknesses while helping to benefit from its strengths. Getting the system to work properly will connect the board of directors to the rest of the employees, enabling them to step in when needed and allow them to give input into all of their areas of expertise. Issues with Stageworks’ financials and questionable accounting practices will be avoidable, or at least preventable, since PatronManager® helps perform financial reports, thereby organizing the data for better understanding and presentation. Furthermore, the program will give Stageworks’ staff more time to finally capitalize on their core competencies as they will no longer be performing tasks manually since most tasks are automated within the PatronManager® system. By learning to use the program efficiently, Stageworks will be able to sell more tickets and get more donations, because PatronManager® finds the right people for these activities. The company will now be able to market directly to them and allow the theatre to be more successful and capture more market share. Finally, the success of PatronManager® depends on the establishment of a clearly defined organizational structure.

PatronManager® is Proven

Eugene Carr, Founder and CEO of PatronManager® describes the system as a customer relation management system and box office ticketing service. The company believes that ticketing is no longer just a transaction, but needs to be a process that documents all interactions with customers; from a moment on the phone, to a tweet they post, to any moment they spend on the company website, all the way to purchasing the ticket. PatronManager® allows everyone on staff to access the same information, and compels them to focus on the same organizational goals in order to provide better customer service. The program also allows fundraising and donor management; to track donor activity, their presence on social media, automatically sends them acknowledgement letters, keeps donor profiles, etc… PatronManager® tracks and documents everything; ticket sales, donations, individual emails, phone calls, email campaigns, it tracks relationships between people and organizations, which can all be used to improve a company’s marketing campaign (PatronManager®, 2013).
This is an ideal CRM system for Stageworks. Claims from the CEO of PatronManager® may be considered biased, especially considering it does not seem to align with Stageworks’ experience with the system, however, other sources support Carr’s claims. Professor Anthony Allen from George Mason University compared PatronManager® to another program called OvationTix. He stated:
It seems that Patron Manager is a much more well-rounded program, and includes more tools particularly for donor cultivation and gift stewardship. I appreciated that the CRM snapshot component allowed for a more targeted solicitation campaign based on information and choices stored in the program.
One component of Patron Manager that I imagine could be especially useful is the dashboard. I appreciate that one click of a button can create a graph from any information the user wishes to input. The dashboard automatically updates in real time, so all members of a team can be constantly aware of changes in sales/donations/participation/etc. With this sort of “immediate gratification” and its Facebook-style “Chatter” communication component, Patron Manager is a modern performing arts manager’s dream. In a constantly evolving society, we need tools that not only help us keep up, but can keep up themselves (2012).
Furthermore, after a conversation with a PatronManager® representative, he found that the program is able to keep up with advancements in social media and internet technology, implying it will remain relevant for the years to come.
A chat room in LinkedIn revealed a conversation initiated for performing arts administrators using OvationTix and Google Grant who were looking for a better program and seeking recommendations. Caroline R., a Technology & Arts Management Specialist strongly suggests the use of PatronManager®, saying:

[I]n my mind, Patron Manager has the smartest and richest implementation of ticketing integrated with Salesforce. You get all the benefits of Salesforce’s security, infrastructure and flexibility, combined with online ticketing and donations, an integrated email tool, subscription packages, detailed and flexible reporting, and responsive customer service (provided by folks who speak theatre as much as software) by choosing Patron Manager CRM. For a cloud-based option, you could also look at Vendini and Ticket Turtle, but if you want a database to serve your marketing and development needs as much as your ticketing ones, Patron Manager will probably be your best choice (2011).

Rod M, Managing Director/Director of Development at Des Moines Playhouse also stated:

We have begun the move to Patron Manager. Although we’re not far enough along that I can provide a review of the entire package, I can tell you this: I am happily impressed with their staff and support as we begin the process. They sent me a draft of an online donation page in the morning, responded immediately to little tweaks and by 1 PM, it was ready. I’m still testing the payment process so it’s not live yet but soon will be (2011).
Furthermore, a recent review by Danny Feldman from LaByrinth Theatre Company supports that this system would be ideal for a small theatre company such as Stageworks, as it could help propel their organization. He stated:

PatronManager® CRM completely levels the playing field for small and mid-size theatres, and even surpasses the big boys in many ways. It really has changed our organization. It allows us to function cohesively as a small staff, connect with our patrons in more meaningful ways, analyze sales trends in real time, and track contributed income in new ways, all with some pretty powerful reporting tools built in. I know it’s cliché, but PatronManager® CRM is definitely a game-changer (PatronManager®, 2013).

The driving forces analysis revealed that theatre attendance is an issue that theatres might struggle with in the future unless the companies become proactive in understanding their customers wants, providing them with new experiences. Independent arts consultant Alli Houseworth mentioned that, “The faster we understand the customer’s behavior, the faster we’ll be able to target those audiences in the future, create more creative ways to keep them coming back, and easily allow them to share their experiences with their networks” (Lord, 2012). The way to understand the customer is through programs like PatronManager®. This is another reason why Stageworks should focus on building its competence in using this system.
A study done about the type of ticketing systems companies use revealed that “Tessitura and, to a lesser extent, Raiser’s Edge and Patron Edge, have a lock on the larger organizations in the field […] Tessitura and the Edge systems’ features are comprehensive to the point of being overwhelming, their data structure is solid and impregnable. Tessitura, especially, gets glowing reviews from those who use it, even as it’s incredible comprehensiveness can be daunting” (Lord, 2012). The problem however, is that Tessitura is the most expensive system with an annual fee of at least $18,000 a year. This type of system is not affordable for a business like Stageworks, so they must use the next best thing. Fortunately, PatronManager® at a cost of $2500 per year mimics most of the functions Tessitura provides. Table 13 in the Appendix shows a comparative matrix of the most popular and efficient ticketing systems; it supports that PatronManager® is the best system for its cost. “Patron Technology [parent company of PatronManager®] decided to build on top of Salesforce.com, the cloud-based computer system that is used to manage processes for Fortune 500 companies across the world. This makes the system stable and standardized, while also allowing Patron Technology to focus not on building the basic skeleton, but on manipulating the interface to make it easy to understand for arts organizations” (Lord, 2012). This program was specifically built for the arts organizations; Stageworks should take full advantage of its capabilities and automated features.
There are other systems, such as Artful.ly, that have similar functions, with no upfront fees, designed for non-profit organizations but has less automated features than PatronManager®. “They [Artful.ly] have a flat $2 per ticket fee that is paid by the patron, a small credit card processing fee, no setup fee, no contract, and currently no cost for the constituent relationship management component. Where this falls down, at least for now, is that Artful.ly is a less robust system than PatronManager® in some fundamental ways. It does not, for example, allow for subscriptions or assigned seating, is limited in the size venue that it can support, and does not integrate with mass-email software” (Lord, 2012). Stageworks has a better system with PatronManager®, there is a slight learning curve, but that is expected with a new technology implementation. Stageworks will need to invest the time to become proficient in order to propel their revenue goals for the future.

Changes Stageworks Needs to Make

There are several changes the theatre can implement to become more proficient. Since the donations module of PatronManager® requires manual data entry of donor information, it was revealed that this task was assigned to a volunteer and not someone more vested in the management of the theatre. Ideally, someone with more knowledge of the donors’ information should execute this task in order for Stageworks to begin using the system, which will facilitate the solicitation of donations.
One of the main attributes of PatronManager® is that it promotes communication within the business, yet it seems like it is having the opposite effect. Currently, only Peggy Huey and Johnny Garde know how to use the program, but they are versed in very few and differing aspects of the system. They should work together and combine their limited individual knowledge of PatronManager® to become more proficient. Stageworks needs to take full advantage of PatronManager’s helpdesk in order to decrease the learning curve. The entire Stageworks staff should understand how to input and retrieve information from PatronManager®. This can be accomplished with training workshops to make sure everyone knows how to use the program and access the data.
Stageworks seems to have issues with the email and master mailing list option of PatronManager®. This is a problem because you want the system to be able to send out the right information to clients to drive the audience in for plays. Stageworks should make sure to get the right information from their clients, like it has been doing with telephone orders, and make sure the staff continues to enter the information into the system. Staff are still depending on Mail Dog for this task because they are not sure it works properly in PatronManager®. This is another issue to address with the PatronManager® Helpdesk.
PatronManager® has shown positive results as Stageworks has already sold tickets for plays later in the season. In the past tickets were only available to purchase for the next show of the season. Utilizing PM, Stageworks can now sell tickets for the entire season at any given time. This allows for greater exposure to upcoming productions, generates greater revenue abilities, and allows for expenses to be matched to productions more precisely. Another great advantage is that patrons are purchasing tickets without any extra advertisement. This shows that even the system’s most basic function is producing positive results.

Conclusion

Stageworks Theatre has positioned itself well for the future by obtaining a Board of Directors with broad professional experience and a staff dedicated to the company’s mission. What is missing has been outlined in this recommendation: clearly defined roles in the organization, an actively participating Board of Directors, and a set of business processes to link everything together. Building professional competency means taking initiative to focus in these areas and prepare for the growth that will follow.

Introduction

The financial statements of any company are a window into the internal operations and are an important tool for internal and external users. Internally, a company can use its financial statements to aid in the creation of planning and to assist with budgeting revenue, expenses, and in this case, donations. External users of financial statements in this arena are those that have an interest in donating to the theatre and for use in procuring government grants. After a complete analysis of the financial statements, the following is a list of items that we have determined should be addressed immediately. Following this list will be an exact implementation plan for each item.
1. Changes to the Balance Sheet
2. Changes to the Income Statement
3. Annual Budgets (5 Year)
4. Audits (every 3 years)

Balance Sheet

The issues brought forth in the financial analysis should be addressed in order for Stageworks to more accurately depict the financial state of the organization. Potential donors and investors should be able to use the Balance Sheet and Income Statement to make their donation decisions. Stageworks’ internal management can also use them to make more informed decisions as to how to manage the theatre. In particular, these items should be researched and more accurately depicted on the balance sheet on Table 6 in the Appendix:
1. The donated vehicle should be properly removed from the BS by creating a journal transaction that debits Accumulated Depreciation, credits the Vehicle and books the difference under Write-off or Charitable Donations, depending on to whom it was donated. Otherwise, expenses are understated and income is overstated which could affect any taxable income situation.
2. The $2,500 in the Inventory account disappeared in fiscal year 2013. It should have been properly written off which would have added to total expenses in 2013 and may have offset any taxable income.
3. The receivable accounts should be monitored to ensure that the money is actually being collected. Without looking at the activity in the account it is unclear if the balance in the Accounts Receivable bucket changed at all from 2013 to 2014 as the ending balances for those years are about the same. If there was no activity in the account, then the question should be, why? Who is monitoring the receivables and making sure they are being collected?
4. Each of the Prepaid Expense accounts should have a corresponding expense account that gets debited when the actual expense is incurred. The balance in the prepaid accounts should go down by the monthly expense of the item that was prepaid. At this point, it is unclear if this is actually being done. If the expenses are understated and income is overstated, then that could affect a potential tax liability.
5. There is an account labeled “Exchange” on the balance sheet and it is unclear as to what that money represents. This account should also be immediately researched to understand why it has a balance of almost $5,000.
6. Intercompany Loans are exchanges between the Outreach program and the Theatre Production aspect. The amounts in these accounts should offset each other and net to zero, but that is currently not the case. These items also need to be researched and determined if they are being handled correctly.
7. There are several issues in the Fixed Assets section of the statement that will be addressed here (hyperlink to Table 10 in the Appendix):
a. The Building – Construction in Progress account is not accurate. The amount shown here is the offset to the loan that was procured to supplement the $700,000 in donations that were designated for a new theatre location. To be more accurate, there should be ~$1,000,000 in assets under the Equipment account or the Furniture and Fixtures account that represents the value of the money spent for the new theatre space. The difference between the $1,000,000 asset and the liability of the loan would then be booked to Equity, which shows donors and government grantors a more accurate value of the theatre.
b. The fixed asset in the above section will then need to be depreciated on a straight-line basis for the next 10 years. Although Depreciation Expense does not affect cash, it will help to reduce the amount of taxable income and therefore lower any tax liability due to non-operating income.

c. In the Chart of Accounts, there is a fixed asset account that has a balance of ~$1,000,000, which presumably is the theatre build-out. However, this balance did not transfer to the balance sheet as provided by the bookkeeper and should also be researched.

8. In the long-term liability section there are a few items that should be monitored more closely, so that the theatre does not have any serious cash flow issues. The amounts in the Deferred Revenue account are significant and almost equal to the amounts in the Accounts Payable account. A small theatre with limited amounts of cash available will need to ensure that any deferred revenue can be realized quickly, so the debtors of the organization can be paid in a timely fashion.

An accounting specialist or CPA from the Board of Directors should review the current accounting system and practices of Stageworks in order to better understand the questionable items stated above. This is a viable recommendation, as there are several current board members that are employed in the financial industry including Keith Brown from the Bank of Tampa and Anna Diaz-Diez. If these resources are not familiar with accounting, it is still possible to ask an accounting firm or local CPA to donate their services in order for Stageworks’ management to utilize the financial statements as a valuable tool rather than a collection of meaningless numbers.

Income Statement

As stated above, having an accounting specialist or CPA, either from, or contracted through the Board of Directors, would greatly enhance the accurateness and completeness of the Income Statement. It is imperative that Stageworks and the Board of Directors pay attention to income statement recommendations as described below:
1. In order for the Board of Directors and Stageworks’ management to review the financial condition of the company, a CPA or Financial Planner (Keith Brown or Anna Diaz-Diez) should reformulate the financial statements, namely the Profit and Loss statement (P&L), into a common size Income Statement format. Currently, Stageworks has a very complicated and lengthy P&L statement. Stageworks’ management team and some of the Board members may be inexperienced in corporate finance and do not understand or want to analyze a P&L statement that is 205 lines long. A common size income statement, (as exhibited in Table 11 of the Appendix) would be better utilized by all of the members of the management team and the Board of Directors.
2. Stageworks is not recording its interest expense properly, which hinders the bottom line for the company. If Stageworks would properly record the interest expense, it would be able to deduct the interest payments from its taxable income, which would most likely relieve Stageworks of any tax liability. Doing this would prove beneficial to Stageworks, because the company would be able to take advantage of the current tax code and rent the theater space with little, if any, tax consequence.
3. It is also recommended that Stageworks accrue its revenues and expenses, in order to ascertain which theatre productions generated the most revenues and which productions incurred the highest expenses, in relation to ticket sales. By doing this, Stageworks will be able to determine which shows generated the most revenues and had the highest or lowest expenses in terms of production. This information can prove very beneficial when planning the next season’s shows.

If Stageworks follows the recommendations described above, it would provide more accurate and useful information to make sound financial decisions regarding theatre production, ticket sales, marketing efforts, and financing activities. Developing a comprehensive and accurate income statement and balance sheet would also greatly benefit Stageworks in its pursuit of receiving grants from the federal, state, and local governments, as well as corporations seeking sponsorship in the non-profit arena. It is also important to note that having inaccurate or incomplete financial statements may result in Stageworks losing grants that they currently have. If any grantor or sponsor wishes to examine the company’s financial statements in order to validate that its sponsorship is being used in accordance with the grant provisions, it would be difficult to determine where and how the funds were being used. This may lead the grantor to pull its funding which would cause financial harm to Stageworks.

Recommended examples of Consolidated Financial Statements can be found in Tables 10 and 11 of the Appendix. The Balance Sheet in Table 10 allows for easy identification of figures in line items, while also being able to compare the figures year-over-year. The revised Income Statement in Table 11 also makes it easier to identify key figures in a more precise format. The revised Income Statement reports key figures in a year-by-year format, which makes identifying problems, areas of strength and weakness, much easier to identify.

Annual Budgets

It is imperative for Stageworks to prepare a budget for current and future years. Having a budget allows Stageworks, and its management team, to provide the operational framework for which to conduct present and future operations. A budget for Stageworks would be beneficial, so that the company would be able to establish benchmarks, measure financial performance year-to-year, and determine which financial items in the budget may be priority for review. Below, metrics will be provided on how to construct and implement the budget and its associated processes:
1. Establish your budget timeframe
a. Prepare 1-year budget
b. Prepare a comprehensive 5-year budget (if feasible at this time)
2. Review financial metrics from the previous year (i.e. operational expenses, marketing expenses)
3. Set goals for any projects Stageworks would like to accomplish in the next fiscal year
. (i.e. change lighting, enhance the lobby, or remodel bathrooms)
4. Estimate future expenses based on current expenses
. a. Fixed costs such as staff salaries, interest expenses and insurance premiums
b. Variable costs that fluctuate based on operating the theatre while considering growth objectives
c. Incremental costs that would be associated with receiving planned grants or donations that could possibly develop new programming (shows) or new programs for the community (i.e. enhance/expand the Outreach Program)
5. Estimate anticipated revenues from all sources (grants, sponsorships, donations, ticket sales, concession sales and rental revenue)
6. Plan for required cash flow needs and develop a cash reserve for unanticipated expenses
7. Adjust the budget in order to align expenses and revenues
8. Implement the budget and periodically review in order to make any necessary changes

Stageworks’ Board of Directors, especially Keith Brown and Anna Diaz-Diez, should be utilized in preparing and implementing the budget. Stageworks’ management and Board should be cognizant of implementing a conservative budget. It is far more advantageous to be realistic in the amount of donations and revenues that the company is likely to receive, instead of being overly optimistic and missing the budgeted targets, which could lead to financial distress. The Board of Directors should convene annually to review and approve the annual budget, to ensure that Stageworks is operating responsibly given its current financial resources. The budget should also be reviewed by management and the Board on a quarterly basis, to ensure adherence to its specified goals and objectives. By implementing a budget utilizing the above process, it becomes a mechanism for monitoring progress and determining what items (revenues or costs) should be adjusted. For example, the budget can be used to anticipate the amount of funds that Stageworks can dedicate to actors’ salaries (How should a nonprofit prepare its budget?)

Audits

We recommend that Stageworks have an independent audit conducted every 3 years. Not all nonprofit organizations are required to conduct an independent audit, but depending on circumstances, it may be required. According to the National Council of Nonprofits, Florida law requires that nonprofits that receive $1 million or more have an independent audit conducted annually. For organizations receiving annual contributions of more than $500,000, but less than $1 million, the financial statements must be reviewed or audited by an independent CPA on an annual basis. For nonprofit organizations that receive less than $500,000, either an audit, review, or compilation is acceptable. Due to these requirements, it is in the best interest of Stageworks to conduct an audit in order to be compliant with state laws and regulations if, and when, the company receives a large donation or grant in the future. If past independent audits have not been conducted, it could possibly jeopardize the grant or donation, which could result in the loss of said funds (State Law Nonprofit Audit Requirements).
The National Council of Nonprofits also states that:
• Federal, state, and local governments may request a copy of the organization’s audited financial statements
• Some contracts with state and local governments to provide services in the community may require the nonprofit to conduct an independent audit
• Private foundations may request the nonprofit to submit a copy of the nonprofit’s most recent audited financial statements in conjunction with submitting a grant proposal
• Some bank may require a nonprofit to have an audit as a condition of receiving a loan
• If a charitable nonprofit is small and has not conducted an audit due to the cost, the nonprofit should not be shy about asking the funder if a more affordable method of evaluating the nonprofit’s financial positions would be acceptable, such as a review of certified financial statements (State Law Nonprofit Audit Requirements).
Due to the possible circumstances or requests listed above, it is evident that an independent audit be conducted in order to be compliant in regards to receiving grants, donations, or bank loans. Overall, audited financial statements would make any individual donor, corporation, or government entity feel more comfortable providing funding to Stageworks knowing that the funds are being provided for their intended purposes (Does your nonprofit need to have an independent audit? ).

Introduction

Since Stageworks suffers from low brand loyalty and awareness, and since the company has hired an external marketing firm to handle its rebranding efforts, this recommendation will focus on crafting a strategic promotional strategy. Three promotional techniques have been identified:
1. Social Media Strategy
2. Guerrilla Marketing
3. Co-Branding

Social Media Strategy

The objective of the social media strategy is to increase marketing ROI by reallocating the current marketing budget from radio and print to a more cost effective channel, social media. This should be successful because social media advertising has varying cost levels, which enables Stageworks to pay less than it currently pays for traditional advertising, including the added bonus of targeting specific demographics. Implementing a successful social media strategy will also result in increased brand awareness, which will spur ticket sales and ultimately lead to the creation of brand equity.

Since conducting our internal analysis, Stageworks has elected to hire a marketing consulting company, Arcturus, to rebrand and execute a social media campaign. With that in mind, this recommendation will focus on the services Stageworks should look for Arcturus to provide and will give Stageworks a greater understanding of how social media should be leveraged for the success of the company. This will provide Stageworks with the information necessary to ensure Arcturus is providing valuable service, while also enabling Stageworks to bring the social media execution in-house by understanding how each platform operates.

Given Stageworks’ limited resources, we suggest that it focus on two platforms, Facebook and Instagram. Even though the marketing firm will be providing the social media services, a sustainable long-term strategy recommendation is that the firm bring the social media execution in-house, considering Stageworks currently employs a marketing manager, as well as a public relations manager who should be able to execute the strategy on their own. Before the Stageworks employees take over social media execution, it is important to document the Facebook and Instagram process so that the internal team can continue executing the strategy effectively. With that in mind, we suggest Stageworks request Arcturas create Standard Operating Procedures that detail how it plans to execute the social media campaigns on Facebook and Instagram.

As stated earlier, the median age of the Broadway theater consumer is 48. Per Pew Internet’s targets, the 30-49, 50-64, and 65+ age groups are important for Stageworks. According to Pew Internet statistics, Facebook remained the highest used social media platform in 2013, across all age groups. Facebook is also where the majority of the aforementioned 30-49, 50-64, and 65+ age groups spend their time, with 79, 60, and 45 percent respectively, of these populations on Facebook. The 65 and older age group is particularly noteworthy because the percentage using Facebook grew 10 percent from 2012, showing that it is the fastest growing group. Since the target theater demographic is on Facebook, it should continue to be the primary social media platform for Stageworks to advertise on.

The second platform Stageworks should focus on is Instagram, which is ideal for companies in the arts such as Stageworks, because it focuses on photos and video, rather than simply text, making it easy to showcase its actors, sets, and plays. Although Instagram caters to a younger demographic than the average age of theatre consumers, Stageworks should still try to reach the 37 percent of 18-29 year olds who use this platform (Duggan & Smith, 2013). Stageworks is located in an urban district which contains residents in this demographic. The largest percentage of residents in the 33602 zip code, including the Channel District is the 25-29 age group at 13.5 percent, followed by the 30-34 group, according to the 2010 U.S. Census (Profile of General Population and Housing Characteristics: 2010, 2010). Furthermore, all of the upcoming developments in the Channel District and Channelside Plaza should prove to be a continued draw for the millennials, driving the median age downwards (Kritzer, 2014). More of the 18-29 year olds are on Instagram than on Twitter, which is why we suggest adding Instagram to the theatre’s social media strategy (Duggan & Smith, 2013).

Another advantage to focusing on Facebook and Instagram is that these two applications have the highest percentage of daily usage rates across all users of the platforms, with 63 percent and 57 percent respectively, of users visiting the sites daily (Gillett, 2014). This means that daily posts are essential for success on Facebook, and a maximum of 10 posts per week is considered best practice. Posts should be uploaded during the afternoons in order to optimize impressions, which is the number of people whose news feed the content appears in, and engagement, which is the number of people liking, commenting on, or sharing the content (Gillett, 2014). Daily posts are also ideal to capitalize on engagement using Instagram, where users are tuned in essentially all the time (Harris, 2013).

In addition to engaging with users organically (i.e. posting for free), Stageworks can also utilize paid advertising on Facebook to promote its shows, beginning a week prior to opening night and continuing through the show’s run. Paid advertising has become a necessary evil on the site because a revised algorithm now favors paid content to appear in users’ news feeds over organic, non-paid content. In addition to appearing in more news feeds, paid Facebook advertising’s benefits are two-fold: 1) more people can be reached for less cost than with traditional advertising, and 2) the ads can be targeted to specific demographics, e.g., by location, age group, interests, or demographics that a specific play’s theme will appeal to, which gives Stageworks more accuracy and efficiency in its targeting efforts. The cost of reaching 1,000 people on Facebook is $0.25 on average (Carter, 2014), compared to $8.00 for radio ads, $20.00 for magazine ads, and $32.00 for newspaper ads, which are some of the other media channels Stageworks has previously used. Furthermore, ads can be set to target specific demographics, so Stageworks can specify the zip code to target the locals nearest the theatre and/or the age demographics of the Channel District and/or prime theatre consumers. Ads can also be targeted to specific profiles, such as people who list an interest in the arts or theatre. Another advantage of using Facebook Ads is that the Ads Manager feature will track click-through and conversion rates. When creating an ad in Facebook’s Ads Manager, the campaign manager can choose an objective for the ad, such as clicks to the firm’s website or website conversion. This means that the purpose of the ads can be to drive traffic to Stageworks’ website or prompt sales of tickets. Using Ads Manager will allow Stageworks to track the ad’s effectiveness in meeting its goal and allow Stageworks to track whether its advertising dollars are being spent effectively; something the theatre has no way of tracking using its current advertising channels.

One example of how Facebook Ads helped a performing arts theatre is when the historic Eagle Theatre in Hammonton, New Jersey was on the verge of demolition, but was saved by the city’s arts and cultural committee. When radio and TV ads were not providing the necessary boost for ticket sales, the arts and cultural committee tried Facebook advertising. They began by boosting popular posts to individuals within 50 miles of the theatre who declared they had an interest in performing arts. This resulted in a 400% return on Facebook advertising cost, as well as enabled the theatre to double tickets sold from promoted posts (The Eagle Theatre, n.d.).

In summary, the benefit of using the social media strategy will be an increase in marketing ROI, reduce the amount spent on advertising as a whole, including ancillary costs such as printing, mailing, and postage, and increasing the effectiveness by targeting the audience Stageworks is trying to reach.

Guerrilla Marketing

Jay Conrad Levinson, first used the term ‘guerilla marketing,’ in his book, Guerilla Advertising, published in 1984 (What is Guerrilla Marketing?). The term refers to using tactics similar to guerilla warfare, whereby marketers perform unconventional ambushes on the target audience. According to Creative Guerilla Marketing, “Guerrilla Marketing is about taking the consumer by surprise, making an indelible impression and creating copious amounts of social buzz. Guerrilla marketing is said to make a far more valuable impression with consumers in comparison to more traditional forms of advertising and marketing. This is due to the fact that most guerrilla marketing campaigns aim to strike the consumer at a more personal and memorable level.” The tactic can be particularly effective for small businesses that want to leave an impression on consumers, without having the luxury of a large advertising budget. This is an ideal strategy for Stageworks to use in building its brand in the Downtown Tampa and Channel District communities.

The objective of the guerilla marketing technique is to increase brand awareness so that Stageworks can become a member of the target market’s consideration set, the handful of entertainment options that receive serious consideration from potential Stageworks customers. Much research has shown that consumers are rarely loyal to only one brand but instead have a set of brands they would consider buying and another-possibly smaller-set of brands they actually buy on a regular basis (Keller, 2008). Because consumers typically consider only a few brands for purchase, making sure that the brand is in the consideration set also makes other brands less likely to be considered or recalled (Keller, 2008). Becoming a member of the target market’s consideration set is extremely important for Stageworks, as there are many entertainment options available for residents in Downtown Tampa and the Channel District, and it is important that they do not overlook Stageworks when considering entertainment options. In order to increase brand awareness for Stageworks, the organization must repeatedly expose itself to the target audience in order to increase familiarity. By repeatedly exposing the target audience to Stageworks’ actors, the firm will increase brand awareness and increase the potential to become a member of the target’s consideration set. Ultimately, the desired outcome of becoming a member of the target market’s consideration set is to drive ticket sales.

The guerilla marketing technique that Stageworks can employ is having the cast from each play dress up as their characters and walk the downtown Gaslight Park area, Franklin Street, and surrounding restaurants during weekday lunch hours. This area is extremely busy during the week because of its proximity to Downtown Tampa businesses. The actors should be ‘in-character’ and walk along the busy streets performing an aspect of the play that would draw attention to themselves. Characters should entice the public by inviting them to the plays, disseminating the play schedule, and providing some sort of incentive to go: a free drink, a discounted ticket, a buy one ticket get the second ticket half-off voucher, etc. The actors can walk into restaurants, get everyone’s attention, perform a quick 30-second sketch, and then leave. A few volunteers would then hand out marketing collateral to everyone in the restaurant that detailed what they just witnessed and provided an incentive to buy tickets to the play.

The guerilla marketing tactic would also provide a slight glimpse or teaser of how the characters would entertain the public during the actual play at Stageworks. This promotional technique will generate significant buzz as the characters roam the streets, making noise and drawing attention to themselves. There are also many other opportunities and events where the actors can visit and promote themselves. There are concerts and evetnts at Curtis Hixon Park, Tampa Bay Lightning games at Amalie Arena, and local nightlife and restaurants in the
Channel District.
This method is feasible, low-cost, and should be effective because the promoting characters can display their acting skill and quality, while providing entertainment and inciting curiosity. The cost for this activity would include the actors’ hourly wage, and cost to design and print the marketing collateral. The resources required are the actors and their costumes, which have already been acquired or created. The activity should be performed on weekdays preceding the play, from 11:30 till 1:30pm.

A previous report conducted by Ana Diez-Diaz and Linda Scarrit mentioned a market research study that polled local Channel District residents by way of a focus group. Scarrit and Diez-Diaz reported that “According to Tampa Downtown Partnership’s 2012 survey of Downtown residents (this survey includes those living in the Channel district, as well as the River Arts District; unfortunately these groups were not differentiated), having close proximity to Arts and Entertainment was one of the three top reasons that residents chose to live in the district- 74% of those responding to the survey said this was important to them.” Since residents in the area are interested in the arts, it is imperative to Stageworks continued success for the theatre to be among their consideration set when it comes to entertainment options.

Co-branding

Earlier in the Drivers of Industry Foresight section, we discussed the need for a theatre to broaden its reach by using its space more creatively, and by creating a unique experience in order to differentiate itself. This is particularly important in capturing the attention of Stageworks’ neighbors, the Channel District residents, a nontraditional theatre audience, who have many options for entertainment. One way to accomplish this is through co-branding with local breweries. Co-branding is when two brands from different industries join together to deliver a unique experience or service that is more appealing than the original product/service alone, in the hopes of capturing the attention of the partner brand’s target market.

Stageworks has wanted to attract the young professionals and other residents living in the Channel District since moving to the area, although attempts have been met with little success. Stageworks wants to target these residents because they have the ability to walk to the theatre, and have more disposable income in comparison to Hillsborough County as a whole. However, residents are unaware of Stageworks as noted in Scarritt’s and Diez-Diaz’s report from 2013.

One objective for this technique is to increase the breadth of brand awareness for Stageworks. Consumers tend to think of brands only in very narrow ways (Keller, 2008), in order to reach the Channel District residents; Stageworks must increase the breadth of brand awareness so that residents do not overlook the organization when choosing entertainment options. By co-branding with local breweries, Channel District residents should begin to consider Stageworks as a viable option when deciding on what to do for a fun night out.

Another objective for this technique is to create brand equity amongst the Channel District residents, which will provide a loyal customer base for the theatre. This can be accomplished by leveraging the brand knowledge of local breweries by co-branding with them. The preferred outcome is that Channel District residents may assume or infer that some of the associations or responses that characterize the breweries may also be true for Stageworks (Keller, 2008). In essence, Stageworks “borrows” some brand knowledge and perhaps some brand equity from the breweries (Keller, 2008). The co-branding technique is powerful for Stageworks, considering that the organization does not have much brand recognition among its community. Thus, co-branding provides secondary brand knowledge, which is important to create strong, favorable and unique associations or positive responses (Keller, 2008) considering the current deficiency between the organization and Channel District residents. By making the connection between Stageworks and local breweries, residents may form a mental association from the theatre to the breweries and, consequently, to any or all associations, judgments, feelings, and the like linked to those breweries (Keller, 2008). Furthermore, since Channel District residents have little to no knowledge about Stageworks, co-branding is essential because the secondary brand knowledge of the local breweries will positively affect the evaluations of the unfamiliar entertainment option that Stageworks provides. In other words, co-branding will provide the incentive for Channel District residents to make the purchase decision towards their first Stageworks experience.

Payless ShoeSource used co-branding in order to “further enhance its connection with girls and moms through its affiliation with American Ballet Theatre Company and its programs,” stated Matt Reubel, Chief Executive Officer and President (PR Newswire, n.d.). We can see from the CEO’s quote that Payless used the co-branding technique in order to leverage the brand knowledge from the American Ballet Theatre Company and reach its market consisting of young girls and their mothers so that the shoe company can sell to them.
Stageworks should frame the proposal to local breweries as an opportunity to promote the company’s craft brews, in order to penetrate the Channel District market. This approach should limit or possibly even negate the cost of providing beer for the event, because a promotional opportunity for local breweries builds awareness and potential growth, a win-win situation for both brands. Stageworks would require a single keg refrigerator, pint glasses, and beer servers, which the partnering breweries could provide. Stageworks should also propose that the local breweries bring branded pint glasses that each customer can use during the play, then take home as a souvenir. This type of branded promotion will benefit the brewery’s awareness and keep it in the minds of consumers as they use the pint glass at home. A single and recurring night each week should be designated as “Craft Beer Night.” The night should be chosen based on its lower level of attendance so that Stageworks does not cannibalize other high performing nights. If Stageworks’ two most popular nights are Friday and Saturday, choosing Thursday night might be an option to bring in local residents looking for a fun night out without the hassle of having to travel a great distance to do so.

A list of potential local brewery partners has been identified based on geographic proximity to Stageworks and include:
• Cigar City Brewing – 3924 W Spruce St, Tampa
• Brewer’s Tasting Room -11270 4TH St N, St. Petersburg
• Coppertail Brewing Company- 2601 E 2nd Ave, Ybor City
• Ūlëlē – 1810 North Highland Ave, Tampa Heights
• Six Ten Brewing – 7052 Benjamin Rd, Tampa
• Florida Avenue Brewing Co – 4101 N Florida Ave, Seminole Heights
• Tampa Bay Brewing Company – 1600 EAST 8TH Ave, Ybor City
• Angry Chair Brewing Company – 6401 N Florida Ave, Seminole Heights
• Southern Brewing & Winemaking – 4500 N Nebraska Ave, Tampa