Financial Analysis: Carefully analyze whatever financial information is offered using the appropriate ratios. Summarize what you discover with a narrative that tells what the numbers say about the financial health of the company.

Financial Analysis: Carefully analyze whatever financial information is offered using the appropriate ratios. Summarize what you discover with a narrative that tells what the numbers say about the financial health of the company.

Really tough. But really fun. When I got back to the office on Monday morning, I looked at my colleagues and thought: "And what did you do over the weekend?" -TOUGH MUDDER PARTICIPANT Tough Mudder Inc. is a Brooklyn-based company that hosts endurance obstacle eventsa rapidly growing sport also known as mud runs. During 2015, about 600,000 participants will each pay between $180 and $260 to tackle a 10- to 12-mile Tough Mudder course featuring 15 to 20 challenging obstacles. The obstacles include wading through a dumpster filled with ice (the Arctic Enema), crawling through a series of pipes part-filled with mud (Boa Constrictor), and dashing through live wires carrying up to 10,000 volts (Electroshock Therapy). The 2015 schedule com- prises 46 two-day Tough Mudder events (a separate run on each day) in the US, Canada, the UK, Ireland, Germany, and Australia. Tough Mudder's website describes the experience as follows: Tough Mudder events are team-based obstacle course challenges designed to test your all around strength, stamina and mental grit, while encouraging teamwork and camaraderie. With the most innovative courses and obstacles, over two million inspiring participants worldwide to date, and more than $8.7 million raised for the Wounded Warrior Project by US participants, Tough Mudder is the premier adven- ture challenge series in the world. But Tough Mudder is more than an event; it's a way of thinking. By running a Tough Mudder challenge, you'll unlock a true sense of accomplishment, have a great time and discover a camaraderie with your fellow participants that's experienced all too rarely these days.? Tough Mudder was founded in 2010 by former British school pals Will Dean and Guy Livingston. While a Harvard MBA student, Dean entered Harvard Business School's annual business plan competition using Tough Guy, a UK obstacle race based upon British Special Forces training, as the basis for his plan.? On graduat- ing from Harvard, Dean and Livingstone launched their first Tough Mudder event. On May 21, 2010 at Bear Creek ski resort, Pennsylvania 4,500 participants battled through a grueling 10-mile course. The Market for Endurance Sports The origins of endurance sports can be traced to the introduction of the modern marathon race in 1896, the triathlon in the 1920s, orienteering in the 1930s, and the first Ironman triathlon in 1974. In recent years, a number of new endurance sports have appeared, including: adventure races-off-road, triathlon-based events which typically include trekking/orienteering, mountain biking, and paddling; obstacle mud runscross-country running events with a variety of challeng- ing obstacles; novelty eventsfun events such as 5K races in which competitors are doused in paint (Color Run), running with real bulls (Great Bull Run), and food fights (Tomato Royale). Tough Mudder used several strategic variables to map the market and position the different products (Figure 1). Obstacle mud runs were initiated in the UK in 1987 with the annual Tough Guy race organized by ex-British soldier Billy Wilson (which provided the inspiration for Tough Mudder). In the US, Warrior Dash launched in July 2009, followed by Tough Mudder and Spartan Races in May 2010. A flood of new entries followed. During 2011-2013, new entrants included: Mud Mingle, Play Dirty Adventure Runs, Dirty Girl, Mudslayers, Gritty Goddess Runs, Alpha Warrior, Big Nasty Mud Run, Survival Race, Udder Mud Run, Fugitive Mud Run, Hot and Dirty Mud Run, and many more. During 2013, there were 3.4 million participants in US obstacle mud runs paying a total of $290.1 million. By comparison, triathlons attracted about two million participants in 2013. In 2013, close to 350 organizations offered obstacle mud runs. The surging popularity of mud runs pointed to the desire of the young (and not so young) to turn away from video screens and virtual experiences and test their physi- cal and mental limits in the Great Outdoors. FIGURE 1 The market for endurance sports Collaborative Unconventional Color Run Tough Mudder Tough Mudder Spartan Races Warrior Dash Low risk High risk Brand-led Activity-led event event Color Run Warrior Dash Ironman Spartan Races Marathons Marathons Ironman Competitive Traditional TABLE 1 Tough Mudder's leading competitors Spartan races Warrior Dash Founding Started by Joe De Sena in 2010 Expanded overseas through franchising US: 108 mostly 1-day events Overseas: 76 events in 26 countries 2015 events Red Frog Events LLC launched Great Urban Race in 2007, Warrior Dash in 2009, and Firefly Music Festival in 2012 US: 27 1-day events Canada: 1 event (No overseas events after 2014) 3- to 4-mile race with 12 obstacles followed by post-race party (beer, bbq, live music) The product 3 types of race: Sprint (3 miles, 15 obstacles), Super (8 miles, 20 obstacles), Beast (12 miles, 25 obstacles) Reebok, Clif Bar, Paleo Ranch Jerky, Bodybuilding.com, PursuitRx Sponsors Shock Top Brewing, Vibram, Anytime Fitness, Gold Bond, Rockin' Refuel The psychology of mud runs (and other endurance sports) is complex. The satisfaction participants derive from overcoming their perceived physical and men- tal limits combines with identification with warrior role models and the nourishing of camaraderie. The New York Times referred to the Walter Mitty weekend-warrior complex, noting that, while the events draw endurance athletes and military veter- ans, the muddiest, most avid, most agro participants hail from Wall Street."* A psy- chologist pointed to the potential for misattributed arousal: the tendency among couples participating in endurance events to attribute increased blood pressure, heart rate, and sensory alertness to their emotional relationship with their partner. Bottom line: Want your boyfriend or girlfriend to feel intense feelings of love and desire for you? Put yourselves through a grueling, 12-mile obstacle course!" During 20132015, the mud run industry experienced a shake-out as many weaker organizers were unable to attract sufficient participants to cover their costs. At the same time new entry continued-new obstacle race series were launched by Battle Frog in the US and Swedish-based Nexthand's Toughest obstacle races in Scandinavia and the UK. By 2015, the industry leaders were Tough Mudder, Spartan Races, and Warrior Dash (Table 1). Growing the Company, Building the Brand Tough Mudder's strategic priority was to establish leadership within an increasingly crowded market. How to position Tough Mudder in relation both to other endur- ance sports and to other obstacle runs was the critical strategic issue for CEO Will Dean. Dean believed that compared to traditional endurance sportssuch as mara- thons and triathlonsthe key attributes of obstacle course races were that they pre- sented significant personal risk, of injury, hypothermia, or extreme exhaustion; they could be collaborative rather than competitive events; and they were more engaging by allowing a variety of experiences and challenges. However, combining the various attributes of the mud run experience- exhaustion, camaraderie, fun, and fearwas challenging in terms of product design. In trading off individual achievement against collaboration, Dean emphasized the collaborative dimensionTough Mudder would be untimed and team-based; the individual challenge would be to complete the course. A more complex chal- lenge was the need for Tough Mudder to present itself as formidable (Probably the Toughest Event on the Planet") while attracting a wide range of participants. Making it a team-based event and giving participants the option to bypass individual obstacles helped reconcile these conflicting objectives. Appealing to military-style principles of esprit de corps (No Mudder left behind") also helped reconcile this dilemma. This combination of personal challenge and team-based collaboration also encouraged participation from business enterprises and other organizations seeking to build trust, morale, and motivation among teams of employees. The principle of collaboration was not only within teams but extended across all participants. Before each Tough Mudder event, the participants gather at the start line to recite the Tough Mudder pledge: I understand that Tough Mudder is not a race but a challenge. I put teamwork and camaraderie before my course time. I do not whine-kids whine. I help my fellow Mudders complete the course. And I overcome all my fears. As psychologist Melanie Tannenbaum observes: this pledge is setting a very powerful descriptive norm ... a very powerful determinant of our behavior ... More than anything else, though, there's a little part of our brains that hasn't quite left the *Peer Pressure' halls of high school. We want to fit in, and we want to do what oth- ers are doing." The spirit of unity and collaboration provides a central element of Tough Mudder's marketing strategy. Tough Mudder has relied almost exclusively on Facebook for building its profile, encouraging participation, and building community among its participants. Its Facebook ads target specific locations, demographics, and likes such as ice hockey and other physical sports. Tough Mudder also makes heavy use of sponsored stories, which appear on users' Facebook news feeds when their friends Like Tough Mudder. Most important, Facebook is the ideal media for Tough Mudder to exploit its greatest appeal to participants: the ability for them to proclaim their courage, endurance, and fighting spirit. As the New York magazine observes: "the experience is perfect for bragging about on social media, and from the outset Tough Mudder has marketed to the boastful." By March 2015, Tough Mudder had four million Facebook "likes." Establishing leadership within the obstacle mud run market was a key strate- gic goal for the company. The tendency for the market to coalesce around a few leading firms would be reinforced by the ability of the market leader to set indus- try standardsto establish norms of the key attributes of an authentic mud run. Hence, Dean envisaged Tough Mudder playing a similar role as the World Triathlon Corporation and its Ironman brand in triathlon racing. Early-mover advantage combined with rapid growth (Figure 2) gave Tough Mudder market leadership in North America. However, staying ahead of the compe- tition required delivering an experience that people would want to come back for, time and time again. This involved three major activities at Tough Mudder: FIGURE 2 Tough Mudder: Growth 20102015 70 No. of events Participants (tens of thousands) 60 50 40 30 20 10 0 2010 2011 2012 2013 2014 2015 Note: Participant numbers are case writer's estimates. Data for 2015 are projections. and close attention to social media. Tough Mudder continually sought clues as to how it might make improvements that would allow it to match the energy, determination, and gung-ho spirit of the participants. Continuous development of obstacles and course design involved generat- ing ideas for new obstacles while on retreats, developing and testing pro- totypes at the Brooklyn HQ, and learning from participant experiences. Tough Mudder continually increased its investment in product development with new and improved obstacles announced each year. In January 2015, Tough Mudder announced that its entire obstacle menu has been revamped including ten exhilarating new obstacles, 2.0 versions of its classic chal- lenges, and off-course Mudder Village obstacles for participants and specta- tors to experience. Efforts to extend brand leadership focused heavily on social media and maxi- mizing traffic to Tough Mudder's website, but also included extensive out- reach to the online and print media. Partnering Partnering with other organizations has been a central feature of Tough Mudder's growth. Its partnerships have been important for building market momentum, pro- viding resources and capabilities that Tough Mudder lacked, and generating addi- tional sources of revenue. Since its inaugural run in 2010, Tough Mudder has been an official sponsor of the Wounded Warriors Project, a charity that offers support to wounded veterans. The relationship reinforces Tough Mudder's military associations and helps legitimize Tough Mudder's image of toughness, resilience, and bravery. Military connections were further reinforced by sponsorship from the US Army Reserve, which viewed Tough Mudder events as an opportunity for promotion and recruitment. Commercial sponsors include Under Armour, Shock Top beer, General Mills' Wheaties brand, Radisson hotels, Cellucor nutrition products, MET-Rx food supple- ments, and Oberto Beef Jerky. Expanding the Product Range Reconciling aspirations for toughness and difficulty with breadth of participation and market appeal, encouraged Tough Mudder to introduce several new products between 2011 and 2015: World's Toughest Mudder was introduced in 2011 to reinforce the brand's reputation for toughness. The annual run featured individuals and teams competing to complete the greatest number of course laps during a 24-hour period. The Financial Times described the event: Le Mans on foot, through a Somme-like landscape with Marquis de Sade-inspired flourishes.98 Mudderella is a 57 mile obstacle course, designed by women for women. The event is all about working together, having fun, and owning your strong! Nine Mudderella events were planned for 2015. Urban Mudder a 5- to 6-mile city-based obstacles course debuted on Randall's Island New York City on July 25, 2015. Participants were required to scale brick walls, hurtle between platforms and fling themselves into giant air bags and perform Mission Impossible-like contortions to avoid break- ing a beam in a field of lasers. The event was designed to be a festival-like party with DJs and street performers, food trucks and a beer garden."10 Fruit Shoot Mini Mudder is a mile-long adventure course for children aged 7 to 12 years old. Like Mudderella, it accompanies the main Tough Mudder events in order to create family involvement. According to Product Director Daniella Sloane, We've created a bunch of obstacles that will work whether youre short or whether you're tall. If you're at least 42 inches you're going to have a good time and you're going to have to work with your fellow team- mates to make it through. The obstacles were developed through children's focus groups and test events. Management As CEO of Tough Mudder, Will Dean focuses upon key priorities. There are only two things a leader should worry about, he told Inc. magazine, strategy and culture ... We aspire to become a household brand name, so mapping out a long-term strat- egy is crucial. I speak with Cristina DeVito, our chief strategy officer, every day, and I meet with the entire five-person strategy team once a week ... We go on retreats every quarter to a house in the Catskill Mountains ... There's no phone coverage, and the internet connection is slow ... We started the retreats to get everyone think- ing about the future."11 At the core of Tough Mudder's strategy is its sense of identity, which is rein- forced through the culture of the company: Since Day 1, we've had a clear brand and mission: to create life-changing experiences. That clear focus means that every employee is aligned on the same vision and knows what they're working toward."12 "We know who we are and what we stand for, he added. To sustain the culture, Tough Mudder has established a list of core values to guide the actions and behavior of the management team. An additional key responsibility of Dean's is hiring: Tough Mudder grew from eight employees at the end of 2010 to around 250 by the end of 2014. His obser- vation that a business is only as good as the people who build it is reflected in meticulous talent seeking aimed at hiring executives who combine professional achievement with the pursuit of adventure and share Dean's passion and values. Tough Mudder in 2015 In 2015, Tough Mudder was reckoned to hold a narrow lead over Spartan Races in terms of revenue and numbers of participantsa result of astute strategic position- ing, effective brand building, careful product design, meticulous operational plan- ning, and obsessive focus on the customer experience. However, sustaining the company's growth and market leadership in the endurance sports sector would be an ongoing challenge as the market began to mature. While the consolidation of the industry around the three leading players would assist the stability and reputation of obstacle mud runs as an endurance sport, competition among the leading players was becoming increasingly intense as the market leaders became ever-more sophis- ticated in course design, marketing, and operations managementand increasingly adept at imitating one another's innovations. Market positioning became a key issue for Tough Mudder: was the firm's attempt to reconcile toughness with breadth of participation sustainable or would the market segment between the organizers of extreme events (such as Tough Guy in the UK and Battle Frog Races in the US) and those offering events more oriented toward fun and recreation (Mud Factor, Zombie Mud Run)? Finally, there was the long-run future of the industry as a whole: would obstacle courses establish themselves as a continuing sport or were they a passing fad