The film makes basic sense on paper. When industrialist Terry learns that his war buddy John Kreese is disgraced and bankrupt, he wants to help him make things right and get revenge on those responsible. The problem is the execution. Kreese is shown bankrupt at the beginning of the movie which is implied to be the consequence of the tournament. This only makes sense if Kreese lost all his students due to his own rash actions and vindictiveness as one tournament loss shouldn't be enough to close him down. Whats more, we see that Terry is aware of this. He apologizes to Daniel and Miyagi for Kreese's rash actions in order to win their trust. So we know that Terry knows that this kid didn't really do anything to Kreese and was just defending himself. Which makes it silly when Terry talks Kreese out of throwing in the towel and moving on with his life and then neglects his business interests to focus on concocting an overly elaborate revenge plot to hurt and humiliate Daniel. Heres the whole plan.
- Send Kreese out of the country.
- Apologize to Daniel and win his trust while informing him that Kreese is dead.
- Recruit a top karate student to compete in the local tournament.
- Have the top karate student goad Daniel into competing, threatening his life and his friend's life in the process (while hiding his own association with the student.)
- Hope that this somehow estranges Daniel from Miyagi so that-
- He can take Daniel in and train him wrong while pressuring him to learn vicious self-injuring attacks.
- Secretly bring back Kreese and wait for Daniel to give up or become uncomfortable with the training.
- When Daniel quits, surround him at the dojo and have Kreese spook Daniel.
- Its unclear what they would have done next because Miyagi saves Daniel. Were they just going to spook him? Probably because-
- Daniel has to show up at the tournament presumably hurt and poorly trained.
- Terry reveals at the tournament he is opening a new chain of Cobra Kai studios.
- Terry's real protege can draw out the tournament match deliberately losing points as needed to draw out the in ring punishment.
- The protege wins.
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