Corporate Evolution and Strategic Management

MBA – PT- Vth Semester

Case Analysis – Playa Dorada Tennis Club: Expansion Strategy

Submitted to: Dr. J. K. Mitra
Faculty of Management Studies University of Delhi.

Submitted By: Group 1 Amit Batra Anjanee Kumar Srivastava Mukul Grover Pankaj Garbyal Ruma Saxena Sunil Manohar Singh Syed Sarfarazul Haque Vikas Arora

S-5 S-10 S-36 S-40 S-57 S-71 S-76 S-81

............ change pricing mix and offerability to increase capacity utilization.................................................. 5 Case – 1 Expand with more clay courts................................................. 8 Q 4) What shall Douglas Hall Do? ........................................................................................................................... leaving hard courts as it is.................................................... 4 Short term options: ......................... 8 Case 3 – Convert all 5 Hard Courts to Clay courts...................................................................................... 9 ............. ..................... 4 Q-3) How many tennis courts needed? ................................................................................................................................. ............................................................................. 2 Q-2) What are the options? .............................. 4 Long term options: ............ 9 Q 5) What are the implications of Tennis in PD Resort?.................................Table of Contents Q-1) What is the dilemma? .......................................................... 8 Case – 2 – No Expansion............................................................................................................... ....................

However. In his first two weeks on the job.specially a low investment base and an easy operation to manage. and hire well-known tennis players. Marketing & Sales division They wanted to continue to promote the PD tennis services and encourage Hall to build additional courts. Corporate Management Resort Operations division They are interested in a profitable operation.Q-1) What is the dilemma? Solution: Douglas Hall. Finance Division They are interested in cash flow and then return on investment which was not easily attainable since there was no room for the additional courts at the existing south side location and building as new tennis club house and a pro shop-in addition to new tennis courts which would increase the fixed cost. But several corporate divisions had different interests in the outcome of strategy of PD Tennis. PD tennis operations had not been profitable to date. They wanted more i. Management. to provide a free Wii tennis lounge for students (18 and under) and build a $100.e. . the tennis director of Playa Dorada Tennis club faced a growing but seasonal demand for tennis courts. Hall had to handle two issues: court capacity and pricing structure and he need to represent his findings and propose a strategy for the year to PD Inc. The corporate divisions who had interest in the outcome of the strategy are as follows: • • • • • Resort Operation Division Marketing and Sales Division Finance Division Development Division PC Inc.000 pro shop and a clubhouse.

the resort golf director could foresee a similar problem with his course capacity. management hoped to develop a methodology that could be applied to the capacity planning decisions. PD Inc. or setting a cost effective tent to house the new site’s service staff that could be a challenge. E. . In resolving the tennis capacity issue.Development division They wanted the courts to blend into the environment and the rest of the exotic resort buildings that meant alternative solutions such as adding high powered lights to a number of courts so that tennis could continue after dusk. Corporate Management division They believed that expansion strategy would be critical to other resort operations.g.

Games that are similar to tennis such as squash etc. It may be a profitable for a short run but sustainability and operational efficiency and the optimum price fixation will still be an issue. It will divert the traffic and frees up the tennis courts and will also act as a sorce of revenue to the PD resort. b. Provide coaching facilities for kids which will attract a large number of customers who want to make their kid active and sporty. Overhead lights can be installed to ensure that customers can play early morning hours and late night hours. Long term options: a. d. can be facilitated by opening squash courts as it requires less space and tennis lovers would love to play squash. Depending on the demand of the customers. d. Focus on its internal operations. e. Reduce prices or more discount packages during low demand. c. Vertical expansion: Making a multi-storey complex at current available space which has multiple courts on multiple floors. . b. additional hard courts which were set up earlier can be converted into clay courts. This will increase the capacity as well as caters to the restriction of limited space and larger availability of courts during off peak period will boost revenue generation. Opening a new entertainment centre in which various facilities will be available. c.Q-2) What are the options? Solution: There are two types of options possible in this case   Short run options Long term options Short term options: a. Modifying the price strategy as per the seasonal cycle. Horizontal expansion: Building of 4 new tennis courts at the existing facility which may a tricky decision.

000 13.000 469.000 Courts 0 $436.600 $206. which is quite insignificant considering the returns from even one sale in real estate business of Playa .200 436.000 152.400 $28.000 12.Q-3) How many tennis courts needed? Solution: Shop Revenues Court fees Annual members Lessons Total revenue Less cost of sale Gross margin Expenses Supervisory Clerical Labor Benefits Taxes Supplies Repairs and maintenance Utilities Miscellaneous expenses Rent Total expenses Contribution 28.200 $177.400 60.200 8.000 Total $395.000 7.000 40.000 12.600 14.000 14.200 676.400 10.600 8.200 235.000 40.000 28.400 48.000 338.000 36.200 24.000 131.200 160.000 7.000 72.000 400 6.200 235.000 40.000 52.000 3.400 The contribution from all 18 courts combined has been only $ 177800.600 16.000 40.200 0 0 0 395.400 7.000 40.000 911.000 13.000 14.000 15.000 516.000 36.800 180.000 0 516.600 $395.

824 2. Let us see the capacity utilization of courts throughout the year.506 2.797 938 1.459 1. Number of Days 31 28 31 30 31 30 31 31 30 31 30 31 Days Missed Bad Weather 3 3 2 1 2 2 3 3 2 2 3 3 Daily Hours (a) 8-5 8-5 8-6 8-7 8-7 8-7 8-7 8-7 8-7 9-7 9-5 9-5 Total Hours Available for Play (per Court) 252 225 290 319 255 255 255 255 224 290 243 252 Month January February March April May* June* July* August* September* October November December Month Total Court Hours Used at PD Tennis Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 889 1.885 1.090 . hence it is quite clear that revenue from courts shall not be a consideration while arriving at decision to have more courts or not.196 1.Dorada.

.409 2.4 % 2005 – 25.Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 840 457 629 2.797 938 Nov-06 Dec-06 Jan-07 2.825 The overall demand for above 3 months has increased from 3624 hrs to 8650 hrs.8 % 2007 – 47.825 Below are the overall capacity utilization figures: 2004 – 18.416 3. but since the demand varies as per season as well as time of day may be reflective of a very high utilization rate per existing schedules.9 % 2006 – 34. Looking at below key figures Nov-05 Dec-05 Jan-06 889 1. which is around 140 % increase in demand.416 3.409 2. still the overall capacity utilization currently is below 50 %.3 % Therefore although the utilization has been increasing.

. Number of courts to be added: Peak Demand – 140 % Capacity utilization – 50 % Excess Demand – 40 % Number of additional courts needed = 18 *. leaving hard courts as it is. Therefore 7 -8 more courts will be needed. Tennis as essential vehicle for real estate business. Economic conditions may change. change pricing mix and offerability to increase capacity utilization.40 = 7. Stable Economic conditions. Assumptions  Only a single segment of youth who prefer hard courts will be affected and it is not the target clientele of real estate sales. The first sector to be affected by economic cycle is real estate hence any investment shall be always conservative.Case – 1 Expand with more clay courts. Only 50 % capacity utilized. Assumptions    Linear demand increase as per projections. Case – 2 – No Expansion. Assumptions      Uncertainty in Demand as seasonal industry. Case 3 – Convert all 5 Hard Courts to Clay courts.2 Courts. There is a scope to manipulate demand.

It will make win-win situation for both resort business and court operations. that is no expansion and adjust the pricing and offerability to suit the needs of consumers as well as organization.  Will cater to most variations in demands. As given in the case the customer sees it as second home where they can spend leisure time during vacation and enjoy recreation facilities. preference for double play over singles and increased capacity due to new expansion result in better utilization of court facilities which will complement resort occupancy. Q 5) What are the implications of Tennis in PD Resort? The following are major implications of changing pricing mix and offerability to increase capacity utilization of the tennis court. since by calculation 7 more courts will be needed. the supporting operation infrastructure and facilities will add value to home buyer customers. Complement resort business The improved pricing structure. Increase in conversions and maintenance assumed to be of insignificant costs compared to long terms returns from real estate. Attracts new buyers Improved court facilities. Good investment Finance Division are interested in ROI and cash flow which can be attained easily. . recreation centers. Q 4) What shall Douglas Hall Do? Group 1 will go for Case 2.

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