Levels of decision making: an Australian events management company

Total Event Solutions (TES) is a hypothetical events management company based in Sydney,
Australia. The company has successfully operated in that market for many years organizing
confer- ences, meetings, exhibitions and other events for both large and small clients in the
local region and throughout the state of New South Wales. The market is extremely
competitive and many of the larger companies TES works with have stated that they have
difficulties in extending their working relationship with TES, though they are very satisfied
with the service they have received. This is because the larger companies they represent
have a nationwide presence and they need a partner to manage events that can also work
on a nationwide basis.

TES’s Board of Directors met and decided that in order to prosper in the future and compete
effectively with national and international rivals in the market, TES had to expand to cover
the entire Australian market. It was determined that it would do so by opening branch
offices in each of the country’s other five state capitals. However, to expand too rapidly can
be an extremely risky aspect of business and lead to so-called overtrading. In such a
situation, though the underlying business may be sound, investment may mean that
cashflow is negative for a period of time and has to be financed in some way. This occurs
because financial and other resources need to be deployed before sales are achieved and
revenue flows in. If there are unexpected adverse changes to the business environment, or
levels of expected sales are not achieved, those providing finance (gener- ally shareholders
or banks) might withdraw the finance thereby leading to potential business failure.

Consequently, the Board of Directors laid down the condition that national coverage should
be achieved, not immediately, but within five years through a phased opening of state
offices in the key cities of Melbourne, Perth, Adelaide, Brisbane and Hobart. The CEO and his
senior team subsequently met to consider the growth plan and determined a schedule for
opening the offices, which involved a phased opening over five years starting with
Melbourne and Brisbane in the sub- sequent year. As usual, annual sales targets were set for
the Sydney office and new annual targets were set for TES’s first new offices which would be
opened in the coming year in Melbourne and Brisbane.
Questions

1. Distinguish between strategic, tactical and operational level decisions in the TES example.

In the context of the tourism and hospitality industry, the distinction between strategic,
tactical, and operational level decisions can be explained as follows:

1. Strategic level decisions: These are long-term decisions that involve setting the overall
direction and goals of the tourism and hospitality organization. Strategic decisions are
made by top-level executives and are designed to give the organization a competitive
advantage in the market. Examples of strategic level decisions in the tourism and
hospitality industry include:

* Deciding to enter a new market or geographic region

* Developing a new brand or product line
* Investing in new technology or infrastructure
* Deciding to merge or acquire another company

2.Tactical level decisions: These are medium-term decisions that involve implementing
the strategies set by top-level executives. Tactical decisions are made by middle-level
managers and are designed to achieve the strategic goals of the organization. Examples
of tactical level decisions in the tourism and hospitality industry include:

* Creating marketing campaigns to promote a new product or service

* Developing pricing strategies to increase revenue
* Designing training programs for employees to improve customer service
* Developing partnerships with other companies to expand the organization's reach

3. Operational level decisions: These are short-term decisions that involve the day-to-day
operations of the tourism and hospitality organization. Operational decisions are made by
front-line employees and are designed to ensure that the organization is running
smoothly and efficiently. Examples of operational level decisions in the tourism and
hospitality industry include:

* Deciding how to allocate staff to different tasks

* Managing inventory levels to ensure that products are available when needed
* Responding to customer complaints and resolving issues
* Ensuring that facilities are clean and well-maintained

Overall, the distinction between strategic, tactical, and operational level decisions is
important in the tourism and hospitality industry because it helps organizations to focus
on different aspects of their business and to make decisions that are appropriate for each
level of the organization.
2. Explain what is meant by the term overtrading.

Overtrading is a situation where a company conducts more business than it can support
with its financial resources1. It occurs when a company expands its scale of operations with
insufficient cash resources, and as a result, runs out of cash, placing the company at
considerable risk of bankruptcy2. Overtrading can also refer to excessive buying and selling
of stocks by a broker on an investor's behalf to increase the commission the broker
collects3. This situation has been known to arise when a broker churns an investor's
account, which is illegal3. Overtrading can be avoided by monitoring cash flow, setting
realistic goals, and avoiding excessive risk-taking1.

Screening: International growth for Kenes events management company

The management of events is a very diverse field and is highly fragmented with many small
busi- nesses operating. Like an advertising agency, a football team or a small travel agency,
events management companies often rely very heavily on the competencies of a small
group of highly skilled people as their main source of competitive advantage. Consequently
such organizations have to plan their growth carefully so that they do not over-burden their
key resource.

The Kenes Group focuses on providing international congress organization services from its
headquarters in Geneva, Switzerland and regional and national offices in key business
locations around the world. Founded in 1965, Kenes is an industry leader in organizing
medical and scientific conferences and is a member of the international trade bodies ICCA
(the International Congress and Convention Association) and IAPCO (the International
Association of Professional Congress Organizers).

Although large in its chosen specialist field there are many competitors and the company
has to consider the suitability of international expansion carefully before proceeding. As the
company’s website points out, ‘we only establish regional and national offices if it makes
sense for our clients and if we can ensure that the Kenes quality, mission and values will be
upheld by the regional and local partners we know and trust’.

Clearly a company such as the Kenes Group is pursuing a strategic objective which involves
spread- ing its market portfolio by gaining a presence in selected foreign markets. Though
geographically widely spread, its current executive offices – providing global coverage
through regional offices – nevertheless exclude a presence in some key countries such as
Brazil, China, Russia and Indonesia.

In such a case the management needs to consider its financial and human resources
carefully and the relative attractiveness of market opportunities before expanding into new
countries and it might be the case that a screening process takes place to determine which
countries provide the best opportunities.

www.kenes-group.com

Questions

1. Explain why a screening process might be beneficial in this case when assessing
international expansion?

A screening process can be beneficial when assessing international expansion for several
reasons:

1. Efficiency- A screening process allows the company to quickly identify potential markets
for expansion by eliminating markets that do not meet certain criteria. This saves time and
resources that would have been spent researching and analyzing markets that are not
suitable for the company.

2. Risk reduction- A screening process can help the company reduce the risks associated
with international expansion by identifying markets that are more likely to be successful
based on certain criteria, such as market size, growth potential, and political stability.

Overall, a screening process can help a company to identify potential markets for
international expansion more efficiently, reduce risks, focus resources, and ensure
consistency in its approach to assessing potential markets.

2. What factors might it be useful for Kenes to take into account when considering
opening new international offices?

When considering opening new international offices, Kenes should take into account several
factors, including:

1. Market demand-Kenes should assess the demand for its services in the potential market.
This includes understanding the local healthcare industry, the size of the market, and the
competition.
2. Cultural differences- Kenes should consider the cultural differences between the potential
market and its existing markets. Understanding cultural norms, communication styles, and
business practices is essential to building relationships and establishing trust with local
clients.

3. Regulatory environment-: Kenes should consider the regulatory environment in the

potential market. This includes understanding the local laws and regulations related to
healthcare and event management, as well as any requirements for business registration
and licensing.

4. Infrastructure-: Kenes should assess the quality and availability of infrastructure in the
potential market. This includes transportation, communication, and technology
infrastructure, as well as the availability of skilled labor.

Overall, taking these factors into account can help Kenes to make informed decisions about
opening new international offices and ensure that the expansion is successful in the long
run.

Cash fluctuations: Event organizer Live Nation

Our intra-year cash fluctuations are impacted by the seasonality of our various businesses.
Examples of seasonal effects include our concerts segment, which reports the majority of
revenue in the second and third quarters. Cash inflows and outflows depend on the timing
of event-related payments but the majority of the inflows generally occur prior to the
event.

Live Nation (2012)

Questions

1. Discuss what the implications of the seasonality of cash flow might be for a company
such as Live Nation.

The seasonality of cash flow can have several implications for a company like Live Nation,
which is a live entertainment and ticketing company. Here are some potential implications:

Revenue Fluctuations: Live Nation's cash flow is likely to experience significant fluctuations
throughout the year due to the seasonal nature of the live entertainment industry. The
company may generate a large portion of its revenue during specific periods, such as the
summer concert season, while experiencing slower periods during the rest of the year. This
can impact the company's ability to manage its expenses, investments, and cash reserves
effectively.
Working Capital Management: Seasonal fluctuations in cash flow can affect Live Nation's
working capital requirements. During peak seasons, the company may need to increase its
working capital to fund additional inventory, marketing expenses, and higher staffing levels.
Conversely, during slower seasons, Live Nation may need to optimize its working capital by
reducing inventory levels and controlling expenses to maintain liquidity.

2. Can you cite other examples of companies involved in THE with such seasonal cash
flows and what are the implications for managers in these companies?

For managers in companies with seasonal cash flows, it is crucial to plan and forecast
accurately, manage working capital efficiently, optimize pricing strategies, and identify
opportunities for revenue diversification. They need to strike a balance between capturing
maximum revenue during peak seasons and managing costs during slower periods. Effective
cash flow management, budgeting, and strategic decision-making are key to maintaining
financial stability and sustaining business growth throughout the year.
The importance of cash management: Live Nation

Live Nation, headquartered in Beverly Hills, California, is probably the largest entertainment
company in the world. The company organizes and promotes concerts and festivals around
the world, owns or leases concert and festival venues and sells tickets for events through its
‘Ticketmaster’ operations.

However, many of its operations are highly seasonal in nature with outdoor events such as
concerts and festivals being concentrated during the spring and summer. Consequently the
results of opera- tions vary from quarter to quarter and year over year. Typically the
company experiences its poorest financial performance in the first and fourth quarters of the
calendar year as its outdoor venues are primarily used, and the festivals it organizes
primarily occur, during May through to September. The seasonality of the underlying
businesses creates volatile cash flows.

-Live Nation Entertainment 2012 Annual Report available at http://phx.corporate-ir.net/

Questions

1. What is meant by cash management?

Cash management refers to the process of managing an organization's cash inflows and
outflows to ensure optimal liquidity, effective use of funds, and the ability to meet
financial obligations. It involves various activities and strategies aimed at controlling,
monitoring, and optimizing the cash position of a company. The primary goal of cash
management is to ensure that a company has enough cash available to cover its short-
term obligations while maximizing the return on excess cash.

Overall, cash management is a critical function within an organization that aims to

maintain adequate liquidity, optimize cash flow, and ensure the financial stability and
growth of the company. Effective cash management enables businesses to meet their
short-term obligations, seize growth opportunities, and navigate through periods of
financial uncertainty.

2. Why is cash management important to an organization such as Live Nation?

cash management is vital to Live Nation as it helps the company navigate through seasonality, optimize
working capital, plan capital expenditures, maintain liquidity, make informed financing decisions, and
manage risks effectively. By prioritizing cash management, Live Nation can enhance its financial stability,
support growth initiatives, and ensure its long-term success in the dynamic entertainment industry.
Risk analysis: Live Nation

Live Nation Entertainment, Inc. based in Beverly Hills, California, claims to be the largest live
enter- tainment company in the world and operates five main areas associated with live
entertainment events: promoting music events, operating venues, ticketing services (such as
Ticketmaster), spon- sorship and advertising sales, and artist management and services.

All businesses encounter risks and it is important managers of those businesses identify the
risks and understand the implications if adverse circumstancs arise. As part of its annual
reporting the company analyses in detail the business and financial risks it encounters.
Some of the business risks identified by the company are summarised as follows:

• Is highly sensitive to public tastes and is dependent on our ability to secure popular
artists and other live music events
• Depends on relationships between key promoters, executives, agents, managers,
artists and clients
• Faces intense competition in the live music, ticketing and artist services industries
• Is seasonal and our results of operations vary from quarter to quarter and year over
year
• Depends, in significant part, on entertainment, sporting and leisure events and
factors adversely affecting such events could have a material adverse effect
• Operates in international markets in which we have limited experience and which
may expose us to risks not found in doing business in the United States
 • Is subject to exchange rates which may cause fluctuations in our results of operations
that are not related to our operations
• May be unsuccessful in our future acquisition endeavours, if any, which may have an
adverse effect on our business
• May not be able to adapt quickly enough to changing customer requirements and
industry standards
• Encounters the risk of personal injuries and accidents in connection with our live
music events, which could subject us to personal injury or other claims
• Is dependent upon our ability to lease, acquire and develop live music venues
Depends in part on the promotional success of our marketing campaigns
• Could encounter poor weather adversely affects attendance at our live music events,
which could negatively impact our financial performance

Source: Live Nation (2012)

Questions

1. Explain why a company like Live Nation needs to identify the risks it is subject to.
2. In what general ways might managers respond to the risks identified in a case such as
Live Nation?

Evaluation: the Olympic bidding process for the Tokyo 2020 Olympic Games

The Olympic Games is the world’s biggest sporting event and cities have to bid against each
other in a highly publicized bidding process. The bids have to go through a careful
evaluation process before the successful city is chosen. Though the terminology is not used
the evaluation involves a series of stages which in essence involve suitability, screening,
feasibility and acceptability.

Suitability – Each competing country has a National Olympic Committee (NOC). The NOC
coordin- ates any possible bid from the country it represents and assesses the suitability of
the bid. At this stage the bid may be withdrawn because it is not deemed to be suitable and
therefore unlikely to succeed, but if it passes this hurdle the NOC formally passes the bid
onto the International Olympic Committee for further scrutiny. Cities such as Prague (Czech
Republic), Saint Petersburg (Russia) and Toronto (Canada) considered making bids for the
2020 Olympic Games, but they did not do so. Rome (Italy) was to submit a bid to the IOC
but the Italian Government subsequently withdrew its support and the bid was withdrawn.
Screening – Following submission of their bids the ‘applicant cities’ are required to answer a
ques- tionnaire covering themes of importance to a successful Games organization. This
allows the IOC to analyze the capabilities and the strengths and weaknesses of the potential
host cities as well as assess the risks involved. Following a detailed study and ensuing
reports, the IOC Executive Board selects the cities that are qualified to proceed to the next
phase. At this screening stage some cities are screened out and cannot proceed. In the
bidding process for the 2020 Olympic Games, Baku (Azerbaijan) and Doha (Qatar) were
rejected at this stage and did not proceed.

Feasibility – At the candidature stage the accepted ‘candidate cities’ submit a second
questionnaire in the form of an extended, more detailed candidature questionnaire which
includes detailed finan- cial and operational details and impact assesssments. The reports
are carefully studied by the IOC Evaluation Commission. The members of the Commission
make four-day inspection visits to each of the candidate cities, where they check details of
the bid. The results of its inspections are passed to IOC members up to one month before
the electing IOC Session. Three cities were considered for selection to host the 2020 games
at this stage: Istanbul (Turkey), Madrid (Spain) and Tokyo (Japan).

Acceptability – The acceptability of the bids is the responsibility of members of the IOC who
each have one vote. Voting continues in rounds eliminating cites until a city with an overall
majority is chosen. Thus in its meeting on 7th September 2013 held in the neutral city of
Buenos Aires (Argentina), Tokyo was chosen to host the 2020 Summer Olympic Games.

www.olympic.org

Questions

1. Explain why the Olympic Games goes through this structured evaluation process.

Overall, the structured evaluation process for the Olympic Games serves to ensure
fairness, transparency, and accountability in the selection of host cities. It assesses the
feasibility, suitability, legacy plans, and sustainability initiatives of potential hosts,
mitigates risks, and engages stakeholders. By following this process, the IOC aims to
choose the most suitable and capable host city that aligns with the Olympic values and
can successfully organize a memorable and impactful Olympic Games.

2. What stakeholders other than the IOC members may have a view on the ‘acceptability’ of
the Olympic bids?

Several stakeholders, in addition to IOC members, may have a view on the acceptability of
Olympic bids. These stakeholders play a crucial role in evaluating and influencing the
viability and desirability of hosting the Olympic Games. It is important to note that the
acceptability of Olympic bids is a complex and multifaceted issue, and stakeholders may
have differing views and priorities. The IOC considers these various perspectives in the
evaluation process to ensure broad consensus and support for the chosen host city.
Strategic drift: Calgary First Night Festival

Recent years have seen a huge increase in the number and range of festivals in countries
around the world as localities, regions and countries compete for consumer spending.
Successful festivals such as those in Edinburgh, Scotland, and Salzburg and Bregenz in
Austria can be highly lucrative for their local economies both directly and indirectly through
the enhanced image of the city that they engender.

However, the environment is highly competitive. The environment is competitive in two

respects in that there are now many more festivals competing for public custom, but also
the festivals have to compete for finite public and commercial financial resources. Many
festivals are highly specialized and depend on public subsidy, volunteers and sponsorship
for survival. Failure to keep pace with the changes in relation to these factors is an example
of strategic drift.

Getz (2002) cites the example of the termination of the First Night Festival in the Canadian
city of Calgary, which attracted up to 40,000 people for this paid-admission, non-alcoholic,
family arts festival, which was held on new year’s eve from 1985 through to 1995. Failure
was attributed not to lack of interest but to other environmental factors:

Price restrictions were imposed which prevented the organizers from increasing their
revenue; An initial city grant was discontinued and put additional pressure on the event;

The festival was not eligible for ongoing funding from the Calgary Regional Arts Foundation,
which otherwise supports local festivals; and

The volunteer festival directors were ‘burnt-out’ because of the constant fight for financial
viability.

Thus failure to respond to the rapidly changing financial circumstances and an

unsustainable lead- ership model implied that a strategic drift had taken place, i.e.
the festival’s rate of change failed to keep pace with the changing external
environment.

Questions

1. What is meant by the term ‘strategic drift’ and how it is illustrated in this case?
The term 'strategic drift' refers to a situation where a company's strategy gradually and
unintentionally deviates from its intended course, often due to external changes or
internal inertia. It occurs when there is a misalignment between a company's strategic
direction and the evolving business environment. strategic drift in the context of the
Olympic Games refers to the misalignment between the IOC's strategies and the evolving
external factors, including changing societal expectations, rising costs, environmental
considerations, political dynamics, and technological advancements. By recognizing and
 addressing strategic drift, the IOC can proactively adapt its strategies to ensure the
continued acceptability and relevance of the Olympic Games in the ever-changing
landscape.
2. What might the organizers of the festival have done to prevent failure in this case?

Thorough Planning and Risk Assessment: The organizers should have conducted
comprehensive planning, including a detailed assessment of potential risks and challenges.
This would involve considering factors such as financial feasibility, logistical requirements,
resource availability, and legal compliance. By identifying potential pitfalls and developing
contingency plans, the organizers could have been better prepared to mitigate risks and
address unforeseen circumstances. By implementing these preventive measures, the
organizers could have significantly increased the likelihood of a successful festival and
minimized the risk of failure.

Eventful cities: Edmonton, Canada

Many so-called ‘eventful cities’ are placing festivals and events at the heart of their
development and promotional strategies, recognizing the key role that they can have in
developing positive images of a location and enhancing economic activity. By way of
example, Richards and Palmer (2012) cite, amongst others, the cases of Melbourne,
Australia, which has labelled itself as ‘the world’s event city’; Seoul, South Korea which has
claimed to be ‘one of the most eventful cities in the world’; and, on a less global scale,
Reno-Tahoe territory in Nevada, USA, which has promoted itself as ‘the most eventful city in
America’.

Among these cities promoting themselves in this way is Edmonton in Alberta Canada, which
refers to itself as ‘Canada’s Festivals City’, setting itself in competition with other Canadian
cities, Montreal and Quebec City, which define themselves in similar terms (Richards and
Palmer, 2012:3). Although Edmonton, a city of about a million people, is somewhat isolated
from other large urban centres, research in 2008 indicated that it hosts an array of colourful,
entertaining festivals every year including Canada’s largest folk music festival and North
America’s largest and longest-running International Fringe Theatre Festival.

Like other cities which have limited promotional budgets, Edmonton has had to rely heavily
on a volunteer workforce. Since adopting this strategy of promoting itself through its
festivals provision in 2008, the city has promoted a strong culture of volunteering among
the population. In particu- lar it promotes a culture of involvement through its Edmonton
Magical Volunteer Army and has a dedicated website (edmontonstories.com) which
encourages visitors and residents to share their stories about their experiences.
-Richards and Palmer (2012); www.edmonton.com, www.edmontonstories.ca

Questions

1. Identify the benefits and potential difficulties volunteers bring to events such as
those in Edmonton.

Benefits of Volunteers:

Cost Savings: Volunteers offer their services without monetary compensation, leading to
significant cost savings for event organizers. This allows resources to be allocated to other
important aspects of the event, such as improving infrastructure, enhancing participant
experiences, or expanding the event's reach.

Enthusiasm and Passion: Volunteers often have a genuine enthusiasm and passion for the
event or cause they are supporting. Their dedication and positive energy can create a
vibrant and engaging atmosphere, enhancing the overall experience for participants and
attendees.

Potential Difficulties with Volunteers:

Recruitment and Training: Finding a sufficient number of volunteers and ensuring they are
properly trained and prepared for their roles can be a challenge. Organizers need to invest
time and effort into recruiting, selecting, and training volunteers to ensure they are
equipped to fulfill their responsibilities effectively.

Reliability and Commitment: Volunteer availability and commitment levels can vary. Some
volunteers may not fulfill their commitments or may drop out at the last minute, leading to
potential staffing gaps. Organizers need to manage volunteer schedules, maintain clear
communication channels, and have backup plans in place to address any potential reliability
issues.

Despite these potential difficulties, the benefits of volunteers in events like those in
Edmonton far outweigh the challenges. By effectively recruiting, training, coordinating, and
appreciating volunteers, event organizers can harness their enthusiasm and dedication,
creating memorable and successful events for the community.

2. Discuss how efficiently cities such as Edmonton are able to utilize resources in
providing and managing events.

Monitoring and Evaluation: Cities monitor and evaluate the impact of events to assess
resource efficiency and identify areas for improvement. This includes analyzing attendance
numbers, economic benefits, environmental impact, and community feedback. By gathering
data and feedback, cities can make informed decisions, adjust resource allocation strategies,
and continuously improve event management practices.

Efficient resource utilization in event management requires a strategic and coordinated

approach. By planning strategically, collaborating with stakeholders, optimizing
infrastructure, engaging volunteers, leveraging technology, and monitoring outcomes, cities
like Edmonton can effectively manage events while making the most of their available
resources.

Public–private partnerships: Managing event venues: The Colorado Convention Centre

The USA has a number of large property management companies with sizeable international
oper- ations which specialize in event venues. However, unlike its major competitors such as
AEG, Live Nation and Nederlander Organization, which generally own or lease their
properties, SMG spe- cializes in managing publicly owned facilities. Founded in 1977,
Pennsylvania based SMG is now a venue management group with operations concentrated
in North America but with further oper- ations in Europe and Asia. One example of a public–
private partnership involving SMG’s private sector expertise is located in Denver, Colorado.

Built in 1990, the Colorado Convention Center and nearby Bellco theatre are top economic
engines driving Colorado’s economy. The Convention Center hosts over 400 events annually
and is owned by the City and County of Denver but operated under contract by SMG, in a
public–private part- nership. The partnership is similar to numerous examples operating
around the world in that public authorities provide infrastructure, but bring in specialist
private sector competencies to manage the facilities.

www.smg.com, www.denver.org
Questions

1. What competencies and resources are provided by the public and private sectors in this
case?

In the case of event management in cities like Edmonton, both the public and private
sectors contribute competencies and resources to ensure successful events. The
collaboration between the public and private sectors allows for the pooling of
competencies and resources, resulting in comprehensive event management. While the
public sector focuses on infrastructure, safety, regulations, and public welfare, the private
sector brings expertise in event planning, sponsorship, marketing, entertainment, and
hospitality, enhancing the overall success of events in cities like Edmonton.

2. What motivates public authorities to form PPPs such as the one in Denver?

By forming PPPs, public authorities can harness the expertise, resources, and efficiency of
the private sector to deliver infrastructure projects, public services, and community
development initiatives. These partnerships provide a mutually beneficial arrangement,
where the public sector gains access to private sector capabilities while the private sector
benefits from revenue opportunities and long-term contracts.