B392 TMA 3 2020 2021 V1 KSA Only

1. Discuss the Metta Rest Spa performance in 2015.
Perform industry,
consumer, competitor, and corporate capabilities analyses to
support your discussion.
CUSTOMERS
Nearly everyone could float. There were four major motivations for clients: relieving
stress and anxiety; managing pain; generating creativity and ideas; and improving sports
performance.
Stress and Anxiety Relief
Anyone who felt overwhelmed or burnt may benefit from a 60- to 90-minute float
therapy, which would remove light and noise. Many eager floaters reported themselves as
attaining profound relaxation or real sleep. Flotation treatment left clients calm and
invigorated.
Pain Management
Knee pain, back pain, neck discomfort and pain associated to pregnancy can all be
adequately controlled by flotation treatment. Muscle, joints and bones were relieved by
weightlessness and even severe chronic pain disorders like arthritis and fibromyalgia
were alleviated.
Creativity and Idea Generation
If other senses are restricted, the remaining senses can be strengthened. Without sensory
information, the brain may focus on one problem or travel about and investigate other
ideas that ordinarily could not be accessed. Some companies send their staff to flotation
treatment sessions and creative brainstorming sessions. Students have enhanced memory
and improved test results through floating.
Athletic Performance
Professional sportsmen and women Stephen Curry, an all-star National Basketball
Association (NBA), and J. J. Watt, a line-backer in the NFL, supported flotation
treatment to increase athletic performance. 5 Physical advantages included pain
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reduction, improved sleep and salt healing. The focus, pleasant imagery and stress
reduction were mental advantages.
BACKGROUND
Metta was created by three partners — Natasha Strickland, Kimberly Paulson, and
Charlie Paulson — who had all been "entirely transformed" by floating practises and who
had a shared interest in owning and running a floating facility. Metta claims to be the
most luxury float spa in Vancouver with cutting-edge treatments for relaxation (see
Exhibit 4).
In seven individual rooms, Metta featured float tanks each with its own bathing
amenities. Each room was equipped with towel, towel face, bath tissue, neck support,
earplugs, barrier cream, a shower gel and a shampoo. After each visitor float, Metta's
pods were filtered and cleaned between the guests. There were also women's and men's
changing rooms, where customers could change into robes and slippers (supplied by
Metta) and lock away valuables. In the changing rooms, toiletries such as lotions, cotton
swabs and hairdryers were stored. Metta also included an infrarot sauna, a reading area,
and a meditation and yoga center. It supplied a wide variety of literature and tea for
relaxation after floating; customers did not hurry out of the spa. Metta borders on two
well-established Vancouver neighbourhoods: Kitsilano and West Point Grey (see Exhibit
5), attracting men and women aged between 18 and 65.
Neither Paulson was Canadian citizens, a married pair, but both had work visas which
enabled them to work for six months in Canada. When Natasha applied for a fresh
financing round from the Stricklands, the Paulsons lived in the United States and did not
participate in daily operations at Metta either. The aim of the collaboration was for
Charlie to work in the front end and manage personnel, as well as for Kimberly to be
responsible for marketing and building contacts with interested consumer groups such as
students, new moms and companies. Because they had made no contribution either to the
job promised or to any financial commitment to the start-up, Natasha intended to take
over all and handle the operations and the funding itself. Natasha was a yoga instructor
and continued to teach while managing Metta at locations in Vancouver.
COMPETITION
In the Vancouver–Lower Mainland region, 13 float spas were established in 2015 Metta's
biggest competition came from the Float House, a studio for franchises located just a few
kilometers from Metta on a popular route. Through its franchising agreement, Float
House has access to substantial marketing resources. Float House has five sites, one in
Edmonton, Alberta in British Columbia. 6 Float House had a different price structure and
tank supplier than Metta, and only three tanks were located on its Fourth Avenue (see
Exhibits 6 and 7). Float House's pods were not emptied and cleaned between the visitors;
instead, water was subjected to a three-fold sanitation and filtration procedure.
DECISION
Should Dan and Deanna Strickland spend an additional $60,000 on Metta Rest Spa? The
Stricklands were less interested in investing their money on a big return than in
supporting the goal of their daughter of owning and running a float treatment business,
but also wanted to preserve the money she had already invested. Was it time to surrender?
What other information should the Stricklands ask to help them decide?
2. As a consultant you were contacted by the parent in order to advise
whether to increase their investment or not. They asked for the
following additional information: Cost Classification & BEP,
Capacity, Unit Sales, Seasonality, Membership Sales, Staffing
Schedule and Wages, Floats per Day and Hour, Marketing Break
Down.
Companies' costs comprise of fixed and variable costs. As noted, as production volumes
fluctuate, variable costs do not remain constant. Fixed costs, however, are costs which
stay constant independent of output levels (such as office rent). To make business
decisions, understanding which expenses are variable and which costs are fixed is crucial.
Amy is, for example, quite worried about her bakery, as the money from sales is below
the whole bakery expenditures. Amy asks for your opinion whether or not she is
supposed to close the business. In addition, she has already committed herself to paying
rent, power and salary for a year.
Even if the company were to shut down, Amy would thus still have these expenditures
until the end of the year. The company recorded sales of 3,000 dollars in January, but
total expenditures of 4,000 dollars and a net loss of 1,000 dollars. Amy expects
February's revenues should be comparable to the January one. Amy's list of baking
expenditures is as follows:
If Amy did not know which expenses were variable or fixed, a proper decision would be
tougher to make. In this example, we can see that there are overall fixed costs of $1,700
and overall variable costs of $2,300.
If Amy were to shut down the company, she still has to pay $1,700 monthly fixed
charges. If Amy continues to operate despite a loss of money, she will lose just $1,000 a
month ($3,000 in income – total cost of $4,000). Amy would thus lose more money
($1,700 per month) if she stopped the business entirely.
This example shows the role of costs in decision-making. In this scenario, it is Amy's best
choice to continue business while searching for methods to minimise the variable costs of
manufacturing (e.g., see if she can secure raw materials at a lower price).
Break-even Analysis
In break-even analysis, variable costs play an essential role. Break-even analysis serves to
identify the revenue amount or the selling units necessary to pay all costs. The formula
break-even is as follows:
Break-even Point in Units = Fixed Costs / (Sales Price per Unit – Variable Cost per Unit)
Consider the following example:

Amy wants the minimum units of items she has to sell to achieve break-even per month.
Only one thing is sold at the bakery: cakes. Fixed bakery operating expenses are $1,700 a
month and variable production costs are $5 for raw supplies and $20 for direct labour.
Amy also sells the cakes for $30 per sales.
To determine the break-even point in units:
Break-even Point in Units = $1,700 / ($30 – $25) = 340 units
Therefore, for Amy to break even, she would need to sell at least 340 cakes a month.
3. Discuss whether the parent should invest more.
The researchers discovered that the priorities of parents in hypothetical circumstances

typically reflected their real investments. On average, parents spent 80 minutes a
weekend and two hours a weekend chatting to their children, which were their longest-
running activity. On average, they spent $195 a month enriching their children, including
roughly $143 for school and clubs. A father who thought his time would bring his
children 10% more money spent an average of 46 minutes extra a week performing
activities with them. Similarly, families spent over $20 more a month for any 10
percentage point returning parents anticipated to provide additional material for
enrichment, despite adjusting for the parents' own income.
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1. Discuss the Metta Rest Spa performance in 2015.

Consider the following example:

To determine the break-even point in units:

Break-even Point in Units = $1,700 / ($30 – $25) = 340 units

3. Discuss whether the parent should invest more.

The researchers discovered that the priorities of parents in hypothetical circumstances

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