Harvard Case - Forest City Tennis Club - Pro Shop and Bar Lounge
"Forest City Tennis Club - Pro Shop and Bar Lounge" Harvard business case study is written by Richard H. Mimick, Elizabeth M.A. Grasby, Lindsay Brock. It deals with the challenges in the field of Accounting. The case study is 3 page(s) long and it was first published on : Jun 2, 2009
At Fern Fort University, we recommend that the Forest City Tennis Club (FCTC) implement a comprehensive strategic plan to address the declining profitability of its pro shop and bar lounge. This plan should focus on improving operational efficiency, enhancing customer experience, and diversifying revenue streams.
2. Background
The Forest City Tennis Club is a private club facing a decline in pro shop and bar lounge profitability. The club's management is concerned about the financial performance of these operations and is seeking ways to improve their revenue and profitability. The case study highlights several key issues:
- Declining Pro Shop Sales: Sales in the pro shop have been steadily declining, driven by increased competition from online retailers and a shift in customer preferences towards more affordable options.
- Underperforming Bar Lounge: The bar lounge is underutilized, with limited customer traffic and low profit margins.
- Limited Marketing Efforts: The club has not invested significantly in marketing and promotion for its pro shop and bar lounge, leading to reduced customer awareness and engagement.
- Inefficient Operations: The club's current operational processes are inefficient, resulting in high overhead costs and low productivity.
The main protagonists in the case study are the club's management team, who are responsible for developing and implementing strategies to improve the financial performance of the pro shop and bar lounge.
3. Analysis of the Case Study
To analyze the situation at FCTC, we can utilize a combination of frameworks:
a) SWOT Analysis:
- Strengths: Established customer base, strong brand reputation, access to a dedicated tennis community, potential for expansion into new services.
- Weaknesses: Declining pro shop sales, underperforming bar lounge, limited marketing efforts, inefficient operations, lack of a clear strategic plan.
- Opportunities: Diversify revenue streams, enhance customer experience, improve operational efficiency, leverage technology, partner with local businesses.
- Threats: Increased competition, economic downturn, changing customer preferences, rising operating costs.
b) Porter's Five Forces:
- Threat of New Entrants: Moderate. The barrier to entry for new tennis pro shops and bar lounges is relatively low, but the club's established customer base and brand reputation provide some protection.
- Bargaining Power of Buyers: High. Customers have a wide range of choices for tennis equipment and dining options, giving them significant bargaining power.
- Bargaining Power of Suppliers: Low. The club has access to a variety of suppliers for its products and services, reducing the bargaining power of individual suppliers.
- Threat of Substitutes: High. Customers can choose to purchase tennis equipment online or dine at other restaurants, offering a significant threat of substitutes.
- Competitive Rivalry: High. The club faces intense competition from other tennis clubs, online retailers, and local restaurants, requiring it to constantly differentiate itself.
c) Financial Analysis:
- Profitability: The case study mentions declining profitability for both the pro shop and bar lounge. This requires a detailed analysis of financial statements, including income statements, balance sheets, and cash flow statements.
- Cost Analysis: Implementing activity-based costing (ABC) can provide a more accurate understanding of the cost structure for both operations. This will help identify areas for cost reduction and improve efficiency.
- Performance Indicators: Key performance indicators (KPIs) should be established to track the progress of the implemented strategies. This includes metrics such as sales revenue, customer satisfaction, operational efficiency, and profitability.
4. Recommendations
To address the challenges faced by FCTC, we recommend the following actions:
a) Pro Shop Revitalization:
- Product Diversification: Expand the product offering to include a wider range of products, including apparel, accessories, and equipment catering to different customer segments and price points.
- Strategic Partnerships: Partner with leading brands and manufacturers to offer exclusive products and promotions.
- Online Presence: Develop a user-friendly online store with secure payment options and competitive pricing.
- Customer Loyalty Programs: Implement a loyalty program to reward repeat customers and encourage increased spending.
- Enhanced Customer Service: Train staff on product knowledge and provide excellent customer service to create a positive shopping experience.
b) Bar Lounge Revitalization:
- Enhanced Menu: Offer a more diverse and appealing menu with competitive pricing, catering to both members and non-members.
- Special Events: Organize themed events, live music nights, and happy hour specials to attract customers and increase foot traffic.
- Marketing and Promotion: Utilize social media, email marketing, and local advertising to promote the bar lounge and its offerings.
- Improved Ambiance: Enhance the ambiance of the bar lounge by creating a more inviting and comfortable atmosphere.
c) Operational Efficiency:
- Inventory Management: Implement a robust inventory management system to optimize stock levels, reduce waste, and improve efficiency.
- Cost Reduction: Analyze and identify areas for cost reduction, such as negotiating better supplier rates, streamlining operations, and reducing energy consumption.
- Technology Integration: Leverage technology to automate tasks, improve communication, and enhance customer service.
d) Financial Management:
- Budgeting and Forecasting: Develop accurate budgets and forecasts to track financial performance and identify potential risks.
- Financial Reporting: Implement a comprehensive financial reporting system to provide timely and accurate information to management.
- Investment Analysis: Evaluate potential investments in new equipment, technology, and marketing initiatives based on their return on investment (ROI).
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The recommendations align with the club's core competencies in providing tennis facilities and services. They also support the club's mission of fostering a vibrant and inclusive community.
- External Customers and Internal Clients: The recommendations prioritize customer satisfaction and cater to the needs of both members and non-members. They also aim to improve the working conditions and efficiency of the club's staff.
- Competitors: The recommendations address the competitive landscape by offering unique products and services, leveraging technology, and enhancing the customer experience.
- Attractiveness ' Quantitative Measures: The recommendations are expected to improve profitability and generate a positive return on investment (ROI). This will be achieved through increased sales revenue, reduced operating costs, and enhanced customer loyalty.
6. Conclusion
By implementing these recommendations, FCTC can revitalize its pro shop and bar lounge operations, improve profitability, and enhance the overall member experience. This comprehensive strategic plan will address the club's weaknesses, leverage its strengths, and capitalize on the opportunities available in the market.
7. Discussion
Alternative options not selected include:
- Outsource Operations: Outsourcing the pro shop and bar lounge operations to a third-party provider could reduce operational costs but may compromise control over the quality of products and services.
- Closing Operations: Closing the pro shop and bar lounge would eliminate financial losses but could negatively impact member satisfaction and community engagement.
Risks and Key Assumptions:
- Market Volatility: The success of the recommendations depends on the stability of the market and the ability of the club to adapt to changing customer preferences.
- Competition: The club needs to remain vigilant about competitor activity and adjust its strategies accordingly.
- Investment Costs: Implementing the recommendations requires significant investment in technology, marketing, and staff training.
8. Next Steps
The implementation of the recommendations should be phased in over a period of 12 months, with the following key milestones:
- Month 1-3: Conduct a detailed financial analysis, develop a budget, and identify key performance indicators (KPIs).
- Month 4-6: Implement inventory management system, negotiate supplier rates, and develop online store.
- Month 7-9: Launch marketing campaign, introduce new menu items, and organize special events.
- Month 10-12: Monitor KPIs, analyze performance, and adjust strategies as needed.
By taking these steps, FCTC can effectively address the challenges it faces and achieve its financial and strategic goals.
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Case Description
After one year of operations, the new manager of a tennis pro shop and bar lounge must prepare, with the help of the company's accountant, financial statements from notes kept throughout the year. The case is intended to be an introductory exercise in accounting for simple transactions relating to assets, liabilities, revenues and expenses. Adjusting entries such as amortization and cost of goods sold are required. Students are asked to complete the accounting cycle by preparing closing entries and an income statement and balance sheet.
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