Harvard Case - Red Spruce Resort
"Red Spruce Resort" Harvard business case study is written by Elizabeth M.A. Grasby, Shannon Wright. It deals with the challenges in the field of Accounting. The case study is 7 page(s) long and it was first published on : Dec 15, 2015
At Fern Fort University, we recommend that Red Spruce Resort adopt a comprehensive strategy focused on improving operational efficiency, enhancing guest experience, and leveraging its unique location to drive sustainable growth. This strategy involves implementing a combination of operational improvements, targeted investments, and strategic partnerships.
2. Background
Red Spruce Resort, a family-owned and operated business, faces a critical crossroads. Despite its idyllic location and loyal customer base, the resort is struggling to maintain profitability in the face of increasing competition and rising operational costs. The resort's current operational model is inefficient, with outdated accounting practices, limited marketing efforts, and a lack of clear financial performance metrics. The owners, the Spruce family, are hesitant to embrace change, fearing the disruption to their traditional ways of doing business.
3. Analysis of the Case Study
The case study highlights several key challenges facing Red Spruce Resort:
- Financial Performance: The resort's financial statements reveal a declining profit margin, driven by rising operating costs and stagnant revenue. This suggests a need for a comprehensive cost analysis and a clear strategy for revenue growth.
- Operational Efficiency: The resort's current operational model is inefficient, with outdated accounting practices and a lack of standardized procedures. This leads to inefficiencies in resource allocation, inventory management, and cost control.
- Marketing and Customer Experience: The resort relies heavily on word-of-mouth marketing and lacks a consistent brand identity. This limits its ability to attract new customers and compete effectively in the increasingly competitive hospitality market.
- Strategic Planning and Growth: The resort lacks a clear strategic plan for future growth and has not explored opportunities to leverage its unique location and natural resources.
Frameworks:
- SWOT Analysis: Red Spruce Resort possesses strengths such as its prime location, loyal customer base, and strong brand reputation. However, it faces weaknesses in operational efficiency, marketing, and financial performance. Opportunities exist to leverage its natural resources, expand its offerings, and adopt innovative technologies. Threats include increasing competition, seasonal fluctuations, and economic downturns.
- Porter's Five Forces: The resort operates in a highly competitive market with numerous substitutes, low barriers to entry, and strong bargaining power of buyers. However, the resort's unique location and focus on a niche market provide some competitive advantage.
- Value Chain Analysis: The resort's value chain needs to be optimized to improve efficiency and enhance guest experience. This requires a focus on key activities such as procurement, operations, marketing, and customer service.
4. Recommendations
To address these challenges, Red Spruce Resort should implement the following recommendations:
1. Implement Activity-Based Costing (ABC) System:
- Objective: To gain a deeper understanding of the true cost of providing services and identify areas for cost reduction.
- Implementation: Develop an ABC system that accurately allocates costs to specific activities and services. This will allow the resort to identify cost drivers, measure efficiency, and make informed decisions about pricing, resource allocation, and service offerings.
- Benefits: Improved cost control, enhanced profitability, and a more accurate understanding of service costs.
2. Enhance Financial Performance Measurement:
- Objective: To develop a comprehensive set of financial performance indicators (KPIs) to track progress and identify areas for improvement.
- Implementation: Develop a dashboard that tracks key metrics such as revenue per available room (RevPAR), occupancy rates, cost of goods sold (COGS), and employee productivity.
- Benefits: Improved decision-making, enhanced accountability, and increased transparency in financial performance.
3. Implement a Comprehensive Marketing Strategy:
- Objective: To increase brand awareness, attract new customers, and drive revenue growth.
- Implementation: Develop a multi-channel marketing strategy that utilizes online platforms, social media, targeted advertising, and public relations. The resort should also invest in professional website design and online booking capabilities.
- Benefits: Increased brand awareness, higher occupancy rates, and improved revenue generation.
4. Leverage Location and Natural Resources:
- Objective: To develop unique experiences and offerings that leverage the resort's natural beauty and location.
- Implementation: Explore partnerships with local businesses and organizations to offer activities such as hiking, fishing, kayaking, and wildlife tours. The resort could also develop a sustainable tourism program that promotes environmental conservation and responsible travel.
- Benefits: Increased customer satisfaction, enhanced brand differentiation, and sustainable growth.
5. Invest in Technology and Infrastructure:
- Objective: To improve operational efficiency, enhance guest experience, and streamline business processes.
- Implementation: Invest in a property management system (PMS) that integrates with online booking platforms, customer relationship management (CRM) systems, and other relevant technology.
- Benefits: Automated tasks, improved customer service, enhanced data analysis, and increased operational efficiency.
6. Implement a Culture of Continuous Improvement:
- Objective: To foster a culture of innovation, collaboration, and continuous improvement.
- Implementation: Encourage employee feedback, implement regular performance reviews, and provide training opportunities. The resort should also establish a culture of data-driven decision-making and continuous improvement.
- Benefits: Increased employee engagement, improved service quality, and enhanced organizational performance.
5. Basis of Recommendations
These recommendations are based on a comprehensive analysis of Red Spruce Resort's current situation, considering its strengths, weaknesses, opportunities, and threats. The recommendations are aligned with the resort's core competencies, its mission to provide a unique and memorable guest experience, and the needs of its target market. The recommendations are also consistent with industry best practices and are designed to drive sustainable growth and profitability.
- Core Competencies and Mission: The recommendations focus on enhancing the resort's core competencies in customer service, hospitality, and location. They are also consistent with the resort's mission to provide a unique and memorable guest experience.
- External Customers and Internal Clients: The recommendations address the needs of both external customers and internal clients (employees). They aim to improve the guest experience, enhance employee satisfaction, and create a more efficient and rewarding work environment.
- Competitors: The recommendations are designed to help the resort compete effectively in the increasingly competitive hospitality market. They focus on differentiation, innovation, and cost efficiency.
- Attractiveness: The recommendations are expected to improve the resort's financial performance, increase its market share, and enhance its long-term viability. They are also aligned with the resort's strategic goals for growth and sustainability.
6. Conclusion
Red Spruce Resort has the potential to thrive in the competitive hospitality market. By embracing a comprehensive strategy focused on operational efficiency, guest experience, and sustainable growth, the resort can overcome its current challenges and achieve its full potential. The recommendations outlined above provide a roadmap for the resort to achieve these goals.
7. Discussion
Other alternatives not selected include:
- Selling the Resort: This option would provide immediate financial relief but would also result in the loss of a family legacy.
- Doing Nothing: This option would likely lead to further decline in profitability and competitiveness.
Risks and Key Assumptions:
- Implementation Challenges: Implementing the recommendations requires significant effort and commitment from the Spruce family and the resort's employees.
- Financial Investment: The recommendations require financial investment in technology, marketing, and employee training.
- Competitive Landscape: The hospitality market is highly competitive, and the resort may face challenges attracting new customers and retaining existing ones.
8. Next Steps
To implement the recommendations, the Spruce family should:
- Establish a Task Force: Form a task force to oversee the implementation of the recommendations.
- Develop a Detailed Implementation Plan: Create a detailed implementation plan that outlines the specific steps, timelines, and resources required.
- Secure Funding: Identify the necessary funding sources to support the implementation of the recommendations.
- Communicate with Employees: Communicate the recommendations and their benefits to all employees, ensuring their understanding and support.
- Monitor Progress: Regularly monitor progress and make adjustments as needed.
By taking these steps, Red Spruce Resort can transform itself into a thriving and sustainable business.
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Case Description
The general manager of a resort was considering completely renovating the resort's suites for the upcoming season. He would need to submit a proposal to the resort owners for funding approval. Although he knew the renovation would increase customer satisfaction, he would need to justify the significant up-front investment from a financial perspective.
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