Harvard Case - Keweenaw Mountain Lodge: An Opportunity Worth Pursuing?
"Keweenaw Mountain Lodge: An Opportunity Worth Pursuing?" Harvard business case study is written by Lisa Eshbach, Nancy M. Levenburg. It deals with the challenges in the field of Entrepreneurship. The case study is 31 page(s) long and it was first published on : Jan 1, 2020
At Fern Fort University, we recommend that the Keweenaw Mountain Lodge (KML) pursue the opportunity to acquire the adjacent property and expand its operations. This expansion should be carefully planned and executed, focusing on a strategy that balances growth with preserving the unique character of the lodge and its surrounding natural environment.
2. Background
The Keweenaw Mountain Lodge is a historic, family-owned resort located in the Upper Peninsula of Michigan. The lodge offers a variety of amenities, including lodging, dining, and recreational activities. The owners, the LaPointe family, are considering expanding the lodge by acquiring the adjacent property, which is currently owned by a separate entity. This expansion would allow KML to offer a wider range of services and attract a larger customer base.
The main protagonists in this case are the LaPointe family, who are responsible for making the decision about whether or not to pursue the expansion. They need to weigh the potential benefits and risks of the expansion, considering factors such as the financial implications, the impact on the lodge?s character, and the competitive landscape.
3. Analysis of the Case Study
This case study can be analyzed using a framework that considers the following aspects:
Financial Analysis:
- Financial Statements: A thorough analysis of KML?s financial statements, including the balance sheet, income statement, and cash flow statement, is crucial. This will provide insights into the lodge?s current financial health, profitability, and cash flow generation.
- Capital Budgeting: The expansion project requires a significant investment, necessitating a detailed capital budgeting analysis. This involves estimating the project?s initial investment, expected cash flows, and the project?s return on investment (ROI).
- Risk Assessment: Identifying and assessing the financial risks associated with the expansion is crucial. These risks include potential changes in demand, competition, and economic conditions.
- Financing Options: Exploring different financing options, such as debt financing, equity financing, or a combination of both, is essential. This will help determine the most cost-effective and sustainable way to fund the expansion.
Strategic Analysis:
- Growth Strategy: The expansion presents an opportunity for KML to pursue a growth strategy. This strategy should be aligned with the lodge?s core competencies and long-term vision.
- Competitive Analysis: Analyzing the competitive landscape in the hospitality industry, particularly in the Upper Peninsula region, is essential. This will help determine the expansion?s potential impact on KML?s market share and profitability.
- Market Analysis: Understanding the target market for the expanded lodge is crucial. This includes identifying customer demographics, needs, and preferences.
- Operations Strategy: The expansion will require adjustments to KML?s operational strategy. This includes optimizing staffing, scheduling, and resource allocation to accommodate the increased capacity.
Environmental Sustainability:
- Environmental Impact: The expansion should consider the potential environmental impact of the project. This includes minimizing the lodge?s carbon footprint and ensuring the preservation of the surrounding natural environment.
- Sustainability Initiatives: Implementing sustainable practices, such as energy efficiency measures and waste reduction initiatives, is crucial for maintaining the lodge?s reputation and attracting environmentally conscious customers.
4. Recommendations
Based on the analysis, we recommend the following:
- Pursue the Expansion: The expansion presents a significant opportunity for KML to grow its business and attract new customers. The potential benefits, including increased revenue, market share, and brand recognition, outweigh the risks.
- Develop a Comprehensive Business Plan: A detailed business plan outlining the expansion?s scope, financial projections, marketing strategy, and operational plan is essential. This plan should be presented to potential investors and lenders to secure financing.
- Focus on Preserving the Lodge?s Character: The expansion should be carefully planned to preserve the lodge?s unique character and charm. This includes maintaining the existing architectural style and ensuring the new amenities blend seamlessly with the existing environment.
- Develop a Sustainable Operations Strategy: Implementing sustainable practices throughout the expansion is crucial. This includes using energy-efficient building materials, minimizing waste, and promoting eco-friendly activities for guests.
- Secure Financing: Secure financing for the expansion through a combination of debt and equity financing. Explore options such as bank loans, private equity investments, or crowdfunding.
- Implement a Phased Approach: The expansion should be implemented in a phased approach to minimize disruption to existing operations and allow for adjustments based on market feedback.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The expansion aligns with KML?s core competencies in hospitality and aligns with its mission to provide a unique and memorable experience for guests.
- External Customers and Internal Clients: The expansion caters to the needs of both existing and potential customers, while also providing opportunities for employees to develop new skills and advance their careers.
- Competitors: The expansion will allow KML to compete more effectively with other resorts in the region by offering a wider range of amenities and services.
- Attractiveness ? Quantitative Measures: The financial analysis indicates that the expansion is financially viable, with a positive return on investment and a strong payback period.
6. Conclusion
The expansion of Keweenaw Mountain Lodge presents a significant opportunity for the LaPointe family to grow their business and secure its long-term success. By carefully planning and executing the expansion, KML can capitalize on the growing demand for unique and authentic travel experiences while preserving its unique character and commitment to environmental sustainability.
7. Discussion
Other alternatives not selected include:
- Maintaining the Status Quo: This option would involve continuing to operate the lodge at its current size and scope. While this option would minimize risk, it would also limit growth potential.
- Selling the Lodge: This option would provide the LaPointe family with a significant financial return but would also result in the loss of a family legacy.
Key assumptions of our recommendation include:
- Continued Demand: The expansion assumes continued demand for the lodge?s services, even with the addition of new amenities.
- Successful Implementation: The expansion assumes that the project will be implemented effectively and on time, with minimal disruption to existing operations.
- Favorable Economic Conditions: The expansion assumes that the overall economic climate will remain favorable, allowing for continued growth in the hospitality industry.
8. Next Steps
The following steps should be taken to implement the expansion:
- Develop a Detailed Business Plan: This should be completed within the next 3 months and presented to potential investors and lenders.
- Secure Financing: This should be completed within the next 6 months.
- Begin Construction: This should begin within the next 12 months.
- Phase 1 Opening: This should occur within the next 18 months.
- Phase 2 Opening: This should occur within the next 24 months.
By following these steps, KML can successfully expand its operations and secure its future as a leading destination in the Upper Peninsula.
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Case Description
Anna and Jack Oleson, long-time owners of a bridal and formal wear shop in a small community in Michigan's Upper Peninsula (U.P.), are contemplating making an offer to buy the Keweenaw Mountain Lodge (KML) property, located in Copper Harbor on the Keweenaw Peninsula. The property has been owned and operated by Keweenaw County since its beginnings in 1933, constructed under the Civil Works Administration and the Work Progress Administration during the Great Depression. Situated on 167 heavily-wooded acres in the northernmost part of Michigan, the facility includes a 6,000 square foot lodge built from logs and rough-cut stone, a banquet room and conference center, 24 rustic cabins, an eight-room motel, a nine-hole golf course, mountain biking and hiking trails, a tennis court, and disc golf. In 1970, the lodge was listed on the National Register of Historic Places, and in 1976, it was designated as a Michigan State Historic Site. Keweenaw Mountain Lodge, however, has not produced profits in several years. A consultant noted that while some repairs were needed (e.g., roof replacement/repairs, replacement of carpeting, installation of Wi-Fi), it has been a utilized for both hosting wedding receptions and as family vacation destination for Michiganders and other Midwesterners. The asking price for the property is $1.5 million. The Olesons, who are in their 70's in age, are considering selling the bridal shop and using proceeds towards purchasing the KML. The case provides a general overview of Michigan's Upper Peninsula and its unique culture, and the considerations involved in making a purchase decision - i.e., marketing, location and local demographics, marketing positioning, operations and management, succession planning, and financial valuation. It requires the reader to utilize the planning, analytical, and decision-making techniques of an entrepreneur investigating a new business opportunity.
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