Sugar Bowl Harvard Case Solution & Analysis

Sugar Bowl Case Study Solution 

Question 1

Prior to evaluation of the offer, we must first list down the financial objectives of Shelby Givens.

  • Make Interest payments to lenders
  • Business loan repayment in 2015
  • Study loan repayment through 25% equity stake.

For the evaluation of offer, let’s first analyze if she has been in line to meet the set financial objectives. If found in line with the objectives, then later is the need to decide if the proposed offer is worth the business or not.

In Q4, 2011, the club posed Net Income of over $230k while the next quarter has over $170k of Net Income earned. Keeping the figures in mind, it can be easily presumed that the Net income of such an amount is sufficient enough to contribute a share of $100k to Retained earnings each year. This way, the business will have the required sum in Retained earnings at the time of loan maturation.

Though indicated figures, it is worth keeping the business because it tends to pose incredible indicators of growth in the long-run.

Question 2

The reading in Q1, 2012 indicate that the business has lagged behind in attracting private events as the revenue not accounting for the Private Event patronage exactly matches the total revenue earned during the quarter. For this issue to resolve, there is felt a need to have means for constant inflows. Therefore, Givens has figured out two different alternatives for strategic partnership to streamline the inflows and enhance profitability in the business. . Of the available alternatives, the one that provides the club with enhanced profits in a short-run as well as in long run is to be considered the most viable option.

As we estimate the profits from a Bowling league option, we assumed that the profits on drinks is 50% of price since they are told to have high contribution margins after Dec,2011. The calculations estimate that the weekly bowling league for 8-weeks would generate $46,080 in profits after 25% reduced catering cost.

The Zulu option would register $7,515 in profits for a period of 6-month. The calculation assumes 25% of the total bowling capacity engaged during the show and its inflows are considered revenues rather than opportunity cost because the club is used to of catering only 120 patrons on Wednesday, showing already less turnout and unoccupied bowling lanes.

From the available alternatives, bowling league option has a greater scope for the business in monetary terms as well as in its complementary relationship with the nature of the business. Therefore, it’s being considered the most viable option of the two in short run as well as in long run, citing the possibility of 50% repeat customers.

Question 3

Before the negotiations, Givens must analyze what the deal can help her achieve. Based on the growth pattern and foreseen future prospects for the business, she should try to achieve at-least the discounted value of all the estimated benefits and prospects. These prospects include the assumption that the business can successfully secure a contract similar to bowling league option in all the upcoming quarters. It also assumes that the event planner holds the capacity to book around 7 private events amounting to an average of $5,000 after it efficiently reserved 7 events in no more than 2 months of induction in the club. Based on the stated assumptions of the best possible scenario and after incorporating the effect of all the future prospects, the club has an estimated Net Present value of over $21Million.

In order for her to convince the investor for such a hefty sum of money, she must bring into his knowledge all the employed strategies that can yield substantial benefits in the long-run and also include in negotiations an effective plan to secure more of the private events from the industry.

Sugar Bowl Harvard Case Solution & Analysis

Question 4

As evident from the thorough study of the case, Givens has certainly implemented tight cost controls and operational efficiency strategies. She is found to have taken strict control of current operations to figure out rooms for correction and maintained firm focus on strategic growth agenda (Strategic partnership alternatives) for the business.

The customer base is mainly comprised of young professionals and graduates in their 20’s and early 30’s and large groups or HR managers for private events. In order to target the youngsters’ segment, Givens has focused largely on leveraging the urban lounge concept and created a compelling and conductive environment.To further add up on its growth and ensure that patrons regards the legacy of this club, Givens have to come up with something that focuses the increased market share in the long-run with continuous building-up of Sugar bowl’s bowling legacy. For this, she can hold a 6-week free of cost ‘how-to-bowl’ classes for teenagers on Mondays and Tuesdays where they will be allowed to bowl two games a day for 6-weeks. This would promote Sugar Bowl as a metaphor for bowling promotion and enhance the chances for increased market share of loyal customers. A promotion to give-away a free 6-month membership to the winner at the end of competition will help spread the word of mouth. This campaign can be titled “Bowlers’ young STAR” which depicts the very nature of its target class..................

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