Golden City Miniature Golf Case Study
The partners must do additional analysis prior to determining if they should invest in a new miniature golf venture in Golden City. Before establishing marketing objectives, advertising and promotional programs, plans for addressing demand fluctuations and considering alternate locations, they must determine if they can generate sufficient sales to fund operations. They have done market research which provides a good baseline for establishing the demand, course capacity and anticipated costs. Once they have analysed this data and established that the business is financially viable, they can address advertising, demand and location questions by developing a marketing strategy. The partners must review their research to calculate realistic projections of the numbers of rounds that will be played for the season and compare them with their capacity. Their research suggests that at least 65% of the high school age population will play at least one round of mini golf per season. There is less concrete data available for the adult and family population. A conservative assumption would be that 20% of the remaining adult and family population of 243,000 will play mini golf at least once per season. This is equivalent to a minimum of 61,000 rounds played in the season. The research also suggests that the new course will be the preferred location of most players. In comparison to the competition, the facility will be new, conveniently located, high quality and will appeal to various skill levels of player. It is reasonable to estimate that 85% of the rounds will be played at the new facility. The partners can expect 51,900 rounds of mini golf per season. The partners should review their maximum round capacity calculation. Mr. Smith’s calculation of 864 rounds per day suggests that a new group of 4 players will start every 4 minutes, 12 hours per day. With only one staff member this may be unrealistic. One staff member is more likely to be capable of greeting, equipping and briefly instructing a group of 4 every 7 minutes. This is equivalent to 411 rounds per day.
The partners must ensure that they will be able to meet this demand, considering weather trends in particular. At maximum capacity and average rainfall, there will be 42,744 rounds of mini golf available in the five month season. This means that the partner’s course will be in high demand. Ideally this allows the partners to charge $4.50 per round. At this price the partner’s have the potential to generate $192,348 in sales. The price of $4.50 per round is in line with competitor pricing. Given that one competitor is making a fair profit margin, it is reasonable to conclude that this price is well tolerated by the market.
Having established their capacity for generating sales, the partners should re-evaluate their initial cost estimate for constructing the miniature golf course. It is wise to plan for weather delays, errors and material wastage due to lack of skilled labour and material price fluctuation. The analysis in Annex 1 below suggests that the partner’s construction cost will range from $20,900 to $27,100. The high end of the estimate includes 25% contingency on all materials and estimates as well as $1,000 salary cost for the skilled labour that will supervise the Industrial Arts students. Further analysis suggests that the partners have not given sufficient considerations to the operating costs of the business. Their estimates do not provide for utilities, loan repayment, loan interest, insurance, course maintenance and replacement equipment. For analysis purposes, utilities, insurance, maintenance and replacement equipment have been estimated at $500 to $750 per month. Finally, the analysis must include an estimate for the rental fee to be paid to the Metropolitan Mall. The attached analysis firmly suggests that a new mini golf would be a lucrative endeavour for the partners, with anticipated...
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