Coral Divers Resort Case Analysis
Strategic Recommendation: What do you advise Coral Divers to do? Core divers Resort (CDR) should focus on making their current business operation more efficient by keeping an eye on operating costs and partnering with adventure resorts for customers who wants adventure diving. The company financials cannot support any expansion for family oriented resort with the company being over leveraged with little cash and liquidity. Secondly, this strategy has ease of implementation and provides a profit increase of 10% with little capital expenditure
Also, Greywell has built a lifestyle around the Coral Divers Resort business and enjoys it with his family. Selling the resort with his little equity in the business will not provide enough money for him to start a new business in another location. Focusing on being more efficient is more profitable for the company as the industry is in its maturity phase with stiffer competition and readily available substitutes.
What do you think Coral Divers would like to accomplish over the next 5 years? Coral Divers is experiencing declining revenues and unprofitability for the past three years. Other resorts that have been able to specialize in certain segments of the diving industry, Coral Divers have been unable to distinguish themselves from other resorts. Coral Divers Resort (CDR) is looking to differentiate itself from other resorts in the New Providence, Bahamas region. The company is looking for opportunities in the diving industry to find a unique niche and gain a competitive edge that will lead to an increase its revenues.
The resort has a beachfront location, the rich resource of the ocean is within close proximity and have developed a good reputation as a quiet and safe resort which appeals to vacationers looking to get away from busy tourist resort hotels. The diving instructors in the resort are certified by PADI and NAUI.
It is a family- run one-service business that is inefficiently operated. It is heavily leveraged making it difficult to get funding for further expansion while facing stiff competition.
There are opportunities in the diving industry to find a unique niche market (adventure diving, family oriented resort) for Coral Divers and gain a competitive edge that will lead to an increase in its revenues like providing additional service to customers eg picking and taking clients to the airport and other educational services about scuba diving which requires less capital expenditure.
The bleaching impact of climate change on coral reefs makes them to lose their beauty, making diving less attractive for divers. The recent surge in airfares and the changing demographics are potential could reduce the customer base of diving resorts.
The current ratio of CDR shows that the company is not able to service its current obligations. The resort’s short –term assets cannot cover its current obligations of $88,476. However quick ratio value of CDR will provide a clearer indication of the company's liquidity and success in meeting its obligations.
CDR quick ration of 0.1875 suggests that the company has a very low ability to service its maturing short- term obligations. This ratio is a more reliable variation of the current ratio because inventory, prepaid expenses, and other less liquid current assets are removed from the calculation. In other words, it shows how CDR can quickly convert its assets to cash without a loss in value if necessary to meet its short-term obligations? The resort’s low quick ratio makes it difficult for the resort to meet creditors requirement and obtain further funds for future business expansion since they operate a business that does not provide a steady and predictable cash flow. Favorable liquidity ratios are...
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