Economic Environment of Business Assignment Answers
19/08/2013
ECONOMIC ENVIRONMENT OF BUSINESS ASSIGNMENT
WILL BIDDEFORD'S TRAM MAKE A RETURN?
Question 1
The central focus of this case is how Biddiford Tram Company, under the management of Mary Jo and Marty, can increase revenue and become profitable given the business constraints it must operate under, namely;
(a) Loss of $0.15 subsidy per passenger from the State of Maine
(b) Not increase the price of tram fare above $2.00 for two years and subsequently not above the rate of inflation.
The railway tram would have to find a way to increase revenue to cover the loss of the $0.15 subsidy, provide a return on their investment while keeping the average fare at $2.00 during the season for two.
Other notable business challenges to be addressed were;
(a) The agreement the authorities had with the local trade union to keep manning levels high at Biddiford tram company.
(b) Mary Jo and Marty had been instructed to charge all passengers including children, a flat fee such that children were not to be offered a discount on the fare.
(c) A potential market in the local visitors who were very price-sensitive.
QUESTION 2
Option A - Shorten the season and concentrate on reducing cost (See Excelsheet OPTION A)
If it was practicable, Option A would be a profitable route for Biddiford Tram Company to pursue. However, this option is not a viable one for the following reasons.
1. There are businesses in Old Orchard Bay which depend on visitors at all times and not only at peak season because they are not seasonal businesses. Operating the Tram only at peak season would be detrimental to their business because they do depend as well on customers that come in the off-peak season.
2. Shortening the season would displease the local trade union of the tram drivers because manning levels and therefore wages would be greatly affected by this. It would almost certainly lead to a dispute in the first two years and may hurt business moving forward.
ECONOMIC ENVIRONMENT OF BUSINESS ASSIGNMENT
WILL BIDDEFORD'S TRAM MAKE A RETURN?
Question 1
The central focus of this case is how Biddiford Tram Company, under the management of Mary Jo and Marty, can increase revenue and become profitable given the business constraints it must operate under, namely;
(a) Loss of $0.15 subsidy per passenger from the State of Maine
(b) Not increase the price of tram fare above $2.00 for two years and subsequently not above the rate of inflation.
The railway tram would have to find a way to increase revenue to cover the loss of the $0.15 subsidy, provide a return on their investment while keeping the average fare at $2.00 during the season for two.
Other notable business challenges to be addressed were;
(a) The agreement the authorities had with the local trade union to keep manning levels high at Biddiford tram company.
(b) Mary Jo and Marty had been instructed to charge all passengers including children, a flat fee such that children were not to be offered a discount on the fare.
(c) A potential market in the local visitors who were very price-sensitive.
QUESTION 2
Option A - Shorten the season and concentrate on reducing cost (See Excelsheet OPTION A)
If it was practicable, Option A would be a profitable route for Biddiford Tram Company to pursue. However, this option is not a viable one for the following reasons.
1. There are businesses in Old Orchard Bay which depend on visitors at all times and not only at peak season because they are not seasonal businesses. Operating the Tram only at peak season would be detrimental to their business because they do depend as well on customers that come in the off-peak season.
2. Shortening the season would displease the local trade union of the tram drivers because manning levels and therefore wages would be greatly affected by this. It would almost certainly lead to a dispute in the first two years and may hurt business moving forward.