Coral Divers Resort Case Solution

Topics: 2009, Revenue, Income statement Pages: 5 (1867 words) Published: October 15, 2012

The issue that Coral Divers Resort (CDR) is facing is that it has been unable to distinguish itself from other resorts in the New Providence, Bahamas region and has been experiencing declining revenues and unprofitability for the past three years as a result. Other resorts that have been able to specialize in certain segments of the diving industry have been doing well over the past years as the industry continues to grow. CDR must look 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 SWOT analysis (Exhibit 1) looks at the current state of CDR and the environment it is operating in.

 Conclusion and Recommendation: 

The most effective way for CDR to distinguish itself from other resorts and gain a competitive edge is to partner with Rascals in Paradise and become a specialized family diving resort. It is recommended that CDR use the all inclusive package approach to selling its vacations and split accommodations evenly between Independent Family Packages and Special Family Packages and provide all meal, bar service, and babysitting services at a breakeven price with meal and bar responsibilities outsourced to the local restaurant and the babysitters hired by CDR from the local community. This option is successful in turning the highest positive net income within the first full year of implementation (See year 2009 in Exhibit 4) and results in the highest growth in revenues and profits in the long term when compared to other alternatives. This is achieved because specializing and being a first-mover into the growing family diving segment of the industry generate the highest competitive advantage. Factor Analysis:

The factors from which this decision was made for CDR were cost, profit, ease of implementation, and competitive advantage. Profit and competitive advantage were the factors that were most important when looking to determine the best solution. Since CDR had been losing profitability significantly and the capital reserves of CDR are extremely small, if the profitability of the resort does not turn positive quickly it could mean bankruptcy for the resort. The criteria used to judge this factor is immediate profitability of the solution in the first full year of implementation. Second, competitive advantage was a major deciding factor because it is the underlying problem for CDRs lack of revenue growth. Without a specific competitive advantage and a specified target market, CDR has been consistently losing revenues to other resorts with a more distinguished specialty. Choosing a solution that would strengthen CDR’s competitive edge would add sustainable growth to revenues in the future. The criteria used to judge this factor is the highest sustained projected revenue growth in the future. Cost and ease of implementation were used as supporting factors. Cost is an important factor because with limited funds and extremely low current profit margins, any added costs would further increase the net loss CDR experiences. The criteria used to judge this factor was the least amount of added costs necessary for implementation. Ease of implementation was another supporting factor that was taken into consideration because of small size of CDR’s management and the limited time and resources they have to implement a change. Also because a major change is absolutely necessary as soon as possible, the ease of implementation would play a significant role in determining how quickly and effectively the recommendation could be put into place. The criteria used to judge this factor was the least amount of effort required by management to implement the solution. Alternative Solutions:

Aside from the recommended solution, the other alternative that was looked at in depth was the option to specialize in adventure diving (specifically shark diving) and increasing the efficiency of CDR’s operations by cutting down on boat...
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