QUESTION

CASE ANALYSIS OUTLINE

This outline if for both the individual and the team case write-up. The team case analysis score is the same for all team members

1. Major Problem or Issues

This section of the report states the major problems or issues faced by the organization over the next 5-10 years. A problem is something that stands in the way of achieving objectives and an issue is a situation that the organization must deal with to fulfill its vision/mission and accomplish its objectives.

2. Analysis

This section of the report details the analysis related to the major problems and/or issues identified in 1 above. The thorough analysis of the company’s situation will lead to viable alternatives to solve the problem or deal with the issues.

Analysis for single line of business organizations:

A. Organizational vision/mission, objectives, current strategy

B. SWOT analysis

C. Competitive Analysis

D. Financial Analysis

E. Implementation Issues/Problems

Evaluation/Control Procedures

What are the strategic implications of the above analysis?

Analysis for multi-line of business organizations:

Portfolio analysis
Resource allocation/restructuring needs

What are the strategic implications of the multi-line of business analysis?

3. Alternative Solutions to Problems/Issues

This section of the report identifies 3 or more viable alternatives the company could pursue to solve the problem or address the issues. Do nothing is not normally an alternative.

A. List of 3 or More

Pros and Cons of Each Alternative

Recommended Course of Action\Justification

The section of the report details the chosen alternative and why this alternative is better than the other listed in 3 above.

5. Implementation Plan

This section of the report spells out “Who will do What, When, and With what Resources”. A good strategy that is not well implemented will produce less than satisfactory results.

Case Study to Read

Mark’s RV Park

Mark Thompson had just completed his first year in the recreational vehicle park business. The purchase of the established park a year earlier was Mark’s “retirement” investment. The $750,000 purchase price seemed to be a way to invest some of his retirement funds in an area close to relatives but still provide an attractive annual income.

Mark chose an RV park as a retirement investment based on trends in the RV and camping marketplace. Recreational vehicle shipments totaled 504,599 units last year representing a 17.2% increase over the year before and a 176% increase over the past six years. An estimated 9.3 million households now own an RV, including motorhomes, travels trailers, fifth-wheel trailers, truck campers, and folding camper trailers. While the Baby Boom generation has traditionally had the highest rate of RV ownership, the 35-54 age group has recently surpassed the 55+ age group for the highest rate of RV ownership. With the number of younger people owning RVs growing, the future of the RV park business appears promising.

RV usage is also climbing. The Recreational Vehicle Industry Association’s Campsite Canvass survey reports that 78% of RV owners reported intending to use their RVs more often this year than they did last year. Additionally, 93% thought RVing was a more affordable way to travel compared to staying in hotels.

In Mark’s state there are 356 businesses associated with the RV industry with a total direct economic impact of $176.3 million of which $81.2 million is RV campgrounds and travel. Additionally, there are 813 direct jobs involving RV parks and travel.

The 39-unit park was located off the main highway leading to a lake, one of the state’s most beautiful and biggest resort areas. The park contained an office, swimming pool, laundry room, restrooms, sanitary dump, and picnic areas. In addition, the park had the potential to add more trailer sites with water and electrical hookups. Located on the corner of a 40-acre plot, the park has plenty of room for expansion. While there was no current access to the creek that bordered the property, there was the potential for developing beach and boat access to the creek as well as other attractions.

Although Mark’s park had been in existence for a number of years, it had shown only lackluster performance. Therefore, Mark was considering ways to increase revenue and profitability. One possibility was to invest even more money in park development and promotion to create a “destination park” rather than the current “pass through” park orientation. “Destination parks” were developed with more amenities and guests averaged longer stays, while “Pass through” parks offered minimum amenities and were designed for guests en route to another destination. In searching for guidance in order to make his decision, Mark obtained data on parks and camping from the State Tourism Department.

Tourism and Recreation

The state has developed and supported a great deal of tourist- and recreationally-oriented attractions during the last decade. The development of a lake and dam in the northwest area of the state, where Mark’s RV Park is located, has given impetus to more rapid development of this area. As a result, the northwest area moved into the second ranking area in the state for overnight visitors. Of the total 24,107,500 overnight visitors to the state last year, about 16% were in the northwest area (see Exhibit 1).

Exhibit 1

Overnight Visitors

County	Visitors	State Share
Benton	1,616,412	5.4%
Carroll	1,060,538	3.6%
Madison	151,702	.002%
Washington	1,948,694	6.6%
TOTALS	4,777,346	15.6%

Washington County attracts the greatest number of overnight visitors. Additionally, Washington County leads the entire region as the economic and population center. As such, Washington County could be a source of weekend business during the slow seasons.

Overnight Campers

Overnight campers represent a specific segment of the tourism market accounting for about 7.2% of the state’s overnight visitors last year (See Exhibit 2).

Exhibit 2

Camping Activity for the last Three Years

	Two years ago	One year ago	Last year
Overnight Campers	1,788,700	1,885,470	2,119,608
Parties	506,030	496,175	542,620
Average stay (nights)	7.4	6.8	7.6
Persons per party	3.6	3.8	3.9
Person-night	13,236,380	12,821,196	16,109,021
Spent per party-night	$53.10	$55.00	$44.98
Annual Economic Impact	$198,864,966	$185,569,450	$185,512,569
Percent by Category
Truck-camp	33.5%	32.0%	32.5%
RV-camp	49.6%	50.0%	49.0%
Tent-camp	16.9%	18.0%	18.5%
TOTAL	100.0%	100.0%	100.0%
Trip-nights	3,744,622	3,373,990	4,123,192

More pertinent to this overnight segment is the number of group-nights (shown in Exhibit 3), which is the total number of parties (3 to 4 people) times the number of nights’ stay in a particular area. Exhibit 3 shows the actual nights in total for the state and then estimated nights for the northwest area.

Exhibit 3

Camper Party Nights: State and Region

		STATE			REGION*
	Two years ago	One year ago	Last year	Two years ago	One year ago	Last year
Parties	506,030	496,175	542,620	78,941	77,403	84,648
Avg. Stay	7.4	6.8	7.6	7.4	6.8	7.6
Group Nights	3,744,622	3,373,990	4,123,192	584,163	526,340	643,330

These two tables (Exhibit 2 and 3) together show that last year, for example, 84,648 camping parties came to the area, stayed an average of 7.6 days, and used 315,231 RV campsites and 119,017 tent campsites. The two explicit assumptions in these calculations are that the area’s share of campers is at least equal to its share of all overnight visitors, and that the percentages of campers by type is the same in the northwest area as for the state as a whole.

Competitive Analysis

Mark found three basic marketing strategies being used by private trailer park facilities. One strategy was aimed at the “overnight” or “pass through” market. This park was designed to appeal to travelers enroute to some predetermined destination or those who are in a location for a short (one- to three-day) period. These parks are usually close to major highways and offer few amenities to guests.

A second strategy was aimed at those travelers who are planning an extended stay (four to seven days) in a particular area—usually a resort or other major tourist attraction. While the trailer park does not contain many amenities, it is located very close to, if not adjacent to the amenities. This would be the situation where a park is located next to a Corps of Engineers recreation area on a lake.

A third strategy, also aimed at the extended traveler, includes all, or most, of the amenities in the park itself. Thus, the park itself becomes the attraction and offers facilities and services geared to guests who will remain in the area for a few days.

Mark’s research of competitors revealed that all three strategies existed in the Northwest area of the state. The major competitors in the Washington-Benton County area are shown in Exhibit 4. This Exhibit clearly demonstrates the differences in services offered in this area. Yogi Bear’s Jellystone Park is by far the most complete—using the concept of a self-contained resort; it offers the full range of services. KOA and Safari are basically using the same strategy but with fewer amenities. KOA’s location on Highway 12 also appeals to overnighters. Safari is being expanded at the present time to offer more sites and amenities.

Exhibit 4

RV Trailer Parks by Type of Amenities

RV Trailer Park

Coffee Snack Bar

Group

Shelter

Rest-

Rooms

Laundry Room

Swimming Pool

Sanitary Dump

Showers

Picnic tables

RecRm

Boats

Teen Hut

Plan Act.

All

Hook-ups

Tennis Courts

Bar-B-Q Grill

Tent Area

Play-ground

# Of Units

KOA

Jellystone Park

Safari

Mark’s RV Park

Karl’s Mobile Home Park

Mark’s RV Park is using the strategy of not providing amenities but locating close to them. It is within a mile of a Corps of Engineers Recreational Area. It offers nothing more than a place to park your trailer, but a grocery store, boats, bait, picnic tables, and so on are all close to the park. A couple of mobile home parks offer overnight hookups but are catering strictly to overnighters and probably the “overflow” of other RV parks.

A new proposed park located only 100 yards off a major highway is planned and is awaiting a zoning decision. Judging from the location and amount of land used in development, it would appear to be aimed at the “pass through” or short stay market.

The real opportunities in the RV park business appear to be destination parks. These parks are close to major population centers (up to four hours driving time) and offer urban RV owners a chance for fun on weekends and during vacations away from home.

Destination parks require a major financial commitment because they require many activities to keep guests busy. A typical list of activities and related facilities would include: swimming, fishing, boating, golf (including miniature golf); children’s playgrounds; horses; jet skis; skiing; separate recreational building for adults and youth; tennis; hayrides; picnic areas; ping pong; shuffleboard; horseshoes; cornhole toss; archery; hiking and bicycle trails; restaurant/bars; general store; laundries; movies; and so on. Most important is a planned recreation program for children, teenagers, and adults. Such parks earn about half of their revenue from fees other than for space. The goal is fun… fun… fun for everybody, so the visitor stays longer and returns frequently.

A second category of destination parks requires less investment in facilities but usually much higher costs for land. Located near a major attraction, such as Disney World, visitors to such parks are attracted by fun and sightseeing activities in the surrounding area.

RV park rates are rising rapidly, but not so fast that RV travel isn’t a substantial savings over other modes of travel. The increase is due to rising costs, of course, but even more-so because RV buyers are generally affluent and don’t mind paying more to get deluxe park facilities.

Although the rate of return for a successful RV park investment is higher than for a mobile home park, the risk is much greater. Feasibility studies for RV parks are more subject to error; in contrast, such studies for mobile home parks are almost foolproof. One problem with RV park investments is that mortgage money is more difficult to obtain than for the mobile home park. The financial community knows of the long successful record for mobile home parks. The RV Park, being newer, has a less well-established financial record.

As Mark considered his options, he also reflected on the need for an effective marketing strategy if the park were going to be successful. One consistent observation he made of private non-franchised trailer parks is that they lack an effective marketing program. Thus, he realized that one of his major considerations must be the marketing activities that would be part of the overall effective management of the park.

Target Market

Although Mark carefully identified several potential market segments, he was not sure which of these he should target. The segments included the following:

Cross-country travelers enroute to a predetermined destination looking strictly for overnight hookups.
Cross-country travelers enroute to a specific area of the country but with no definite destination in mind—looking for some overnight and some short-stay (two to four days) accommodations.
Local area residents—usually weekenders on short trips with a predetermined destination—tourist attraction, horse show, lake recreation area, etc. in mind. They mostly want overnight hookups but also need some short stay accommodations.
RV clubs, large multi-unit family groups, sport spectators, etc. These may be local area residents and/or non-local residents, depending on the nature of the group involved. They may want only overnight accommodations for a short stay.

Mark knew that the marketing mix, consisting of: (a) location, (b) amenities, (c) price, and (d) promotion, should be put together with a specific group in mind. For example, a strictly overnight park would be located close to a major highway, offer few amenities, and not require a park theme. Exhibit 5 shows some of the possible positions available for a new or redesigned park attempting to “fit in” with existing offerings.

Exhibit 5

Positioning a Trailer Park

LOW AMENITIES			HIGH AMENITIES
Karl’s Mobile Home Park	Mark’s RV Part	KOA		Safari	Yogi Bear’s Jellystone Park

The current trend in travel trailer parks is in the direction of the high amenity concept such as Yogi Bear’s Jellystone Park. These parks appeal to the extended stay market (five to seven days) with a complete array of amenities from laundry rooms and complementary Wi-Fi to planned activities for children. At the other end of the scale is the mobile home park that has a few sites for travel trailers and offers no specific amenities for the traveler.

Mark is concerned about installing the complementary Wi-Fi but after speaking with a sales engineer at a leading provider of next-generation network access solutions, he learned that they often provide information to RV parks and entertainment facilities due to the changing trend in travelers and technology. In order to compete, he feels he needs to consider the Wi-Fi capability and then decide if he would pass the charges on to the customers or consider that an investment in amenities. An informal estimate from an Information Technology professional indicated that he would need one outdoor access point for each acre of coverage. With installation cost and monitoring equipment, he is expecting the investment to be approximately $60,000 for the entire park.

Mark is also considering changes in his park’s design to make it “big rig friendly.” While there is a trade-off between the size of each individual site and the number of spaces, the “big rig” RVs represent a potentially very profitable clientele. These rigs need wide roads for easy turns, pull-through sites (as opposed to back in sites), and full hookups including 50-amp electrical service, water, sewer, cable, and high-speed internet. While have at least some spaces reserved for big rigs reduces the overall number of sites, big rig owners are usually affluent and willing to pay for the necessary space and amenities.

Price

The prices charged by different trailer parks reflects three things: (1) competition, (2) amenities offered, and (3) usage or costs associated with serving a guest. More amenities mean a higher price. Typical prices for RV parks reflect these factors and are shown below:

All hookups (2 people) $38.50 per night
Water or Electricity only $35.00
No hookups $ 25.00
Charge for each additional person $ 5.00
Air conditioner or heater surcharge $ 10.00

This price structure reflects current competitive prices for a park with several amenities, which also charges those that use a service more than nonusers. The basic price level reflects the number of amenities offered. Mark’s RV Park currently offers few amenities and charges a flat rate of $25.00 per night.

Another concern for RV parks is the problem of seasonality. With the exception of few places in the United States (e.g., San Diego and Florida) most areas have a tourist season when demand for hospitality services is higher than at other times of the year. For example, an RV park in Arizona may be full to capacity from December to March as snowbirds spend the winter there yet will resemble a ghost town in August.

Mark is fortunate that the Northwest part of his state has a temperate climate and is a favorable destination for much of the year. Spring is cool, but not cold; summers are mild, and in the fall, the foliage rivals that in most parts of the country. However, winters can be cold with ice and snow resulting in a substantial reduction in visitors. Thus, Mark will need to factor into his pricing those months when the park will be mostly vacant.

Using current revenue and expense data, Mark knew he could estimate revenue and expenses for expansion to a 100-site destination type park for average occupancy levels. The park had a 45% occupancy rate last year, Mark felt that repositioning the park as a 100-site destination park would increase occupancy rates to at least 65%. If expansion were feasible, Mark knew he would still need an effective marketing plan to increase occupancy.

Mark estimated that an additional $1,230,500 would be needed for expansion of the park and to reposition it close to the Yogi Bear’s Jellystone Park already in operation. This included 61 more sites, additional pools, a water slide, access to the river, canoe rental shop, a riding stable, driving range, and other amenities such as WIFI capability needed to reposition the park as a destination park. (See Exhibit 6 for income statement information).

A less aggressive strategy would be to add some amenities and position the park close to the KOA-Safari position. Mark felt this would result in a 55% occupancy rate and would require an investment of $744,500. Exhibit 7 offers a breakdown of the cost estimates for adding additional amenities.

Mark knows that with the increase in amenities under either option, his other revenue and operating expenses will increase. Mark expects his current revenue streams to increase at the same rate as the hookup revenue and expects his stable, canoe and golf club rentals to also be in proportion to his spaces rented. For now, he is estimating his stable, canoe and golf club rental combined to be 20% of spaces rented and charge $25 per person.

For operating expenses, Mark is estimating that the variable expenses of Cost of Goods Sold will be the same percentage of sales as the income statement presented and Utilities-electric and Utilities-water will be in proportion to spaces rented. Mark expects payroll expense to be 50% of revenue for amenities such as stable, canoe and golf and expects payroll taxes to continue at 10% of payroll. For the grounds and store, he expects payroll to increase at the same percentage of spaces rented.

Mark expects all other fixed expenses to increase by 100% except depreciation and interest for full amenities and 75% for partial amenities. Mark will have to borrow the money for the amenities and expects to pay 8% interest and deprecate all new assets over 10 years. Cable and WiFi monthly bills he expects to range around $2,000 per month each for 100 hookups. Mark contacted his tax adviser and he told him to estimate 30% for income taxes.

Mark was still undecided about what he should do next. He knew he could not continue the current losses but wondered if a more effective promotional campaign might increase occupancy without any additional capital investment.

Exhibit 6

Last Year’s Income Statement

	Occupancy
Based on 7-month season (210 days)	45%
No. of spaces rented	3,686
Gross Income	$92,138
Extra Occupancy	6,300
Vending machines, Laundry	8,400
Store Sales	85,150
TOTAL INCOME	$191,988
Less Cost of Goods Sold	51,030
GROSS PROFIT	$140,958
Less Expenses
Salaries	$31,500
Payroll Taxes	3,150
Property Taxes	8,169
Insurance	6,480
Advertising and Signs	9,000
Office Expense and Supplies	900
Telephone	1,800
Utilities Elec.	11,505
Utilities Water	5,502
Maintenance—Bldg & Ground, Trash	600
Maintenance—Pool	3,000
Maintenance—Roads	900
Deprecation	28,000
All other expenses	7,500
Total Expenses	$118,006
Income Before Debt Service and Taxes	22,952
Interest Expense	36,000
Taxes	0
Profit	($13,048)

Exhibit 7

Amenity Cost Estimates

	All Amenities	Partial Amenities
Land Preparation/Landscaping	$180,000	$180,000
Site Preparation (61)	61,000	61,000
Paving Roads	250,000	250,000
Drainage/Sewage	75,000	75,000
Large Pool (40’ x 80’)	38,000	38,000
Small Pool (25’ x 60’)	33,000
Recreation Building (Adult)	125,000
Recreation building (Youth)	112,000
Water Slide	30,000
River access	25,000
Canoes/Rental Building	15,000
Concession Stands (2)	6,000
Stable and Horses	15,000
Driving Range	25,000
Miniature Golf Range	25,000
Equipment	30,000
50 am hookups	30,500	30,500
Additional Working Capital	50,000	20,000
Total Additional Capital	$1,230,500	$744,500

ANSWER

Introduction and Major Problems or Issues

Mark Thompson, owner of a recreational vehicle park, is planning to continue his retirement investment in the RV park business. He owns a 39-unit park currently, which is located off the main highway and leads to one of the state’s beautiful lake. The park represents a “pass through” type design with its marketing strategy revolving around the lucrative location adjacent to amenities providing a short stay for travelers. It contains an office, swimming pool, laundry room, sanitary dump, restrooms, and picnic tables. Due to the vacant area around the place, it has room for expansion, and its location near the northwest area of state also helps with the fact that it has become an attractive spot for overnight visitors and campers (Routledge, 2003).

Mark wants to increase his revenue and profitability. For making this decision, he wants to analyze all the aspects of expansion and redesigning, along with the cost analysis and market segmentation with relevant strategy. Different types of trailer parks have been considered, while keeping the marketing strategy into consideration. The financial aspect of an RV park is analyzed as compared to that of a mobile home park. Big rig friendly RV is also being considered based on their affluent customers generating high profitability.

Some of the major issues to handle for Mark are –

Which marketing strategy to use for attracting customers
Which type of trailer park he should focus upon, ranging from Karl’s mobile home park to Yogi Bear’s Jellystone park
Which market segment should be his primary target
What should be the pricing charge and how will the revenue be generated
How to consider the impact of amenities such as Wi-Fi, and other factors such as seasonality factor of the industry

Major problem to handle –

How to sustain the RV park in a long-term and be profitable over the due course of time

Keeping all these issues, problems, and business aspects in mind, Mark needs to make his decision.

Analysis

Analysis for single line of business organization

Organizational vision/mission, objectives, current strategy

The vision and mission statement have not been clearly stated by the RV owner. However, his mission is supposed to provide a comfortable stay for travellers en route to their destination with facilities of basic amenities nearby, which would affect the customers’ behaviour and attitude towards the service(William Phanuel, 2012). The vision of his business is to be one of the favourite destination travel trailer parks in the state for travellers. One of his objectives is to increase his current revenue and attract more customers through relevant promotional campaigns. The current strategy is not properly planned, and he is analysing the factors affecting his decision.

SWOT Analysis

The SWOT analysis of Mark’s RV park business has been conducted, with the results shown below:

Strengths

Lucrative location of park, near one of the state’s most beautiful lakes
Contains basic amenities in the neighbourhood
Mark’s last year experience with RV park business

Weaknesses

Not generating higher revenue
Low occupancy rate
Incomplete business plan for expansion/upgradation
Not enough financial and marketing knowledge for Mark Thompson

Opportunities

Large area nearby for expansion
Increment in the no of RV owners and RVs itself
High percentage of overnight campers and tourists in the area of location
Destination park theme appearing to be more lucrative

Threats

Chances of failure in expanding the business
Not getting enough financial support
Other competitors opening parks in the nearby location
Seasonality factor affecting for a major part of the year

Competitive Analysis

The RV park industry in USA has been on a rising trend over the years. A PESTEL analysis has been performed for the business, which is discussed below. After the PESTEL analysis, a five forces analysis has also been done to evaluate the internal industry environment.

The external environment factors can be associated with the government’s recreational development plan in the state, operating environment of the destination parks and RV parks, Financial policies associated with the type of parks for which the loan is being sanctioned, etc. Social factors such as increase in the number of young RV owners and institutional trips can affect the RV park industry in a positive way (Nitank Rastogi, 2016). Political factors are not a concern, while ecological factors are associated with the environment in the northwest area of the state. Technological factors cannot affect the importance of RV parks or destination parks. However, the way of booking can change to digital medium i.e. through online booking and the prices could get affected a bit. The promotional campaigns are also going to be partially digital. The new proposed park is located only 100 yards off the major highway. So, the proposal of park needs to adhere with the highway policy keeping tourism and transport both into consideration. Income tax has also been analysed by Mark with the help of his tax advisor. Apart from these, there is not much legal factor to affect the business.

The five-forces analysis has been performed to evaluate the known industry environment for the newly proposed park in the described area: –

New Entrants (Low)

High economy of scale
Lesser competitors in the nearby place
Restrictive policies by government
Lack of experience could lead to identification of wrong market segment as the primary target market

Suppliers (Medium)

Not enough space in the area to sell
The proposed area for selling could affect the type of park to be established

Substitutes (Low)

RV owners doesn’t have much option for similar places
Customers are affluent and regular with a high willingness to pay

Buyers (Medium)

High in number
Decision makers not much informative
Low switching cost
High buyer demand
Some being highly affluent customers

Rivalry (Medium)

Low switching cost
Attractive growth over the years
Services not being standardized, and hence, subjective for customers
Competitors having different facilities, catering to different market needs

The competitors of Mark’s RV park range from Karl’s Mobile home park to Yogi Bear’s Jellystone Park, with each catering to different customer segment. Jellystone park is more of a self-contained resort with full range of services and facilities to clients. Mobile home parks cater to overnighters and sometimes handles the overflow of other RV parks. KOA and Safari expanding their facility services, with KOA diversifying itself by appealing overnighters due to its nearby location on Highway 12.

The operating costs are going to vary according to the type of park to be established. The installation and monitoring costs are expected to be around $60000 for the entire park. Operating expenses will increase as a result of higher electricity needs, water utilities, cables, Wi-fi, etc. Overall the operating costs will increase, but the revenue generated will decide the final profit. And, the revenue will depend upon the pricing charge and the occupancy rate of the park.

Financial Analysis

There have two estimates made by Mark for the addition of amenities. After proper analysis and estimation of costs for different amenities, it has been found that for repositioning the park similar to Yogi Bear’s Jellystone Park, the additional cost will come out to be $1,230,500, while the additional cost for positioning similar to KOA & Safari parks will come out to be $744,500. This has been properly described in the Exhibit 7 of the case, which is also shown below:

Exhibit 7

Amenity Cost Estimates

	All Amenities	Partial Amenities
Land Preparation/Landscaping	$180,000	$180,000
Site Preparation (61)	61,000	61,000
Paving Roads	250,000	250,000
Drainage/Sewage	75,000	75,000
Large Pool (40’ x 80’)	38,000	38,000
Small Pool (25’ x 60’)	33,000
Recreation Building (Adult)	125,000
Recreation building (Youth)	112,000
Water Slide	30,000
River access	25,000
Canoes/Rental Building	15,000
Concession Stands (2)	6,000
Stable and Horses	15,000
Driving Range	25,000
Miniature Golf Range	25,000
Equipment	30,000
50 am hookups	30,500	30,500
Additional Working Capital	50,000	20,000
Total Additional Capital	$1,230,500	$744,500

This alternative also affects the occupancy rate, which is estimated to be 65% in case of Jellystone park’s positional similarity, and 55% in case of KOA & Safari park positional similarity. Mark is estimating the stable, canoe and golf club rental combined to be 20% of spaces rented and he is planning to charge $25 per person. The expected Cost of Goods Sold will be the same percentage of sales as the previous year income statement. Taking all other estimations as discussed in the case, the projected annual income statement has been shown below: –

Projected Annual Income Statement

	Occupancy (Jellystone)
Based on 7-month season (210 days)	65%
No. of spaces rented	5,324
Gross Income	$133,100
Extra Occupancy	9,100
Stable, Canoe, and Golf club rentals	26,620
Vending machines, Laundry	12,135
Store Sales	123,000
TOTAL INCOME	$303,955
Less Cost of Goods Sold	73,714
GROSS PROFIT	$230,241
Less Expenses
Salaries	$13,310
Payroll Taxes	1,331
Property Taxes	11,800
Insurance	12,960
Advertising and Signs	18,000
Office Expense and Supplies	1,800
Telephone	1,800
Utilities Elec.	16,618
Utilities Water	7,947
Maintenance—Bldg & Ground, Trash	1,200
Maintenance—Pool	6,000
Maintenance—Roads	1,800
Deprecation	35,300
Cable and Wi-fi	74,536
Total Expenses	$204,402
Income Before Debt Service and Taxes	25,839
Interest Expense	98,440
Taxes	52,227
Profit	($124,828)

The net profit is ($124,828) if Mark repositions to Jellystone park. This net profit is different from the additional capital investment that Mark will have to do to expand the park. Some further adjustments could however lead to a net positive profit, such as changing the pricing policy, not providing Wi-fi and cables, working to improve the seasonality factor, etc.

Under the KOA similar positioning, the net profit would further dip as the occupancy level would be lower, and also some additional income sources such as stable, canoe, and golf club rental would not be there.

Implementation Issues/Problems

Some analysis has been done about the cost of additional capital, expenses, interests, etc. But, the net financial aspect is showing negative result. Moreover, the financial loan has not been considered till now. The pricing decision needs to be taken according to the industry standards, and maybe it could give positive net profit, if the price charge per person is increased from $25 to $38 as with all hookup facility. Cables and Wi-fi systems include a major chunk of fixed expense, but their effectiveness could not be measured. These major implementation issues are yet to be discussed and finalized. Implementation plan needs to be correlated with mission and objectives of the organization (Lotich 2011).

Evaluation/Control Procedures

Mark Thompson has not opened a full-facility destination park yet. So, it can happen that some of his expected values may vary in a large proportion, and that can affect the decision-making process. The strategy of being the park with not much amenities but closer to location has not given good results for the company. They have targeted overnighter tourists and campers till now, but now the company is planning to modify its target market by expanding their facilities and services. The pricing however, can be benchmarked on the basis of all amenities destination park standardization (Beuren 2014). The marketing strategy should be modified according to their expansion plan, and Mark will have to look at its promotional budget, sales, etc. once he decides about the type of expansion plan. He also needs to look at the seasonality factors of the destination vacations, and other competitors growing in the same area and catering to the same market segment.

Analysis for multi-line of business organizations

Portfolio Analysis

The current RV park of Mark caters mostly to overnighters. If he plans to open the 100-yard park targeting different customer segment, only then he will have to analyse his portfolio offering.

Resource allocation/restructuring needs

No resource allocation or restructuring is needed in this case.

Alternative Solutions to Problems/Issues

Change the target customer segment to overnight hookups only

Mark could change its current target segment of attracting cross-country travellers with some short stay durations. He could target the cross-country travellers who have a predetermined destination and who are only looking for overnight hookups. This could change the operating business of the company.

Pros. This would allow him to reduce the amenities further and he could attract a larger no of overnight tourists and campers, who already come in high proportion in the state.

Cons. Changing the customer segment would demand the change in perceptive image. The fun aspect would have to be lowered down, and the business could suffer from the confusion of operational changes.

Expand the park space but continue the same business proposition

There is a plenty of room to expand the space for RV rentals. Mark could only expand the space, keeping the business proposition and customer segment same as before. This would not require much structural changes in the business, but only some capital to purchase land and prepare the site for paving roads, building sewage system, etc.

Pros. There would not be requirement of organizational structural change (Rosenberg, 2016). Mark has already been in the same business targeting the same customer segment. So, he will know how to attract more customers showing larger space area.

Cons. Since, there is no change in the business proposition, it might happen that the revenue stream continues to be same despite of the capital investment made for more space acquisition. The existing park has not been able to generate positive net profit, and hence, this idea could impact the business financially in a large way.

Target both overnight customers and big rig RVs and expand the space for big-rig only

Mark could target overnight tourists and campers for the existing park space, and also diversify its business by expanding the space for big-rig tourists. This would cater to the demands of a wider section of society and can positively affect his business. The big-rig customers are a very profitable clientele. They are usually affluent with a high willingness to pay for the necessary space and amenities.

Pros. This idea could help in diversifying Mark’s business and it could work collaboratively for all sects of customers. If this idea works, the revenue streams are going to increase drastically, and the company can turn profitable in near future.

Cons. If this diversification happens, Mark would be targeting two different customer segments at the same time. This could lead to a confusion in their promotional and marketing strategy, which could further aggravate the problem of miscommunication from the company’s side.

Recommended Course of Action/Justification

After careful analysis, it is recommended that Mark start with diversifying his business and catering to overnight tourists & campers, and big-rig owners. For overnighters, he already has a marketing plan along with a detailed list of provided amenities. He should continue targeting them because the segment is growing at an attractive rate. For the expansion programme, he needs to target big-rig owners so that he could generate a positive net profit from this segment, while applying economies of scale for the overnight customers. The only consideration factor is to keep different marketing proposition for the two groups. Their marketing strategy could revolve around providing wholistic package for customers, whether it be for overnighters or for affluent big-rig owners who want a wide space facility. Proximity to highway also ensures the arrival of bigger vehicles for stay.

To ensure the company’s survival, Mark should do the following steps: –

Build a clear differentiation message between the two customer segments
Use different value propositions to the segments, while keeping both under the same umbrella of providing fun, comfort and en route support to the customers
Change the pricing policy according to the service needed, and charge extra for additional service (even in case of Wi-fi if provided)

Apart from taking the above measures, Mark could think positive about his strategy of diversification, and once, it reaps positive benefits, he could then upgrade the park to a full-facility destination park.

Implementation Plan

As the business is about to diversify itself as a RV park for different customer segments, there is a need to modify some things such as their marketing strategy, their pricing policy, loan approvals for capital expenditure, and building a long-term relationship with the customers.

Who

Mark Thompson will be responsible for bringing out the required changes, with the help of involved teams such as marketing team for building marketing strategy, finance team for loan approval.

What

The recommended strategy needs to be carried out in a logical order such as first applying for the capital expenditure loan, and meanwhile deciding the promotional campaigns for targeting the new segment of big-rig owners. Then, after that, there is a need to acquire those customers and maintain a long-term relationship by providing them quality service.

When

The approval of funding from loan, capital purchase, and then setting up the required infrastructure would require around 6-8 months, and after that, the company would be set to go.

What Resources

The main resource required would be the land space and the road for the vehicles. The sewage connection system and the recreational building are needed to connect with the corresponding existing systems.

Conclusion

Recreational Vehicle parks have been a booming industry in the US, and many new companies are coming up to leverage this opportunity. Mark Thompson also wants to cache in this opportunity by making some modifications in his existing business. He has plenty of space to expand, and he is awaiting a zoning decision for a new proposal of park near a major highway. Out of all the alternatives, he should choose to open a park specifically for big-rig owners with optimum amenities and continue targeting overnighters in the existing park space area. He needs to maintain category wise marketing message with a proper service differentiation. If the above recommendations are followed by Mark, it has a huge possibility that his business becomes a large success.

References

1. AJ Templeton (2016). Driving RVpark/Campground Selection: A Grounded Theory Approach, Journal of Tourism Insights

2. Jennifer Kim Lian Chan, (Dec 21, 2007). Motivation Factors of Ecotourists in Ecolodge Accommodation: The Push and Pull Factors, Asia Pacific Journal of Tourism Research

3. Sangchoul, (Sep 2011). Rural Tourism Demand: Duration Modeling for Drive Tourists’ Length of Stay in Rural Areas of the United States, Journal of Tourism Challenges and Trends

4. Chuck Woodbury, (Feb 08, 2018). Rural Tourism Demand: Duration Modeling for Drive Tourists’ Length of Stay in Rural Areas of the United States, RV Travel USA

5. Nathan Swartz, (Apr 20, 2015). A Complete Guide to RV Camping in State Parks of the United States, Wandrly Magazine USA

6. Alexandra Wittenberg Arizona, (Sep 13, 2018). As RV life increases, legal parking more- scarce, AZ Daily Sun

7. Simon Bell, (Oct 2007). Outdoor Recreation and Nation Tourism, Living Review Journal

8. Metin Kozak, (Jun 2002). Comparative analysis of tourist motivations by nationality and destinations, Science Direct

9. Jill Fjestul, (Nov 01, 2012). Examining the RV Travelers’ Camping Experience: A Social Media Approach, University of Central Florida

10. Ed Brooker, (May 06, 2014). A critical review of camping research and direction for future studies, SAGE Journals

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