Hurricane Island Outward Bound School: Case Analysis

Description
It descripbes the Case Analysis of Hurricane Island Outward Bound School.

Case Study Hurricane Island Outward Bound School

1. Background of the case
Hurricane Island Outward Bound (HIOB) school started in 1964 is a non-profit organization with a mission to provide safe, challenging educational experiences in a wilderness setting, carefully structured to improve self?esteem, self reliance, concern for others, and care for the environment.

The company since inception has not been able to break even on operating basis, with a huge reliance on contribution to finance the deficit. This deficit greatly concerned the trusties and hence a special attention was given to marketing to boost revenues. As a result the school’s deficit started reducing and is on the verge of making an operational profit for the first time in its history.

The case is about the options before Mr.Chin, The Marketing Director of HIOB, for making the marketing plan for the year 1987 and how to finance his plan.

2. Problems
As per our analysis, there are short term and long term problems 1) Short Term Problem • • • Financing the deficit in the marketing budget Difficulty in filling up the courses during off Peak season Difficulty in staffing the courses because of fluctuation in demand

2) Long Term Problem • Increasing the company’s revenues to breakeven.

3. Objectives of Mr.Chin

The main objective of Mr. Chin at present is to achieve profitability by 11% increase in revenue ($3.4 million) along with 2700 student enrollments and 47,800 SPD’s. This continued growth has to be accompanied by financial stability. One more important objective was to build off season business.

4.

Available Solutions

For the School in order to achieve its objective of making its courses more profitable, the following options are available



Increase in Prices of Public Course

The disadvantage of this option is that, most of the course have already reached the “2000$ barrier”. And it was unclear, how much effect, the price increase will have on the demand or what it might do marketing’s overall contribution to profit. As it is clear from the exhibit 1 that over the years that though the expenses of public course as a percentage of total expenses has increased over the years the same is not the case with the public course revenue, in fact it’s revenue decreased from 1982 to 83 from 59.31% to 51.62% as a percentage of total revenue of the respective year.



The company should increase its marketing expenditure as it is evident from exhibit 1 that the percentage of the marketing expenses as a percentage of total expenses for the respective years have decreased. From 10.34% in 1982 to 6.23% in 1985.



Alter the course mix by focusing on PDP, as it is more profitable

The fear on this option is that, the donors might contribute less, as the perception would be that, the school is deviating from its mission of serving the youth and the underprivileged, instead focusing on profitability. The point in favor of this decision is that, the contribution from donation is very small portion of the total revenue. [Refer Exhibit 1]. • The company should pay more attention to the special program as it can be inferred from exhibit 1 that the over the period from 1982 – 85 the special program expenses has increased by 148% but the revenues for the same has increased by 164.74%. So in order to

generate more profit the firm should look into giving specific attention on the special programs. • Maine sea program is the most popular program as every year maximum number of student enroll themselves in this program but over the years from 1981-85 the percentage of total enrolment for this course as a percentage of total enrollment for that year has decreased from 49.75% to 29.96% [refer exhibit4].The SPD for Maine sea program has plunged down from 53.66% in 1981 to 29.96% in 1985.In Maine sea program there are various programs out of which sea kayak -7 days has a capacity utilization of 90% and also earned a profit of $6300. The firm should try to popularize this course more than the others in this program. The H1 22 days program should be scrapped as it has a capacity utilization of 65% and also made a whopping loss of $95,250. As for Florida sea program it can be inferred from exhibit 4 that its SPD has marginally increased from 6.1%in 1980 to 7.7% in 1985.The enrollment percentage of the students more or less remained the same. Here the program like fl 8 day is making operational profit but their capacity utilization is very less at36% so the strength of this program should be reduced. In the case of summer land the student enrollment has increased from 7.6%in 1981 to 19.5% in 1985and so it’s SPD has also increased significantly. Here rafting 6 days is making excellent profit among other programs and its capacity utilization is also at 85 %. So the firm should concentrate on this program. Programs for the managers are where the firm is making profit with its entire program having a capacity utilization of more than 75%. This is the star product for the firm which gives maximum profit to it.







5.

Best Solution

After careful analysis, we feel that the best solution could be an ideal combination of both the above alternatives and is explained below. Focus on PDP: The immediate solution to finance the deficit in the marketing plan would be to increase revenues by focusing on PDP Programs. The main opposition to this thinking was that, it was against the schools objective of serving the youth and the underprivileged. But our line of thought was that, in the long run, it would not be financially feasible for the school to run, without achieving operating profits. And only if the school sustains itself it can work towards its mission. The school can offer advance booking to companies to offset the seasonality problems. Different schemes & packages can be worked out for companies in order to the push the sales of more SPD’s, which in turn increases revenue. Target audience of PDP & special programs are either corporate sponsored or business people, to whom cost will not be a deterrent, and hence the school can charge a premium on its pricing, and thereby increasing its revenue. Responses from Human Resources (HR) professionals at the companies which underwent PDP trainings suggested that managerial participants showed a higher level of confidence were better equipped to meet deadlines and showed tremendous improvement in presentation and communication skills. Based on these feedbacks the PDP would be positioned as a premium product for corporations that desire superior employees who bond well and work more efficiently as a team. On the other hand, the school can reduce PDP and Special Programs during peak season and increase in off season which will be both ways beneficial, i.e. the PDP target audience will be vacationing in summer, and as well the public course will be filled in the peak season. As the PDP programs are held during the off-season September to May, demand will be uniformly distributed throughout the year. This will ensure continuous employment to the instructors around the year, solving the staffing problems. The customer base can be increased by developing relationships with corporations and at the same time by using the existing alumni network to gain referrals. This would help to promote the course.

Public courses: Public courses would be a mass market product geared towards teenagers that want an alternative to summer camp or school. These courses will be heavily concentrated during summers (Peak Period) New higher?level public courses will be created for students who have taken previous courses. It will be easier to sell courses to these students, as they have already experienced the schools other offerings before. They can also be given discounts for the repeat purchases. Also offers like “Bring a friend at half the price” can be used to promote the program during off-season. The price for the public programs can also be increased during the peak season, to capitalize on the demand and give discounts during off-season, as to boost demand.



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