WATER WORLD INSTRUCTIONAL CASE Team Members – Darshna Vasantbhai Gohil – 219128727 Praneet – 22028080 Gurneet Sachdeva - 220037743 Chandan Dhoot - 220060158 Dhruv Mehra - 219994961 Gurleen -220044624 APPLIED CAPSTONE PROF. DORJANA NANO August 1st, 2023 Business environment Water World, Inc. operates in the competitive water park industry in Sanderling, Texas. The park's attractions include cooling water rides and educational shows featuring sea otters. To manage costs and maintain quality, the company owns Otter Land, a subsidiary producing plush otter toys. The company faces seasonality challenges and aims to keep a minimum ending inventory of 60,000 plush otters each month. Sales projections vary throughout the year based on historical trends, tourism, demographics, and disposable income. To increase profits and sustain growth, Water World is considering expansion opportunities. The management seeks to integrate financial and managerial accounting principles to devise a strategic expansion plan. With a strong business environment and a reputation for entertainment and education, the company is poised for future success. Alternative expansion Strategies 1.Regional Market Penetration: This strategy focuses on deepening Water World's presence within its existing regional market. The company will invest in aggressive marketing campaigns, introduce loyalty programs, and enhance customer engagement to increase the frequency of visits and per-customer spending. By optimizing its operations and leveraging data analytics, Water World aims to boost revenue and profitability without significant capital investment. Pros: a. Lower Capital Requirements: Minimal capital investment is needed as the strategy utilizes existing facilities and resources. b. Reduced Risk: Concentrating on a familiar market reduces exposure to the uncertainties of entering new markets. c. Customer Retention: Enhancing customer experience and loyalty can lead to repeat visits and increased spending. d. Quick Implementation: Implementation can be swift, leading to rapid results and shorter payback periods. Cons: a. Market Saturation: The potential for further growth may be limited due to market saturation. b. Competitive Intensity: Rivalry within the regional market may intensify, impacting profit margins. c. Limited Revenue Upside: The strategy may not deliver exponential revenue growth compared to new market expansion. 2.Seasonal Diversification: This strategy involves diversifying Water World's offerings to attract visitors during off-peak seasons. The company will introduce special events, indoor attractions, and holiday-themed packages to entice visitors throughout the year. By utilizing underutilized capacity during slow periods, Water World aims to smooth revenue fluctuations and optimize resource allocation. Pros: a. Revenue Stability: Extending the park's appeal beyond peak seasons ensures a more stable revenue stream. b. Reduced Dependency: Reduced reliance on peak season revenue reduces the vulnerability to external factors such as weather conditions. c. Improved Resource Utilization: Efficiently utilizing resources during off-peak seasons can enhance cost-effectiveness. d. Enhanced Competitiveness: Offering unique attractions during slow periods can differentiate Water World from competitors. Cons: a. Investment Required: Implementing new attractions or events may entail upfront costs. Seasonal Staffing Challenges: Managing staffing levels during peak and off-peak seasons can be complex. b. Market Demand Uncertainty: The success of new attractions during off-peak seasons depends on customer demand. Recommendation My recommended strategy for Water World is Seasonal Diversification. This approach involves introducing new attractions and events during off-peak seasons to ensure revenue stability, reduce vulnerability to external factors, optimize resource utilization, differentiate from competitors, and foster long-term growth. By diversifying offerings, Water World can attract visitors throughout the year, mitigating the reliance on peak season revenue and minimizing the impact of seasonal fluctuations. Utilizing underutilized capacity during slow periods will improve cost-effectiveness and resource efficiency. Furthermore, offering unique attractions during off-peak seasons will differentiate Water World from competitors, enhancing its market position and customer appeal. Positive experiences during non-peak periods can lead to word-of-mouth referrals and future growth. This strategy is financially viable as it requires lower capital investment compared to other expansion options, offering potential attractive returns on investment over time. By focusing on seasonal diversification, Water World can establish a stronger and more resilient market presence, ensuring long-term success and growth in the industry. Projected Cashflow Revenue from New Other Operating Operating Investment Attractions Revenue Expenses Net Cash Flow Year (Thousands) (Thousands) (Thousands) (Thousands) (Thousands) 1 $500 $100 $2,000 $2,500 $100 2 - $500 $2,500 $2,200 $800 3 - $800 $2,800 $2,000 $1,600 4 - $1,200 $2,900 $2,000 $2,100 5 - $1,500 $3,000 $2,000 $2,500 The investment in new attractions is incurred only in the first year, while revenues from the new attractions and other operating revenues increase gradually over the first three years. Operating expenses remain stable throughout the projected period. Net cash flow is calculated as the difference between total revenue and operating expenses.