Case Memo Westlake Lanes

TO: Shelby Givens, General Manager, Westlake Bowling Lanes
FROM: Exemplar #1
SUBJECT: Business Strategy for Westlake Lanes – Analysis and Recommendations
DATE: March 10, 2010

1. Issues and Options
Since 2004, Westlake Lanes has experienced declining revenues and increasing costs driven primarily market factors and an absence of effective cost and operations management.
Despite the company’s recent turnaround under Shelby Givens’ leadership, it is not on track to repay the Board for the money it lent 16 months ago. On March 24, 2010 a Board of Directors meeting is scheduled to discuss the strategic direction of the company.
It is my understanding that Westlake Lanes is considering the following three options for its business strategy going forward:
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Option 1: Convert Westlake Lanes into a “kid-friendly” venue with video and arcade games and a designated private party space to complement existing lanes;

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Option 2: Convert Westlake Lanes into an “urban bowling lounge” which caters to single young professionals in Raleigh; and

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Option 3: Maintain the current business model and focus on growing revenues through strategic marketing initiatives and achieving further cost reductions.

2. Analysis
2.1 Financial Analysis
Based on the January and February 2010 Income Statements, Net Income for 2010 is projected to be approximately $19,884, compared to a Net Loss of ($59,787) in 2009.1 With an estimated gross profit margin of 92%2 for 2010, one can observe that the majority of the company’s costs are fixed. With its high profit margin ratio, the company has the potential to increase profitability significantly with incremental increases in revenues. The corresponding downside is that the company is at risk of incurring significant losses if it does not generate enough revenue to cover fixed costs.
The financial analysis estimates the projected Net Income for each option in “Low”, “Moderate”,