Hurricane Island

SUMMARY:

Hurricane Island Outward Bound (HIOB) is on the verge of breaking even, after grossing $ 4.954 million in revenues and $ 5.11million in expenses for the year 1985. Forecast is that it might cross $ 5 million for the year 1986. Going by the trend, it might make an operational profit. On the quest for growth, the Management has embraced the need of marketing to attract customers viz. Teenagers, corporate executives and people in need. Having launched the Professional Development Program (PDP), better marketing strategies, and changes to the program structure HIOB seeks to become consistently profitable while benefiting society.

OBJECTIVE:

Overall objectives were to sustain continued growth and gain financial stability. With budgetary constraints, HIOB had to maintain school leadership within Outward Bound System and build off season business.

PROBLEM STATEMENT:

How to achieve the target of delivering 2,700 students, 47,800 Student Program Days (SPDs) and $3.4 million in revenues while staying within the budget and balancing the interests of various stakeholders?

DISCUSSION:

Current market composition is:

1) Special programs: specific groups such as war veterans, youths with disabilities, juvenile delinquents, substance abusers.

2) Public courses: students between age groups of 14-19 years

3) PDP's to cater to the market comprising of executives and managers.

The following graph shows each market's contribution to current business areas:

The performance w.r.t revenue generation has shown a gradual increase in both the public course and the special programs. The below graph provides the increasing trend.

Considering profitability as another measure of performance, the school has always been unprofitable (going by the data available over the years 1982 - 1986).

** Profitability is the ratio of the revenues to the expenses incurred.

RECOMMENDATIONS:

Increase the price of public programmes

Trend of expenses incurred on Public courses over the years as a part of the total expenses (in 000's):

1982 1983 1984 1985

Public courses 1442 1851 2264 2395

Total expenses 3346 4229 4836 5116

Ratio 43.09% 43.76% 46.81% 46.81%

Trend of Revenue generated from Public courses as a part of the revenue generated from courses (in 000's):

1982 1983 1984 1985

Public course 1563 2013 2445 2672

Total Revenue 2048 2757 3389 3956

Ratio 76.31% 73.01% 72.14% 67.54%

While the expenses have increased over the years, the revenue generated due to the expenses has decreased. So to match the revenue from the expenses, the price should be increased.

This can be substantiated by better focusing on better marketing strategies:

* Expansion of the direct sales, by adding two sub-recruiters which would cost $9000, as it had generated 17% of the total applications and 20% of the total enrolments in 1986.Morever, with a success rate of 85% and a revenue generation capacity 10 times more than that of the direct cost incurred ($612000 vs $68500), this is worth doing.

* Building up of the telemarketing skills, at a cost of $6000, focusing on the 500-1000 students who had applied but not yet enrolled.

Change in the course mix, by focusing on PDP's and special programs.

The concern is that, with shifting focus on PDP's, the contribution to the overall revenue from donation might decrease. But this has already been showing a decreasing tend over the years,

1982 1983 1984 1985

Donation 587 1142 1130 998

Total Revenue 2635 3899 4519 4954

Percentage 22.27 % 29.28 % 25.00 % 20.14 %

Contribution of revenue generated from special programmes as a part of the total revenue:

1982 1983 1984 1985

Expenses PDP 425 644 793 1054

Revenue PDP 485 744 944 1284

Profitability 114.1% 115.52% 119.04% 121.8%

Total Revenue 2635 2899 4519 4954

Percentage 18.4% 25.6% 20.8% 25.9%

A further noticing aspect is that while the spending on special programmes has increased by 148% over the years, the revenues generated because of the same have increased by 164.74%.

So, the decreasing trend in the contribution of the donations towards the total revenues can be offset to an extent by enhancing the contribution of that from the special programmes. So more and more special programs can be held.

Course analysis:

Maine