Construction of Golf Resort - A Report on Cunningham Holdings Limited

This report focuses on the operations of Cunningham Holdings and their plan to construct an international golf resort. It includes an action plan, implementation of decision models, and recommendations for the project.

Construction of Golf Resort - A Report on Cunningham Holdings Limited
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Part 1
Action Plan
I. Identification of the decision variables
The decision variables under the Cunningham golf resort project are the number of
golf holes to be constructed and the nature of the clubhouse to be constructed.
Let this be represented by the variables as indicated below.
x1 ; Straight par 5
x2 ; Dogleg par 5
x3 : Straight par 4
x4 : Dogleg par 4
x5 : Long par 3
x6 : Short Par 3
y ; Standrad clubhouse
w ; Exclusive clubhouse
II. Identification of the objective function
The objective pf the models is to maximise the total enjoyment index derived rom the
golf holes and the clubhouse.
III. Identification of the constraints
The constraints of the task are grouped into two; frost we have the resource constraint
which include the total land area to be covered by the project ad the total project cost.
Second set of constraint consists of the minimum features that an international golf
resort should have.
IV. Writing the objective function and the constraints as mathematical equations
i. The standard clubhouse model
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Max: 2 x1 +1.5 x2+1.5 x3 +2 x 4+ 1.75 x5 +2.25 x6
Subject to
x1 ≥ 1
x2 ≥ 1
x3 :≥ 2
x4 :≥ 2
x5 ≥ 1
x6 ≥ 1
x1+ x2 ≤ 4
x3+ x4 ≤ 14
x5+ x6 ≤ 4
5 x1+5 x2 +4 x3 +4 x4 +3 x5 +3 x6 ≤ 72
5 x1+5 x2 +4 x3 +4 x4 +3 x5 +3 x6 ≥ 70
x1+ x2 +x3 + x4 + x5+ x6 =18
3 x1+3.5 x2 +2 x3 +2.5 x4 +1 x5 +0.75 x6 ≥ 36
3 x1+3.5 x2 +2 x3 +2.5 x4 +1 x5 +0.75 x6 +2 y ≤ 42
1000000 x1 +1500000 x2+750000 x3 +900000 x4 +600000 x5 +650000 x6 +3500000 y ≤ 20000000
ii. The shareholders’ request
Max: 2 x1 +1.5 x2+1.5 x3 +2 x 4+ 1.75 x5 +2.25 x6+4w
Subject to
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x1 ≥ 1
x2 ≥ 1
x3 :≥ 2
x4 :≥ 2
x5 ≥ 1
x6 ≥ 1
x1+ x2 ≤ 4
x3+ x4 ≤ 14
x5+ x6 ≤ 4
5 x1+5 x2 +4 x3 +4 x4 +3 x5 +3 x6 ≤ 72
5 x1+5 x2 +4 x3 +4 x4 +3 x5 +3 x6 ≥ 70
x1+ x2 +x3 + x4 + x5+ x6 =18
3 x1+3.5 x2 +2 x3 +2.5 x4 +1 x5 +0.75 x6 ≥ 36
3 x1+3.5 x2 +2 x3 +2.5 x4 +1 x5 +0.75 x6 +4 y ≤ 42
1000000 x1 +1500000 x2+750000 x3 +900000 x4 +600000 x5 +650000 x6 +6000000 y ≤ 20000000
iii. Option 1
Max: 2 x1 +1.5 x2+1.5 x3 +2 x 4+ 1.75 x5 +2.25 x6+4w
Subject to
x1 ≥ 1
x2 ≥ 1
x3 :≥ 2
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x4 :≥ 2
x5 ≥ 1
x6 ≥ 1
x1+ x2 ≤ 4
x3+ x4 ≤ 14
x5+ x6 ≤ 4
5 x1+5 x2 +4 x3 +4 x4 +3 x5 +3 x6 ≤ 72
5 x1+5 x2 +4 x3 +4 x4 +3 x5 +3 x6 ≥ 70
x1+ x2 +x3 + x4 + x5+ x6 =18
3 x1+3.5 x2 +2 x3 +2.5 x4 +1 x5 +0.75 x6 ≥ 36
3 x1+3.5 x2 +2 x3 +2.5 x4 +1 x5 +0.75 x6 +3.2 y ≤ 42
1000000 x1 +1500000 x2+750000 x3 +900000 x4 +600000 x5 +650000 x6 +5500000 y ≤ 20000000
iv. Option 2
Max: 2 x1 +1.5 x2+1.5 x3 +2 x 4+ 1.75 x5 +2.25 x6+4w
Subject to
x1 ≥ 1
x2 ≥ 1
x3 :≥ 2
x4 :≥ 2
x5 ≥ 1
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x6 ≥ 1
x1+ x2 ≤ 4
x3+ x4 ≤ 14
x5+ x6 ≤ 4
5 x1+5 x2 +4 x3 +4 x4 +3 x5 +3 x6 ≤ 72
5 x1+5 x2 +4 x3 +4 x4 +3 x5 +3 x6 ≥ 70
x1+ x2 +x3 + x4 + x5+ x6 =18
3 x1+3.5 x2 +2 x3 +2.5 x4 +1 x5 +0.75 x6 ≥ 36
3 x1+3.5 x2 +2 x3 +2.5 x4 +1 x5 +0.75 x6 +4 y ≤ 42
1000000 x1 +1500000 x2+750000 x3 +900000 x4 +600000 x5 +650000 x6 +5300000 y ≤ 20000000
v. Option 3
Max: 2 x1 +1.5 x2+1.5 x3 +2 x 4+ 1.75 x5 +2.25 x6+4w
Subject to
x1 ≥ 1
x2 ≥ 1
x3 :≥ 2
x4 :≥ 2
x5 ≥ 1
x6 ≥ 1
x1+ x2 ≤ 4
x3+ x4 ≤ 14
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x5+ x6 ≤ 4
5 x1+5 x2 +4 x3 +4 x4 +3 x5 +3 x6 ≤ 72
5 x1+5 x2 +4 x3 +4 x4 +3 x5 +3 x6 ≥ 70
x1+ x2 +x3 + x4 + x5+ x6 =18
3 x1+3.5 x2 +2 x3 +2.5 x4 +1 x5 +0.75 x6 ≥ 36
3 x1+3.5 x2 +2 x3 +2.5 x4 +1 x5 +0.75 x6 +4 y ≤ 42
1000000 x1 +1500000 x2+750000 x3 +900000 x4 +600000 x5 +650000 x6 +6000000 y ≤ 20500000
Part II
The models were created in the spreadsheets using the Solver add in. The excel file is
accompanying the report.
Part III: Report
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A Case study on Cunningham Holdings Limited’s Construction of an International Golf
Resort
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Introduction
Project overview
The management of a successful business is more than just finding avenues of making
money and selling staff. The managers apart from handling the daily operations of the firm
are also tasked with making decisions that are meant to improve the company’s brand in the
future (Perneger & Agoritsas, 2011). This is what is termed as strategic decision making. The
decisions are made based on the mission and vison of the firm. This is the type of decision
that dictates how the firms’ planning is made so as to ensure the business objectives are met
in the long run. The managers are thus tasked with evaluating probable future occurrence and
acting in manner that will put the company brand name on top in the near future.
In line with the strategic decision-making techniques, this report focuses on the
operations of Cunningham holdings. The company is a family owned enterprise that
specializes in offering hospitality services (Brockmann & Anthony, 2016). Based on its
vision which fronts creating a sustainable product to the communities globally, the firm is
interested in undertaking a golf resort project that is meant to improve local tourism as well
as improve the living standard of the local communities (Kiani & Shadlen, 2009). The
managers of Cunningham are dedicated to running a sustainable firm and are hence
determine to ensure the economical, ecological as well as environmental impact of their
decisions are within the United Nations development goals.
In the past shareholders meeting the CEO of the firm Oscar Cunningham did bring
forward an agenda to construct an international golf resort covering 42 hectares at a cost of $
20 million. Included in this resort would be a clubhouse. According to the management plan a
standard clubhouse is the best fit to accompany the golf resort project. The plan to construct a
standard clubhouse is though not in the interest of the shareholders as the latter has requested
for an exclusive clubhouse at a cost of $ 6 million. The CEO of the company was concerned
this may not be achievable and hence as a senior analysist to the firm I was tasked with
evaluating the available options and presenting a report. This document is therefore meant to
showcase the findings and suggest a recommendation that the managers should adhere to.
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Implementation of the decision models
To assist the managers, identify the optimal decision plan to implement, I did develop
5 models. These were the shareholders request, 3 options that can assist improve on the
shareholders’ request as well as the managers plan. A recent international survey on the
golfers did give some insight information regarding the utility that golfers derive from a golf
resort. The models are therefore meant to take the utility maximization criteria approach as
well as consider the Cunningham’s resource constrains. The models have two type of
decisions that the managers ought to make the first one is the golf resort holes’ configuration
and the second on is the type of clubhouse to include in the resort. The objective of the
project is to maximise the total enjoyment index which is the variable used to measure the
utility derived from the resort by the clients.
The models are as displayed in the tables below.
The management standard clubhouse model
Cunningham Gudgal Golf Resort
Golfing hole Total Pars Total size (ha ) Enjoyment Index Cost of the holes Number of holes
Straight par 5 5 3 2 $1,000,000 1 >= 1
Dogled par 5 5 3.5 1.5 $1,500,000 1 >= 1
Straight par 4 8 4 3 $1,500,000 2 >= 2
Dogled par 4 40 25 20 $9,000,000 10 >= 2
Long Par 3 3 1 1.75 $600,000 1 >= 1
Short par 3 9 2.25 6.75 $1,950,000 3 >= 1
Clubhouse features
Standard Clubhouse
Space occupied 2
Construction cost $3,500,000
Objective Function
Total Enjoyment Index 35
Constraint
Total Cost $19,050,000 <= $20,000,000
Total space occupied 40.75 <= 42
Total Number of holes 18 = 18
Par 5 2 <= 4
Par 4 12 <= 14
Par 3 4 <= 4
Total Pars 70 <= 72
Total Pars 70 >= 70
Golf acreage 38.75 >= 36
The original shareholders request
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Cunningham Gudgal Golf Resort
Golfing hole Total Pars Total size (ha ) Enjoyment Index Cost of the holes Number of holes
Straight par 5 8.25 4.95 3.3 $1,650,000 1.65 >= 1
Dogled par 5 5 3.5 1.5 $1,500,000 1 >= 1
Straight par 4 41.6 20.8 15.6 $7,800,000 10.4 >= 2
Dogled par 4 8 5 4 $1,800,000 2 >= 2
Long Par 3 3 1 1.75 $600,000 1 >= 1
Short par 3 3 0.75 2.25 $650,000 1 >= 1
Clubhouse features
Exclusive Clubhouse
Space occupied 4
Enjoyment index 4
Construction cost $6,000,000
Objective Function
Total Enjoyment Index 32.4
Constraint
Total Cost $20,000,000 <= $20,000,000
Total space occupied 40 <= 42
Total Number of holes 17.05 = 18
Par 5 2.65 <= 4
Par 4 12.4 <= 14
Par 3 2 <= 4
Total Pars 68.85 <= 72
Total Pars 68.85 >= 70
Golf acreage 36 >= 36
Shareholders request option 1
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Cunningham Gudgal Golf Resort
Golfing hole Total Pars Total size (ha ) Enjoyment Index Cost of the holes Number of holes
Straight par 5 10 6 4 $2,000,000 2 >= 1
Dogled par 5 5 3.5 1.5 $1,500,000 1 >= 1
Straight par 4 36 18 13.5 $6,750,000 9 >= 2
Dogled par 4 8 5 4 $1,800,000 2 >= 2
Long Par 3 9 3 5.25 $1,800,000 3 >= 1
Short par 3 3 0.75 2.25 $650,000 1 >= 1
Clubhouse features
Exclusive Clubhouse
Space occupied 3.2
Enjoyment index 4
Construction cost $5,500,000
Objective Function
Total Enjoyment Index 34.5
Constraint
Total Cost $20,000,000 <= $20,000,000
Total space occupied 39.45 <= 42
Total Number of holes 18 = 18
Par 5 3 <= 4
Par 4 11 <= 14
Par 3 4 <= 4
Total Pars 71 <= 72
Total Pars 71 >= 70
Golf acreage 36.25 >= 36
Shareholders request option 2
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Cunningham Gudgal Golf Resort
Golfing hole Total Pars Total size (ha ) Enjoyment Index Cost of the holes Number of holes
Straight par 5 5 3 2 $1,000,000 1 >= 1
Dogled par 5 5 3.5 1.5 $1,500,000 1 >= 1
Straight par 4 28 14 10.5 $5,250,000 7 >= 2
Dogled par 4 20 12.5 10 $4,500,000 5 >= 2
Long Par 3 9 3 5.25 $1,800,000 3 >= 1
Short par 3 3 0.75 2.25 $650,000 1 >= 1
Clubhouse features
Exclusive Clubhouse
Space occupied 4
Enjoyment index 4
Construction cost $5,300,000
Objective Function
Total Enjoyment Index 35.5
Constraint
Total Cost $20,000,000 <= $20,000,000
Total space occupied 40.75 <= 42
Total Number of holes 18 = 18
Par 5 2 <= 4
Par 4 12 <= 14
Par 3 4 <= 4
Total Pars 70 <= 72
Total Pars 70 >= 70
Golf acreage 36.75 >= 36
Shareholders request option 3
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Cunningham Gudgal Golf Resort
Golfing hole Total Pars Total size (ha ) Enjoyment Index Cost of the holes Number of holes
Straight par 5 10 6 4 $2,000,000 2 >= 1
Dogled par 5 5 3.5 1.5 $1,500,000 1 >= 1
Straight par 4 36 18 13.5 $6,750,000 9 >= 2
Dogled par 4 8 5 4 $1,800,000 2 >= 2
Long Par 3 9 3 5.25 $1,800,000 3 >= 1
Short par 3 3 0.75 2.25 $650,000 1 >= 1
Clubhouse features
Exclusive Clubhouse
Space occupied 4
Enjoyment index 4
Construction cost $6,000,000
Objective Function
Total Enjoyment Index 34.5
Constraint
Total Cost $20,500,000 <= $20,500,000
Total space occupied 40.25 <= 42
Total Number of holes 18 = 18
Par 5 3 <= 4
Par 4 11 <= 14
Par 3 4 <= 4
Total Pars 71 <= 72
Total Pars 71 >= 70
Golf acreage 36.25 >= 36
Analysis of the feasible models
The feasible models are those that have an objective value that is able to meet all the
constraints listed. The managers’ plan when modelled does not give an optimal value. This
indicates that under the current position of the firm, it cannot be attained. The cost of $ 6
million of constricting an exclusive clubhouse in addition to meeting all the requirements of
an international golf resort cannot be funded by the budget allocation of $ 20 million. The
model is thus not feasible. Out of the 5 models generated above only 4 were realized to be
feasible. This are discussed in details below.
The standard clubhouse model
This model did take account of the shareholders plan to construct an international golf
resort with a standard clubhouse. The clubhouse is planned to occupy a total of 2 hectares and
is to be constructed at a budget of $ 3.5 million. Based on the shareholders plan the total cost
for the resort inclusive of the clubhouse should be a maximum of $ 20 million. When these
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details were modelled using Microsoft excel; it was observed that adhering to this model will
consumes a total of $ 19.05 million with a landscape of 40.75 hectares needed. In return the
golfers will derive an enjoyment index of 35 from the resort project. To put the model in
place the firm will have to settle for the standard clubhouse in addition to constructing the
golf holes with a configuration as displayed; the straight par 5, dogleg par 5 and long par 3
only one hole should be constructed for each. The straight par 4 should have 2 golf holes
while the dogleg par 4 to have 10 holes. Finally, the 3 golf holes need to be of the short par 3
type.
Option 1
The original plan by the shareholders cannot be implemented as the firm has limited
finance to support it. This option is thus meant to develop a comprise that can improve on the
managers plan while at the same time deviating from the shareholders suggestion. Under this
option, the firm ought to reduce the capital allocated to the exclusive clubhouse to $ 5.5
million and construct the clubhouse in an area of 3.2 hectares. In return the option will yield a
total enjoyment index of 34.5. The total capital needed to put the model in place is $ 20
million and it will occupy a land space of 39.45 hectares. The golf resort should have the
following features under the option 1 model; straight par 5 need to be 2 holes dogleg par 5
and short par 3 one hole each, straight par 4 to have 9 holes while dogleg par 4 and long par 3
to have 2 and 3 holes respectively.
Option 2
The option 2 model is also an improvement of the shareholders request, in this case
the total construction cost of the exclusive clubhouse is reduced to $ 5.3 million while the
land space to be covered by it is left as before. In return this model will need a total of $ 20
million to implement and a space of 40.75 hectares. The total enjoyment index that the clients
will derive from the project is 35.5. Under the option 2 model the golf resort should have
holes’ configuration as follows; For the par 5’s the holes constructed should be 1 for each, the
short par 3 should also have only one hole. For the par 4’s the straight par 4 need to have 7
holes while the dogleg par 4 to have 5 holes. Finally, the long par 3 to have 3 holes. This will
be a total of 18 holes which is what is needed for an international golf resort.
Option 3
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Under option 3, the shareholders request is upheld the way it is without any
modifications. However, since the firm is not able to implement the model using its current
budget there is need to increase the total capital allocated to the golf resort to $ 20.5 million.
Using this budget gives a feasible point, the total constriction cost for the project will thus be
$ 20.5 million and it will occupy a land space of 40.25 hectares. In return the project will give
a total enjoyment index of 34.5. the model when adopted will give a golf resort with golf
holes’ configurations illustrated; the straight par 5 and the dogleg par 4 should have 2 holes
each, the dogleg par 5 and short par 3 each to have one-hole, straight par 4 will have 9 holes
while long par 3 to have 3 holes.
Implications of the feasible models
The four feasible models derived above do have a diversified implication on the
shareholders request. First the managers plan is to construct a standard clubhouse which
occupy only 2 hectares is not in line with the shareholders request. Also, out of the three
suggested options, option 2 entails reducing the size of the exclusive clubhouse. The 2
remaining options that is 2 and 3 do adhere to the shareholders initial request even though
there need to be cost adjustments so as to allow the models to be in line with the company
financial constraints.
Recommendations
Using the enjoyment index as the basis for making decisions, there are two models
that ought to be considered that is the managers plan and the option 2. For option 1 and
option 3 the total enjoyment index of only 34.5 is quite low which means the models will not
be attractive to the clients of the firm. We thus need to evaluate the remaining models that
have higher enjoyment index. For the option 2, the model is built under the assumption that
the construction cost of the exclusive clubhouse can be reduced to fit in the company’s
budget. Being that the costs of constructing the golf resort are just estimates, a farther study
should be done to determine the actual costs expected as well as identity avenues that can be
used to cut down the suggested costs. I thus recommend that the managers consider putting in
place the model described under option 2 as it optimises the enjoyment derived from the
project by the consumers.
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References
Brockmann, E. N. & Anthony, W. P., 2016. Tacit knowledge and strategic decision making. Group
& Organization Management, 27(4), p. 436–455.
Kiani, R. & Shadlen, M. N., 2009. Representation of confidence associated with a decision by
neurons in the parietal cortex. Science, 324 (5928), p. 759–764.
Perneger, T. V. & Agoritsas, T., 2011. Doctors and patients' susceptibility to framing bias: a
randomized trial. Journal of General Internal Medicine, 26(12), p. 1411–1417.
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