A Case study of Cunningham Holdings Limited

Golf Resort Construction
Part III: Report
A Case study of Cunningham Holdings Limited’s investment in an International Golf
Resort
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Introduction
Overview of the project
Managing a successful businesses empire demands more than marketing and sales.
The managers are responsible for management of the daily sales as well as engaging in
making investment’s decisions that will improve the brand image of the firm in the long run1.
This is what is defined as strategic decision making. The decisions made should be in line
with the firm’s vision and mission. The managers must therefore evaluate the probable future
market trends so as to retain and acquire more market share. In line with strategic decision-
making this report focuses on the case study of Cunningham holdings. This is a family owned
firm that specialises in according hospitality services. The firm’s vision fronts creating a
sustainable product for the global community. The management of the firm are dedicated to
adhere to the mission and hence ensure business operations that is environmentally,
ecological and economically sustainable2. This are some of the areas that are emphasised on
by the United Nations development goals.
The company CEO did raise an agenda to construct an international golf resort in the
previous shareholders meeting. The resort was to cover 42 ha and be constructed at a budget
of $20 million with a clubhouse included in it. The management plan recommends a standard
clubhouse a recommendation that is not in line with the interest of the shareholders. So as to
reach a consensus, this report researched on the available options for the firm and
recommended the most optimal decision that the firm should take.
1 Perneger & Agoritsas, “Doctors and patients' susceptibility to framing bias: a randomized
trial” 1411–1417.
2 Brockmann & Anthony, “Tacit knowledge and strategic decision making” 436–455.
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Implementation of the decision models
To evaluate the probable decision, 6 models were developed and analysed; this were
the standard clubhouse model (M1), exclusive clubhouse (M2), and 4 other models that
involve moderation of the exclusive clubhouse features. A recent international survey on the
golfers did bring out some information regarding the golfers’ utility from a golf resort. The
developed models will thus be evaluated by maximising the utility of the golfers and coming
up with the best structure of a golf resort. The model decision variables are the golf holes
configuration and the nature of clubhouse to be constructed. In addition, the enjoyment index
representing utility will have to be maximised under the prevailing constraints.
The models developed are presented in the tables below
The standard clubhouse model (M1)
VARIABLES SP5 DP5 SP4 DP4 LP3 DP3 COLUMN 1 COLUMN 2 COLUMN 3
WEIGHT 1 1 2 10 1 3
ENJOYMENT INDEX 2 1.5 1.5 2 1.75 2.25 35
CONSTRAINTS LHS SIGN RHS
atleast one SP5 1 1 >= 1
atleast one DP4 1 1 >= 1
atleast one SP4 1 2 >= 2
atleast one DP4 1 10 >= 2
atleast one LP3 1 1 >= 1
atleast one SP3 1 3 >= 1
no more than 4 par 5's 1 1 2 <= 4
no more than 14 par 4's 1 1 12 <= 14
no more than 4 par 3's 1 1 4 <= 4
Total maximum par 5 5 4 4 3 3 70 <= 72
Total minimum par 5 5 4 4 3 3 70 >= 70
Total maximum acerage 3 3.5 2 2.5 1 0.75 40.75 >= 36
Total number of holes 1 1 1 1 1 1 18 = 18
Total maximum acerage 3 3.5 2 2.5 1 0.75 40.75 <= 42
Total budget 1,000,000.00 1,500,000.00 750,000.00 900,000.00 600,000.00 650,000.00 19,050,000.00 <= 20,000,000.00
Cost Hectare Index
Standard Clubhouse 3,500,000.00 2 0
The exclusive clubhouse (M2)
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VARIABLES SP5 DP5 SP4 DP4 LP3 DP3 COLUMN 1 COLUMN 2 COLUMN 3
WEIGHT 1 1 9.666666667 2 3 1
ENJOYMENT INDEX 2 1.5 1.5 2 1.75 2.25 33.5
CONSTRAINTS LHS SIGN RHS
atleast one SP5 1 1 >= 1
atleast one DP4 1 1 >= 1
atleast one SP4 1 9.666666667 >= 2
atleast one DP4 1 2 >= 2
atleast one LP3 1 3 >= 1
atleast one SP3 1 1 >= 1
no more than 4 par 5's 1 1 2 <= 4
no more than 14 par 4's 1 1 11.66666667 <= 14
no more than 4 par 3's 1 1 4 <= 4
Total maximum par 5 5 4 4 3 3 68.66666667 <= 72
Total minimum par 5 5 4 4 3 3 68.66666667 >= 70
Total maximum acerage 3 3.5 2 2.5 1 0.75 38.58333333 >= 36
Total number of holes 1 1 1 1 1 1 17.66666667 = 18
Total maximum acerage 3 3.5 2 2.5 1 0.75 38.58333333 <= 42
Total budget 1,000,000.00 1,500,000.00 750,000.00 900,000.00 600,000.00 650,000.00 20,000,000.00 <= 20,000,000.00
Cost Hectare Index
Standard Clubhouse 6,000,000.00 4 4
Exclusive clubhouse option 1 (M3): Reduce clubhouse cost
VARIABLES SP5 DP5 SP4 DP4 LP3 DP3 COLUMN 1 COLUMN 2 COLUMN 3
WEIGHT 1.375 0.375 10.5 2 1 2.75
ENJOYMENT INDEX 2 1.5 1.5 2 1.75 2.25 35
CONSTRAINTS LHS SIGN RHS
atleast one SP5 1 1.375 >= 1
atleast one DP4 1 0.375 >= 1
atleast one SP4 1 10.5 >= 2
atleast one DP4 1 2 >= 2
atleast one LP3 1 1 >= 1
atleast one SP3 1 2.75 >= 1
no more than 4 par 5's 1 1 1.75 <= 4
no more than 14 par 4's 1 1 12.5 <= 14
no more than 4 par 3's 1 1 3.75 <= 4
Total maximum par 5 5 4 4 3 3 70 <= 72
Total minimum par 5 5 4 4 3 3 70 >= 70
Total maximum acerage 3 3.5 2 2.5 1 0.75 36.6 >= 36
Total number of holes 1 1 1 1 1 1 18 = 18
Total maximum acerage 3 3.5 2 2.5 1 0.75 36.6 <= 42
Total budget 1,000,000.00 1,500,000.00 750,000.00 900,000.00 600,000.00 650,000.00 20,000,000.00 <= 20,000,000.00
Cost Hectare Index
Standard Clubhouse 6,000,000.00 2.1 4
Exclusive clubhouse option 2 ((M4)); reduce clubhouse construction cost
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VARIABLES SP5 DP5 SP4 DP4 LP3 DP3 COLUMN 1 COLUMN 2 COLUMN 3
WEIGHT 1 1 10 2 1 3
ENJOYMENT INDEX 2 1.5 1.5 2 1.75 2.25 35
CONSTRAINTS LHS SIGN RHS
atleast one SP5 1 1 >= 1
atleast one DP4 1 1 >= 1
atleast one SP4 1 10 >= 2
atleast one DP4 1 2 >= 2
atleast one LP3 1 1 >= 1
atleast one SP3 1 3 >= 1
no more than 4 par 5's 1 1 2 <= 4
no more than 14 par 4's 1 1 12 <= 14
no more than 4 par 3's 1 1 4 <= 4
Total maximum par 5 5 4 4 3 3 70 <= 72
Total minimum par 5 5 4 4 3 3 70 >= 70
Total maximum acerage 3 3.5 2 2.5 1 0.75 38.75 >= 36
Total number of holes 1 1 1 1 1 1 18 = 18
Total maximum acerage 3 3.5 2 2.5 1 0.75 38.75 <= 42
Total budget 1,000,000.00 1,500,000.00 750,000.00 900,000.00 600,000.00 650,000.00 19,990,000.00 <= 20,000,000.00
Cost Hectare Index
Standard Clubhouse 5,640,000.00 4 4
Exclusive clubhouse option 3 (M5); change the available budget hypothetically
VARIABLES SP5 DP5 SP4 DP4 LP3 DP3 COLUMN 1 COLUMN 2 COLUMN 3
WEIGHT 1 1 4 8 1 3
ENJOYMENT INDEX 2 1.5 1.5 2 1.75 2.25 38
CONSTRAINTS LHS SIGN RHS
atleast one SP5 1 1 >= 1
atleast one DP4 1 1 >= 1
atleast one SP4 1 4 >= 2
atleast one DP4 1 8 >= 2
atleast one LP3 1 1 >= 1
atleast one SP3 1 3 >= 1
no more than 4 par 5's 1 1 2 <= 4
no more than 14 par 4's 1 1 12 <= 14
no more than 4 par 3's 1 1 4 <= 4
Total maximum par 5 5 4 4 3 3 70 <= 72
Total minimum par 5 5 4 4 3 3 70 >= 70
Total maximum acerage 3 3.5 2 2.5 1 0.75 41.75 >= 36
Total number of holes 1 1 1 1 1 1 18 = 18
Total maximum acerage 3 3.5 2 2.5 1 0.75 41.75 <= 42
Total budget 1,000,000.00 1,500,000.00 750,000.00 900,000.00 600,000.00 650,000.00 21,250,000.00 <= 21,250,000.00
Cost Hectare Index
Standard Clubhouse 6,000,000.00 4 4
M6; Change cist and area of the exclusive clubhouse
VARIABLES SP5 DP5 SP4 DP4 LP3 DP3 COLUMN 1 COLUMN 2 COLUMN 3
WEIGHT 1 1 6 6 1 3
ENJOYMENT INDEX 2 1.5 1.5 2 1.75 2.25 37
CONSTRAINTS LHS SIGN RHS
atleast one SP5 1 1 >= 1
atleast one DP4 1 1 >= 1
atleast one SP4 1 6 >= 2
atleast one DP4 1 6 >= 2
atleast one LP3 1 1 >= 1
atleast one SP3 1 3 >= 1
no more than 4 par 5's 1 1 2 <= 4
no more than 14 par 4's 1 1 12 <= 14
no more than 4 par 3's 1 1 4 <= 4
Total maximum par 5 5 4 4 3 3 70 <= 72
Total minimum par 5 5 4 4 3 3 70 >= 70
Total maximum acerage 3 3.5 2 2.5 1 0.75 40.25 >= 36
Total number of holes 1 1 1 1 1 1 18 = 18
Total maximum acerage 3 3.5 2 2.5 1 0.75 40.25 <= 42
Total budget 1,000,000.00 1,500,000.00 750,000.00 900,000.00 600,000.00 650,000.00 19,950,000.00 <= 20,000,000.00
Cost Hectare Index
Standard Clubhouse 5,000,000.00 3.5 4
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Analysis of the feasible models
The feasible models are those whose objective value is derived after adhering to all
the listed constraints. The shareholders plan is not feasible. This means that using the current
resources of the firm, the managers cannot construct an international golf resort while at the
same time meet the requirements of the shareholders regarding the clubhouse. From the 6
models developed 4 were observed to be feasible and are discussed below.
M1
This model is in line with the managers suggestion. It involves constriction of a golf
resort with a standard clubhouse covering 2 ha at a cost of $ 3.5million. Modelling the
clubhouse in excel, we observe that the model will require a total of $ 19.05 million and a
landscape of 40.75ha to construct. The total enjoyment index expected from this is 35. Under
this model, the golf holes should be configured as presented in the table below.
SP5 DP5 SP4 DP4 LP3 DP3
1 1 2 10 1 3
Option 2 (M4)
The plan suggested by the shareholders isn’t feasible, this option thus modifies the
shareholders suggestion to meet the firm resource capacity. In this model the cost of the
clubhouse was cut to $5.64 million and the remaining features retained. This option optimises
the golfer’s enjoyment index at 35. The total cost of the project will be $ 19.99 million and
the land area covered is 38.75 ha. The golf holes will have to be configured as indicated in
the table below.
SP5 DP5 SP4 DP4 LP3 DP3
1 1 10 2 1 3
.
Option 3 (M5)
The model M4 also improved the features of the exclusive clubhouse. Here the total
budget available for the project is hypothetically increased to $21.25 million. This details
when modelled give a feasible option that maximises the enjoyment index at 38. The model
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will consume a total of $21.25 million and take a land space of 41.75 ha. The golf holes
configuration under this model is as presented in the table below.
SP5 DP5 SP4 DP4 LP3 DP3
1 1 4 8 1 3
M6
This model entails reducing the cost as well as the area of the exclusive clubhouse.
The area is reduced to 3.5 ha while the cost is estimated at $5 million. This gives a feasible
solution that optimises the enjoyment index at 37. The implementation of the model will
consume a total land area of 40.25 ha and cost $19.95 million. The golf holes configuration
under this model are illustrated in the table below.
1 1 6 6 1 3
2 1.5 1.5 2 1.75 2.25
Implications of the feasible models
The feasible models discussed above have a varied effect on the request of the
shareholders. The managers plan to construct a standard clubhouse do not meet the
shareholders needs while the other 3 models discussed although recommend the construction
of an exclusive clubhouse, they modify its features. Of the 4 models only option 5 adhered to
the shareholders suggestion even though this will be achieved at a higher cost.
Recommendations
Applying the enjoyment index as the basis for decision making M5 is the
recommendable model. The other options have lower enjoyment index with M1 having 35,
M4 has 35 and M6 has 37. The limitation of M5 is that it consumes more capital, being that
the firm only has $ 20 million available for the golf resort project, M5 will not be a viable
option. This leaves M6 as the best model to adhere with. With just a construction cost of
$19.95 million, the firm will be able to develop a golf resort that meets the international
standard requirement while at the same time yield an enjoyment index of 37. From the
analysis done in this report implementation of M6 is the best cause of action that is
recommended.
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References
Brockmann, E. N. & Anthony, W. P. "Tacit knowledge and strategic decision making." Group &
Organization Management, 27, no. 4 (2016): 436–455.
Perneger, T. V. & Agoritsas, T. "Doctors and patients' susceptibility to framing bias: a randomized
trial." Journal of General Internal Medicine 26, no. 12 (2011): 1411–1417.
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