Fundamentals of Managerial Economics - Case Study Example

Executive Summary The report illuminates two key strategic issues surrounding the Secret Garden Party Organization. Secret Garden Party is an arts and Music festival that runs yearly on every last week of July. The party is usually held at Huntingdon in abbots Ripton. Fred Fellows founded the Music festival program. The two strategic issues that this paper focuses on include the pricing of the tickets and the measures to ensure that this annual event does not clash with any other event. The report will also discuss the various options for the two strategic issues. Finally, the paper will concentrate on in-depth analysis of the annual music event. Section 1: Key Strategic Issues The management of Secret Garden Party Organization is grappling with several key issues, which will dictate its performance in the industry. One key strategy is the need to target internet viewers to its program. Such a move is justified by the fact that the literacy rate in UK is above 95% besides having high rate of internet users. The other critical issue that the organization is grappling with is the issue of bad weather. It is worth noting that the organization should consider conducting indoor events to avoid chances of bad weather ruining the event. The other two strategic issues that are of concern to the Secret Garden Party include the pricing of the tickets and the measures to ensure that this annual event does not clash with any other event. However, the two main issues, which will be put into perspective, include the pricing of the tickets and the measures to ensure that this annual event does not clash with any other event. In order to make sure that the annual event registers maximum attendance, it is prudent that the date in which the event is staged does not clash with any other major event. According to Hirschey (2008), the July date is a strategic date because most of the major rival events do not take place around the same date. Besides the unique date according maximum revenues for the organization, it also ensures that the program attract maximum corporate sponsorship. Corporate sponsorship raises the standards of this event by ensuring the program is pomp and color. The event is always very memorable judging by how lovers of the festival always look forward to the event (Cronk & Hill, 2008). The other justification of setting a unique date is for the logistics reasons; planning such a global event is no mean fete, and it gets more difficult if several other programs are being organized around the same date. A program of that caliber requires security measures, humanitarian measures, and proper sanitation for the guests. All these requirements are always attained on this event thanks to the fact that it is set on a unique date. The other key strategic issue is the issue of pricing. Research by the event organizers revealed that majority of the lovers of this annual event are reluctant to attend the event owing to the fact that the ticket prices are beyond their reach. The event organizers must be alive to the fact that lowering the ticket prices will go a long way to increase the number of attendance to the event considerably. Indeed, it is better to reduce prices, which will increase the number of attendance thereby maximizing the revenues for the event (Kinnie, 2003). Reducing the prices will not affect the surplus at the event because the corporate sponsors associated with the event always shoulder most of the costs incurred at the event. Section 2 Several ways can be used to attain the strategic issues discussed in section 1 above. The issue of pricing is very critical to the financial viability of the annual event. The organizers of this event need to explore various options available to them regarding the issue of pricing of the tickets. Currently, the ticket prices are very high; this factor is blocking out potential lovers of the events from attending this otherwise popular event (Kuchler, 2013). One option that the organizers can explore to attain reduction in prices is through strategic corporate partnership. By the event organizers collaborating with corporate organizations, they will reduce their costs significantly since the corporates will sponsor various costs involved as well as donating critical equipment that may be required at the event. The fact that the corporate bodies sponsor the event reduces the costs to the organizers enabling them to reduce their prices. The other option available to the event organizers with regard to lowering the prices is categorization of the ticketing system. Cronk & Hill (2008) says that there should be tickets for VIP and ordinary people. The justification of such a move is that the prices of the VIP tickets can be increased with less or no effect on attendance by this category of audience. On the other hand, the prices for the ordinary citizens should be slashed by up to 50% to increase the attendance rate from this category of audience (Moffett, 2005). On the other hand, the major option that can be exploited in order to ensure that the event does not collide with any other major event is through setting a unique date. The unique date can be set on a weekday in the month of July. The justification is that most events are always held on weekends around the festive seasons such as December or April (Moffett, 2005). The other option that can be exploited by the event’s organizers to ensure it does not clash with any other major event is through booking the venue in time so that no other major event is held on the same venue. Each option that the organizers of this event intend to roll out has potential threats that come with it. The option of collaborating with corporate organizations in a bid to reduce the costs and consequently, the price presents the potential threat of inconvenience. Getting corporate organizations to sponsor events is an elaborate process judging by the many procedures involved. It is possible that the event organizers can spend a considerable amount of time courting a corporate organization but eventually fail to secure the sponsorship. According to Mowen and Guan (2009) the apparent threat that is inherent in the option of reducing the prices for ordinary tickets and increasing the prices for VIP tickets is that it may not work after all. This is so because the ordinary audience may have a feeling that the reduced prices are still high. With regard to the option of setting the date on a weekday to avoid clash with any other major event, the potential threat is that many of the potential audiences might be busy at their workplace on the weekend and may not find time to attend the function (Muller, 2005). Finally, the option of booking the venue in time to avoid inconvenience may come with more costs to the organizers' event thereby eating into the revenues that they have raised from the ticket sales. The social media is a critical tool that will enhance the success of this program. Research shows that social media is widely used by the majority of people. In fact, 45% of the population is on Twitter, Facebook, LinkedIn, and Blogs (Rapp, 2005). This, therefore, means that the event organizer can popularize the event using social media. There is a need to have a good profile for the popular social media that can attract potential audience to the event. The organization should constantly update the social media profile with up-to-date information regarding the event. When the event is set on a date that does not clash with any other major event, the attendance rate will increase which consequently leads to increase in the revenues realized at the event. The fact that the ticket prices is reduced coupled with aggressive publicity of the event via social media goes a long way to ensure that more potential audience get a wind of the event and attend it in their numbers. Section 3 The issue of ticket pricing is a key issue, which should not be ignored if the organization wishes to improve its business performance in terms of profitability and revenue base. The option available to the event organizers with regard to lowering the prices is categorization of the ticketing system. There should be tickets for VIP and ordinary people. The prices of the VIP tickets can be increased with less or no effect on attendance by this category of audience. On the other hand, the prices for the ordinary citizens be slashed by up to 50% to increase the attendance arte from this category of audience (Moffett, 2005). 3.1 Hersey-Blanchard Situational Leadership Model The option of collaborating with corporate organization to organize this annual event is a noble idea. In approaching this option, the Hersey-Blanchard Situational Leadership Model comes handy. This leadership model embraces four leadership styles, which include telling, selling, participating, and delegating. The option of collaborating with the corporate bodies is quite elaborate and therefore quality leadership comes handy (Secret Productions, 2013). The first two leadership styles according to this model, which is telling and selling, are more focused on getting the task done while the remaining two, which is participating and delegating is more focused on team formation (Cronk & Hill, 2008). The model requires that the leader must have the diagnostic capabilities that will enable them to adapt to the demands of various stakeholders. Situational leadership is both task oriented and relationship oriented. It ensures that the primary task, which is to realize increased returns from the event, is upheld besides keeping good relationship with the various stakeholders. The secret to ensuring that the event attracts corporate bodies for sponsorship requires teamwork. Cronk and Hill (2008) says that a cohesive team has to be in place, the team should form a formidable strategy that they will use to attract the sponsorship. Corporate sponsorship raises the standards of this event by ensuring the program is pomp and color. Addressing the strategic issues at the organization through the various options will definitely affect the stakeholders either positively or negatively. The organization has two categories of stakeholders, which include internal target group and external target group. Internal target group include loyal customers, which have been attending the previous editions of the event while the external target group include suppliers, distributors, and mass media. The internal target group will be positively affected since reduction of prices will mean that they pay less to attend the event. On the other hand, the distributors, suppliers, and mass media could be adversely affected in the sense that if the turnout does not increase with the reduced ticket prices the company may lack the finances to owner the financial obligation it owes its external target group. It is important that the company maintain sound working capital management so that it is able to honor its obligations to suppliers and distributors. By the event organizers collaborating with corporate organization, they will reduce their costs significantly since the corporates will sponsor various costs involved as well as donating critical equipment that may be required at the event. The fact that the corporate bodies sponsor the event reduces the costs to the organizers enabling them to reduce their prices (Muller, 2005). The business has a unique selling point because it offers quality entertainment to the audience. This is proven by the fact that audiences troops in in their numbers to attend the event. 3.2 Organization Capabilities The sound business performance in terms of profitability and revenue base that the company continues to enjoy can be attributed to the various business capabilities of the organization. The company boasts of skilled labor in the various sectors of the company. The marketing team is aggressive, the finance team ensures optimal use of resources, and event-organizing team is experienced since they know what it takes to make the event to tickle. The other strength that this organization enjoys is the fact that it is has developed a strong brand over the years. Many people always hold the organization in high regards because it has always offered memorable events since its inception and this justifies the strong brand, which it enjoys. In 2004, the event was just a one-stage show hosting up to 1000 guest but currently, the event has expanded by leaps and bounds and currently hosts up to 30,000 guest. Unlike its competitors in the industry, the company has production capabilities owing to the fact that it is able to host the garden party festivals annually with fewer difficulties if any. The success of this annual festival can be attributed to the sound management of Fred Followers. Through his impeccable management capabilities, he has steered the organization to greater heights in the competitive entertainment industry. Currently the festival has various genres, which include rock world, electronic, dance, folk, and reggae. 3.3 Attractiveness of the market The entertainment industry is quite attractive judging by the various positive indicators in the industry. The GE/Making Matrix analysis technique comes handy in describing the fortunes inherent in this industry. The entertainment market has been growing over the years especially in the United Kingdom. For instance, Secret Garden Party organization entered the market in 2004 and in 9 years, the company has gained popularity and sizeable market share. For instance, the annual event held in 2012 attracted up to 40,000 audiences. There is still potential for growth to this organization, all it has to do is to consider incorporating popular genres such as Hip-hop, dancehall, and rock music to attract even more audience. Dancing has become an important genre judging by the popularity it has gained in the recent past, as such it is important that dancing is included in the event. The other selling point of this market is the fact that it is characterized by cutthroat competition and each organization within the industry must strive to gain share of the market through provision of quality and unique entertainment that makes it stand out in the market. The other point that makes this industry attractive is the fact that there is free entry and exit and less government interference. The market is also profitable and this fact makes its very attractive for investment. The profitability is attributed to the fact that UK citizens love fan and they are ready to spend for the sake of the fun. Finally, Secret Garden Party Organization enjoys economies of scale owing to its capacity. It receives supplies in bulk and as such, it is able to enjoy economies of scale which makes it makes it to be cost efficient. Cost efficiency is a good practice in business because it allows the organization to offer cheaper ticket prices that attracts potential consumers. The organization targets all groups of potential audience. The various individuals who attend the party usually have unique tastes and as such in order to increase the audience base by more than 50% in the year 2014 it is important that all genres such as rock, world, electronic, dance, folk, and reggae be incorporated at the festivals. 3.4 Risk Analysis Every option that the company has in place has its risks and how such risks are managed is key to the success of that option. An effective risk management has two stages namely risk assessment and risk control according to Project Management Institute's body of knowledge (PMBOK). Risk assessment has three elements, which includes identification of uncertainties in the option, after identification of uncertainties analysis is conducted to determine how such risks affect the performance of the business. After the analysis of the risk, the risk should be prioritized and those with extreme adverse effects eliminated (Muller, 2005). Care must also be taken to ensure that the risk are controlled effectively by the management to mitigate their stalling of the event. Some of the risks that could be experienced in with the option of reducing the prices of ordinary tickets and increasing the prices of VIP tickets include lack of ordinary citizens to respond to reduction of ticket prices because they might not be aware of such a move if proper awareness is not conducted. The other reason for lack of response to the reduced ticket pricing is the fact that people may still find the new pricing high and beyond their reach. When the targeted audience does not responds to the reduced ticket pricing the organization will suffer from grave financial consequences. The risk associated with the option of collaborating with the corporate partners is that they might peg their collaboration to allot of conditions, which may in the end compromise of the quality of the event. When the quality of the event is compromised, the audience will be dissatisfied and this might affect future turnout of the event (Muller, 2005). In most cases, the corporate sponsors may want a lot of advertisement in between the event to the dissatisfaction of the audience. The table below summarizes the risks associated with the issue of reducing ticket prices. Issue: Ticket pricing Option Risk Mitigation Collaborating with corporate organization Demand a lot of advertising that compromises the quality of the event Only accept optimal advertising during the event. Reducing the prices of ordinary tickets and increasing the prices of VIP Tickets The company may register reduced revenues if the audience fails to respond to reduced pricing Aggressive awareness campaign be put in place to ensure that the target audience are aware of the reduced prices Critical Success Factors There are notable critical success factors that the organization wishes to achieve in order to increase the performance in the market. The success factors at the organization include price, service, quality, and reliability. With the reduced ticket prices, audience who were originally left out due to high-ticket prices will attend the event thereby increasing the revenue base of the company. The other critical success factor is the issue of quality; the organization should ensure that it offers a memorable event that meets the expectations of all groups of audiences who attend this annual music festival. It is apparent that the event will get more media attention and popularity due to reduced ticket prices. Finally, the company will be able to honor its financial obligation to suppliers and distributors. Indicators for the critical success factors are summarized in the table below; Indicators of success factors 1 Increase in attendance rate 2 More media attention and publicity of the event 3 Increase in working capital which allows the organization to honor financial obligation to suppliers and distributors Increase in revenue base due to increased attendance rate Section 4 The success of this program since its inception by Fred Fellows can be attributed to good management. It is therefore true to conclude that the event boasts of good and effective management. The management of the event has always adopted a participatory model of leadership. The participatory approach of leadership in this organization is made possible by the fact that there exist various communication channels that exists in this organization (Weinstock, 2010). The management has rapport with workers and this is a good motivation to workers since they can seek audience with the management whenever they have any problems. The secret Garden Party Organization can be described as a medium enterprises judging by several factors. The first factor that shows that the business is a medium enterprise is the number of employees. The organization has 120 employees who are all employed on permanent and pensionable basis. Moreover, the business is also characterized by a high annual turnover from ticket sales and other investments. On average, the organization registers $40 million in revenues, which qualifies it as a medium enterprise (Secret Productions, 2013). The fact that there are 120 employees in the organization makes conflict inevitable in the organization. Conflict is likely to arise because the various stakeholders may have divergent opinions on the various strategic options that the organization has in place. Some stakeholders may prefer certain strategic options to the others leading to time wastage and complex decision-making on which option to adopt and which one to forfeit. It is worth noting that there is need to have in place a conflict resolution mechanism to ensure that the conflicts are solved amicably before they cripple the operations at the organization (Weinstock, 2010). The best way to address the issue of conflicts is through having a conflict resolution team that comprises of workers and managers. The corporation possess an elaborate and unrivalled communication strategy which is responsible for efficicncy in operations expereinced there. The sound communication strategy has enabled the company to sustain and manage a barrage of conflicts that its always confronted with. The best way to address the conflicts that are inherent in this organization is through embracing the Thomas-Kilmann Conflict Resolution Model. The conflict has two succinct dimensions on how to organize the five conflict management styles; the two dimensions are assertiveness and cooperativeness. The five conflict management styles according to this model include avoiding, accommodating, collaborating, competing, and compromising. It is in order that the management of this organization uses this model as reference point whenever they are faced with conflict of any kind. It is worth noting that stakeholders in this organization should adopt the various conflict management styles depending on the situation at hand. In this case, the major cause of conflict arises from the choice of strategic option (Muller, 2005). The best way to address this apparent conflict is through compromise. Parties with dissenting opinions must avoid hardline positions so that the decision on which strategic option to adopt is arrived at easily and with less friction among the parties. Adopting this model will ensure that conflicts that arises within the organization are solved expeditiously before they cripple the core functions of the organization. Conclusion The two major strategic issues that are of concern to the Secret Garden Party include the pricing of the tickets and the measures to ensure that this annual event does not clash with any other event. Attaining these two key strategic issues will go a long way to ensure that the business performance of this organization in terms of profitability and revenue is enhanced. The management should put deliberate measures to ensure that these objectives are attained in good time. The report has also discussed the various options for the two strategic issues. Finally, the paper will concentrate on in-depth analysis of the annual music event with regard to management of the event and the organization in general. References Cronk, T . & Hill, C. 2008. Global Business Today. Australia: McGraw-Hill. Hirschey H. 2008. Fundamentals of Managerial Economics. Massachusetts: Cengage Learning Kinnie, S. 2003. Understanding the Role and Performance Link: Unlocking the Black Box. London: CIPD. Kuchler, H. 2013. Revellers desert music festivals. Available at < http://www.ft.com/cms/s/0/5be56fb0-cc0d-11e1-839a-00144feabdc0.html#axzz2cVC8eRRZ> [Assessed 22 November]. Moffett, C. R. n.d. International business. [Ppt] Available at [Assessed 22 November]. Mowen, M., & Guan, L., 2009,.Cost Management: Accounting and control. Massachusetts: Cengage Learning. Muller, A. K. 2005. Swot Analysis for Henkel's loctite. Munich: GRIN Verlag. Rapp, B. 2005. Understanding Competitive Advantage: The Importance of Strategic Congruence and Integrated Control. New York: Springer. Secret Productions, 2013. Secret Productions. [Online] Available at < http://www.secretproductions.net/#/secretproductions> [Assessed 22 November]. Weinstock, L. 2010. Festival Review: The Secret Garden Party. [Online] Available at: [Accessed 22 November]. Read More