Olympics Committee's Bid for the Olympics of 2018 - Essay Example

Assignment Case study Table of Contents Introduction 3 Analysis of revenue calculation 3 OCOG Expenditures 5 Non OCOG Expenditures 6 The Capital Investments Budget 8 None of the cities which were examined will invest in activities related to OCOG. All capital expenditures incurred in the region will be spent on improving the overall infrastructure of the region. The Capital Investments Budget will be used only to improve the infrastructure of the city. 8 The projected cashflows 8 Munich 8 8 Annecy 9 Pyeongchang 9 10 The inflation and exchange rate assumptions can be applied to the following list of cities: 10 Munich 11 Annecy 11 Pyeongchang 11 Conclusion 11 Bibliography 12 Introduction The Olympics committee has asked for the bid for the Olympics being held in the year 2018. For this purpose three cities has applied. The candidates’ cities are: 1. Annecy 2. Munich 3. Pyeongchang Analysis of revenue calculation Annecy Munich Pyeongchang Revenue USD in thousand in 2018 IOC Contribution $ 440,000.00 $ 440,000.00 $ 440,000.00 TDP Sponsorship $ 200,000.00 $ 197,602.00 $ 200,000.00 Local Sponsorship $ 740,673.00 $ 564,738.00 $ 449,000.00 Official Suppliers $ 117,970.00 $ 38,109.00 $ 174,600.00 Ticket sales $ 232,988.00 $ 245,778.00 $ 301,900.00 Licensing $ 51,150.00 $ 42,459.00 $ 43,600.00 Lotteries $ - $ 22,498.00 $ 18,700.00 Donation $ 2,762.00 $ 14,272.00 $ 27,400.00 Disposal of assets $ 13,532.00 $ 65,254.00 $ 8,700.00 Subsidies $ 48,327.00 $ - $ 162,100.00 Others $ 202,348.00 $ 254,011.00 $ 83,100.00 Total Revenue $ 2,049,750.00 $ 1,884,721.00 $ 1,909,100.00 Projected inflation 2.00% 1.60% 1.80% (Munich, n.d.) (Annecy, n.d.) (2018, n.d.) The proposal submitted by Annecy seems to be more profitable in terms of revenue. The main consideration involved in this regard is the inflation rate used by Annecy which is 2.0% and further the inflation rate used by Pyeonchang which is at 1.80% and the lowest inflation rate of which is 1.60% and is considered to be lowest. (Annecy, n.d. Annecy Bid 2018.) Based on the inflation rate the projection was also enhanced. One thing is definite - IOC contribution will have the same level despite of inflation. Ticket sales are the highest in Pyeongchang. After that comes Munich. The difference between Munich projection and Pyeongchang projection has reached the point of $56.122 million dollars. Sponsorship includes TDP and Local Sponsorship. He highest sum of money goes for Annecy. This company is known to contribute up to $940.673 million into sponsorship. A second company in the list is Munich Company. It was estimated that the overall income of this company has reached the point of $762.340 million dollars. Consequently, if to review this company in terms of sponsorship, Annecy can be regarded as the most favorable contestants for Olympics. ( Munich, n.d. Munich Olympic Bid 2018) Third criterion to be viewed in this paper is licensing. When to review companies from the point of view of licensing, I can definitely say that the most “earning” city in the list is Annecy. This city is able to give the revenue from licensing which totals $51.15 million dollars. A second company in the list is Pyeonchang. This company earns as much as $43.6 million dollars. Consequently, a conclusion can be made that in terms of licensing and in terms of revenue potential Annecy occupies the first place in the list. On the basis of the analysis above we would conclude that Annecy is able to project the highest revenue which totaled to $2,049.750 million dollars. Therefore, we can consider Annecy as the most suitable candidate for hosting the Olympics. (Munich, n.d. Munich Olympic Bid 2018) OCOG Expenditures Annecy Munich Pyeongchang OCOG Expenditures USD in thousand in 2018 Sports venues $ 177,821.00 $ 165,992.00 $ 143,100.00 Olympic Village and Other Villages $ 142,286.00 $ 217,811.00 $ 124,300.00 MPC $ 24,081.00 $ 16,984.00 $ 74,800.00 IBC $ 56,445.00 $ 28,168.00 $ 31,900.00 Hospitality center and other $ 71,788.00 $ 7,594.00 $ 19,500.00 Workforce $ 297,381.00 $ 165,532.00 $ 236,100.00 Information Systems $ 206,860.00 $ 196,609.00 $ 309,300.00 Telecommunications and Technologies $ 129,617.00 $ 92,306.00 $ 150,300.00 Internet $ 8,999.00 $ 5,523.00 $ 14,300.00 Ceremonies $ 120,580.00 $ 86,299.00 $ 114,700.00 Medical Services $ 22,809.00 $ 18,944.00 $ 24,900.00 Catering $ 30,038.00 $ 26,358.00 $ 37,400.00 Transport $ 89,563.00 $ 112,601.00 $ 92,300.00 Security $ 47,489.00 $ 43,812.00 $ 41,000.00 Paralympics Games $ 109,178.00 $ 101,296.00 $ 75,700.00 Advertising and Promotion $ 55,817.00 $ 57,152.00 $ 68,600.00 Administration $ 125,994.00 $ 108,518.00 $ 125,700.00 Pre-Olympic Events and Coordination $ 34,441.00 $ 16,840.00 $ 22,500.00 Others $ 384,041.00 $ 327,420.00 $ 202,700.00 Total $ 2,135,228.00 $ 1,795,759.00 $ 1,909,100.00 (2018, n.d.) (Annecy, n.d.) (Munich, n.d.) The expenditure table indicates that the total expenditures projected by Annecy are on the higher side and the expenditures of Munich are on the lower side. The only minus is a relatively high amount of money needed to finance workforce in Annecy. Here the expenses on the work force proved to be higher as compared to the other cities. The expenses incurred by Annecy are higher than then of Munich what tell that Munich is the best alternative to be selected as a venue for the Olympics 2018. (Annecy, n.d. Annecy Bid 2018) Non OCOG Expenditures Annecy Munich Pyeongchang Non OCOG Expenditures USD in thousand in 2018 Airports $ - $ - $ 520.00 Roads and Railways $ 1,013,661.00 $ 873,825.00 $ 4,123,900.00 Accomodation $ 408,367.00 $ 318,055.00 $ 670,400.00 Sports Venues $ 553,881.00 $ 188,849.00 $ 469,700.00 Olympic Village $ 6,702.00 $ 327,852.00 $ 710,000.00 Media $ 146,634.00 $ 133,052.00 $ 334,600.00 Electricity $ 134,154.00 $ - $ - Environmental management system $ - $ 134,626.00 $ - Medical Services $ - $ - $ - Security $ - $ - $ - Telecommunication $ - $ 5,963.00 $ - Others $ 182,322.00 $ 148,666.00 $ - Security operations $ 761,579.00 $ 58,128.00 $ 20,000.00 Transport operations $ 7,420.00 $ - $ 15,000.00 Medical operations $ - $ - $ 4,000.00 Environmental management system operations $ 7,729.00 $ 4,142.00 $ 75,000.00 Other operations $ 272,533.00 $ 4,670.00 $ 9,000.00 Total $ 2,135,228.00 $ 1,795,759.00 $ 1,909,100.00 (2018, n.d.) (Annecy, n.d.) (Munich, n.d.) The total cost incurred in the process of Annecy analysis clearly shows that if chosen as a venue for Olympic game this city is likely to incur the highest cost as compared to non-OCOG expenditures. Analysis laces Munich is on the lowest side in terms of non OCOG expenditures. (Munich, n.d. Munich Olympic Bid 2018) The Capital Investments Budget None of the cities which were examined will invest in activities related to OCOG. All capital expenditures incurred in the region will be spent on improving the overall infrastructure of the region. The Capital Investments Budget will be used only to improve the infrastructure of the city. The projected cashflows The projection done by every city is presented as follows: Munich (Munich, n.d.) Annecy (Annecy, n.d.) Pyeongchang (2018, n.d.) The cashflow provided by Pyeongchang is in KRW whereas other cities have provided the cash flow in USD. If we compare the cash flow of all the cities with that of Munich we will see that Munich is the most cash rich city in the area. Cash flow analysis also shows that Munich is likely to enjoy high cash flow rate after Olympic events. The inflation and exchange rate assumptions can be applied to the following list of cities: Munich Projected inflation rate of US is taken at 2.2% Exchange rate taken by Germany for Euro to USD conversion in the year 2018 is 1.22 Date of finalization of budget is September 2010 Annecy Projected inflation rate of US is taken at 2.2% Exchange rate taken for Euro to USD conversion in the year 2018 is 1.22 Date of finalization of budget is October 2010 (Munich, n.d. Munich Olympic Bid 2018) Pyeongchang Projected inflation rate of US is taken at 2.2% Exchange rate taken for KRW to USD conversion in the year 2010 is 1,150 Date of finalization of budget is December 2010 Conclusion Based on the analysis above we would recommend that bidding of Olympic should be awarded to Munich. This conclusion was based on a careful analysis of the city and its ability to draw cash. Bibliography 2018, P., n.d. Pyeongchang 2018. [Online] Available at: http://www.pyeongchang2018.org/upload/volume/volume1 07 Finance_low.pdf. Annecy, n.d. Annecy Bid 2018. [Online] Available at: http://v4.interactiv-doc.fr/FrmViewer.aspx?NumPage=0&c_code=Annecy2018_Volume1_PP_Al_pdf_271. Munich, n.d. Munich Olympic Bid 2018. [Online] Available at: http://www.muenchen2018.org/files/site/pdf/m2018_bidbook_vol1.pdf. Read More