Reference no: EM13867724

Case Study - Location Strategies Southwestern University's Location Decision

With the steady growth in attendance at Saturday home football games, Southwestern University's president, Dr. Joel Wisner, had reached a decision. The existing stadium, with seating capacity of 54,000, simply would not suffice. Forecasts showed increasing interest in the program [see Southwestern University: (B) in Chapter 4], and complaints by loyal fans and big-money athletic club boosters revealed the need for premium-class seating and luxury amenities not found in a 1950s-era stadium [see Southwestern University: (C) in Chapter 6].

But the choice of what to do was anything but clear to President Wisner. His vice president of development, Leslie Gardner, had presented three options: (1) expand the existing stadium to 75,000 seats, adding numerous luxury skyboxes and upgrading most of the yardline seats to include comfortable backings; (2) build a brand-new stadium three miles from campus on land, worth about $3 million, donated by a team booster; and (3) signing a 10-year contract with the Dallas Cowboys football team to rent their stadium, 28 miles away, for a fee of $200,000 per game.

Each of these options had clear benefits-yet each had at least one very strong negative as well. Expanding the current facility carried a $12 million price tag, with an annual fixed cost of about $1 million and with a variable cost of about $1 per attendee. If the job were not completed in the nine-month off-period between seasons, the team would be left without a home field on which to play in 2004. This meant reneging on contract dates with powerhouse teams that were signed some 3 to 4 years earlier. Contract violations are not a matter taken lightly in the NCAA or the Big Eleven Football Conference.

Building a brand-new stadium off-campus would yield a plush, state-of-the-art facility, but it had to be named after the donor of the land. It also meant a huge fundraising drive on the order of $40 million by President Wisner, plus likely bond insurance placing a 20-year debt burden on the college's balance sheet. He tentatively concluded that fixed cost would be in the neighborhood of $5 million per year and variable cost about $2 per attendee.

The third option had definite advantages from the perspective of many, if not most, of the fans who attended the games. A large number already lived in the Dallas-Fort Worth area and would be spared the long commute and horrible traffic jams that always seemed to occur in Stephenville on game days. Clearly, however, students would be unhappy and buses would have to be provided by SWU, for free, to bring students from Stephenville to Dallas. While the actual noted price of $200,000 per game seemed high on the surface, the $1 million per season (there are five home games a year) was a drop in the bucket compared to the other options. However, the Dean of Students said the school should expect the bus transportation to be about $10 for each of the 15,000 student tickets sold for each game.

Prior to asking the VP of finance to do the detailed analysis, President Wisner asked Gardner to survey three groups that held personal stakes in the project: students, booster club members, and college faculty/staff. Selecting 50 people at random in each of these groups, Gardner asked them to "grade" each possible location on five factors. Using letter grades, the results are shown in the table below.

Gardner decided to give equal weight to the grading of each of these groups. But the administration did not equally weigh the five factors. "Cost" and "guaranteed availability" were rated twice as important as "convenience," which in turn was ranked twice as important as "comfort" and "national image."

DISCUSSION QUESTIONS

1. Are the factors Gardner selected for evaluation reasonable and complete? What others might be included?

2. Prepare a crossover chart based on the information provided.

3. Based first on your analysis of the survey data, and then on your analysis of the crossover charts, provide a justification for each location. Provide a complete list of reasons for not selecting each of the three sites.

4. Which location do you recommend, and why?