“Southwestern University: Stadium Expansion Decision Plans”

“Southwestern University: Stadium Expansion Decision Plans”

To: Dr. Marty Starr – President of Southwestern University

Prepared by: Your Name

Operations Management

We have come to realize that our Saturday’s games have grown in popularity and our existing stadium does not have the capacity required to safely and satisfactory operate the event. We have received several complaints from our fans, staff members and big-money athletic club boosters stating that we need to expand or renovate our stadium. Our forecast also revealed that we may expect growing number of attendees in coming years. The club boosters have expressed their opinion and demanded premium-class seating and luxury amenities that are not found in our existing site.

We have formed a team to analyze and evaluate the current situation and come up with the alternatives that will resolve the problem. Upon our investigation we have established three options that may satisfy and solve the capacity and luxury requirements. The options are as follows:

• Expand the existing stadium to 75,000 seats, adding numerous luxury skyboxes and upgrading most of the yard line seats to include comfortable backings

• Build a brand-new stadium three miles from campus on land, worth $3 million, donated by a team booster

• 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

We assume the financial consequences to be as follows with each option:

Option 1: expanding the current facility will have a $12 million price tag with an annual fixed cost of $1 million and variable cost of $1 per attendee

Option 2: fundraising drive on the order of $40 million, 20-year debt burden on college’s balance sheet by insurance bond, fixed cost of $5 million per year and variable cost of $2 per attendee

Option 3: $1 million per season in fixed cost (there are 5 home games a year with $200,000 per game) and $10 bus transportation fee...