Diane and Rudy Conrad own a small lodge outside Yellowstone National Park. Their lodge has 15 rooms and can accommodate up to 50 guests. Their busy season runs from May through September, but they remain open until Thanksgiving and reopen in April. Currently their annual revenue is $320,000. With expenses running at $230,000—
including mortgage, payroll, utilities, maintenance, and so forth—the Conrads’ annual income is $90,000.
Diane and Rudy include in the room rate a continental breakfast on weekdays and a full breakfast on weekends.
They currently employ one cook and two wait staff for the breakfasts on weekends, handling the other breakfasts themselves. They also have several housekeeping staff members, a groundskeeper, and a front-desk employee.
The Conrads take pride in the efficiency of their operation, including the loyalty of their employees, which they attribute to their own form of clan control. If a guest needs something—
whether it’s a breakfast catered to a special diet or an extra set of towels—Grizzly Bear workers are empowered to provide it. This proactive approach is especially helpful given that many of their guests are families with children.
The Conrads recently decided to expand their business.
They bought the property next door, giving them space to build an additional 20 rooms. They want to expand without cutting back on their signature personalized service. In addition to hiring more staff to handle the larger facility, they are collaborating with local businesses to offer guided rafting, fishing, hiking, and horseback riding trips. They are also expanding their food service to include dinner during the busy season, which means renovating the restaurant area of the lodge and hiring more staff.
Ultimately, the Conrads would like the lodge to be open year-round, offering guests opportunities to cross-country ski, snowmobile, and hike. They also plan to offer holiday packages. The Conrads report that staff members are enthusiastic about their plans and want to stay with them through the expansion. “This is our dream business,” says Diane. “We’re only at the beginning.”
QUESTIONS 1. How can the Conrads use feedforward, concurrent, and feedback controls now and in the future to ensure their guests’ satisfaction?
2. What budgetary considerations would the Conrads have as they plan their expansion?
3. How could the Conrads use market controls to plan and implement their expansion?