I am just looking for part III of the case which is (Strategic Analysis - Future Expansion) portion of the case. Kindly let me know if you can help with that. Thanks

ISSN 1940-204X Pikesville Lightning: Evaluating Strategic Business Expansion Opportunities1 Thomas G. Canace Wake Forest University Paul E. Juras Babson College INTRODUCTION trained for the major leagues in obscure one-horse towns with little pizzazz. Such organized baseball was confined to the northeastern United States at first, but quickly expanded throughout the country by the turn of the century. Although the number of minor league clubs had decreased considerably by the mid-twentieth century, by the 1980s minor league baseball had exploded, with attendance exceeding 20 million for the first time since 1950. This success prompted the business relationship between the two leagues that exists today under the Professional Baseball Agreement. Under the new agreement set forth in the 1990s, the majors continued to pay a large share of the operational expenses, but minors were now required to share ticket revenues and establish minimum standards at their ballparks. To this day, many fans and observers are unaware that the major league organization has full authority to decide who plays for the minor league team for the season. In fact, many farm clubs have commented that it is not unusual for them to learn their final rosters about one month before the start of the season. Of course, while the minor league owners have limited control over the baseball operations, all clearly recognize that they Greg Storm, team owner, has often been quoted as saying, \"I don't own a baseball team; I sell hot dogs!\" This line ties in well with the recent strategy of minor league organizations to transform games into an \"affordable family experience\" offering much more entertainment than just the game. Still, Storm is a visionary who values outside-the-box thinking and who continually strives to be a market leader in finding unique ways to grow his business. Storm needs help \"hitting a home run,\" because base hits alone would not revolutionize the industry or provide long-term, sustainable growth for the seasonal business. BACKGROUND In 1882, the Northwestern League of baseball was organized. Soon after its inception, however, league officials signed an agreement with the National League and the American Association that established territorial rights and essentially assigned \"major\" or \"minor\" league status to teams. From this agreement, the Northwestern League became the first recognized minor league in baseball. Further agreements established the rights of major league teams to draft minor league players, resulting in the \"farm system\" where players IM A ED U C ATIO NA L C A S E JOURNAL 1 \u0007This case was prepared to provide an opportunity for students to interpret, analyze, evaluate, synthesize, and communicate a solution to a management accounting problem. 1 VOL. 5, N O. 2, ART. 3, JUNE 2012 2 0 1 2 I MA are still running a business that must thrive at the local level, and the operating performance of these organizations has been anything but \"minor.\" In fact, thanks to the strategic thinking and entrepreneurial spirit of a new breed of team owners, these teams are run like top-flight professional clubs, playing in uniquely designed ballparks while also offering a new entertainment alternative for families. These owners have recognized that, while on the surface, their mission is to \"play ball\" by preparing young players for the big leagues, more importantly their profitability depends largely upon their successful establishment as an entertainment venue. Many observers have often made the analogy that minor league teams compete with movie theaters for entertainment revenue, charging a flat-rate admissions fee but hoping to expand the bottom line by providing ancillary food and entertainment services. Hence, while winning games is key to filling the ballpark at the major league level, operating success for minor league teams is driven more by affordability and alternative non-baseball entertainment. and loyalty during the season, Storm has made it very clear to his employees that he does not want to be limited by the seasonality of the business. Table 1 Top Initiatives of Pikesville Lightning Panel A - Game Day Events for All 1. 2. 3. 4. 5. 6. 7. 8. Post-game fireworks and concert Kids Happy Hour - free hour in FunZone for kids only Surprise Major League visitor from the past Meet-the-players night Become a general manager for the weekend Road trip give-away - travel with the team to a road game Win a 1-hour shopping spree in the Lightning Shop \u0007All-star kid of the game - one child selected before each game based upon pre-entry. 9. The Magical Family - one family selected to sit with team 10.\tMascot encounter - sit with the \"Lightning Bolt\" team mascot Panel B - Special Request Game Day Experiences 1.\t\u0007Birthday party - food, swimming, FunZone games and special VIP treatment 2.\t\u0007Ceremonial first pitch - includes cap, autographed baseball, and team picture with you 3. Corporate outings and parties 4. Buy-a-box: Rent the owners' box for a night for your event. THE PIKESVILLE LIGHTNING The Pikesville Lightning organization is a minor league baseball team based in Pikesville, Ohio, and plays in the Central Division of the Eastern League. Since the 1976 season, the team has been the AAA affiliate of the Pittsburgh Pirates, and currently plays in Waterfall Stadium, a state-of-the-art facility built in 2006 near Cleveland. Storm Enterprises is the primary owner of the organization, and maintains full ownership of park vending and entertainment operations. Food and entertainment revenue is so vital to the overall profitability of the organization that owner Greg Storm has often been quoted as saying, \"I don't own a baseball team; I sell hot dogs!\" This line ties in well with the recent strategy of minor league organizations to transform games into an affordable family experience with much more entertainment offered than just the game. In addition to the wide array of foods, drinks, and snacks, Storm designed the ballpark with kids in mind by providing various forms of entertainment around the perimeter of the park. To keep parents and children coming back to the park, Storm firmly believes that team success on the diamond must be complemented by family fun at every game. Table 1 provides a sample of some strategic initiatives he has put in place during the season to entertain fans (Table 1). Storm is a visionary who values outside-the-box thinking and who continually strives to be a market leader in finding unique ways to grow his business. While many minor league organizations have also found ways to improve attendance IM A ED U C ATIO NA L C A S E JOURNAL EXPANDING PROFITABILITY In recognition of his stretch goal for the business, Storm developed a first-step initiative to bring some of this ballpark experience into the homes of fans even during the off season to keep fans thinking about the team. The company obtained an exclusive franchise from its manufacturer to purchase \"POG\" ovens (branded with the Pikesville Lighting team logo for distribution via phone and Internet orders. A \"POG\" is a special type of hot dog sold at the ballpark that has become a hit with Pikesville fans of all ages, and has even been labeled \"out of this park\" by many sports vending companies. These ovens were special because they were smaller replicas of the ovens used at the park. With fiscal 2010 on the horizon, Storm, a chief financial officer (CFO) earlier in his career, has asked the divisional accounting team to begin planning profitability from oven sales. To provide the necessary data to prepare the budgeted financials for fiscal 2010, the accounting team pulled together some volume data, accessed the general ledger to pull financial data, and summarized some key elements of the cost structure (Table 2). 2 VOL. 5, N O. 2, ART. 3, JUNE 2012 As an aid in planning, Storm described a unique income statement format he wanted the accountants to use when preparing the budgeted information for his review. He referred to it as a \"Hybrid P&L\" because it was comprised of the GAAP-based and contribution margin based income statement. To ensure there was no miscommunication, he illustrated the concept for them on a piece of paper as shown in Table 3: Table 2 Selected Financial and Other Data Panel A - Volume Data for Hot Dog Oven Business Units\tKilowatt Units Kilowatt Quarter Sold Hours Quarter\tSold Hours FY2006: FY2008: Q1 9,100 4,300 Q1 10,000 4,000 Q2 14,700 5,250 Q2 16,000 5,000 Q3 16,900 6,310 Q3 18,000 6,000 Q4 14,800 10,011 Q4 15,000 10,000 Table 3 Illustration of Hybrid Income Statement Hybrid P-and-L Sales Less: Cost of Goods Sold Equals: Gross Profit Less: Operating expenses: Variable Equals: Contribution Margin Less: Operating expenses: Fixed Equals: Operating income FY2007: FY2009: Q1 9,500 11,777 Q1 11,000 12,000 Q2 15,100 10,966 Q2 17,000 11,000 Q3 17,000 9,120 Q3 20,000 9,000 Q4 15,000 8,320 Q4 13,000 8,000 Table 2 Selected Financial and Other Data (continued) Panel C: Other Summary Data Cost of Goods Sold has historically amounted to $35 per oven sold, while sales commissions represent 6% of sales. These figures aren't expected to change for fiscal 2010. Storm has also advised the team that advertising expenses must remain flat relative to the prior year, while administrative salaries and insurance expenses are each subject to inflationary increases of 3%. Cost data for the prior 16 quarters is available for these items in the general ledger, as shown in Panel B. Cost data for shipping, electricity, maintenance, and depreciation are available for the prior 16 quarters in the general ledger as well. The sales and operations teams have also provided relevant volume data over the last 16 fiscal quarters, as shown in Panel A. A VISION FOR THE FUTURE Future Expansion Initiatives While Storm considered his first initiative a \"step in the right direction,\" he was already starting to think ahead to the next breakthrough. Unlike his peers in the world of team ownership, he really did not want to take time off during the off season while there could be a wealth of unexplored opportunities awaiting him. He valued his accounting team as consultants and was eager to receive their input about the strategic direction of team marketing and entertainment events. Once again, he wanted to consider off-season initiatives as a way to expand the seasonality of the business. But this had to be bigger than the POG oven initiative. He wanted to capitalize on his facilities' investments and really get the fans involved to provide a year-long experience. He knew this would get a great deal of attention from the local media, and could even hit the national radar screen as an innovative breakthrough. From a business standpoint, since much of the capital infrastructure became idle during the off season and some of the operating expenses were fixed, he believed that a high proportion of new revenue from off-season ventures could drop to the bottom line and expand his overall profitability. Management has also planned to build up the balance sheet during the first quarter of fiscal 2010 with capital expenditures of $500,000 for additional trucks to assist in the ground distribution of the product and with a $1 million investment in POG ovens. (The division's fixed-asset policy is to take a full year's worth of depreciation on assets purchased during the year, regardless of the date of acquisition.) The trucks are expected to have a useful life of 10 years. For planning purposes, the division doesn't tax-effect its financials because taxes are calculated at a corporate level and allocated to the divisions based upon overall performance. Engineers expect to use 13,000 kilowatt hours during the first quarter of fiscal 2010. In planning for the first quarter of fiscal 2010, Storm was interested in three scenarios for the budgeted financials: (1) Base Case: Assume 12,000 ovens sold at a price of $100 per oven; (2) Market Penetration Strategy: Assume the company can sell 10% more ovens by offering a 5% price discount; (3) Market Premium Strategy: Assume the company loses 15% of its planned customers if it attempts to sell the ovens at a 15% premium and spending $5 more per unit to make the logo bigger. 2 \u0007The division's fixed asset policy is to take a full year's worth of depreciation on assets purchased during the year, regardless of the date of acquisition. IM A ED U C ATIO NA L C A S E JOURNAL 3 VOL. 5, N O. 2, ART. 3, JUNE 2012 Table 2 Selected Financial and Other Data (continued) Panel B - General Ledger Data Raw Download from Oracle General Ledger Current data (07/05/2010 13:05:04) GL Account Retrieval year/quarter/account Func. Currency usd Profit Center 1000 Pikesville - Oven Distr. Channel 10 Final customer sales Product PG-101 POG Warmer Oven PLIGHT 101 Page feed 1 of 2 Lead column GL number Actual Fiscal year Quarter insurance 000100100 $ 5,000 2006 1 insurance 000100100 $ 5,000 2006 2 insurance 000100100 $ 5,000 2006 3 insurance 000100100 $ 5,000 2006 4 insurance 000100100 $ 5,000 2007 1 insurance 000100100 $ 5,000 2007 2 insurance 000100100 $ 5,000 2007 3 insurance 000100100 $ 5,000 2007 4 insurance 000100100 $ 6,250 2008 1 insurance 000100100 $ 6,250 2008 2 insurance 000100100 $ 6,250 2008 3 insurance 000100100 $ 6,250 2008 4 insurance 000100100 $ 8,737 2009 1 insurance 000100100 $ 8,737 2009 2 insurance 000100100 $ 8,737 2009 3 insurance 000100100 $ 8,737 2009 4 admin. salaries 000100110 $ 18,000 2006 1 admin. salaries 000100110 $ 76,099 2006 2 admin. salaries 000100110 $ 76,099 2006 3 admin. salaries 000100110 $ 78,689 2006 4 admin. salaries 000100110 $ 78,689 2007 1 admin. salaries 000100110 $ 82,455 2007 2 admin. salaries 000100110 $ 82,455 2007 3 admin. salaries 000100110 $ 86,555 2007 4 admin. salaries 000100110 $ 138,016 2008 1 admin. salaries 000100110 $ 138,016 2008 2 admin. salaries 000100110 $ 138,016 2008 3 admin. salaries 000100110 $ 138,016 2008 4 admin. salaries 000100110 $ 140,777 2009 1 admin. salaries 000100110 $ 140,777 2009 2 admin. salaries 000100110 $ 140,777 2009 3 admin. salaries 000100110 $ 140,777 2009 4 advertising 000100121 $ 192,506 2006 1 advertising 000100121 $ 192,506 2006 2 advertising 000100121 $ 192,506 2006 3 advertising 000100121 $ 192,506 2006 4 advertising 000100121 $ 197,896 2007 1 advertising 000100121 $ 197,896 2007 2 advertising 000100121 $ 197,896 2007 3 advertising 000100121 $ 197,896 2007 4 advertising 000100121 $ 203,883 2008 1 advertising 000100121 $ 203,883 2008 2 advertising 000100121 $ 203,883 2008 3 advertising 000100121 $ 203,883 2008 4 advertising 000100121 $ 210,000 2009 1 advertising 000100121 $ 210,000 2009 2 advertising 000100121 $ 210,000 2009 3 advertising 000100121 $ 210,000 2009 4 shipping 000100122 $ 100,100 2006 1 shipping 000100122 $ 161,700 2006 2 shipping 000100122 $ 185,900 2006 3 shipping 000100122 $ 162,800 2006 4 shipping 000100122 $ 104,500 2007 1 shipping 000100122 $ 166,100 2007 2 shipping 000100122 $ 187,000 2007 3 shipping 000100122 $ 165,000 2007 4 Raw Download from Oracle General Ledger Current data (07/05/2010 13:05:04) GL Account Retrieval year/quarter/account Func. Currency usd Profit Center 1000 Pikesville - Oven 10 Final customer sales Distr. Channel Product PG-101 POG Warmer Oven PLIGHT 101 Page feed 2 of 2 Lead column GL number Actual Fiscal year Quarter shipping 000100122 $ 110,000 2008 1 shipping 000100122 $ 176,000 2008 2 shipping 000100122 $ 198,000 2008 3 shipping 000100122 $ 165,000 2008 4 shipping 000100122 $ 121,000 2009 1 shipping 000100122 $ 187,000 2009 2 shipping 000100122 $ 220,000 2009 3 shipping 000100122 $ 143,000 2009 4 depreciation 000100123 $ 32,655 2006 1 depreciation 000100123 $ 32,655 2006 2 depreciation 000100123 $ 32,655 2006 3 depreciation 000100123 $ 32,655 2006 4 depreciation 000100123 $ 32,655 2007 1 depreciation 000100123 $ 32,655 2007 2 depreciation 000100123 $ 32,655 2007 3 depreciation 000100123 $ 56,000 2007 4 depreciation 000100123 $ 56,000 2008 1 depreciation 000100123 $ 56,000 2008 2 depreciation 000100123 $ 56,000 2008 3 depreciation 000100123 $ 56,000 2008 4 depreciation 000100123 $ 70,000 2009 1 depreciation 000100123 $ 70,000 2009 2 depreciation 000100123 $ 70,000 2009 3 depreciation 000100123 $ 70,000 2009 4 utilities 000100184 $ 17,850 2006 1 utilities 000100184 $ 20,099 2006 2 utilities 000100184 $ 23,100 2006 3 utilities 000100184 $ 33,024 2006 4 utilities 000100184 $ 32,550 2007 1 utilities 000100184 $ 31,000 2007 2 utilities 000100184 $ 28,999 2007 3 utilities 000100184 $ 25,997 2007 4 utilities 000100184 $ 18,000 2008 1 utilities 000100184 $ 21,000 2008 2 utilities 000100184 $ 24,000 2008 3 utilities 000100184 $ 33,000 2008 4 utilities 000100184 $ 35,000 2009 1 utilities 000100184 $ 33,000 2009 2 utilities 000100184 $ 30,000 2009 3 utilities 000100184 $ 27,000 2009 4 maintenance 000100191 $ 6,980 2006 1 maintenance 000100191 $ 7,800 2006 2 maintenance 000100191 $ 9,040 2006 3 maintenance 000100191 $ 11,650 2006 4 maintenance 000100191 $ 7,869 2007 1 maintenance 000100191 $ 11,250 2007 2 maintenance 000100191 $ 9,980 2007 3 maintenance 000100191 $ 9,200 2007 4 maintenance 000100191 $ 6,500 2008 1 maintenance 000100191 $ 7,500 2008 2 maintenance 000100191 $ 8,600 2008 3 maintenance 000100191 $ 11,700 2008 4 maintenance 000100191 $ 12,000 2009 1 maintenance 000100191 $ 11,800 2009 2 maintenance 000100191 $ 10,000 2009 3 maintenance 000100191 $ 9,600 2009 4 IM A ED U C ATIO NA L C A S E JOURNAL 4 VOL. 5, N O. 2, ART. 3, JUNE 2012 He was excited about these prospects especially because he knew that no other team owners were considering such a strategy, so this would give him a first-mover advantage. Storm was routinely heard saying, \"We are limited only by our own creativity,\" and now he would put this phrase to test with his accounting team in the hopes of making history in the world of minor league baseball entertainment. to become strategic advisors continuously working toward business solutions. Recently, he recalled that, early in his career, he was exposed to a framework that he had never implemented for his business: the C-framework for the strategic business partner (SBP) role (Table 4). He decided to present this framework to his accounting organization. He wanted to place the onus on them to bring this framework to life by \"fitting\" it to their situation and organization, however. As he began introducing the framework to them, he emphasized that such a governing model would provide a tangible way to consciously think about the importance of strategic financial management through business partnering, and to avoid \"slipping\" back into a role that fails to see past the mere production of the fundamentals. He explained that, at the top of the framework, there were several dimensions along which individuals could assist the CFO in becoming a better partner to the overall business (CFO levers). These dimensions serve as inputs. First, the accounting organization could act as catalysts in leading change for the business by helping to introduce and implement new strategies. Second, they could take Enhancing Organizational Strategic Financial Management In addition to creating a new strategic breakthrough for his organization, Storm was interested in developing a framework for governing the ongoing strategic financial management of his business. Without such a framework, he believed his accounting organization would not be empowered to unleash its strategic contribution to the business, but would forever be seen only as the \"numbercrunchers.\" Given his roots in accounting and finance, he wholeheartedly believed that the growth and prosperity of his business depended upon adopting a better business partnering model. Such a model would rein in the intelligence of his accountants to add value beyond the traditional transaction processing and would enable them Table 4 The C-Framework for the SBP Role CFO \"Levers\" Catalyst Collaborator Consultant Conscience Leading Change Integration Hub Independent, Objective Advisor Beyond Financial Governance; A Broader, Business Conscience Strategic Business Partner Company \"Levers\" Customers Costs Internal External Rethinking Organizations for long-term sustainability IM A ED U C ATIO NA L C A S E JOURNAL 5 Community Long-term Focus VOL. 5, N O. 2, ART. 3, JUNE 2012 on the role of collaborator by serving as a hub to integrate the functional aspects of the business such as purchasing, sales, human resources, and information technology. Third, the accountants would assume the role of consultant by acting as an independent, objective advisor to the business leaders. Finally, recent scandals have made it clear that the accounting organization must provide a conscience to the business - not only with respect to the reported financials but also by advising how strategy could have broader ramifications. By acting as a catalyst, collaborator, consultant, and conscience for the business to partner with the business leaders, each of the dimensions should ultimately impact the company along several dimensions (company levers) that serve as outputs. First, each action at the CFO level should positively impact the customers of the organization - both internal partners who rely on information and advice from the accountants and the external revenue-generating fans. Second, each CFO lever should assist the business in achieving a cost structure that allows for long-term sustainability. No business can live for the present without considering ramifications for the future. Finally, the first-tier levers should work toward the advancement and benefit of the local and larger community. Storm declared that, once developed and tailored to the Pikesville organization, the framework would be lived by the accounting team every day and the entire business would reap the rewards of linking the financial function into the strategic aspects of the decision making. They would \"C\" themselves as business partners in every task they perform for the business. To motivate them toward this goal, he reminded them that their current task of developing the offseason initiative was a prime example of how they already go beyond just \"counting beans\" and have begun to step into a role of helping to run the business. help improve the profitability and expansion potential of the business. He was confident that, by performing the work he was asking them to do, they, too, would begin to view themselves as strategic financial managers - business partners - who would support and assist with the decision making of the business. Storm asked the team to prepare a report for his review. He wanted the report to address the following current issues and future prospects that could propel the business toward long-term growth: \t\u0007 Provide an executive summary that outlines the current situation, key metrics from your financial analysis, and your strategic recommendations for the business. \t\u0007 Financial Analysis - Using statistical and financial methods, provide an analytical assessment of the planned performance for the POG oven segment including \t\u0007 A table that outlines the cost behavior of each element of the cost structure; \t\u0007 A hybrid-format budgeted income statement for Q1FY2010 [provide supporting analysis]; \t\u0007 Outline the benefits and usefulness of Storm's hybrid income statement approach. \t\u0007 Strategic Analysis - Future Expansion \t\u0007 Outline your advice to Storm about one specific high- impact potential off-season expansion strategy to be employed for achieving greater profitability. Include in your discussion an assessment of the resources (e.g., operating, capital, financing, personnel, and external consultants) necessary to execute the strategy. \t\u0007 Strategic Analysis - Employing the C-framework \t\u0007 Use the C-framework to outline your advice to Storm about how to improve its strategic financial management function. Include a thorough discussion of the framework by linking each CFO-lever input to each of the three company-lever outputs. THE CHALLENGE It was clear to the accounting team that Storm had high expectations for their work and for the future of his organization. Storm challenged them to \"hit home runs\" with their thinking, for base hits alone would not revolutionize the industry or provide long-term, sustainable growth for the seasonal business. He viewed his accountants as consultants who not only had the technical skills to provide financial and analytical information, but who also had the strategic thinking to provide valuable input to him and the business leaders to IM A ED U C ATIO NA L C A S E JOURNAL 6 VOL. 5, N O. 2, ART. 3, JUNE 2012 ABOUT IMA With a worldwide network of more than 60,000 professionals, IMA is the world's leading organization dedicated to empowering accounting and finance professionals to drive business performance. IMA provides a dynamic forum for professionals to advance their careers through Certified Management Accountant (CMA) certification, research, professional education, networking and advocacy of the highest ethical and professional standards. For more information about IMA, please visit www.imanet.org. IM A ED U C ATIO NA L C A S E JOURNAL 7 VOL. 5, N O. 2, ART. 3, JUNE 2012