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Westlake Lanes How Can This Business Be Saved Case Solution

Solution Id Length Case Author Case Publisher
1238 710 Words (3 Pages) Richard G. Hamermesh, Alisa Zalosh Harvard Business School : 4431
This solution includes: A Word File A Word File

Westlake’s recent changes have made it into a profit giving business after two years of losses. The business had had high costs spent on overheads and therefore, its profitability was low. When Shelby changed the business strategy to cost-cutting, the business increased in revenue and costs were cut drastically in all areas including electricity, healthcare insurance, cleaning, and other fixed expenses. These cost cuts made the business worthwhile and viable. Shelby was faced with some alternatives for the future of the business. The high market opportunities and the availability of finance because of revenues generated presented opportunities for her to expand the business.

Following questions are answered in this case study solution

  1. Is WL a viable business? What is the required number of customers per day for WL to achieve breakeven in March 2010?

  2. By the endpoint of the case, the business is cash-flow positive. How should Givens evaluate whether to build, sell, or liquidate the business? What information does she need to make this decision?

Case Analysis for Westlake Lanes How Can This Business Be Saved Case Solution

1. Is WL a viable business? What is the required number of customers per day for WL to achieve breakeven in March 2010?

Westlake had become more profitable in 2010. The business had undergone major changes and improved drastically. The strategy had changed, and it now enabled the business to cut costs. This cost-cutting generated increased revenue for the company and allowed the company to utilize this revenue in other activities. Shelby’s strategies made the company profitable after two years of losses. The revenue had gone up 6% because of the efforts. The fixed expenses were cut by 8% that reduced the costs greatly. Apart from that, the health insurance costs were decreased by 13% by eliminating the health insurance benefit given to the employees. The previous cleaning services had high costs. Therefore, with the aim of decreasing the costs, a new cleaning service was taken on board for half the cost as the previous one. To decrease the electricity costs, the government-sponsored rebate was utilized for light bulbs decreasing the cost of the electricity bill by 30%. Joining an association for bowling with a beneficial membership saved $11,000 for Westlake. These drastic cost cuts show that the business is viable.

Breakeven = Total fixed costs / (Price - Variable costs per unit)

Fixed cost: Rent = $107,800

2. By the endpoint of the case, the business is cash-flow positive. How should Givens evaluate whether to build, sell, or liquidate the business? What information does she need to make this decision?

By the end of the case, Givens faces three options. She can either build the business, sell it, or liquidate it. There is external industry information as well as internal information available to make this decision. Firstly, the internal information available was the option to expand. The first option was to build a kid-friendly lounge, the second was to upscale the bowling lounge. However, both options had different investment requirements and required different changes. The external information of the bowling industry is also available.

Bowling is the most popular played sport in the USA. There is a large number of bowling centers throughout the USA.

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