Beadsman Island Resort – Swot Analysis

Beadsman Island is a resort island surrounded by the Shores of the Kelsey River. Beadsman Island is a self-contained and all inclusive resort. The island resort features three hotels and activities such as golf, relaxing at the spa, dining, and shopping. An island has a convention center and an art gallery that contains 1200 pieces of art in its collection. The resort began development in 1988 as a result of a river redirection for flood conservation reasons. In the spirit of growth, Beadsman Island is looking to expand operations.

Of the 1600 acres of the island, only 750 acres as development, as a result there is still nearly 800 acres left for development. Some of the items on the expansion wish list include adding lodging, building private villas, expanding the convention center, gardens, and recreational facilities. This ambitious plan requires additional financing to make it a reality. The three possibilities to acquire financing include going public through an initial public offering, acquiring another organization in the same industry, or merging with another organization.

Evaluating strengths, weaknesses, opportunities, and threats is important to making he correct financing decision. After careful evaluation a decision must be may to pay for this expansion. Introduction of PIP As an alternative, the Beadsman Island Resort could decide to take their company from privately held to shared by issuing an initial public offering (PIP) in the stock market. An PIP is the first issue of stock a company makes, where the issuing firm sells pieces of itself to investors who are now partial owners (Tabular, 2001).

The investors own a number of shares, which determines what percentage of ownership they hold. Owning a portion of the firm can be potentially lucrative for an investor if the firm increases in value. After the investors own the shares, which they acquired at a certain rate, they can sell them in the secondary market for a profit, as long as the firm’s value has indeed increased. At times, when a firm has excess net income, they will share those profits with the shareholders through dividends, paying a certain amount per share back to the owners.

As with all great things, Pip’s are not without their drawbacks. A SWOT analysis is helpful for managers and will provide insight with decision. For an initial public offering, a SWOT analysis could be conducted.

Strengths:

Through an initial public offering, new capital is raised and may be available quickly and in one lump sum. This is because an PIP is typically not sold to the individual investor directly from the firm; there is a middleman or brokerage firm involved. Also, the firm’s owners gain liquidity because their shares hold value that can be sold readily in the secondary market, not to mention that a publicly held firm tends to enjoy a higher profile, making it easier to attract sales as well as vendors for supplies.

Weaknesses:

The greatest weakness may be that the firm is now responsible to share profits with many investors, as well as face the added burden of continuously improving in performance to increase shareholder wealth (the first tenant of finance). Also, now that the firm is responsible to many people, the private investors lose a Soot Analysis 9 By dillydallied introduced to help insure the interests of public shareholders are accommodated.

Opportunities:

Once a firm has entered the stock market through its PIP, there is a much greater ease in future transactions. A firm can continue to raise capital wrought issues of new shares later. Another opportunity will be a more accurate valuation of the firm, which is now set by the firms’ shares instead of through more subjective standards set by private owners. This could aid the firm if they look for a merger or acquisition in the future.

Threats:

Reporting practices required by the Securities and Exchange Commission can be exhaustive in time and effort, as well as divulging information the firm may not want as public knowledge. Falling stock prices will present a threat to the firm, because decreased valuation of the company ay affect lines of credits, secondary offering pricing, the company’s ability to maintain employees, and the personal wealth of insiders and investors.

Finally, the firm may also face the threat of a takeover if a large enough proportion of the shares are outstanding. Acquiring another Organization The Beadsman Island Resort is contemplating expansion. The act of acquiring another organization will make this possible. The resort, located on the Kelsey River, currently has three hotels to accommodate guests: The Beadsman Main, The Tunney, ND Melanoma Convention Center. A string of amenities are included at each site and are conveniently located in prime areas.

If the organization wishes to expand by acquiring a new establishment they must ask what type of establishment they will add. Will it be another hotel, possible acquire the on island museum, or some other type of tourist catered facility? Regardless of what The Beadsman Island Resort chooses, the SOOT Analysis (Strength, Weakness, Opportunity, and Threat) must be factored in to make sure the venture is advisable.

Strengths: While the initial tart-up funds may be draining, the acquisition of a new hotel or tourist based attraction will increase profits substantially. A good budget must first be drawn up to determine if the acquisition is appropriate. If the pay-back period of expansion financing exceeds a certain number of years, the project may be deemed ill-advised.

Weaknesses: Increased liabilities. There would be a decrease in cash flow as capital is needed in the acquisition of the new divisions.

Opportunities: Expansion of customer base is a key opportunity. Drawing attention to the franchise is vital if it sizes to become a household name. Word of mouth publicity will be circulated and new customers can be drawn. Increase in revenues will ensue.

Threats: Shareholders can possibly withdraw support from the organization if they feel that it is a risky venture. Loss of investors would cause stock prices to drop if the company is publicly traded. Merger A merger would be a great idea for the resort. Based on the strength of the organization, the resort could be a profitable company if they would merge with one of the surrounding hotels. Beadsman is one of the strongest resorts in the area and as the beat amenities of the three hotels in the area.

Beadsman also has a strong financial strategy to strengthen the recreation center and the botanical garden to draw more revenue. If the organization considers merging with one of the surrounding hotels, they should consider addressing the issue of the same standards of Beadsman Resort. The opportunities that tourists present will enhance the acquisition of another hotel. Beadsman should be able to increase its ability to merge because of the strong ties the Beadsman Family has with the Chamber of Commerce.

Since it was founded in 1994, the company has increased in revenue and has increased their profits on a yearly basis. Merging with another hotel will only increase the profitability of the shareholders and allow more employees to be hired, thus bringing more tourists to the town and to the resort. Conclusion After completing the SOOT analysis of all the options of going through a public offering, acquiring another organization in the same industry, or merging with another organization, the best course of action is go through an initial public offering.

The initial public offering provides the fastest and most efficient route to acquire capital. Although the private investors have to share profits with the common shareholder it has the opportunity to create a larger business and easily grow larger in the future if the company hopes to acquire additional capital. Also selling securities ensures that the company is reaching its goal of profit minimization and shareholder value. Without needing to reach those goals the company does not have to ensure profitability. With current laws such as Sardines-Solely makes it difficult to aka financial reporting errors.

Acquiring a similar company can be a drain to an expanding company. Along with acquiring a new company, the old company assumes all debts, and a reduction of cash flow, this will hamper the desire to expand on Beadsman Island in the present. However, once Beadsman Island has gone public and with a successful expansion should consider buying another company to diversify. Merging poses similar issues as acquiring a new company. Merging can include management politics that can interfere with the goal of expansion as each arty would be looking to ensure that its priorities are met.