Read the following case study and answer all questions.
Ambrosia Day Spa is a thriving small business that has been operating since 2012. Currently based in Port of Spain, Ambrosia first opened its doors to the public in Tunapuna, in east Trinidad, but due to the low patronage in that area, the business was relocated to the much more affluent Port of Spain area in August of 2013. Founded by Cadence Smith, a certified massage and facial therapist with UK-based training and international experience, Ambrosia Day Spa struggled to survive in the early years. The move to Port of Spain was a huge risk, and it was done at great expense. Rental rates in Port of Spain are up to three times more expensive than in Tunapuna for a comparably sized location, so it took two years for Cadence to build her clientele to a level that could sustain and grow her business. Despite the costs, the move to Port of Spain turned out to be a good decision since the market for spa services is far more developed, and persons/clients are much more willing to spend larger sums for quality spa services. The spa operates out of a rented house in the Woodbrook area in Port of Spain. Cadence converted the ground floor into a beautiful and spacious spa facility, while she lives upstairs in the private residence. The high rental prices in Port of Spain meant that Cadence could not afford to rent both a business place and a separate place to live at the same time, so finding this house where she could run her business and live on the premises was the ideal solution for her. At present, Cadence has five therapists on staff to help with servicing their clients. Ambrosia offers a variety of quality spa services which include deep-tissue, Swedish, and sports massages, body wraps and scrubs, facial treatments, and manicure and pedicure services. In addition to the in-spa
services, Ambrosia also offers “house call” services where Cadence and her staff visit the homes of her most affluent clients to perform a full range of spa services. Her most innovative business idea is the “spa party”. A
spa party is a planned social event that is arranged at the homes of her wealthier clients, where the client will invite her close family members and friends to her home, and Cadence and her staff will perform a range of
services to the client and guests during the event, all based on pre-arranged service bookings. Cadence enforces a strict “no impromptu services” policy at the spa parties, which means that only services that were pre-booked would be rendered on the day. If someone needs an additional service that was not pre-booked, that person will have to make an appointment to visit the spa. This allows Cadence to grow her client base. Most of Ambrosia’s clients are women, with men accounting for only 3% of the clients. The spa now makes a tidy profit, and Cadence lives a comfortable life after years of struggle. However, she is seeking to grow her business’s profitability even further, and she has narrowed her choices to three competing alternatives:
1. Open a second spa location. This option would involve the costs of acquiring (renting) and outfitting a new spa, hiring and training new staff, and advertising and promotions to create adequate awareness of the spa’s presence in the area. Of course, this option would mean that it would take a while (potentially years) for the new location to break even, and then to produce a profit.
2. Convert unused space at her current location into a hair salon. This option would involve the costs of outfitting and equipping a fully functional and attractive hair salon that can accommodate up to four (4) hairdressers and their customers at a time. The layout of the hair salon must complement the
existing spa’s ambiance and décor. Cadence intends to “rent” each hair station to young aspiring hairdressers who will bring in their own clients and run their own “mini businesses”. The rent received from each hair station would add to Ambrosia’s monthly profits, plus each customer of the hairdressers could potentially become a new client of the spa.
3. Increase service prices by 10-15%. This option will have no up-front costs. Lower-priced services will see a price increase of 15%, while more expensive services will have a 10% price increase. These increase in service price will directly increase Ambrosia’s profitability. However, Cadence anticipates
that some clients may reduce the number or frequency of services that they will request because of the price increases, while it is possible that some clients may leave altogether, preferring to find a more affordable spa.
Which decision should Cadence make?
Question 1: Strategic Management and Goal Setting (Chapter 5)
A. Explain the importance of strategic management to managers in general, and list two (2) benefits that this will bring to Ambrosia Day Spa.
B. (i) What is a Mission Statement?
List two (2) benefits or characteristics of mission statements.
(ii) Why is it important for Ambrosia Day Spa to have a Mission Statement? Explain.
C. Create a Mission Statement for Ambrosia Day Spa.
D. Explain the difference between Strategic Goals and Operational Goals. Provide four (4) key
differences.
E. Using the case provided, create two (2) Strategic Goals and two (2) Operational Goals
for Ambrosia Day Spa. Remember these goals must be S.M.A.R.T.
Question 2: Decision Making (Chapter 6)
Cadence cannot decide what to do to increase their revenue –
A. Explain the six (6) steps in the Decision-Making Process model, then apply the six (6) steps in this model to this case study. (Decide which business alternative Ambrosia should use.)
B. Why would it be a good idea for Cadence to get the views of their loyal employees when making this decision? Provide four (4) reasons with explanations.
Question 3: Managing Change (Chapter 8)
A. As a result of the decision made (in Q2A), identify and explain four (4) types of changes that may be
made within Ambrosia Day Spa (or any other organization).
B. Discuss any three (3) reasons why the employees of Ambrosia Day Spa may resist change.
C. Describe three (3) ways how ADS or any other organization can best implement the changes that need to be made.
Question 4: Communication and Teamwork (Chapters 13 and 14)
A. Describe four (4) ways or strategies that the managers at Ambrosia Day Spa can best communicate to heir employees the changes that need to be made.
B. Ambrosia Day Spa relies heavily on teamwork.
(i) List and explain four (4) of the different types of teams that organizations may use?
(ii) State and explain two (2) benefits of using teams relevant to Cadence and Ambrosia Day
Spa.
C. (i) Describe what is meant by team cohesiveness, using a simple example to illustrate.
(ii) Identify and describe three (3) possible sources of conflict among teams.
