Big Sky of Montana, Inc.

The purpose of this case analysis of Big Sky of Montana, Inc. is to develop recommendations for pricing policies for the next winter season. The results of the case analysis are in five sections, as follows: (1) problem/decision statement; (2) alternative strategies; (3) critical issue identification; (4) analysis of alternative strategies; and (5) recommended pricing policies.

The primary problem faced by the Big Sky resort is that it is operating in the red. During the 19771978 season, the resort posted a net loss (before taxes) of $66,981 (refer to Table 1, which may be found on the following page.

The principal problem underlying the operating loss which is faced by the Big Sky resort is that, while it defines itself as a destination resort, it has not pursued strategies most likely to exploit its mission of providing highquality, highvalue complete ski resort facilities and services for both individual and group destination skiers. Rather, the Big Sky resort management has placed too great an emphasis in its

Operating Performance: 19771978 Season===============================================================

Profit Center Revenues Operating Before Tax ($) Ratio (%) Profit(Loss) Profit(Loss) ($)

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t. 5 e. Skiing/lodging/food packages will be offered to both individual and group destination skiers wherein skiing, lodging, and food prices are discounted. Skiing prices will be discounted 7.0 percent, while both lodging and food prices will be discounted 5.0 percent. CRITICAL ISSUE IDENTIFICATION The single most important issue by which the alternative strategies must be evaluated is the effect they will have on the operational profitability of the resort. More specifically, however, the strategy alternatives must be evaluated on the bases of their effect on: 1. Overall shortterm (current year) profitability of the resort. 2. The shortterm (current year) profitability of each profit centerskiing, lodging, and food/beverage service. 3. The proportional contribution of each profit center to total profits. 4. The longterm (second year and onward) profitability of the resort, which, for the purpose of this analysis, will be an assessment of the probable impact of the strategy alternative on the rate of repeat visits (yeartoyear) by both individual and group destination skiers. ANALYSIS OF ALTERNATIVE STRATEGIES The two alternative strategies are analyzed separately in this section. The results o
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Approximate Word count = 2240
Approximate Pages = 9 (250 words per page)