Type your Paper Title Case Synopsis Remember to always indent the first line of a paragraph (use the tab key). The synopsis should be short (2-3 sentences). Keep it simple…notice 2-3 sentences NOT paragraphs. State the Assignment Question The question that plagued Exotic Adventures Inc is whether to cancel a South American tour on October 8. What are the ramifications of cancelling the trip prior to October 8, cancelling the trip after Manaus, turning around before Iquitos, or completing the upstream tour? Case Analysis Exotic Adventures Inc. EAI) is a travel company that operates expedition-style voyages mainly to Polar Regions. EAI also offered voyages between season to the islands of the South Pacific and the Atlantic also covering the Amazon River. The company decided to offer these additional excursions to assist in defraying fixed business cost (Shaw & Hulland, 1999). EAI first began excursions through the Amazon River Basin during the high water season of March 1997. There were two options; option one was the upriver voyage from Belem, Brazil to the town of Iquitos, option two was a downstream voyage from Iquitos to Belem, Brazil (Shaw & Hulland, 1999).
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The company then became convinced that it would be good to offer tours during the low water seasons, which for this area happens in October. This would offer tourist a greater opportunity to view the local wildlife, which during the high water season would normally retreat inland away from the river’s edge (Shaw & Hulland, 1999). After conducting analysis of the low water season, it was discovered that the water was normally no lower than 18 feet deep. The vessels with a 14-foot draft provided EAI with information on whether their ships could safely navigate the channel.
EAI decided to proceed with tours during the low water season of October. The company then decided to add the tour to their 1998/99 brochure (Shaw & Hulland, 1999). Seeing the success in adding the low water tour, the company had seen a total of 52 bookings for the upstream tour and 47 for the downstream tour by August of 1998. The ship used for this voyage was the 80-passenger Inland Explorer. Charging a total premium of $4,000/US, this included a flight, and lodging. These numbers were just above the break-even oint for the Inland Explorer (Shaw & Hulland, 1999). A win short lived; by early September, EAI started receiving messages from their agents in Brazil that the river’s water level had dissipated to extremely low levels. Blamed on El Nino the Brazilian pilots would not exceed the halfway point on the excursion, or pass Manaus. The reasoning was due to the fact that the waterway between Manaus and Iquitos had been unstable, fluctuating between 12 and 14-feet deep (Shaw & Hulland, 1999).
With a draft of 14-feet, this proved to be unsafe for the Inland Explorer to navigate the channel. In efforts to see their local economies grow Peru, stated that their pilots had been navigating the channel also with ships with having 14-foot drafts and this posed no problems for EAI to continue with their planned voyage. There was no unbiased information to sway EAI’s decision either way. The Brazilian government wanted the voyage to continue because of the money that tourist would spend at various ports, coincidentally the Peruvian government felt the same way.
On October 8, days before the passengers would depart for Belem EAI faced with the decision to cancel the entire trip and refund all monies paid by tourist, or continue with trip as planned (Shaw & Hulland, 1999). EAI had just three options, option one was to cancel the voyage on October 8 and inform the passengers of this prior to them departing their homes to travel to Belem, Brazil. This option would result in having to refund all monies paid by the passengers, as well as paying cancellation fees estimated to be 30,000.
Although, this option would save the company money on fuel for the voyage, salaries for the pilots, food for both trips, port fees, and international airfares. Option 2 provided the company with the opportunity to keep the voyage and monitor the waters through their South American agents. Had the levels become dangerously low the voyage would end in Manaus. This would cost the company only half of the ticket cost for the upstream voyage, and the full ticket price for the downstream voyage. However, the company would incur cost of chartering an aircraft to take the passengers to Iquitos.
Again as in the first option the company would save money on fuel, pilots salaries, and some savings on the Brazilian portion of port fees. The final option would that the information might be flawed and the water levels were safe to travel to Iquitos. If this were the case then the journey would have been able to continue, as planned EAI would be able to turn a profit. This would be because they would not have to issue any refunds for ticket sales; they also would not incur an additional cost for air deviations or chartering a flight. (Shaw & Hulland, 1999) Data Analysis to Support Decision The chart above shows the three options before EAI.
Option one cancel the trip would cost the company 184,000. Additionally, option two is cancel the trip in Manaus this offers a 20% probability of occurring. This option would also cost the EAI 282,000 after refunds, additional cost, plus savings that the company would see because of choosing this option. Finally, option three continuing with the trip proves to be the lucrative for EAI. There is a 50% probability that the voyage would be a success, also the company would not incur any additional cost and would not have to issue any refunds. This option would afford the company a profit of approximately 106,000.
What Happened One can see with the information provided it would be the recommendation of the author that EAI continue with the trip as planned to Iquitos. This decision supported by the 50% probability of making it, as well as the profit that EAI would see if they do not have to issue any refunds for tickets purchased by passengers. EAI would also continue to see positive business interactions among local governments, and retail stores in the various ports their ships dock. References Shaw, P. , & Hulland, J. S. (1999). Exotic Adventures Inc: The Amazon River Voyage. London, Ontario, Canada.
