MGMT 5091 Module 6 Capstone Plan and Defense Example

Buy the Option, Not the Bet: Lakemont Marine's Electric Pontoon Plan, Assembled From One Register and Defended Against Five Objections

Student Name

American College of Education

MGMT5091: MBA Capstone Experience

Module 6 Assignment

Instructor Name

November 15, 2027

Recommendation

Lakemont Marine should launch a factory-built electric pontoon line for model year 2030, with first shipments in July 2029, and should treat the launch as a staged option rather than a single commitment. The line should consist of one 23-foot model sold at a wholesale price of $76,000 through 34 dealers whose territories include lakes where gasoline engines are prohibited or restricted, built in a dedicated bay with a single propulsion supplier and supported by dealer technicians trained in high-voltage service.

On the final assumptions register, version 3, the line's net present value over five years at an 11 percent cost of capital is about $6.1 million, with no value counted beyond year five. The required investment is $6.4 million, cumulative cash flow turns positive in year four, and the break-even wholesale price, at the planned volumes, is about $70,400. The recommendation is not that electric pontoons are the future; it is that Lakemont can buy the right to find out for a price it can afford to lose.

How Each Part Carries the Recommendation

Rumelt (2011) described a good strategy as a diagnosis, a guiding policy and a set of coherent actions. The diagnosis, set in Module 1 and sharpened in Module 2, is that Lakemont's dealers are losing buyers on 412 restricted lakes in their territories because Lakemont offers no boat those buyers can use, and that the retail premium an electric model requires is larger than most pontoon buyers will pay. The guiding policy follows from that: sell to the buyers who have no gasoline alternative, and ignore the rest.

Each function then carries the same policy. Marketing, from Module 4, positions the line as the full-size pontoon for lakes where gasoline cannot go, promotes it through lake associations and demonstration days rather than national media, and sells the dock charger as a priced accessory so that the $76,000 price holds. Operations builds the boat in a dedicated bay designed for about 600 boats a year, drawing hulls and furniture from existing shops. The resource gap identified in Module 3, the absence of high-voltage engineering, is closed by buying a complete propulsion package from one supplier with paid engineering support, while Lakemont builds its own capability in installation, testing and dealer training. Finance, from Modules 3 and 5, shows that the firm can pay for the bay without new long-term debt, and that the value depends above all on price.

Stages and Stopping Rules

McGrath (1999) argued that an uncertain venture should be structured as a sequence of options, with each further commitment made only when evidence from the last one justifies it, and that the discipline lies in deciding in advance what evidence would end the venture. The plan therefore sets two gates. The first falls at the end of model year 2030. Lakemont continues to full second-year production only if it has sold at least 120 boats, at least 26 of the 34 dealers have sold at least two each and the average realized wholesale price, after any promotions, is at least $74,000. If the first two conditions are met but price is not, the line continues at first-year volume for one more season while the positioning is reviewed. If fewer than 90 boats are sold, the line stops, the bay is converted to gasoline production and the loss is limited to about $3.5 million before taxes: the battery handling and test equipment, which cannot be reused, and the first year's fixed and launch costs, less the contribution from the boats already sold.

The second gate falls at the end of model year 2032, when the bay approaches its capacity. A second shift or a larger bay is approved only if third-year volume has reached at least 400 boats at a realized price of at least $74,000 and battery package costs have fallen at least 10 percent from launch. At $74,000, the five-year value is still about $3.9 million, so the gates are set where the line remains worth continuing rather than where it merely avoids a loss.

Defense: Five Objections

Why not wait until battery costs fall further? Waiting lowers cost but surrenders the mid-market opening Module 2 found, and dealers who want an electric model will take one from another builder. The first stage costs little enough that the value of learning early outweighs the saving from waiting. Why not partner with a premium builder that already has an electric model? The premium builders sell at retail prices above $120,000 and are owned by groups that compete with Lakemont's dealers' other brands; a partnership would hand them Lakemont's dealer relationships. What happens when the premium groups move down-market? They will, probably within three to five years, which is why the first stage must build dealer service capability and owner visibility on restricted lakes, the parts of the position that take longest to copy.

Why only 34 dealers when Lakemont has 118? Because the diagnosis says the line is for restricted-lake buyers, and dealers outside those territories would sell mainly to buyers who compare the boat with gasoline and resist its price. And will the gasoline business suffer? The plan assumes a loss of no more than about 62 gasoline boats a year from year three, and the positioning is designed to keep even that small, since the line is sold where gasoline boats cannot be used.

Leading the Change Inside Lakemont

The plan will fail if it is treated as a side project. Kotter (1995) found that major changes most often fail when leaders do not build a sufficiently powerful guiding coalition and do not create short-term wins that demonstrate progress. The guiding coalition here should include the owners, the vice president of operations, the sales director and two respected dealers from restricted-lake territories, who can speak to other dealers in terms a factory cannot. The short-term wins are already built into the timeline: the first prototype running on a restricted lake in October 2028 and the three pilot boats tested through the winter in the South. Each should be shown to the whole workforce, since the gasoline line's employees will otherwise read the new bay as a threat rather than as a second product that protects the firm's future.

What the Owners Are Asked to Approve

The decision requested in January 2028 is specific. The owners are asked to approve capital of $6.4 million for the dedicated bay, battery handling and test equipment and tooling; added fixed costs of $2.1 million a year from 2028, of which $250,000 funds lake-by-lake promotion; a three-year supply agreement with one propulsion supplier, with prices tied to battery cost indexes and a paid engineering-support clause; the hiring of a product manager in the first quarter of 2028 and a dealer training manager in the third; and the two stage gates, with their criteria, as binding conditions on any further investment. They are not asked to approve a second shift, a second model or dealers beyond the 34, each of which waits for the evidence the gates will produce. Every figure in this request appears in the assumptions register, version 3, and in no other form anywhere in the plan.

References

Kotter, J. P. (1995). Leading change: Why transformation efforts fail. Harvard Business Review, 73(2), 59-67.

McGrath, R. G. (1999). Falling forward: Real options reasoning and entrepreneurial failure. Academy of Management Review, 24(1), 13-30. https://doi.org/10.2307/259034

Rumelt, R. P. (2011). Good strategy bad strategy: The difference and why it matters. Crown Business.