Decision Trees - Activity

Furnham Park Rugby Football Club has had a remarkable recent history. Rising from the ranks of the amateur game, their promotion to the National Leagues came swiftly. The Chairperson of the club had an excellent Committee, forward thinking in its coaching and development plans and willing to take risks to see the club develop and move forward. As the club gained promotion, interest in the team increased in the local community. The club's roots were in the community and many people from it contributed to the administration and running of the club.

As promotion followed promotion, the demands made on the players and the staff at the club increased. The Committee were energetic in raising funds to support all these demands. Ground improvements became a bigger issue as more people visited the club on match days and as the rules and regulations became more stringent in the higher leagues.

The club has now found itself in National 3 North and have started the season well. There is every chance that the club could gain promotion again at the end of the season and this would put the club into National League 2. At this level, the regulations and health and safety considerations of the ground become critical - it would only be 2 divisions below the Premiership. Any further improvement is going to be hampered by the quality of the facilities at the ground, the ability to generate revenue from gate receipts and thus invest in improving the team. There is a possibility that the players - who are currently part time, will be asked to become fully professional. The club already pays its players but full time players would significantly affect their overheads.

Image: Furnham Park Rugby Club have some difficult decisions to make both on and off the pitch. Copyright: Ibon san Martin

The club have called an Extraordinary General Meeting (EGM) where a series of difficult decisions will have to be taken. At the heart of the problem is how far the club should invest to achieve its ambitions. They have looked at clubs such as Bristol and Rotherham who expanded quickly, got into debt and then faced difficult financial decisions that nearly forced them out of business. Furnham do not want to get to that position but are also ambitious to keep the club moving forward. Some of the key issues are as follows:

The club needs to invest in improving the ground facilities. This includes repairs to existing stands, building new stands, developing areas like the club house, catering facilities, bars, toilets and improvements to the playing surface. Much of this work is required by the Rugby Football Union (RFU) if they are to have their promotion to higher leagues ratified.
By improving ground capacity and facilities, they will be able to accommodate more supporters, which in turn will bring in more gate revenue. This revenue will be important in helping to pay players' wages and in generating funds for further investment.
Promotion to higher leagues will undoubtedly attract increased sponsorship - at present the sponsorship tends to be local but promotion would help to bring increased interest from bigger sponsors.
Promotion would mean that the club will get access to more of the revenue from international matches that the RFU collects. In addition, there is the growing possibility that the club can get some coverage of their games on TV and therefore generate TV revenue.
To compete at the higher levels, a number of the coaching staff and all of the players would need to be put on full time contracts. The club would also need to have funds to be able to buy players as they become available and would need to be able to compete in terms of wages and so on.
Promotion to the higher league is a possibility but evidence suggests that clubs like Furnham find the step from the area leagues to the National Leagues huge - relegation the following season and all that entails is a distinct possibility.

Image: The club's ground needs much work doing to it - is a saviour around the corner? Copyright: Ibon san Martin

Much of the above discussion may be overshadowed by the most recent development. Furnham is also a rapidly developing town. Situated in the north of England, it is within easy commuting distance of Newcastle, Leeds, Middlesborough and Durham. As housing in the area has expanded, the facilities have lagged behind. A major supermarket retailer has approached the club about selling its land for a new store development to serve the town. The club have mixed feelings because whilst they have identified a new potential location, it is some way outside the town and some feel the club would lose its community atmosphere. The cost of developing the land would be partly offset by the money gained from the sale of their existing ground but they would need to raise further funds to develop the type of stadium that would meet League requirements and really put the club on the map. This would be based on the assumption that the club could continue its successful climb.

The Committee have identified various outcomes and associated values along with some statistics about the probabilities of these outcomes as indicated in the table below.

Option 1: Stay at present ground

Option 2: Sell ground to supermarket and develop new stadium

Task

Using the information above, and any other figures you might think relevant, construct a decision tree for both scenarios.
Calculate the final value and therefore advise the club on which option it should take.
Provide a 750 word report to the Committee outlining other information you might need in arriving at a decision and critically analysing any assumptions you have made in constructing the decision trees.

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