Decisions Related to Venture Capital Management - Assignment Example

Decisions Related to Venture Capital Management AFFILIATION: Decisions Related to Venture Capital Management a) Bruce is an entrepreneur, and that is enough information to judge him about his overconfidence about the business. He appears to be far more optimistic concerning his new corporate initiative (Abdelgawad, Zahra, Svejenova, & Sapienza, 2013). He did not market and advertise his newborn company greatly, and he confessed that people do not know about it largely. The company has a disadvantage about popularity that causes the sales revenue to suffer. The company is at the stage of infancy, and therefore, the company owner needs to develop a strategic marketing plan as soon as possible. The company runs an online store, and the competition in the industry is simply overwhelming to say the least. At the same time, the owner puts too much into the new venture, and now he is seeking to get a loan from Cockatoo Capital, but the financial institution will have to look deeper into the issues of the company before deciding about the sanctioning of the loan. The company does not appear to be an ideal place to invest, and it does not have a unique business model that can generate profitability all of a sudden. The company is competing against gigantic names such as Amazon.com. The chances of organizational survival are minimal. The sales volume remained hopeless in the recent financial period. The company does not have a significant market value against its name. Only thing that can save it from going out of money is the effective marketing plan. The company has to offer discounts or will have to offer customers with the utmost value in terms of products. Both strategies will cause a dent in the profitability because the sales will create less revenue, and the high quality products will cost more than the level that the organization can handle in the current circumstances. The Baby Shack is living in double jeopardy. The experts at Cockatoo Capital should decide on the basis of figures that depict the ability of revenue generation of the company, and these numbers are hopeless because the company recorded a loss recently. The Cockatoo Capital needs to ensure that the lender is having the required capability to return the loan with established markup as well. The potential borrower has a high default risk associated with itself, and the financial institution must keep that in mind while making final decisions about the loan application. The Cockatoo Capital has to treat the real option of lending the money to the company skeptically because the odds are against the possibility of making an adequate return on the deal. The first and foremost responsibility of a financial manager is to safeguard the returns of the company, and the managers at Cockatoo Capital might not uphold the basic principle of their profession by going into the deal with Baby Shacks. The financial institution should not dismiss the application prematurely. However, they can analyze the future financial performance of the Baby Shacks in order to make a decision in the presence of more information. The new ventures are notorious for being slippery, but they have the ability to shock the world as well. Nothing definitive can be said about the future of Baby Shacks, but it has the power to be a game changer or it can be a disaster as well. The officials at Cockatoo should use strategic financial outlook of the Baby Shacks as a standard in order to decide the status of the loan application. The company must keep all the options alive via delaying the final decision by observing the fiscal performance of the applicant. In this way, they can sanction the loan after observing betterment in the company’s sales and profitability. Additionally, the financial institution can offer the company to provide 25% of the amount in advance and, if the lender can prove its financial performance to be worthwhile then, the Cockatoo Capital will provide the remaining amount as well. The Baby Shacks will have to create loyal customers by developing closely knitted relation with them. The company has to develop online surveys in order to record feedbacks of the customers. These records will assist the company in developing more suitable products in the future that will go along the customer needs well enough. The Cockatoo should not treat the newly founded company’s management as experienced one because there is no one controlling financial sector of the Baby Shacks, and Human Resource Department is not fully developed as well. The company requires doing a lot of hiring, and at the same time, they have to hire the proficient marketing strategist who can help the company in the process of developing new products and services according to the needs of the customers. The customers’ thinking patterns must provide the significant foundations to carry on the process of product development. The company has to forge corporate linkages with the suppliers that produce products, which are high in demand. The company will need to double the revenues in order to give Cockatoo 5x return on investment. Furthermore, the company does not represent an attracted investment opportunity because of the declining sales volume and the company recorded a loss as well. b) Q.1 Dealmax is working to provide the selling services that can help the customers in finding maximized deals in different industries. The company is operating in the industry of brand new cars. They also sell real estate properties. They vend pets, toys, and other consumer products as well. The company is operating in different markets, and therefore, it is maintaining a portfolio in various bazaars, and some of them are more profitable than others (Honig, 2004 ), but eventually, the company successfully creates profit for itself. Q.2 Dealmax is looking to provide the consumers with best possible deals in variety of the industries. The basic and fundamental benefit offered by the company is sheer level of savings to the customers. The financial conditions of the world are deteriorating in all parts of the world, and therefore, people want to save money wherever they can do so. The offers provided by the Dealmax give opportunity to them to have maximum level of savings. The company is running a site that assist the audience in doing comparison of various deals available in the market as well. Q.3 The company that operates the major online service provider mozo has created fame out of providing low cost loans to the customers. They are also working to provide car insurances to the students and general public in the Australian local society. The models of Dealmax and mozo are different because the former is operating in wide range of consumer related industries, but the latter one is providing specialized financial services such as home loans to the Australian nation. Q.4 Dealmax is not operating in the industry where winner takes all because the company is maintaining the vastly spread network of businesses, and every player in the market of online stores is doing the same. In this way, some of them gain advantage in some industries while, others do the same in other ones so each one of them gets a fair share of the business, and eventually, no one is a winner and no one loses either. However, everybody has moderate level of success in the market (Baron, 2007). The consumers get reasonable deals, and the market structure of the industry resembles perfect competition to some degree. Q.5 Dealmax is no doubt a success story in the local market of Australia, and it can be a favorable buyout because the acquirer will have the chance to use the company’s intangible assets to its advantage. Additionally, the companies like Amazon and Best-Buy will be eager to purchase the company because it will help them in terms of strengthening their position in the Australian market. No other company will be able to close the deal with Dealmax because of its high price. On the other hand, Dealmax’s management may not sale the company because they want to establish their name in the market more powerfully over the next few years. Conclusion This paper has been written in order to highlight some facts about current market practices. The creation of new online store is a delicate business. However, the management of the Baby Shacks failed to understand the nature of the business, and therefore, they have suffered a loss in the opening year of the company. Furthermore, Dealmax is operating to offer significant degree of savings to the customers in various industries. In parallel, mozo.com is providing people with cheap financial services. The industry of e-commerce where there is no winner and there is no loser too. The market gives everyone due share so that they do not go out of the business. The market structure of online store industry resembles the mechanism of perfect competition, and therefore, the consumers are provided with the best value while, the companies make moderate level of profits as well. The new entrants suffer significantly into the market because entry barriers are low, but survival in the industry represents a tough job as well. References Abdelgawad, S., Zahra, S., Svejenova, S., & Sapienza, H. (2013). Strategic Leadership and Entrepreneurial Capability for Game Change. Journal of Leadership and Organizational Studies Vol 20 (4), 394-407. Baron, D. P. (2007). Corporate Social Responsibility and Social Entrepreneurship. Journal of Economics & Management Strategy Vol 16 (3), 683–717. Honig, B. (2004 ). Entrepreneurship Education: Toward a Model of Contingency-Based Business Planning . Academy of Management Learning and Education Vol 3 (3), 258-273. Read More