MISSING PET SUPPLIES - Case Study Example

(Assignment) The case of missing pet supplies Dwayne and Fred were the two executive employees of ACME with more than six years’ service experience in the company. They were later acquired by a large national company, Garden & Pet Central. Both Dwayne and Fred faced some ethical issues since they had to operate cooperatively with their eventual competitors; therefore they decided to start a new venture of their own. They had better access to market and suppliers and several years’ industry experience as their main competitive advantages for running a new venture.

However, in my opinion, they did not have an accurate business plan at the beginning and it caused dilemma at every phase of the project development. In addition, they were not adequately leveraged with capital, and subsequently their business confronted with a sequence of crises. It seems that some assumptions they made were unreasonable. For instance, they thought that capital acquisition would be an easy process; and that misconception led them to difficulties. 2. Dwayne and Fred had to address many ethical issues while contemplating starting their business.

They were to spend more in order to comply with the projected ramp up. It caused some unexpected financial expenditure and badly affected the balance of designed budget. In order to meet the startup costs of $87,500 and possible operational losses, the partners took a loan of $300k a large regional bank called Zinc’s. As a result of various expansion activities, their monthly operational expenses rose to $24k (including several interests). The partners met with the most difficult reality when they knew that the approved loan was cut down to $175k.

It forced them to continue with half the needed money for inventory and nothing for operational losses. Income Statement For the year ended -- -- ------ Particulars Amount ($) Amount ($) Total estimated revenues Total operating expenses: Startup costs-87,500 Operational expenses(24х12)-288,000 Others-XXX,XXX --------------- Expected net income (@ 30% margin) XXX,XXX 1,000,000 300,000 The net income figure ($300k) does not indicate the actual surplus status of the business. In order to calculate the actual net income status, it is necessary to get the total list of operating expenses such as wages, advertisements, repairs, and interests.

Even if the business acquired the estimated net income, it was of no use as it would not be adequate to meet the incurred expenses. 4. It is suggestible for Dwayne and Fred to minimize various operational costs as it would enlarge the profit figure. For this purpose, it is necessary to frame an effective financial budget since it is the best alternative to control various unnecessary costs. Similarly, they may take benefit from a third partner who is financially stronger. At the initial stage, they need not to stock much inventory; the minimum stock level indicates the maximum working capital.

They can also issue fresh shares in order to meet the deficit money. Moreover, the partners must seek potential creditors such as depositors and other financial institutions who can address the unexpected fund crises. It is identified that segment marketing would be a better tactic for newly started ventures as they cannot concentrate much on larger areas. Dwayne and Fred can also make use of their strong relationship with customers and suppliers in order to boost the sales volume.