...Strategic Capital Management, LLC _________________________________________________________________________________________ Case Summary Strategic Capital Management is an entrepreneurial venture by Elena along with two of her MBA classmates. The fund has $20m as of now for investments with a mandate of generating annual returns of atleast 10% with little market exposure. SCM would charge a management fee of 2% of AUM and an incentive equal to 20% of profits. SCM also required that the investors keep their money for a minimum of 2 years. The firm is looking to invest into Internet Sector. And currently they are exploring Ubid, an online auction company and a subsidiary of Creative Computers. Ubid and Creative Computers Ubid is a subsidiary of Creative Computers, a catalog distributor of computers and computer peripherals. In 1998, the company began selling computer equipment over the internet. Ubid website was developed to sell factory excess and refurbished goods through an auction format. Buyers could view and bid on computers, peripheral equipment and other consumer electronics. Ubid generated revenues of $2.1m in its 1st quarter. Creative Computers’ management felt that its stock price did not adequately reflect the potential of internet business as other internet players in the market were highly valued. Therefore, with an intention of improving valuation, the company decided to carve-out the internet subsidiary. Inorder to discover the fair price, the company decided...
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...What to do about excess cash As we saw in class nowadays there are plenty of corporations whose cash balances exceed their debt due. The question that naturally arises, is what implications do cash balances have for the WACC calculation. In answering this question, first we need to distinguish between cash used for operations and excess cash. The cash used for operations exist in a firm in order to support its daily transactions, like paying bills, employees, change in the tills etc. That means even an unlevered firm needs cash in order to produce cash flows. Excess cash on the other hand is not necessary for the operations of the firm. From a taxation point of view, both categories of cash yield interest rate which is part of taxable corporate income. However the interest income that corresponds to the cash used for operations is a necessary byproduct of the firm’s daily operational activities. As such, this interest income is already included in the cash flows of the unlevered firm in the WACC calculation. Instead the interest income of the excess cash needs to be accounted for in the tax shield calculations. More precisely, that interest income represents a negative tax shield. Let’s redo the derivation of WACC, assuming now that the firm has K of excess cash, which is invested in risk-free marketable securities. ¯ Given perpetual expected operating cash flows,C the value of the operating firm is: VU = ¯ C(1 − τ ) r∗ The value of the levered firm is ¯ ¯ C(1 − τ ) τ rD DL τ rf K C(1...
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...| | | | | | I. Case background In this case study, Sarah Wolfe who was the founder and CEO of the Beta Management Group, a small investment management company based in a Boston suburb in 1989, wanted to expand her business in 1991 by changing investment strategy. II. Sarah Wolfe Previous investment strategy: Her company‘s stated goals were to enhance return and reduce risks, so that during first several years she put majority of company’s funds in index funds, account for between 50% to 99%. Because she did not have so much money to invest in other financial instruments and thought index funds was safer, especial Vanguard’s Index 500 Trust, than other financial instruments in 1989. According to the appendix 1, we can calculate the standard deviation of SP500 was 3.59% during 1989 and monthly average return was 2.36%. Although the index funds return was not that high, this strategy choose by Ms. Wolfe had a low risk level so it should be a good choice for her relate to her amount of funds in beginning period. However, index funds could not be always well, the monthly average return of index funds dropped to -0.15% which means if she still put all her money in index funds, she would lose a lot of money. Fortunately, Ms. Wolfe reduced Beta’s equity position to 50% in June due to she successfully forecasted the big drop of SP500 index in August and September (-9.03% and -4.89% respectively). Therefore, she still made money for its clients during downward...
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...9-202-024 REV: APRIL 8, 2002 MARK MITCHELL TODD PULVINO ERIK STAFFORD Strategic Capital Management, LLC (A) On December 9, 1998, Elena King contemplated her first investment as a hedge fund manager. In only a few months, Elena had raised $20 million for her new fund, Strategic Capital Management, and was looking forward to putting the money to work. Based on recent comments by high-profile analysts such as Henry Blodgett of Merrill Lynch and Mary Meeker of Morgan Stanley, Elena thought that the Internet sector provided excellent prospects for lucrative investments. She was specifically interested in a recent initial public offering (IPO) by Ubid, an Internet auction firm. Strategic Capital Management, LLC Elena became interested in hedge funds when she was an MBA student during the prior two years. A strong believer in portfolio diversification, Elena was enamored with the risk-return profile of many hedge-fund strategies. Like many of her fellow classmates, Elena chose to forgo a traditional career in consulting and investment banking by pursuing an entrepreneurial venture. She was able to convince two of her classmates to join her in launching Strategic Capital Management (SCM), LLC. Against the backdrop of a strong stock market, SCM had little trouble raising $20 million with a mandate of generating annual returns of 10% with little market exposure. SCM would charge its investors a management fee of 2% of assets under management and an incentive fee equal to 20%...
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...Executive Summary: The objective of this report is to evaluate investment opportunities for Strategic Capital Management, LLC regarding stocks of Creative Computer and/or its subsidiary firm Ubid. The analysis deduces arbitrage to be the best investment strategy. Strategic Capital Management (SCM), LLC: SCM is a recent entrepreneur venture founded by Elena King and two of her fellow classmates. The company has currently generated 20 million dollars and aims for annual returns of 10 percent. Its investors are charged a management fee of 2% of assets under management and an incentive fee equal to 20% of profits. Moreover company policy requires investors to keep their money invested for a minimum of two years. Recent meetings with prominent analysts, Henry Blodgett of Merrill Lynch and Mary Meeker of Morgan Stanley have indicated the Internet Sector to hold promising investment opportunities, therefore Creative Computers and its subsidiary Ubid present potential prospects for investment. Analysis: Internet Sector: Dot-com Bubble The dot-com bubble has enabled the Internet sector and its related fields to yield earnings at an above-average rate relative to the market. Hence the expected return on these growth stocks is great (see figure below). However these investments involve an inherent risk that must not be ignored. Because this sector is categorized by strong competition the need for innovative and skillful business strategies is a must. ** (Note: since...
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...HBS Case 9‐202‐024 Strategic Capital Management, LLC Instruction for the Case Report The case report carries 10 marks and should follow the structure suggested below. It should have at most 6 pages including the cover page, and should be printed with line space 1.5 lines and font size 12. The cover page should contain the name of the group, student name and ID number. There is one mark for the clarity of the writing. Note that lecturers will help you to clarify conceptual issues but not specific case questions and calculations. The report is due at 5pm Friday March 29 in the submission box on Level 3 of Block D. No electronic submission will be accepted. Late submission carries point deduction: 5 marks for 1‐day (or less) overdue, 8 marks for 2‐day overdue, and all 10 marks for 3‐day (or more) overdue. Exception will be considered only for medical reasons. Case Report Structure: I. Case background (0.5 mark) II. III. Create a table with the key dates, events, and decisions to be made. Investing in hedge funds (1 mark) Key differences with mutual funds in terms of investment strategy, risk, and reward. Arbitrage opportunity (2 mark) Was there an arbitrage opportunity on Dec 9? What should be the arbitrage transactions (long or short in each stock, number of Ubid shares for each share of Creative Computers)? Elena is required to post cash collateral for her short position. Should she borrow to purchase Creative Computers (CC)...
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...CRITICAL REVIEW ON STRATEGIC MANAGEMENT ON HUMAN CAPITAL IN NEW ECONOMY Zubaidah binti Haji Harun Email address : zupian@yahoo.com PhD Candidate,Faculty of Business Management, Universiti Teknologi MARA, 40450, Shah Alam,Selangor ABSTRACT New economy can be meaning of many way. It can be defines knowledgebased economy, globalize economy, digital economy. When economy need knowledge more than other tangible assets, the human resources are become the vital resource and assumed as an asset to an organization. Knowledge workers or called human capital have different characteristics contrast to non-knowledge workers. To be competitive advantage in present marketplace, human capital should be treat as a capital to an organization and must be managed significantly and neatly. Human Resource Department becomes an important part to deal with a lot of challenges in managing human capital in new economy. Keywords : New economy; Knowledge – based economy; Human capital; Knowledge Management; Intellectual Capital INTRODUCTION In this 21st century, the global economy was shift to new economy or be known as knowledge – based economy (k-economy) There is no longer agricultural and industrial economy but we are now entering to knowledge society which is work is linked to knowledge and learning. The rise of the new economy, the knowledge component of products and services has increased dramatically in importance and has become the dominant component of customer value. There are two types...
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...Laurentian Bakeries Capital Allocation Policy Recommendation Capital Allocation Policy purpose Strategic plan Reinforce the management philosophies by achieving certain objective that all projects be consistent with business strategies, support continuous improvement, consider the human resource and environmental impact, and provide a sufficient return on investment. company background and case summary identify and quantify inefficient or lost opportunities and establish targets for their elimination Capital Allocation Policy Operating Plan identify major continuous improvement initiatives and budget for the associated benefits Capital Allocation Policy Authorization for Expenditure (AFE) present the project's linkage to the business strategies. include specific details of economic and engineering, involvement and empowerment, human resource, environment. Cost of Capital (WACC) Net Present Value Questions? Thank you! Laurentian Bakeries Inc established in 1984 manufactured a variety of frozen baked food products at plants in Winnipeg (Pizzas), Toronto (Cakes) and Montreal (Pies) In late May, 1995, Danielle Knowles, vice president of operations for Laurentian Bakeries Inc prepared a capital expenditure proposal to increase capacity in the company's frozen pizza plant in Winnipeg, Manitoba, in order to expand in the US market three year plan of capital requirements The first year of this Strategic Plan becomes the annual Operating Plan. identify major continuous improvement ...
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...CSR Management Accounting Performance reporting and evaluation Accounting Truth? Story? Meaning? Effects on stakeholders/society? Food for thought/evaluation? Buy Apple products? Invest in Apple? Work at Apple? Cooperate with Apple? Future of Apple? Management/Leadership-lessons? Account: noun 1. an oral or written description of particular events orsituations; narrative: an account of the meetings; an account ofthe trip. 2. an explanatory statement of conduct, as to a superior. 3. a statement of reasons, causes, etc., explaining some event. 4. reason; basis: On this account I'm refusing your offer. 5. importance; worth; value; consequence: things of no account. EXPAND verb (used without object) 12. to give an explanation (usually followed by for ): to accountfor the accident. 13. to answer concerning one's conduct, duties, etc. (usuallyfollowed by for ): to account for the missing t ypewriters. 14. to provide a report on money received, kept, and spent. 15. to cause (usually followed by for ): The humidity accounts forour discomfort. His reckless driving accounte d for the accident Basic dichotomy of accounting: some results of actions taken are significant and need to be recorded and some are not Not recorded externalized; effects do occur but are not the company’s responsibility Environmental audit: a complete understanding of the environmental impact of organisational activity and costs assigned to effects Mushroom growers abues avoiding...
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...tools at their disposal. But not all mentoring programs are equally effective, and not all companies have learned how to sustain mentoring. IBM has done it — and offers specific guidance and best practices you can use to achieve equally powerful results. IBM use mentoring to strengthen organizational intelligence...build sustainable communities of mentors and mentees... promote collaboration across differences... and above all, link mentoring to strategy and use it to sustain competitive advantage. Business organizations are coming to view knowledge as their most valuable and strategic resource, and bringing that knowledge to bear on problems and opportunities as their most important capability. They are realizing that to remain competitive they must explicitly manage their intellectual resources and capabilities .To build their intellectual capital, those organizations are utilizing the social capital that develops from people interacting repeatedly over time. Lincoln Re has an early-warning process in place to monitor research in the medical field for anything that eventually may...
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...payment. (Johnson & Leenders, 2010). It is preferable to separate need identification and defining commercial equivalents into two separate stages due to the general recognition that about seventy percent of the opportunity for value improvement stands within these first two phases of the acquisition process. (Johnson & Leenders, 2010). There are many technical details that goes into the analysis of the acquisition process. One thing that is consistently recommended is to continuously increase participation of operating managers and key-staff individuals throughout the acquisition process. The involvement of these key individuals would create an efficient process and effective strategic choice throughout the acquisition. "Such involvement, they argue, can facilitate better strategic choices by fostering a broader information base and greater commitment from those who will have to implement the decisions made during acquisition." (Jemison & Sitkin, 1986). Early supply and supplier involvement, also known as ESI, is very important in the acquisition process due to assuring that what has been specified is also procurable...
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...helps increase its prestige and power. Its performance in the field of “new” international agenda items (direct human, environment, etc.) lags behind its economic might. China will continue to be the manufacturing plant of the industrial world for many years. Investment in China will be driven primarily by the creation of local infrastructure focused on trade for export markets, whilst Chinese capital markets will still remain inchoate for many years. India wants to be powerful and hence enjoy global prestige. Its competitive edge resides in low labor costs (wages) in certain sectors (textiles, outsourcing, information technology). It has no coherent project of prosperity. Investment will continue to flow from companies wishing to reduce their labor and other production costs by “offshoring” their plant, call-center or web-center operations. Investment will be strong in areas of value-added products, such as chemicals, software and other IT-related industries, but on an insufficient scale to make it boom across all socioeconomic structures. Moreover, capital markets will remain incipient when compared to international counterparts. Russia wants power, prosperity and prestige, but it is uncertain on how to get it. Sometimes it talks and behaves as a superpower. The population of scientists is immense. The Europeanization of Russia will represent a tension between conflict and cooperation with countries within its sphere of influence. But such tension...
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...firm-specific human capital which is likely to generate organizational rents, since those assets are more likely to be unique, sporadic, and thus a better basis for sustainable advantage. However psychological literature supports that generalized investments have value for the firm through it’s effects on worker’s commitment to the firm. This paper examines the impact of firm’s specificity in human capital versus generalization commitment of externalized workers. Externalized workers, face persistence pressure to maintain assets that are highly desirable in the market. Firms cannot offer lifetime contracts but nonetheless offer workers greater assurances of remaining competitive in the job market through more attention to general skills development and training. These skills increase the probabilities of the employees remaining employable, thus reducing their anxieties about the diminished job security (internal workers) or the stability of the employment relation (external workers), decreasing the likelihood of future or prolong unemployment. The study show more positive response in external workers when generalized investment by employers are made. Firms often fear to invest in externalized labor but the potential positive effects it has on employee’s commitment level are valuable outcomes of firm’s investments in general skills development and other transferable resources. The resource-based literature holds that the key strategic assets for a firm are its human capital. Loyalty...
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...recruitment, training, motivation and retention of employees. In addition, the HR department ensures compliance with labor laws and administers the conflicts within the organization. The human resources department is responsible for attracting the right people to grow the company. People who are part of the organization may require additional training to better perform its functions and there's where the human resources department. Over time, it is also necessary to offer space to keep them motivated and updated * Human Capital Human capital is a term used in some economic concepts of growth to designate a suppositional production factor dependent not only on the quantity but also the quality and degree of training and productivity of the people involved in a production process. From that initial technical use has spread to designate the pool of human resources having a company or financial institution. Also spoken informally of enhanced human capital with increasing degree of skill, experience or training of persons of such economic institution. * Motivation (leadership) Motivation is internal and specific to each individual process, which involves the implementation of behaviors in staff to a purpose that the company deems it necessary and desirable. It is a process caused by the result of an evaluation of the individual performs a given situation. Leadership is the set of managerial skills or policies that an individual has to influence the lifestyle of people...
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...stakeholders. HRD is a combination of organizational endeavors including education, training, development, career planning and development that ensure continual improvement and growth of both the individuals and organizations. The foray of workers entering into public and private sector organizations in Baluchistan from various disciplines has necessitated the need for appraising the Human Resource Development situations in Baluchistan. Therefore this article is an attempt to investigate the human resource situations in the province. Keywords: Human Resource Development, Human Resource Management, Training and Development, Human Resource Capital Introduction Human Resource Development is one of the key functions of an organization. It is the framework for the expansion of human resource talent within the organization. Human capital is an inventory of human ∗ Dr. Jan Mohammed, Assistant Professor, Institute of management sciences, University of Balochistan, Quetta. Email: jan_mohammed61@yahoo.com...
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