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Risk and Option Analysis of Proposed Venture

In: Business and Management

Submitted By rachels
Words 1102
Pages 5
Memorandum:

-------------------------------------------------
Subject : Risk and Option Analysis of Proposed Venture

Introduction

With reference to the company’s new announced project about exploring the meeting market of Country A, we have some points which I think would be useful to consider before undertaking the project.

Background:

Rephrasing the whole project definition and scope as you provided in the annual presentation, our company is going to explore the Moroccan market. Our company, Xava Coffee and Confectionary is undoubtedly among the best companies of the country. Being a multinational company having our operations in France, Germany and North America, we are fully equipped with the abilities to explore new markets. We are already exporting a significant amount of coffee to the emerging markets such as China and India. Now the company is thinking to set up a production plant in Country A to market the coffee in Country A market as well as explore from there to the Mediterranean countries and the Middle East. The project appears to be financially viable as it has reasonable IRR and satisfactory NPV however; the project would carry significant risks.

Key Points of proposed project:

Being a multinational company, it is our long term benefit to explore and develop new markets. We have a unique advantage of production facilities within and outside our border with strong international market links. We have customers in three continents of the world and different environmental conditions, customer demographics and consumer buying behaviors are helpful for our company. If we undertake the proposed project, it will help Xava in many ways. First of all, Country A has plenty of labor force therefore we can get work force at low cost. In addition, the country is a growing economy having significant room to grow and develop. There is a

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