...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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...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% of profits. SCM also...
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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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...Human Capital Management Plan 2004–2008 United States Copyright Office | Contents 1 Message from the Register of Copyrights Copyrights Copyrights 3 Introduction Human Capital Framework · 3 Framework Our Mission · 4 Copyright Office Strategic Plan Mission, Goals, and Objectives · 5 Business Process Reengineering · 5 Current Organization and Workforce · 5 Reliance Upon Library of Congress Human Resources Services · 6 7 Part 1 · Strategic Alignment 7 Part 2 · Organizational Alignment and Workforce Planning 9 Part 3 · Talent 15 Part 4 · Results-Oriented Performance Culture Performance Culture 17 Part 5 · Leadership and Knowledge Management 19 Performance Measures and Evaluation 19 Appendices a: Stakeholder Roles and Responsibilities · 19 b: Implementation Framework · 21 Message from the Register of Copyrights I am pleased to present the Copyright Office Human Capital Management Plan for 2004–2008. This Plan has been developed as a companion to the Office’s Strategic Plan and links our human capital planning to the Office’s strategic policy and management objectives. It emphasizes the importance of human capital management to the successful accomplishment of our mission. In every organization, people are the most valuable resource. This is especially true at the Copyright Office, which is fortunate to have a seasoned, dedicated, and professional workforce that is customer-service oriented. The Office has a unique mission, and I am gratified when I work with...
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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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...SUMMARY OUTLINE CAPITAL BUDGETING PRACTICES OF INDIAN COMPANIES Introduction Corporate strategy provides the focal point for the firm's long-run strategic planning. The capital budgeting system, particularly for large strategic projects, is determined in the context of strategic planning and, thus, it is a top-down process. Corporate strategy and strategic planning play the most crucial role at the identification and evaluation phases. Operating and administrative capital budgeting decisions can be decided at lower /middle level of management within the overall strategic framework and guidelines from top management. The capital budgeting system at lower/middle level will largely be a bottom up process. It may be noted that external and internal environment provides a context to the company to establish and review its missions, concerns, and multiple objectives which, in turn, shape its corporate strategy. Objectives There are two objectives of this study: a) To document the capital budgeting policies and practices of companies in India, a developing" country, and contrast them with those of USA and UK, the developed countries b) To ascertain how business executives look upon the linkage between corporate strategy and investment decision-making. Sample and Methodology The study used interview-cum-questionnaire method and sent to 14 companies different businesses which had agreed to participate in all. Methods of Evaluation The study was...
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...Aligning Human Resources & Strategic Plans John P. Righeimer Maverick Energy Contents Introduction……………………………………………………….pages 3-4 The Problem: HR is not aligned with strategic planning……….....pages 4-7 The Solution: Aligning HR with organizational strategy………....pages 7-12 Conclusion…………………………………………………………pages 12-13 References……………………………………………………….…page 14 John P. Righeimer Maverick Energy PH: 815-498-3855 2 Introduction Most organizations view the department of Human Resources (HR) as an administrative function and ignore the need and opportunity to align it with its strategic plans. In circumstances where HR is included in the strategy of an organizatio n, its alignment does not go beyond a forecasting function. The main reason that HR is not aligned with the strategy of an organization is that it does not hold a seat at the strategic planning table. The irony with HR being left of out of strategy planning is that by its nature, HR is about people, which is the core of an organization and its strategic plan. The HR function not aligned with an organization’s strategy. My hypothesis is that it is hard to measure HR success and thus it is considered “soft” and not important in the strategy development. What gets measured gets done and/or receives the authority to contribute to an organization’s strategy. HR is often viewed as the organization’s “cop”, ensuring that benefits are properly administered and hiring/firing is handled to the letter of the...
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...on scare financial capital to a concentration upon scare human capital as cited by Bartlett and Ghoshal (2002). There is no doubt that financial capital is most important tools for an organization to grow and expand but capital by itself does not create wealth. The strategic capital of the current society is the human resource. Knowledge has become the key factor of every modern organization. A knowledge employee is able to create an idea without capital, knowledge is brain power. As cited by Drucker (1993) the most important, and indeed the truly unique, contribution of the 20th century was the fifty-fold increase in the productivity of the manual worker in manufacturing. The most important management needs to make in the 21st century is similarly to increase the productivity of knowledge work and knowledge worker. As such, human resource is the most essential asset a modern organization should have. Definition of Human Resource Human Resource involves establishing policies, practices, system and administrative management that focus on employees’ behavior, attitudes and performance. In short, human resource targets an organization most valuable resource which is its employees. These are the employees whose day to day operations are to generate revenue for the organization and work towards the common goal of the organization. With poor Human Resource Management, an organization is unable to sustain in the competitive market. Strategic Management In today’s competitive...
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...Marketing Strategy – Chapter 5 – Strategic Position Assessment Strategic position assessment: provides the basic information about the sources of value in the business and the drivers that create value in the business. The SPA should be done at two levels: The corporate level should focus on the value potential of the company’s portfolio of businesses. The unit level should focus on the value and drivers of the individual markets and products. Each business is assigned one for the five strategic objectives: 1. Divest: closed or sold 2. Harvest: capable of generating healthy CF with limited growth opps. 3. Maintain: mature markets with acceptable share and further share-building activities do not generate a (+) NPV. 4. Growth: positioned in attractive market where they posses competitive advantage 5. Enter: new growth opps. Assessing the current position: 1. Weaknesses of financial measures: do not give reliable indicators on whether current performance is creating long-term value a. Company-level: most measures fall short in providing an indicator of long-term performance. b. Unit-level: can be even more misleading because they encourage deceptive comparisons across business units 2. Strategic value drivers: those organizational capabilities that have the most significant impact on the firm’s ability to create SV. These drivers shape a company’s ability to create and retain competitive advantage. a....
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...Strategic management, corporate responsibility and stakeholder management Integrating corporate responsibility principles and stakeholder approaches into mainstream strategy: a stakeholder-oriented and integrative strategic management framework Takis Katsoulakos and Yannis Katsoulacos Takis Katsoulakos is a Director at INLECOM Ltd, Burgess Hill, West Sussex, UK. Yannis Katsoulacos is a Professor at Athens University of Economics and Business, Athens, Greece. Abstract Purpose – The purpose of this article is to establish a strategic management framework that supports the integration of corporate social responsibility principles and stakeholder approaches into mainstream business strategy. Design/methodology/approach – A top-down and bottom-up approach was used to develop the proposed framework. The top-down approach focused on analyzing the main strategic management theories including social responsibility movements to identify complementary concepts and create a relevant topology. The bottom-up approach was based on empirical research on the views of business companies on corporate social responsibility, a review of best practices and case studies mainly in Greece. Findings – The paper describes a stakeholder-oriented integrative strategic management framework linking the main strategic management theories across value, responsiveness and responsibility dimensions. A mathematical model is presented describing the synergistic development of advantage-creating knowledge and...
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...Aligning Employees Leading Strategic Change Robert S. Kaplan Marvin Bower Professor of Leadership Development, Emeritus Copyright © President & Fellows of Harvard College Align employees to the strategy: Four HR processes 1. Create Strategic Awareness Communicate Communicate Communicate 2. Align Personal Goals Personal Scorecard Make Strategy Everyone’s Job 3. Provide Necessary Skills Strategic Job Families Strategic Readiness 4. Align Personal Incentives Variable pay Team based You need a formal process to improve workforce readiness. Strategy should be linked to existing HR programs for performance management. How do we align employees to the strategy? 1. Create Strategic Awareness Communicate Communicate Communicate 2. Align Personal Goals Personal Scorecard Make Strategy Everyone’s Job 3. Provide Necessary Skills Strategic Job Families Strategic Readiness 4. Align Personal Incentives Variable pay Team based Communicate “seven times seven different ways” to make strategy everyone’s job Personal relevance brings the strategy to life Sustained communication uses different channels to get the message across • Leadership meetings • CEO random visits to employees • Dear Colleague Quarterly Letter in Mellon News • Learning lunches & informal discussions • Intranet • Working groups facilitated by HR • Staff briefings Source: Presented by Jack Klinck, Vice Chairman, Mellon Europe at BSCol European...
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...There are different ways of measuring a firm’s profitability. Different measures of profitability are likely to result in very different rankings of firm performance True Page: p37 6. Economic profit is a better indicator of a firm’s performance than accounting profit because economic profit includes the cost of remunerating of the capital employed by the firm False Page: p36 7. Time is an important factor in assessing a firm’s performance True Page: p39 8. If time enters into the equation, the maximization of profit equates the maximization of the firm’s value, where this value is equal to the Net Present Value of the firm’s cash flows False Page: p39 9. In practice, valuing firms by discounting economic profits leads to the same result as by discounting the firm’s net cash flows True Page: p40 10. In fact, the value of a firm less its debt does not equal the stock market value of its equity False Page: p40 11. Flexibility is a very important and valuable element in the corporate arena because investments and strategic behaviors...
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