You are the CEO of business which you want to develop significantly by expanding into a
new country.
You need to present a proposal to the board of directors of the company to gain their
approval for the expansion. They are, generally, a bit risk adverse, and medium to longterm thinkers.
An expansion of this size requires special shareholder approval, only obtainable at an
annual general meeting. Therefore, you only have one opportunity to pitch your proposal.
About the business:
Your business is a multi-national business financial services business. Founded in the UK in the
1980s, the business concentrates on providing specialist insurance, trade finance, and associated
services, including consulting, for companies involved in international commodities trading. The
business does not have retail customers. Its expertise and focus is business-to business.
Shareholders and company control
The company is listed on the main London Stock Exchange with a roster of institutional
shareholders, the largest of which is an insurance company with a 6% stake. You and the other
directors collectively own around 1.5% of the company. Capitalisation is £440 million. Trading
performance The business’s clients are UK based in the main with 85% of the turnover and 90% of
the profits after tax coming from London commodity traders and brokers. There are a few European
based companies who provide the rest of the business. Group turnover is £ 500 million per annum
with net profits at £ 60 million, and profits, after tax, are £45 million. There is no debt. ROCE is
35%.
Over the past few years, business has stagnated somewhat. At the same time, you have been asked,
on many occasions, to provide services for Australian commodity businesses who export to China.
Similarly, Chinese buyers in London have asked you to provide services for them in their local
markets.
You feel that you should expand to exploit the Chinese market and believe that, in order to do
the job properly, you need to commit to opening a business where commodity producers,
sellers and buyers are therefore in China.
Over the years, a number of your predecessors have proposed similar actions. Indeed once the
company did expand into the US market, only to close the operation when commodity prices
slumped resulting in client collapses with your company being owed significant fees. You view this
as a valuable learning experience for the company, rather than a reason not to try and expand again.
Board approval
You have had the long phone calls and lunches discussing ideas and options. You have gathered the
information and have a plan in your mind. You conclude that China is a long- term, global-scale
market. You also feel that, in order to compete and be taken seriously, you need to be there
physically and culturally.
To get the project up and running, you need full Board of Directors approval in order to propose the
expansion to shareholders at the annual general meeting.
You need to write a single Board Paper as a business report, covering all the essential information.
The report will be reviewed and commented on by the Board committees. These are Audit,
Remuneration, Nominations, and Corporate Social Responsibility. All the committees need to be
convinced.
You estimate the new business will turnover £150 million per annum with net profits at £48 million,
and profits, after tax, are £31 million. You think the capital requirement for the expansion is in the
region of £60 million.
- The submission format is a Business Report so your submission must be structured
accordingly. - The word count limit is 1500 words (+/-10%) excluding references, a title page and any
appendices.
Business Report Structure
The submission format is a business report so your submission must be structured accordingly.
Below is a suggested framework: - Short introduction / purpose of the report.
- Executive summary
- The analyzed content and arguments including if appropriate
- Limitations
- Conclusions
- Recommendations
Markets, Products, and Channels
This content area may contain module content
(theories/ journals/ books) from the following
MBA modules: - Marketing
- International Business
- Marketing Strategy module.
Operational impact
This content area may contain module content
(theories/ journals/ books) from the following
MBA modules: - Operations management.
- Operational Strategy
Financial impacts
This content area may contain module content
(theories/ journals/ books) from the following
MBA modules: - Accounting and finance
- Financial Strategy.
Organizational impacts
This content area may contain module content
(theories/ journals/ books) from the following
MBA modules: - Organisational behaviour.
- Human Resources management.
- Organizational Strategy
Sample Solution