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External Financing

Genesis’ newly established operations management team decided to seek outside assistance in developing a long-term operating plan that also addresses the financial issues identified. A major consideration for Genesis is assessing those short-term and long-term economic factors, which will greatly enhance the company’s ability to successfully transition to a viable international business. Grasping and correctly prioritizing these economic factors, supply and demand, interest rates, inflation, unemployment, and exchange rates are pivotal, thereby requiring expert guidance. Therefore, their first major decision was to hire a respected strategy-consulting firm, Sensible Essentials.

After meeting with the client team, Sensible Essentials concluded that the operations management team would significantly benefit from a more in-depth understanding of the financial environment at Genesis. This understanding needed to encompass not only sales, costs, and profitability forecast under the new strategic plan, but also the way expansion would highlight the need to manage working capital and cash flow in order to try to minimize the need for external financing.

As the lead consultant for Sensible Essentials, do the following:

  • Describe the financial environment at Genesis.
  • Describe how the company’s strategy for financing as a startup may no longer be suitable as it seeks to expand its operations globally.
  • Identify and explain two ways Genesis can improve its strategy.
  • Explain how global financial markets in terms of financial strategy affect Genesis.

Write a 3–4-page paper in Word format. Apply APA standards to citation of sources. Then, create a 6–8-slide PowerPoint with Speaker’s notes and references (including research) presenting your findings to the Genesis operations management team.

 

 

Genesis Corporation

The Genesis Corporation develops highly technical software and hardware applications for high-end commercial and military use. Genesis is considering expanding its production operations to lower cost locations outside the United States. The company currently has facilities in Canada but realizes the need for further expansion in order to respond timely to global customers.

Background

Two technology students founded the Genesis Corporation in 2000 as a small technology lab in North Carolina. The company grew rapidly, and by 2004, revenue growth exceeded all expectations as an expanding client base prompted an operating expansion. Genesis opened its first non-US operating facility in Canada during the last quarter of 2004, followed by another facility in Canada in early 2005.

Financing for this expansion came from two sources: family seed monies and an equity investment by a small group of venture capitalists. Rapid revenue growth, the operating expansion, new international clients, and the involvement of more professional ownership necessitated an expansion of the management team. The expanded management team, which now oversees domestic and international operating facilities, consists of a general operations manager, an accountant, a software application expert, a marketing manager, a production manager, and a customer service manager. All of these individuals with the exception of the production manager were outside hires.

Opportunity and Dilemma

An intensive strategy planning session with the founders and new owners resulted in a five-year strategic plan that calls for aggressive expansion. The group feels that Genesis has unique technology that will be very attractive to governments and large manufacturers in the developed world and selected emerging economies, but the company must move quickly to take advantage of these opportunities.

The newly developed operations management team is charged with optimizing all operations and expanding the company’s sales to emerging markets in Europe and Asia. This expansion of sales and operations will require significant amounts of capital to invest in new production facilities and resources, sales staff, and marketing activities. Genesis hopes to avoid having to find more equity investment to fund this expansion, but it is not clear if sufficient funds can be generated internally from sales and profits, and obtaining a bank loan can be very challenging for small, young companies.