Summary analysis of the business options, selecting optimum business portfolio.
The date is July 2009, just prior to Qaim Consulting Corporation's year-end of July 31. The President of Qaim , Michael Gordon, is reviewing an analysis of his company's business options in preparation for the business portfolio decision that must be presented to the Board the following week. A crack team of recent MBA graduates from Harvard, Stanford, and UFT conducted the analysis, so Mr. Gordon had no concerns about its validity. It was up to him to select a portfolio that would allow Qaim Consulting Inc to continue to prosper in the rapidly evolving world of online education and training. There were eight opportunities in all, none of which had a payback period of over three years:
- five current businesses (actually four businesses, but the fourth also had "Turbocharge" option, "4T")
- two proposed new businesses, which Qaim could develop internally (the "In-House Development" options)
- one proposed new business, which Qaim could acquire (the "Acquisition" options)
Given the summary analysis of the business options (Table 1), select the optimum business portfolio for Qaim for the 2008/09 fiscal year. The Board had already advised there would be a capital investment cap of $65 million for the coming year. Justify the decision.
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Table 1 - Summary Analysis of LS Business Opportunities
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Current Businesses
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In-House Development
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Acquisition
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1
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2
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3
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4
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4T
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5
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6
|
7
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Industry Attractiveness
(1 = low, 5 = high)
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5
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5
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3
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4
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4
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5
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4
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5
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Competitive Strength
(1 = low, 5 = high)
|
5
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3
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5
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4
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5
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5
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4
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4
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Strategic Fit
(1 = low, 5 = high)
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5
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3
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4
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5
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5
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3
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5
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4
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Capital Expenditure ($mill)
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5.0
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10.0
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15.0
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10.0
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25.0
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10.0
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25.0
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50.0
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Low Case
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NPV ($mill)
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15.4
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18.5
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30.8
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23.1
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69.3
|
30.0
|
12.0
|
15.0
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Probability (%)
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5
|
30
|
20
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15
|
20
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5
|
10
|
25
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Expected Case
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NPV ($mill)
|
23.2
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27.8
|
46.4
|
34.8
|
104.4
|
45.0
|
115.0
|
250.0
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Probability (%)
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90
|
50
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75
|
75
|
50
|
75
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75
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50
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High Case
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NPV ($mill)
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28.7
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34.4
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57.4
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43.1
|
129.2
|
60.0
|
180.0
|
400.0
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Probability (%)
|
5
|
20
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5
|
10
|
30
|
20
|
15
|
25
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