Transcript Tara Inc. - Duke University`s Fuqua School of Business

Tara Inc.
Tara Inc.
Tara – A Buddhist savior-goddess with numerous forms, widely popular in Nepal and Tibet.
Tara Inc.
Agenda
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Company
Current Situation
Shoe Industry
Country
Risks
Analysis
Conclusion
Tara Inc.
Company
• New business model and idea
– For Profit company with non profit
characteristics
– Tara’s Shareholders are impoverished people
– Sources from plant located in Gabon
• Current situation – Need Financing
Tara Inc.
The Shoe Industry
• Competitive Landscape (3 major players)
• Extremely labor intensive
• High gross margins
– Profit margins are eroded through high R&D
and marketing costs
• Susceptible to niche players
Tara Inc.
Company Strategy
• Competitive advantage – quality shoes at value
prices and world stewardship
• Pricing Advantages
– R&D
– Marketing
– Sales Force
• Internet will play a key role
• Maximize shareholder value
• Focused on niche shoe market (running and cross
trainers)
Tara Inc.
Republique Gabonaise (Gabon)
Macroeconomic Data (1995)
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Population: 1.14 MM
GDP Growth: 1.9%
GDP/Capita: $3,915 US
Inflation Rate: 2.9%
Short Term Interest Rates: 22%
Unemployment Rate: 22%
Exchange Rate: US$1: 647CFAF
Tara Inc.
Gabon
• Favorable country specifics
– Relatively stable government republic; multiparty
presidential regime (opposition parties legalized in
1990)
– Active FDI growth over past 5 yrs
– Well established distribution infrastructure
– Macroeconomic policy move towards diversity
– US economic aid outpost
– High unemployment – Higher worker quality
Tara Inc.
Country Risk Measures
Tara Inc.
Project Risks
Project Risks
Technology
Mitigating Factors
The technologies are known and well established
Abiltiy to convince IFC to invest
Project coincides with their mission statement
IMF relations deteriorate
As long as government continues its macroeconomic
policy reforms, relationship should continue to grow
Completion Risks
Well established industry (and US outpost)
Electricity
Same sourcing as oil companies
Labor
High unemployment rate. Company mission to assist local
population will attract employees
Information Cost
Experiences managers both external and in Gabon will
operate plant
Labor Skills
Mandatory employee training workshops
US risk premium for Shoe project
Includes risks of operating in an average shoe
manufacturer in the US
Tara Inc.
Sovereign Risks
Soverign Risk
Currency
Mitigating Factors
Only labor cost is affected
Hyper Inflation
To the extent Tara will need local currency, this will not
affect company much as long as purchasing parity holds
Creeping/Complete Expropriation A Majority of after tax profits are returned to the country.
Capital Control
Again, majority of A.T. profits are held within country
War
Slight chance for this occurance and location next to US
Outpost
Corruption
Most likely in small amounts. IFC offsets large corruption
factors
Tara Inc.
Analysis – Economic Return - Conclusions
See Excel Spreadsheet
Tara Inc.
Q&A