Voice over Internet Protocol Supplier’s Decisions

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Table of Contents

Staying with the current plan
Closing down the company
Selling the company
Slowing down the rate of growth
Asking for a 90-day extension to take care of the cash flow problem
Reduce expenses
Other possibilities
References

Staying with the current plan

The current plan entails the implementation of the Phase II Plan, which entails the development of an intensive marketing strategy aimed at attracting more small business entities to purchase the commodities offered by the company. According to the management function of the company, the plan has the potential to enhance the performance of the company. However, the leadership function of the company, particularly the board of directors, share the sentiment that the company should have already attained the breakeven point; hence, the plan should not be executed.

From a critical perspective, the company has reduced its revenue losses since the execution of the Phase I Plan; thus, there is a likelihood that the second phase will result in the attainment of the breakeven point. The company reported a loss of $88,000 in 2005, and it predicted the loss margin to go down to $66,000 in 2006 (“VoIP.biz, Inc.,” 2007). Analysts in the business have already revealed that the VoIP supplier process has a high potential of gaining popularity as business entities start looking into developing affordable data and communication networks. It is also apparent that the first-mover position of the company has resulted in many challenges, which will be overcome with time as the company realizes a large and profitable market share. In this light, the company should finance the implementation of the Phase II Plan.

Closing down the company

Closing down is also a viable option for the company because it will eliminate the need for the investors to continue financing a business that is yet to breakeven. However, closing down the company may be more costly for the company than getting along with its current business plan. The company will inconvenience its current customers if it chooses to close down. This implies that there is a likelihood that the investors will have to pay the customers following the lawsuits that the closure will attract (Hill & Jones, 2012). The closure also implies that the investors will not get their money back because the company is yet to breakeven. Closing down should be the last option that the company considers because of the hefty losses that will be incurred by the stakeholders.

Selling the company

Selling the company might come up as the most reasonable option because the company will have a chance to retrieve the money that has been invested over the years. The investors will have a chance to finally get some profit from their money because the company will sell at a price based on its future value. Selling the company will forward the responsibility to hit the breakeven point to the buyer; hence, current investors will have eliminated the risk of experiencing higher losses as the company looks to expand its market.

The board of directors of the company has already revealed that the company is only willing to risk $500,000 in the Phase II Plan, which implies that the members of the board have no confidence in the plan. The plan requires $3,000,000, and there is a slim chance that this money will be raised by the investors (“VoIP.biz, Inc.,” 2007). The buyer may have the ability to finance the Phase II Plan.

Slowing down the rate of growth

Slowing down the rate of growth seems to be one of the favorite options of the members of the board of executives of the company. The technology industry has seen companies start-up and expands into giants within a very short time, and this is caused by the fact that in this business, companies have no option but to fight for exponential growth to survive. Most of the companies that do not finance faster growth die slowly because of the high competition in the business.

By slowing down its rate of growth, the company will be letting go of the first-mover advantage it has in the small business market. More competitors with the ability to maintain faster growth will take over the market, forcing the company to close down or take other undesirable measures (“VoIP.biz, Inc.,” 2007). This implies that slowing down the rate of growth is a risky option for the success of the company.

Asking for a 90-day extension to take care of the cash flow problem

As Jim O’Neil claimed at the end of the case study, the company has already secured a contract with a large call center. This implies that business activities in the company are starting to look up, and it is appropriate for the board of directors to give the management function another quarter to take care of the cash flow problem. The company can increase its market share within the next three months, and this will possibly provide the required revenue to finance the second phase of business. However, the delay in making a decision may also attract higher losses for the company (“VoIP.biz, Inc.,” 2007). In case the company fails to fix the problem during the 90-day extension, it will be difficult to convince the investors not to take any action that might not be supported by the management function.

Reduce expenses

The company is looking to expand, and it is apparent that the growth of a business is always accompanied by an increase in financial liabilities. Reducing expenses in the business will limit its growth potential (Merrifield, 2009). For instance, if the company decides to reduce the marketing budget, it will reduce its potential to reach out to potential clients; hence, reducing its chances of hitting the breakeven point. Reducing the expenses will also imply that the Phase II Plan will be partially implemented, and this will translate into issues in satisfying consumer demands in the future.

Other possibilities

The company may also consider the option of inviting its partners to invest in the Phase II Plan. Since the board of directors is only looking to risk $500,000 of investors’ money, the $2,500,000 deficit in the budget can only be raised through borrowing (“VoIP.biz, Inc.,” 2007). Financial institutions are likely to be skeptical about loaning the company because of its previous performance in business, but partners may be willing to risk their money if the plan looks valid.

The management has already partnered with several hardware and software suppliers; hence, this option might save the company from closing down. The partners also pose an opportunity for the VoIP supplier to attract more clients because they will also take part in marketing the company. The strategic partnership is a viable option, and it involves minimal risks on the part of the current investors in the company.

References

Hill, C., & Jones, G. (2012). Strategic Management Theory: An Integrated Approach. Boston: Cengage Learning.

Merrifield. R. (2009). Rethink: A Business Manifesto for Cutting Costs and Boosting Innovation. Boston: Addison-Wesley Professional.

VoIP2.biz, Inc.: Deciding on the Next Steps for a VoIP Supplier. (2007). In Brown, C. V., DeHayes, D. W., Hoffer, J. A., Martin, E. W., & Perkins, W. C. (Eds.), Managing Information Technology (pp. 128-143). Upper Saddle River, NJ: Prentice Hall.

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