Ethical Considerations in Global Expansion

Welcome to Conscious Capitalism in the Marketplace

You are about to start a new company that will be entering into the microcomputer business. You will have limited financial resources and complete accounting responsibility.

You will provide the seed capital (investment money) needed to start your business up. You can use this money to build a production facility, open sales offices, and design brands. You will invest 2,000,000 in the first quarter and another 1,000,000 in each of the next 2 quarters.

After this period, you will have the opportunity to approach the venture capital community for additional equity funding. In quarter 4, you will be able to receive up to an additional 5 million for your future development. Potentially, you will have up to 9,000,000 to invest in this new enterprise.

You have the next year and a half (six quarters or decision periods) to get this company off the ground. Within this time frame, your firm should become a Conscious Business that aligns and harmonizes the interests of employees, customers, suppliers, the community, and shareholders.

A balanced scorecard will be used to measure your firm's performance and to compare your results with those of your competitors. The firm's total business performance will be based upon its financial performance, marketing effectiveness, market performance, investments in the firm's future, human resource management, manufacturing productivity, asset management, financial risk, creation of wealth, and reputation.

The balanced scorecard requires that you take a multidisciplinary perspective in managing your firm. To be successful, you will need to deal with both the short-term and the long-term, to consider both financial and nonfinancial issues, and to provide for customers, employees and stockholders.

While you must do well in all areas measured, your investments in the future will indicate where your true priorities lie. How you choose to make these investments will indicate the balance or imbalance of your priorities among all of the stakeholders to whom you have responsibility. After this 6-quarter startup phase, will you be judged to be a Conscious Capitalist, a semi-conscious capitalist or an unconscious capitalist?

Markets

Your company will be introducing a new line of microcomputers into selected markets in North America, South America, Europe/Africa, and Asia.

The map is divided into 4 regions: North America (abbreviated NORAM); Latin and South America (LATAM); Europe, the Middle East, and Africa (EMEA); and Asia and the Pacific (APAC). NORAM's city is Chicago. LATAM's city is Sao Paulo. EMEA's city is Paris. APAC's city is Shanghai.

The current state of the PC industry

· Other firms will be entering the market at the same time that you are.

· The microcomputer industry is in the introductory stage of its product life cycle. There is no history and there are no established competitors.

· All competitors, including your own company, will start with exactly the same resources and knowledge of the market.

· You will sell through company-owned sales offices in four major metropolitan markets around the world.

· You will not sell through retail stores. Your marketing strategy will be tightly focused on direct sales to business customers.

· Your target market will be the business sector, not the home market.

Market Segments Among PC Buyers

The PC market can be divided into three major market segments. Each segment has its own set of needs and wants. Each one also has a price point where they are willing to consider a purchase, should you be able to satisfy their needs and wants.

These three segments are portrayed in the accompanying graph. The circles are positioned to indicate the price and performance requirements of each segment. The size of the segment is portrayed by the size of the circle. Each segment has different needs and wants and requires a different market strategy to appeal to it.

The Mercedes segment is looking for a high performance computer to use in engineering and manufacturing applications. Mercedes customers are willing to pay extra for the higher performance.

The Workhorse segment is the largest group of customers. They want an easy-to-use PC for office workers. It should also be modestly priced.

The Traveler segment wants a practical computer to use on the road. Traveler customers are executives and sales people who travel a great deal. This segment is also price-sensitive.

Quarter 1: Organize the firm and set up shop

· Name the company.

· Sell 2,000,000 in stock to executive team.

· Assign corporate responsibilities to the team.

· Analyze the market survey.

· Review the Industry Newsletter

· Establish corporate goals and strategic direction.

· Design at least one brand for each target segment.

· Schedule the opening of the first sales office.

· Build a production facility.

Quarter 2: Go to test market

· Sell 1,000,000 in stock to executive team.

· Review the Industry Newsletter

· Establish employee training and compensation packages.

· Seek employee insights to improve firm performance.

· Hire sales and service personnel.

· Establish brand price and priority.

· Design an advertising campaign.

· Schedule production.

· Purchase market research.

· Open an additional sales outlet (optional).

Quarter 3: Skillful adjustment and market expansion

· Sell 1,000,000 in stock to executive team.

· Review the industry news and balanced scorecard from the test market.

· Review also the market, financial, human resource, and production reports.

· Follow through on employee insights to improve performance relative to all stakeholders.

· Adjust the firm's strategy and tactics (brand design, pricing, advertising, sales and service personnel, compensation, production) as needed.

· Schedule the opening of one or two new sales offices.

· Expand fixed production capacity.

Quarter 4: Invest in the future

· Sell up to 5,000,000 in stock to venture capitalists.

· Review the industry news and balanced scorecard from the test market.

· Review also the market, financial, human resource, and production reports.

· Adjust the firm's strategy and tactics as needed.

· Invest in research and development in order to introduce new brand features to the market.

· Prepare a business plan for venture capitalists.

· Invest in the future for customers, employees, stockholders, and the community.

· Substantially expand market coverage via new sales offices.

· Expand fixed production capacity.

Quarter 5: Expand the business strategy

· Study the market, balanced scorecard, industry news, financial, human resource, and production data to determine how to better meet customer needs, empower employees, add to the bottom line, and contribute to the community.

· Introduce new brands with new features developed by your research and development (R&D) department.

· Continue with market expansion by adding sales people, new offices, and production.

· Explore licensing opportunities and the development of strategic alliances.

· Adjust the firm's strategy and tactics as needed.

Quarter 6: Refine the business strategy

· Study the balanced scorecard, industry news, and market, financial, human resource, and production data.

· Adjust the firm's strategy and tactics as needed.

This represents the whole of the world you will compete in. From this point on, you will receive information as you need it. You will also be given an ever-expanding set of decisions to make. The sequence follows the way an entrepreneurial firm develops a new market in the real world.

Getting Started

Now that you have a feeling for the business in which you will compete, take a quick look at what's in store for you in the current quarter and in the near future.

In quarter 1, the goal is to set up your company. These are the decisions that you must make:

1. Name your company.

2. Organize your team, decide on corporate responsibilities

3. Review the market research.

4. Establish corporate goals and strategic direction.

5. Design at least one brand for each target segment.

6. Open a sales office for future sales.

7. Setup a production facility.

8. Make sure there is at least 300,000 in the cash account and Certificate of Deposit combined.

Industry News

The international market is in constant flux.

Market potential will rise and fall in accordance with local and worldwide economic conditions. The ever-changing economic situation will play itself out in shifting demand between regions. This will affect the attractiveness of doing business in each market.

The Industry Newsletter will be your best source for current and projected trends in international relationships and economic conditions. It will be your responsibility to predict how these conditions will play themselves out in future demand.

YOUR TASK

In the Workspace, you will find the world economic news that analysts believe is the most important to your industry. You should make the Industry Newsletter a must read for all members of the executive team as various events may affect your firm's ability to succeed in the market.

Marketing Research

Initial Goal: To obtain an overall feel for the market

Your market research firm conducted a survey of potential end users. Each market segment has a unique set of needs and wants. Your initial goal in reviewing the market research is to obtain an overall feel for the market.

Try to form a mental image of each segment. This is called profiling a segment. Creating a profile for each segment will help you to select geographic markets for sales channels, design new brands, price your products, and develop an advertising campaign.

YOUR TASK

1. Review the relevant marketing data.

2. Decide on an initial business strategy.

3. Design one or two brands for each target segment.

4. Initiate the opening of your sales channel and the construction of your production facility.

Customer Needs

Understanding what customers value

The market research data focusing on customer needs can be very helpful. It allows you to examine the costs and benefits of potential products. However, this data is incomplete because it does not tell you which specific features each segment might want. Customers are more concerned with benefits than with features. It will be your task to determine which features will deliver the desired benefits.

YOUR TASK

To help you select the right features for your target market, review your customers' needs and applications. The numbers within the table quantitatively indicate how important the need is to that segment.

A rating of 110 or higher indicates that the need is important to the segment. Ratings below 100 might suggest the opposite. That is, low numbers could potentially affect customer value in a negative way.

Customer value hierarchy

Remember that customers do not buy components or features, they buy benefits. At a higher level, these benefits help users to accomplish their goals and to realize certain values or end states.

It is your job to figure out how to deliver the value desired. A good way to start is to apply the logic behind the means-end hierarchy. Take the most important benefits desired by each segment and speculate on which components or services will be necessary to deliver these benefits.

Desired End States

Personal and organizational goals (core values, guiding principles): "Ends" which are served by the product/service "means".

Consequences

What the product does for the user (subjectively defined): Realizations, benefits, desired and undesired outcomes, sacrifices, costs, etc.

Attributes

What the product is (objectively defined): Features, activities, options, and parts.

The means-end hierarchy will be useful in designing your new brands. Understanding the relationship between features and benefits is a prerequisite to developing successful brand designs.

To learn more about Market Research, consult the Help file: Market Research. You may also find it useful to read the Match-up Benefits and Features section.

Human Resources

Human Resource Management entails recruiting the best employees, satisfying their needs and motivating them to excel. The primary vehicle available to you to recruit, satisfy, and motivate employees is the compensation package that you offer them.

Your human resources strategy and decisions will revolve around the compensation packages that you offer to your employees. The package includes an annual salary, health benefits, vacation time, and a contribution to the employees' pension funds.

Your Human Resource Department will monitor the compensation packages and productivity levels of all of the firms in your industry. Each quarter, you will learn about the salary and benefits offered to employees by each competitor. Industry experts predict that the firms that offer the best compensation package will tend to have the most productive employees. Unhappy employees do not work as hard or as effectively. For example, unhappy sales people do not generate as much revenue as happy ones. And, unhappy production workers will not produce as many units in a day as happy ones. Lower revenues and higher production costs can strangle a company.

In the current quarter, you have no specific tactical decision to make.

In the next quarter, you will have to establish a compensation package for your employees.

For now, review the available information on employee compensation and then formulate your human resource strategy. This information comes from a survey showing the typical salary, health benefits, vacation, and pension contribution in the industry.

Responsibilities

The managing partners of any new business need to organize themselves before they start any business activities.

In Marketplace, both leadership and teamwork are necessary to succeed. There is too much work and the work is too varied for any one person to do it all. Moreover, the world is dynamically changing thanks to your customers, competition, and your own decisions. No single person can keep a finger on all the pulses of the business, much less formulate an effective strategy and execute a complex set of interconnected business decisions. You must divide up the tasks and responsibilities, be focused and organized, and mentally agile.

Who will be responsible for Marketing, Distribution, and Finance? What work must be done? Who will be the overall leader?

The selection of the primary area of responsibility is important because your performance evaluation will be measured, at least in part, by the firm's performance in all areas related to this selection.

YOUR TASK

The Workspace shows all the team members in your company.

1. Choose a primary area of responsibility for each person on the team.

2. Select a secondary area of responsibility as a backup to the person who has the primary responsibility.

3. Elect one person to lead the team, the president of the company. This person can also take on one of the other management positions.

4. Upload a picture of each team member so that the competition can see what they are up against. And your Business Coach will find it helpful.

NOTE: EVERYONE should be responsible for profit analysis.

DECISION TIP

In making your selection, consider the following areas of responsibility:

· Overall leadership: setting objectives, organizing and assigning work, managing schedules and meetings, monitoring overall performance (balanced scorecard), and managing the team to lead the industry.

· Marketing: delivery of customer needs through brand design, pricing, ad copy design, and media placement.

· Sales management: distribution (location and timing of sales offices) and sales force management (number, targeting, training and incentives).

· Manufacturing: capacity planning, production scheduling, and quality improvement.

· Accounting and Finance: financial performance, cash flow management, profit analysis, and capital structure.

· Business Analytics: analysis of market and operational data.

· Human Resources: compensation plans and worker productivity.

· Other, ___________________________________.

Employee Compensation

There is great competition amongst the employers for the best employees. Your ability to recruit and retain the best employees will be directly affected by how well your compensation package compares to your competition’s as well as the norm for the electronics industry. The higher you are above the norm, the more motivated your employees will be to succeed, and create more demand for your products.

The compensation package that you will offer includes an annual salary, health benefits, vacation time, and a contribution to the employees' pension funds. Starting in Q2 when you will test the market, you will be able to modify the compensation package for your employees. You will then be free to change the package from one quarter to the next.

DECISION TIP

Your employees and those of other companies are always seeking better compensation. Each quarter, they are surveyed as to what area of their compensation package they would like to see improved. In the early quarters, they will want to see significant improvement in their base salary. As salaries improve, their focus will begin to shift to other things such as their health benefits, vacation time, and pension contributions.When people are faced with an actual offer, they may behave differently than expected. Study both the survey data and how the industry employees seem to be responding to the offers made by various competitors.

Industry Production Worker Compensation

There is strong competition among workers for production jobs. For every position, there are probably 100 people who would like to have it. As a result, the pay and benefits tend to be low. In fact, many workers have no health benefits, little vacation time, and no pensions. As a new firm, you have the opportunity to improve conditions for your workers.

The compensation package that you will offer includes an annual salary, health benefits, vacation time, and a contribution to the employees' pension funds. In the next quarter, when you will test the market, you will be able to modify the compensation package for your production people. You will then be free to change the package from one quarter to the next.

YOUR TASK

· In the Workspace, review the typical production worker compensation package for all companies in your industry.

· Pay attention to what is important to improve for these workers. The importance value indicates how strongly the production workers feel about increases in each area of their compensation package. You can expect these numbers to change over time.

Industry Production Supervisor Compensation

YOUR TASK

· In the Workspace, review the typical supervisor compensation package for all companies in your industry.

· Note also what is important to improve. The importance value indicates how strongly the supervisors feel about increases in each area of their compensation package. You can expect these numbers to change over time.

Industry Sales Force Compensation

There is great competition amongst the employers for the best sales people. Your ability to recruit and retain the best employees will be directly affected by how well your compensation package compares to your competition’s as well as the norm for the industry. The higher you are above the norm, the more motivated your employees will be to succeed, and create more demand for your products.

The compensation package that you will offer includes an annual salary, health benefits, vacation time, and a contribution to the employees' pension funds. In the next quarter, when you will test the market, you will be able to modify the compensation package for your sales people. You will then be free to change the package from one quarter to the next.

YOUR TASK

· In the Workspace, review the typical sales force compensation package for all companies in your industry.

· Pay attention to what is important to improve for these workers. The importance value indicates how strongly the sales people feel about increases in each area of their compensation package. You can expect these numbers to change over time.

Marketing

Your marketing strategy and decisions will revolve around your target market selection and the products, prices, and advertising to serve these markets. Be sure that your tactical decisions are closely aligned with your overall strategy.

YOUR TASK

· In the current quarter, you may want to design multiple brands for your test market.

· In the next quarter, you will have to price and advertise these brands.

Brand Management

One of your most important decisions in this quarter is brand design.

In the next quarter, your sales people will try to sell your products to the market. Their success, and the success of your company, depends on how well you design each brand.

To attract customers, consider designing one or two brands for each target segment. Ultimately, you will want a good assortment of brands. After you gain some experience, plan to offer a good, better, and best model in your target segments.

Before you design your brands, it would be wise to review your target customers' needs.

Customer Needs

Understanding what customers value

The market research data focusing on customer needs can be very helpful. It allows you to examine the costs and benefits of potential products. However, this data is incomplete because it does not tell you which specific features each segment might want. Customers are more concerned with benefits than with features. It will be your task to determine which features will deliver the desired benefits.

YOUR TASK

To help you select the right features for your target market, review your customers' needs and applications. The numbers within the table quantitatively indicate how important the need is to that segment.

A rating of 110 or higher indicates that the need is important to the segment. Ratings below 100 might suggest the opposite. That is, low numbers could potentially affect customer value in a negative way.

in a negative way.

DECISION TIP

For each market segment, you can sort the needs by importance.

Customer value hierarchy

Remember that customers do not buy components or features, they buy benefits. At a higher level, these benefits help users to accomplish their goals and to realize certain values or end states.

It is your job to figure out how to deliver the value desired. A good way to start is to apply the logic behind the means-end hierarchy. Take the most important benefits desired by each segment and speculate on which components or services will be necessary to deliver these benefits.

Desired End States

Personal and organizational goals (core values, guiding principles): "Ends" which are served by the product/service "means".

Consequences

What the product does for the user (subjectively defined): Realizations, benefits, desired and undesired outcomes, sacrifices, costs, etc.

Attributes

What the product is (objectively defined): Features, activities, options, and parts.

The means-end hierarchy will be useful in designing your new brands. Understanding the relationship between features and benefits is a prerequisite to developing successful brand designs.

To learn more about Market Research, consult the Help file: Market Research. You may also find it useful to read the Match-up Benefits and Features section.

Design Brand

Brand design is one of the most difficult tasks in marketing.

Customers buy benefits, but your brands are built from components. The challenge is to select the components that will provide the desired benefits and satisfy the customers’ needs and uses.

YOUR TASK

1. To design a new brand in the Workspace, first choose a name for your brand. The name should convey the desired image of your company and product line.

2. Next, select the components to include in your brand. Choose those that you think will satisfy your target segment. Keep in mind the benefits that are desired by the segment, how the product will be used (applications), and the price the segment is willing to pay.

DECISION TIP

It is recommended that you design two brands for the test market. In order to effectively gauge your customers' reaction to your offering, you may find it helpful to design a brand for each of the two segments you have planned to target at this time. Entering the market with two brands will reduce your risk and maximize the opportunity to learn from the test market.

Note the cost to design or modify a brand.

In the Workspace, as you select components, you will see the total materials cost. However, remember that your production cost is more than the simple sum of the materials cost of each component. It also includes labor and production overhead. You will see the unit production cost decline sharply as the sales volume increases. Your selling price is likely to be twice your production costs, perhaps a little less.

Sales Channel

Your sales channel strategy and decisions will revolve around the selection of sales outlets and staffing of sales and service people. However, before you begin to make tactical decisions, it is important to have an overall sales channel strategy to guide these tactical decisions. Review the available information regarding the market opportunity and the sales office options and then formulate your sales channel strategy.

YOUR TASK

· You must decide where your first sales outlet will be located for the test market.

· Next quarter, you will have to hire sales and service people and decide how you want them to focus their efforts.

The Territory Development section of the Help file provides some valuable information on what to think about when you enter a market.

Market Potential

Your market research firm has tried to derive an estimate of the potential demand by segment and geographic market. The researchers asked each customer:

· How likely they would be to purchase computers in the next 12 months.

· How many products each customer would be likely to purchase if the customer decided to buy.

Finally, the researchers counted the number of customers in each geographic market by segment.

In order to estimate market potential, the researchers applied the following equation:

FORMULA

Market potential = probability of purchase × number of units × number of potential customers.

YOUR TASK

Review the potential market size of each segment and geographic market. The data indicates how many units could be purchased over the next 12 months. There is a separate estimate for market potential for each segment in each city.

estimate for market potential for each segment in each city.

DECISION TIP

Note that the data indicates the potential demand for the next 12 months. You might assume that 25% of the market potential would be realized in any quarter (as there are four quarters in a year). But this is not likely to happen.

First, the quality of your firm's decisions and those of your competitors will affect demand. In the early stages of market development, everyone’s marketing efforts and products are likely to be weak simply due to a lack of experience.

Second, it will take a few quarters for customers to learn about your new brands and their benefits. They might even be skeptical in the beginning.

For these reasons, actual demand is likely to be much less than potential demand in the early quarters. The opposite could be true a year from now.

Finally, be cautious in using this market information. At best, these estimates are very rough projections. Buying intentions are notorious for being wrong about actual purchases. The actual purchase rate will ultimately depend upon how well the product is designed, priced, advertised, and distributed, as well as how well you and your competition serve the market.

To learn more about Market Research, consult the Help file: Market Research.

Open Sales Offices

Your territory development decision is one of the more straightforward decisions that you are faced with.

Each city has a different sales potential or number of prospective buyers. In addition, there are differences in the composition of the market segments. One metropolitan area may have a greater proportion of one segment than another city. These differences in market composition will influence the sales volume of the different brands on the market.

Your Market Opportunity Analysis (MOA) should provide you with a rough estimate of the sales potential by segment and by geographic market. Determine which markets have the highest concentrations of potential customers in your target segments. With this information, you should be able to establish a priority list of geographic markets.

the market.

Your Market Opportunity Analysis (MOA) should provide you with a rough estimate of the sales potential by segment and by geographic market. Determine which markets have the highest concentrations of potential customers in your target segments. With this information, you should be able to establish a priority list of geographic markets.

YOUR TASK

Specify which sales office should be opened for the quarter 2 test market. Pay attention to the setup cost, which will have to be paid this quarter, and the lease cost, which will have to be paid each quarter in the future.

DECISION TIP

There are other concerns beyond potential market size to keep in mind as you open sales offices:

· Operating expenses: larger and more prosperous markets tend to have higher operating expenses.

· Competition: early entrants will have the pioneering advantage of building unchallenged customer loyalty, but they pay a price in low initial sales due to a lack of customer awareness of the product category.

The Territory Development section of the Help file provides some valuable information on what to think about when you enter a market.

Manufacturing

Your manufacturing strategy and decisions will focus on investments in fixed production capacity and scheduling operating capacity to meet projected quarterly demand, and developing a lean, high quality production line.

Due to very favorable economic incentives from the government, the microcomputer industry and the firms that sell electronic parts are gravitating to the industrial areas around Shanghai, China. Your production facility will be in the same region. You will not be able to change the production location or add new production facilities later, but you will be able to increase the production capacity as your sales grow in the future.

YOUR TASK

In the current quarter, you have one very important tactical decision to make: an investment in the production facility.

Set Fixed Capacity

Fixed capacity versus Operating Capacity:

There are two kinds of production settings; fixed capacity and daily operating capacity.

Fixed Capacity determines the maximum number of units that your production facility can produce each day.

Operating Capacity determines how fast the fixed production line will run, and therefore, the number of units that are produced each day. It is possible to adjust operating capacity up or down by speeding up and slowing down the production. This change, in turn, affects the number of workers employed.

Operating capacity must always be less than or equal to fixed capacity.

YOUR TASK

· Specify your fixed capacity. You must decide how big of a production line should be built for the test market. Production capacity is measured in units per day and units per quarter. Your production facility can run for 5 days per week, 13 weeks per quarter. For total of 65 days per quarter.

· Choose either 25 or 50 units per day, depending upon the size of your target segments and regional market. Consider how aggressive you will be in opening new sales outlets.

DECISION TIP

· During your first test market, it is not likely that your firm will sell more than 15 units per day or more than 975 for the entire quarter. It will take a quarter or two to learn how to market to the microcomputer industry and build up your name recognition. You will not need to build a large production facility at this stage in the life of your company. Also, it is not financially possible to purchase more than 50 units per day.

· The decision to increase fixed capacity has a one-quarter delay. In other words, if you decide to increase fixed capacity by 25 units per day in quarter 3, the change in fixed capacity will not actually be completed until the start of quarter 4. You will not be able to begin producing 25 additional units per day until that time. It is important to always be looking into the future and forecasting your demand requirements one or two quarters out. As your distribution expands, plan on adding more fixed capacity. As you add new brands and new sales people, you should also consider production expansions.

Accounting

To help you in your accounting and financial planning, your accounting firm has prepared a set of interconnected financial statements. As you make your business decisions for the current quarter, the expenses or investments will be posted to the appropriate accounting ledger and your cash flow statement, income statement, and balance sheet will be adjusted accordingly.

The current quarter financial statements are essentially a budgeting tool. They are adjusted with almost every business decision you make.

Your accounting firm also serves the role of independent auditor. It has the legal right to refuse to certify your financial statements if it concludes that you are placing your firm at risk with overly aggressive expenditures. It will set limits on the amount of spending you can do in any quarter in order to protect your firm’s equity and reduce the risk of bankruptcy.

You can find more information about Accounting Statements in the Help file.

Projecting Cash Flow

The current quarter cash flow statement shows changes in all of the balance sheet accounts, including cash. These changes are then listed as inflows and outflows of cash and are categorized by operating, financing, or investing activities.

Pay attention to the cash balance at the end of the period. You must end the quarter with a positive cash balance. If you see an ending cash balance of 1, it means that your company is projected to run out of cash and will have to borrow money from the loan shark as an emergency loan. The emergency loan would appear in the Financing Activities section of the Cash Flow Statement.

Pro Forma Income Statement

The pro forma income statement documents the quarterly revenues, expenses, net income, and earnings per share each quarter.

In the Workspace, note that the revenues ledger item is zero because you have not made any sales yet.

Pro Forma Balance Sheet

The current quarter balance sheet provides the current financial status of your firm in terms of its assets, liabilities, and owners' equity.

Make sure there is at least 300,000 in a combination of the cash account and Certificate of Deposit in order to cover any unexpected problems in the next quarter.

Finance

In order to get your new company off the ground, you (and the other members of the executive team) will need to provide seed capital (investment money). This is the money that you will use for all the initial expenses related to starting up your company. You will have to build a production facility, open sales channels, hire sales and service personnel, and design your products before you begin to see revenues.

Within the first 3 quarters, you will invest 4 million. You are expected to raise this money by pledging your own personal assets and finding family members and friends to back you. You will issue 40,000 shares of common stock to yourself (and the other members of the executive team) at 100 per share in exchange for the 4 million investment.

After this period, you will have the opportunity to approach the venture capital community for additional equity funding. In quarter 4, you will be able to receive up to an additional 5 million for your future development.

Closely Held Stock

As the owners of the company, your team will invest money in your own firm by selling stock to yourselves. In the first quarter, you will invest 2 million into the firm. An additional 2 million will be invested over the next two quarters.

This quarter, you sold 20,000 shares of common stock at 100 per share to yourself or your team members. Your firm can use this money (2 million) for all the expenses that will occur this quarter. The unused cash will be carried over to the next quarter.

Certificate of Deposit

Commercial banks and other institutions in the marketplace offer a 3-month certificate of deposit that allows you to invest cash and earn a 1.5% quarterly interest rate.

If you decide to invest money this quarter, you will be able to withdraw it at the beginning of the next quarter.

YOUR TASK

In the Workspace, enter the amount your company would like to deposit this quarter. Be sure to check how much interest you will earn by the beginning of next quarter.