Optimal Capital Structure

The capital structure of a company refers to the mix of the long-term finances used by the firm. It is the financing plan of the company. Financing the firm’s assets is a very crucial problem in every business and as a general rule there should be a proper mix of debt and equity capital along with equity shares is called financial leverage or trading on equity. The long term fixed interest bearing debts is employed by a firm to earn more from the use of these sources than their cost so as to increase the return on owner’s equity. It is true that capital structure cannot affect the total earnings a firm but is can affect the share of earnings available for equity shareholders. The capital structure decision can influence the value of the firm through the cost of capital and trading on equity or leverage. The optimal capital structure Continue reading

Multidivisional Organizational Structure

In Multidivisional Organizational Structure, each business unit is placed in a self-contained division and supplied with all support functions. Thus each part essentially operates separately from the other parts of the company.  The office of corporate headquarters is created to control and oversee the divisions. Headquarters also provides corporate support functions, such as finance and R&D.  Divisional managers have operating responsibility; corporate managers have strategic responsibility.  Each division is treated as a profit center and can adopt the structure and control systems that best serve its strategy. A multidivisional structure has several advantages. Enhanced corporate financial control is one advantage of the multidivisional structure. The profitability of the different divisions is very clear, allowing the corporate staff to readily determine the best resource allocation scheme. Enhanced strategic control is another benefit, because corporate staffs are freed from operating responsibilities, and can concentrate on corporate strategy. The structure overcomes limits to Continue reading

The Concept of Co-Sourcing

New methods of outsourcing are today redefining the way of working. Co-sourcing  is a situation of partial  outsourcing, in which a business function or process is performed by both internal staff and by an external party or external resources, such as consultants or outsourcing vendors, with specialized knowledge of the business function.  Compared to full outsourcing, for the traditional owner of the processes, co-sourcing has advantages of staying in control, a non-transactional partnership and the ability to grow the own knowledge level of the co-sourced process. One such way is co-sourcing which is an investment relationship marked by shared objectives, shared risks and shared rewards between two companies, one of which is a service provider. Specifically, the service provider would have to help restructure the company and be willing to make new investments, while driving out costs from the co-sourcing company’s existing ways working. Although it may seem similar to Continue reading

Case Study: The Not-So-Wonderful World of EuroDisney

The Walt Disney Company is the parent company of Euro Disney and other Disney company in various countries making it a network of international family entertainment network in all house hold around the world with four business diversification which are media networks, parks and resorts, studio entertainment and consumer products. Disneyland, Disney world and all places Disney have been known as the happiest place on earth, the goal of Walt Disney is opening Disneyland was not to just be a theme park, but to be a theme park that the entire family could enjoy. Although the Walt Disney Company was founded in 1938, it was not until 1952 that the theme park, Disneyland, was opened to the public. When Walt Disney opened an amusement park in the middle of Southern California orange groves in 1955, he changed the way that Americans, and the world, viewed such entertainment. Once the domain Continue reading

Composition of Indian Capital Market

Capital market is the market for long term funds, just as the money market is the market for short term funds. It refers to all the facilities and the institutional arrangements for borrowing and lending term funds (medium-term and long-term funds).it does not deal in capital goods but is concerned with the raising of money capital for purposes of investment. The demand for long-term memory capital comes predominantly from private sector manufacturing industries and agriculture and from the government largely for the purpose of economic development. As the central and state governments are investing not only on economic overheads like transport, irrigation and power development but also on basic industries and sometimes even in consumer goods industries, they require substantial sums from the capital market. The supply of funds for the capital market comes largely from individual savers, corporate savings, banks, insurance companies specialized financing agencies and the government. Among Continue reading

Case Study of Dell: Primary Target Markets and Positioning Strategy

Dell is a Multinational Corporation which is headquartered in the United States of America. The company deals with computer technology devices where it designs, manufactures and distributes personal computers and other complimentary products and services. The company was formed in 1984 by Michael Dell and was initially referred to as PCs Limited. When the company was formed, they built the computers they sold from stock components but made sure that the computers were compatible with the IBM framework. However, this was changed in 1985 when they started selling their own computer designs. The first computer model that the company designed and sold in 1985 was called Turbo PC. These first models were custom assembled according to customer requests. In order to market their computers, the company advertised them in computer magazines that had a national outlook. The company was however rebranded to Dell Inc. in the year 2003 in order Continue reading