Research the business environment of the Arab Gulf and the UAE. Using your research and the information provided in the case, describe the business context within which Ascom operates.
ASCOM Marketing was launched by Vijay in 1991. In many of the countries in the Arab (Persian) Gulf region, UAE Law required that a national citizen must own at least 51% of the business. Hence Ascom was registered as a limited liability company with 100% legal ownership in the hands of an emirate national who was willing to sponsor Vijay and his family. The national sponsor was responsible for all the financial and legal obligations of the business and also owned the assets of Ascom. Vijay owned the responsibilities of the business.

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The service provided by the ASCOM include design and production of corporate news letters and community shopping guides, conceive designs and produce corporate identity programs, trade show exhibits, packages, signs, booklets, annual reports and print radio and T.V. Advertising. Ascom had a license only in PR and marketing communications. As there were government restrictions on media licenses the company found it impossible to get to a license to publish magazines.

Vijay launched the first issue of Asians Abroad (AA) in 1993. AA was characterized as a quality lifestyle magazine which targeted the professionals and business segment of Asians in the Middle East. The publication was registered in USA with ASCOM marketing as the marketing representative in the Middle East. This way Vijay protected not only the central assets of the business, the magazine, but also allowed ASCOM to remain in compliance with its license. Vijay enjoyed the creative part of the business and preferred to spend time focusing on AA content and presentation and the idea stages of client projects.

The company employed 6 employees in sales, accounting, production and in writing and editing. Vijay introduced a five day work week and did not mind flexibility in working hours as long as his staff was responsible. Most of his employees were paid salary and compensation packages were typically as prescribed by UAE labor Law. By 1996the magazine revenue comprised 40% of the company revenue with a balance drawn largely from other print media services.

Page 2 AD 754 Cases Essay

What kind of person is Vijay?  What were his reasons for starting Ascom?  Vijay was a hard working and considerate a “Cando” person. He exhibited many  of the characteristics associated withmarketing stereotype, creative, positive, persuasive and high energy. He had a passion for media business, creativity and innovations. He tended to be action oriented and not prone to attending a lot of details when reviewing ideas, relying heavily on intuition and hard work to make things happen. Vijay was good at Networking and received invitations to speak and provide training on various business topics for companies and organizations in Dubai.

He was discontented with the nine to five routine. He also felt that working for someone was boring and lacking integrity and realized that he did not want to live that way for the rest of his life. These were the reasons for Vijay to quit his job and launch ASCOM Marketing.

Discuss Vijay’s reasons for starting ETC.
Vijay had launched the ETC as a way to diversify revenue and strengthen the cash flow of ASCOM. It was to compliment existing activities of the company and to strengthen the cash flows of ASCOM by diversifying the source of revenue. ETC was to be a club that offered traveled benefits to south Asian travelers in the Arab(Persian )Gulf. He felt that ASCOM could target the Asian travelers at a low cost than other competitors. He expected that the club dues would bring in the necessary capital to manage the increased cost of launching and growing the business, along with the cash flow coming from ASCOM. The major cost of this business was promotion and involved the design and promotion of printed material, which ASCOM was capable of doing.

4. Describe the key events over the life of ETC that led to its ultimate closure.

 The capital required for expansion of ETC was taken from the internal generated funds and trade credit. Cost cutting began in 1991 and the financial condition of ASCOM began to deteriorate. In 2001 the ETC was terminated and all other offices were closed except for the main ASCOM office in Dubai.

The key events that led to the failure of ETC were:

The start up phase of ETC taxed the management resources of ASCOM. More offices had to be opened and additional staff had to be employed to manage the ETC operations. No financial projections were developed or particularly well formed marketing plan was made and so the cash flow was erratic.

Vijay always moved forward with his initiative to launch ETC without knowing how it was going to work out. The expansion on demands of ETC combined with the slow business environment in existing business was depleting the financial resources quickly. There were competitors offering similar club services and they had more resources to commit than ASCOM. In your view, what led to the failure of the ETC business? Explain why you think this was critical to its closure.

The ETC business failed because of lack of capital funds, inability on the part of Vijay to give proper attention to his business coupled with severe financial mismanagement. These factors led to a point where it was not financially viable to operate the ETC.

Recommend at least three significant things Vijay should do in the future in order to better handle a “ETC initiative”.
Recommendations to handle a better ETC initiative:

·  Develop a detailed marketing strategy for any business.

·Financial planning is very essential for a business venture.

· Separate business entity should be formed so that the existing business does not face financial strains.

Conduct a financial analysis of Ascom during the 1997-2000 periods. Assess the viability of the business at the end of 2001.

Financial analysis of ETC

A detailed financial analysis of Ascom`s balance sheets ,which included business figures of ETC, during the years 1997 to 2003 reveals the following aspects.

Equity for the both the operations of Ascom & ETC was clubbed and in fact the owners had not brought in capital to fund the operations of ETC causing severe drain on the  just flourishing business of Ascom.

Owner’s equity has increased during the period till 1999,mainly by ploughing back of profits, which indicates a positive trend. Whereas from the year 2000 onwards equity has depleted to negative figure of -$ 98433 during the year 2002.

In any sound business venture the Current Assets should take care of paying off the Current Liabilities and long term funds are infused by way of equity and bank borrowings which are to be restricted to certain levels. In the matter of Ascom we find that the working capital needs have not been fully met hence the company faced severe financial crisis during the years 1997 to 2001.

Gross profits of Ascom ,  after starting ETC, showed an increasing trend during the period from1997 to 1999,during the year 2000 it went down to $ 374024 showing a 50% fall in profits. Though cash profits, which includes depreciation added back, showed an increase it was not sufficient to meet the financial needs of ETC and Ascom as well.

The viability of the business of ETC was under severe strain during the year ended 2001 mainly because of want of equity, the pressure for payment to creditors and business conditions continued to be difficult in Dubai.

End 2000 and beginning of 2001 ETC was consuming the finances of Ascom as well.

The data base of the customers of ETC which was utilized for running the business was written off during the year 2002 ( which included the financials for the year 2001) causing negative capital and the net income was a loss of $ 347403

Considering the negative financial position of Ascom and the business climate prevailing in Dubai it is suggested that Mr. Vijay should close the operations of ETC.

 Pinnacle Technologies – Middle East

Richard Ivey School of Business

The University of Western Ontario

Discussion Questions:

What contributed to the success of Pinnacle Technologies?
Jordan Samhuri was part owner and CEO of Dubai based Pinnacle Technologies. It was the largest supplier of mobile worker wireless data communication solutions in the Middle East. It was a separate entity but acting as a subsidiary of Psion Teklogix .

Pinnacle devoted 100% of its business to Teklogix and was able to negotiate a number of benefits which helped the business to grow successfully. Some of them are listed below:

· It could sell and service its Middle East customers directly or was free to establish its own network of dealers, resellers and agents.

· Pinnacle could purchase Teklogix products at a substantial discount which varied by product but averaged at least 30% off Teklogix international price list.

· It enjoyed better discounts than any other distributor.

· it could act like a subsidiary and be treated like a subsidiary without actually being one.

·Better credit conditions in terms of higher amounts of credit and longer payment periods.

·Free extensive technology training, much more than they give to their distributors.

· An advantage that Pinnacle had over the competition is that its decision makers and technical people were in the same region, hence important decisions could be made fast.

·In an effort to educate customers and attract new customers Samhuri was a frequent speaker at Indus conferences and short technology based courses offered in the region.

·Samhuri estimated that 90% of Pinnacle’s business was generated through personal relationships.

· Pinnacle was established in Dubai to allow them direct contact with customers rather than having to rely on local agents.

·Pinnacle assisted its customers in ensuring their Teklogix system worked seamlessly with their WMS, ERP or MRP software. Pinnacle also made modest changes to the company’s existing systems, but this was always done in the context of hardware installation.

·Pinnacle also supplied its customers with Zebra Bar Code printers and related software

·Customers were pleased with the products and services of Pinnacle because neither the wireless infrastructure nor the terminals malfunctioned or stopped performing.

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