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Lucky Prawn Farm

Essay by   •  October 11, 2011  •  Case Study  •  3,879 Words (16 Pages)  •  2,972 Views

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hhttp://www.antiessays.com/free-essays/31437.htmlLucky Prawn Farmhttp://www.termpaperwarehouse.com/search_results.php?query=indutrial+engineering&action=search

Lucky Prawn Farm is a case that highlights the importance of management and operational strategies and control. At the heart of the startup's state of affairs is a dire need for additional operational funding due to unforeseen expenditures for its infrastructure requirements (as opposed to requirements for the harvest itself—fry, feeds, etc.).

LPF was launched with the vague strategy of raising "above-average returns" with minimal investment. The investors did not have experience in the industry, and the industrial partner himself, Ben Torres, had no actual experience in raising prawns. Acceptable returns were not defined, and the startup period for stabilizing the venture was not determined. Consequently, no rate of return was discussed for the initial investment, and a minimum profit/maximum loss threshold was not set to signal when to shut down.

Day-to-day business control resided entirely on the Operations Manager (Torres) whose services were initially valued at P25,000, the same amount each of the three capitalists invested. While it was not discussed whether this contribution arrangement would have held perpetually through all financing needs, it should have been reasonable to expect Torres to contribute actual cash in succeeding funding requirements. Moreover, management accountability on the part of Torres to the three capitalists was not discussed. If setting up an arbitrary P75,000 for the first prawn crop was already unqualified, the inexperienced group also did not plan for quantitative targets after the first prawn crop. Management control was not emphasized; hence, a system for performance feedback and evaluation was not established.

Torres claimed that the loss on the second harvest was due to decreased prices, however, analysis clearly shows that even if the previous year's price was applied to the 1989 harvest, the revenue still would not offset the cash outlays. After the first harvest, it would have been possible for the...

Lucky Prawn Farm

Lucky Prawn Farm

Case Analysis

Management

Major Problem

How can the partners of the Lucky Prawn Farm manage their prawn farming venture?

Minor Problems

How can they settle the issue about poor communication and transparency?

How can they assure that their (the partners) total invested capital will not be put into waste?

Alternative Courses of Actions (ACAs)

a. Improve Internal Control;

b. Regular visit of the three non-residents to the farm;

c. Shift to Bangus Business and stop Prawn Farming;

d. Ben Torres should be given some freedom in running the venture.

a. Improve Internal Control

This will require Ben Torres, the managing partner, to make monthly Financial and Managerial Reports, and to send proposals to be approved or disapproved by the three non-resident partners.

Advantage:

* There will be a transparency in all of the finances of the venture;

* There will be no problem or questions to where the money is spent;

* It will be easier for the partners to check the venture's condition and financial position;

* Torres can state what he needs for the betterment of the business;

* Can be an avenue for improved communication between partners;

* Will lead to improvement in decision-making and investment-making for the business.

Disadvantage:

* Ben Torres might need to hire additional secretary to make the financial reports which make it more expenses;

* Ben has to spend time in encoding and transcribing the finances;

* Decision-making may not be uniform (others may approve, others may not);

* There is a possibility of misunderstanding and result to a conflict between the partners.

b. Regular visit of the three non-residents to the farm

This will mandate partners to take responsibility in making periodical personal check-ups in the actual business site. This will also be a form scheduled meetings for the partners.

Advantage:

* Clearly check the status of the farm;...

Lucky Prawn Farm

Lucky Prawn Farm

Essay by terronina, University, Master's, A-, September 2006

This case seems the classic example of businessmen's careless undertaking of a venture. While successful investors of the same industry report its profitability, the owners of Lucky Prawn Farm seem to have put too much faith in their declaration and neglected to do their own research and planning. It seems that they presumed having a pond and a manager with first hand experience in observing prawn culture practices were enough. Had they done more research on the subject they would have found that though shrimp aquaculture promises high profitability boosted by the demand of consumers for high-value seafood products and fluctuating supply from fisheries, in the long term returns from this venture rarely matched expectations due to the risks involved. These risks could be minimized through careful planning, feasibility analyses and prevention measures, however, reading through the case, they seem to have overlooked all these procedures leading to costly adjustments that were considerable and difficult to absorb relative to their initial investment. With the situation already presented I would suggest that the owners concentrate on their first pond and set a start-up period for stabilizing the venture.

They should also define the acceptable rate of return for their investment and have an assessment of improvements that need to be financed, their ranking according to priority

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