Evelien: ‘Borders goes into administration’

After many success stories of companies who found a solution for their financial problems, mainly caused by the economic downfall, I’d now like to highlight that even big companies with a fixed value can fail their corporate finance.

The Borders bookshop chain in the UK, which employs 1,150 people, has lost the battle. The company suffered from increased competition from online retailers and supermarkets. Further, they faced severe cash flow pressures.

Due to several credit insurers who had reduced their cover to Borders, some of their suppliers became less willing to trade with them and stopped or reduced its credit.

This all made it really difficult for Borders to fill up its stock levels, which decreased its customer service and lead to declining revenues.

Borders tried to survive by seeking for a buyer for all or some of their outlets, but they couldn’t reach their goal.

Borders is a typical example to say that credit insurance is a symptom of a business in jeopardy, in a dangerous situation.


I believe that Borders failed their corporate finance because they hadn’t enough reserve to bridge periods of less credit. They had to foresee that this could happen, definitely when you’re in a branch with growing competition.

Of course not everything is due to the decreasing credit insurance. When the traditional bookshop became less popular and cheaper alternatives like supermarkets got more attention from the customers, Borders had to intervene.

Borders’ marketing department should have used their creativity to come up with new ideas and strategies to attract their customers by new or better services.

As a business you always have to create value for your customers or they will turn their back on you. The bankruptcy of Borders is due to a mix of human miscalculations.

Nowadays, innovation is the key to a long and successful story. Consumers are more demanding than twenty years ago. They expect to buy the latest cell phone and one month later, they want to find a more updated version. The most expensive television or car isn’t as exclusive after a while than it was at the time of purchase.


By Evelien Van Gaeveren

Source: BBC NEWS, ‘Borders goes into administration’. BBC News, November 26 2009, www.bbc.co.uk.

Livine: Businesses in U.S. Brace for New Rules on Emissions

I’ve chosen for an article about the reducing of the emissions that cause the global warming. I think that’s a very interesting article because it’s important for our future, health and the planet. It’s also a very active topic.

The companies have waited a long time for the day that they would be obligated to reduce their emissions who cause the global warming. Wednesday 25/11/2009, President Obama has proposed a national goal for such reductions.

A lot of American companies have already thought what they should do to achieve these standards. Many have made their conclusion years ago that it’s unavoidable that they must do something and they wanted to know what exact rules there are. Many companies have registered their emissions to analyze their results. Some of them have already made notable progress.

Big companies as General Electric, Ford Motor Company and PepsiCo have worked with environmental groups to found the United States Climate Action Partnership, an association where they can look for solutions to decrease the emissions in the whole economy.

Mal-Mart, the biggest retailer, has outlined strict targets to rebate the energy consumption in his stores and he has given thousands of his suppliers the instruction to report their energy consumption and their carbon dioxide emissions.

Duke Energy, a power company says that clear rules are necessary to make sure that all the companies who are familiar with coal-fired power plants can finance their transition to lower carbon fuels, natural gases or nuclear energy.

The leadership of the White House is required and the only way to get a bill by the Senate. A bill means certainty and clarity and this is what the companies need.

Until now, the U.S is the only industrialized economy who fairs the targets for reducing the greenhouse. Limiting the greenhouse means the anguish of the energy-intensive companies like petroleum refineries and coal-fired power plants and elucidating the development of alternative energy like sun and wind. The U.S claims that this will lead to higher energy costs and petroleum accounts, less domestic production and an increase of fuel import and a slower growing economy.
Luckily, their are still some companies like Apple and Nike who contradict this and support the reduction of the emissions. They think that its urgent time for changes and that the companies have to take control and should invest in sustainable business and have to look for innovative solutions.

There are many projects but there’s still no agreement that can ensure that the targets of the President will be pursued.

I agree with Apple and Nike, it’s in the hands of the companies and they need to do something before it’s too late and it’s in the interests of everyone. So the companies have a great responsibility. We just live ones so we have to take care for our planet and think at our children and their future.


You can read the article on: http://www.nytimes.com/2009/11/26/business/energy-environment/26emissions.html?scp=5&sq=corporate%20finance&st=cse


Greet!
Livine

Lien: "Stagecoach books its seat as Spanish Group raises bid for National Express"

For my final blog on corporate finance, I have read an article dealing with a part of corporate finance that hasn’t yet been talked about that much; namely ‘takeovers’.

The British transport operator, ‘National Express’, is thinking about selling its business after having to endure some difficult times with poor financial results, losses etc. which have pulled down the value of its shares.

Amongst the investors, is the company’s biggest shareholder, a Spanish group, which has already made an offer, but which has now raised its final offer after first being rejected. Their plan is to buy the company and then again sell a part of it to National Express’ competitor, Stagecoach.

National Express however still doubts and is also considering another option. It would try to get out of (a part of) its debts by issuing rights worth £ 350 million. This might be a more difficult option because of for instance its low share prices.

Opinions about the takeover are still very diversified and the company just wants to have time to consider all of its options.

For my last blog, I found this article to be again very interesting. It shows how a company can get in such big financial troubles that they are unable to get out of these problems themselves, so they have to seek help in more desperate measures. One of those measures can be selling (a part of) your company. Then again, this might be the only way to insure that your company will survive and to still wake away with some money yourself.

In the case of National Express, I suppose it would be the right thing to do. The rights issue that they are considering would be too dangerous. Maybe the shareholders would consider buying new shares to save the company. Then again, not all of the money can come from existing shareholders and that is where the biggest problem would be, I suppose. Maybe the price of the shares is too low to attract enough new investors. Overall, in my opinion, the takeover is the best way to save the company from its debts.

I find this article to be a good last article about corporate finance, because you don’t only have the aspect about how a company gets a part of its capital, by issuing shares, but also the part in which they describe what a company’s options are when its financing gets into trouble. For instance by selling the company or issuing new rights.

Thank you for reading this blog the last couple of weeks!

Greetings,

Lien

Article: “Stagecoach books its seat as Spanish Group raises bid for National Express”

Source: http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article6820976.ece Date: 4th September 2009