Databank in Africa Harvard Case Solution & Analysis

Q3: How would you describe the financial performance of Databank Group’s four major businesses as reported in exhibits 7 and 8? Do you find the company’s projections in these exhibits credible? Why or why not?

The four major businesses of Databank’s group involve stock brokerage (DBL), asset management (DAMSEL), research service (DRIL) and finally corporate finance (DFS). When the Ghana Stock Exchange started trading in 1990, Databank was the first company in Ghana to provide stock research and among the first to provide brokerage services to clients on the nascent exchange. The business unit has a large presence in the market with approximately 85% equity market share in the Ghana Stock Exchange. The DBL is a stock brokerage division whose revenues have increased with approximately 41% in ten years. The operating expenses of stock brokerage division were found to have an increase of 22%. EBITDA of the division has increased by 78% from 2003 to 2013 and finally, net profits of DBL have increased by 76%.

The next business unit is Databank’s asset management division that has shown a tremendous growth in the past five years and contributing more than any Databank business in terms of both profit and revenue. In asset management division, most of the assets came from the flagship brand of the company known as Epack investment fund. Because of the scarcity in terms of resources, Damsel has dependent word of mouth marketing strategy mostly. The revenue of the asset management division of the company has increased from 79% during the time span of ten years, and it has been the highest in terms of other divisions. In addition to this, the operating expenses of the asset management division were found to have an increase of 53% from 2003 to 2013. Again, the operating expenses of the DAMSEL division are highest among all other division. The average earnings before interest, taxes, amortization and depreciation are found to be increased by 25%.

The third division of the firm is research services that are engaged in providing internal advice to the company’s money managers. In addition to this, DRIL provided research commentary on the region to such international media companies like BBC, Reuters, CNN and Bloomberg. Revenues earned by the company’s DRIL division are found to be 44% followed by 27% of operating expenses and 72% of net profits. The last division of the company is corporate finance that is based on providing investment banking services like corporate restructuring, initial public offering, mergers and acquisitions, bond structuring and floatation. The company is known to be a first mover in corporate finance industry in Ghana.

In addition to financial statements analysis of Databank, ratio analysis has been done as well to identify the liquidity, profitability and leverage of the company. In order to analyze the liquidity of the company, current ratio has been calculated and found to be 1.02 in 2002 that increased to 1.36 in 2013. To analyze the asset management, total assets turnover and operating assets turnover has been calculated. Total asset turnover is found to be 3.27 in 2002 that further decreased and reached 1.94 in 2013.

Q4: How would you organize or map the business opportunities Databank faces? How would you then evaluate these opportunities in light of strengths and weaknesses of Databank?

One of the major advantages for Databank in Ghana is the richness of the country in terms of gold deposits and cocoa beans. Furthermore, the company is known to be a pioneer in the Ghana’s capital market and processed half of the liquidity on the Ghana Stock Exchange thus, enjoying first mover advantage. The company is known to be a risk taker therefore, enjoys first mover in several fields in Ghana. Although the size of the company is small with limited employees but still the company possesses strong management. In addition to this, Databank’s unique culture has led to strong loyalty and shared sacrifice from its seniors as well as lower level employees. Asset leverage, financial leverage and economies of scale are some of the few strengths of Databank.

As far as the weaknesses of the company are concerned, the company’s foundation is Ghana that is a low-income country. Along with this, the country is facing political instability since independence. Problems in terms of corruptions, poor governance, and weak structures are some of the weaknesses in the country that left the economy of the country in economic stagnation.  Above all this, the country is known for corruption in politics, hunger, poverty, and wars on ethnic groups. In addition to this, Databank is also facing inefficiencies in its workforce as there is a high rate of understaffing. Moreover, the technology used in the company has become obsolete and, therefore, not useful. The company is also facing issues related to high staff turnover...........................

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