Quattroporte Incorporation Harvard Case Solution & Analysis

QUATTROPORTE INC

1.      INTRODUCTION

QUATTROPORTE is a Canadian-based software company which sells its software related services online. The product range that QUATTROPORTE offers its customers is a full suite of tools that help QUATTROPORTE’s prospective customers to achieve operational efficiencies. The applicability of its tools and is not restricted to the operation only, but QUATTROPORTE’s services can also be used by the staff and clients for managing the financials and communications.

QUATTROPORTE is growing at a fast pace that generates significant chunk of their sales from Canada and has stood out in the past quarter sales; which makes the company’s business viable in its prospective industry. QUATTROPORTE’s management team has input a lot of efforts to make the company sustain in the industry by grasping significant interest for the product solutions worldwide. Due to this high growth potential in QUATTROPORTE, it is seen to enter into a hyper-growth situation with growth rate exceeding that of other industry incumbents and the overall industry itself.

Due to this opportunity, QUATTROPORTE’s management team received a request for managing significant new sales from abroad. Your Merchant Account provider (merchant account provider’s processes credit card transactions) requires you to open a foreign-based subsidiary in order to process sales outside of North America. To this point, the management team has three viable options to consider from and these are: Delaware (USA), British Virgin Islands, and Isle of Mann. Each of these three countries needs to be assessed for their economic potential and recommendations will be provided for leveraging a rapid growth in sales through the new subsidiary in order to enhance QUATTROPORTE’s global profits.

The case suggests that for a foreign based subsidiary, England can be a consideration where the transaction processing rates from the merchandise will fall in a range from around 1.75% to 2.25%. On the contrary, if the subsidiary is opened in the remaining areas of Europe as well as in Australia, Asia and South America then the rates for processing transactions will be considerably high that will fall between 2.95% - 3.95%. However, the three options given above such as Delaware (USA), British Virgin Islands, and Isle of Mann will be cost relatively low versus the other options mentioned above.

2.      THE THREE COUNTRIES (PLG)

a.      Isle of Mann

i.            BACKGROUND & ECONOMY

The Island of Mann is not a part of U.K or of European Union but it is a British Crown Dependency whose constitutional responsibility for military, defense and international representation is U.K Government. Its key industries are tourism; manufacturing and off-shore banking that holds its own currency known as the Isle of Mann Pounds (Manx) that is benchmarked with the UK pound sterling. With a population of 85,421 and a labor force of 41,790; the primary speaking business language is English. The unemployment rate is very low e.g. 2% and is void public debt that shows its strong position. Isle of Mann holds a strong position in the telecommunication industry and has a top-notch telecommunication infrastructure. The GDP of £3.2 Billion ($4.9 billion US) for a population of 85,421 is a remarkable achievement.

ii.            GOVERNMENT

The Government is seen to have a lax tax module for those high-tech and financial companies who plan to operate on the island, which has led opportunities for expansion of employment opportunities in highly developed countries. The Lieutenant Governor is the head of the Isle, whereas, the executive head hold the position of the Chief Minister. As it is a crown dependant Isle, therefore, it can take many decisions of its own laws except on the defense foreign affairs and the consular services. However, the Isle does contribute financially to these sectors.

iii.            TAXATION

Isle of Mann sets its own tax structures and has no novel corporate, estate or other taxes, however, the income tax structure is levied at low rates and the VAT structure is same as the tax VAT applied to UK companies. Income tax is void until profits aren’t earned on the Isle’s land and if it’s earned from sources such as property development and rental income then 10% tax is subjected to the earnings. The tax structure is seen to be lax and capital gains from the tax are null. However, there are risks associated with it too, such as if you operate outside of the Island then you find the tax structure a monetizing hell.

iv.            INTERNATIONAL RELATIONS

Isle of Mann is found to stand high on the ranking of International bodies such as IMF, WTO, OECD, FATF and FSF. With strict controls and compliance in the area, Isle of Mann holds a good standing and is the member of these bodies under United Kingdom.

v.            INTELLECTUAL PROPERTY PROTECTION

The UK stands second in the Intellectual Property Index after Germany as Isle of Man being under British Crown dependency has state of .....................................

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