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Case Analysis

Karen Vincent and Zodiac Corporation




1. Opportunity Evaluation

Zodiac corporation is clearly in a crisis. Therefore the investment opportunity, if any, needs to be evaluated from the perspective of a turn-around strategy.

The “Back to Back” group traveling industry in 1,973 is in its early development stages, which at first glance provides an opportunity for early entrants who are able to take advantage of the general public’s unmet need for low-cost leisure travel. The industry’s growth potential is large considering that customers are very likely to be enticed by the offer of saving 30 to 40% of what they would normally pay by making individual travel plans.

The lower price to consumers therefore provides a source of competitive advantage when comparing group traveling versus the conventional way of booking travel plans. However, when comparing TTG to other group-traveling companies, whether existing or potential new entrants, we find it will be very difficult to maintain competitive advantage because the service provided is easy to imitate or even to improve by well established indirect competitors such as nation-wide travel agencies who can take advantage of their existing platform to include group-travel in their portfolio of services. For the same reasons, achieving value added potential through differentiation and long-term sustainability are estimated to be low for TTG.

The profit margins, as projected by the financial statements, seem low (approximately 11 % per passenger not including overhead costs). With increased competition, profit margins are likely to become even lower.

From an investment perspective, the risks are high because the proposed venture is both at its very beginning stages and the entire investment amount is required for working capital and hence there are no tangible assets.

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