KARAOKE BAR BUSINESS CASE STUDY

MR. CHUA CASE STUDY 3

Rolan B. Mamalias

January 21, 2021

Thor Domato Jr.

Bachelor of Public Administration

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KARAOKE BAR BUSINESS CASE STUDY

The Problem

Mr. Chua in his plan for expansion by putting up a branch of his grocery near Cubao, has decided to take

the third option: incorporating under the business name, “Chua Groceries, Inc.” He figures that he needs a

subscribed and paid-up capital of ₱100 million to be submitted to the Securities and Exchange Commission

(SEC). He has only ₱50 million cash in the bank. He invited two close friends to chip in the balance of ₱50

million to make up for the balance. Mr. Chua wants to be elected as president and his wife as treasurer of the

company. His two friends would be elected vice-president and corporate secretary, respectively.

While Mr. Chua, his wife and son, the manager of the planned branch of the grocery store, would control

the day-to-day operations of the company, he does not feel comfortable with the 50-50 sharing of the capital.

What if relations with his two friends turn sour in the future? Aggressive and ambitious that Mr. Chua is, what

worries him is if he further expands the grocery business in the future and the two friends do not agree, there

would be a deadlock in the voting. His two friends could be a bar to his future expansion plans. Mr. Chua

decided to go on a 51-49 percent sharing in the stockholdings of the planned company. 51 percent is to be

owned and controlled by him. He needs therefore ₱2 million more for his paid-up capital to assure control of the

company. His problem is, where would he get that much money fast? Which sources of funds could Mr. Chua

avail of on credit?

Goal Setting

With the investment this big, Mr. Chua must have already done his research on the success rate on the

expansion of his grocery business. Since he already has an existing similar business, it is necessary for him to

comply in the required obligation imposed by the Securities and Exchange Commission. Now that he already

has a concrete plan to have a partnership with his two friends but still wanted to have a much bigger shares to

company, he can always lend funds to local banks to help him with the investment needed.

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KARAOKE BAR BUSINESS CASE STUDY

Executing the Plan

Once Mr. Chua got the agreement to have a share of 51% with his partners friends. He ca now proceed

and apply for a business loan in any local bank of his choice. Since he already has an existing business, he

must already have a good credit history, cash flow history and projections for the business, collateral available to

secure the loan and many pieces of loan documentation that includes business and personal financial

statements, income tax returns, a business plan and that essentially sums up and provides evidence for the first

four items listed.

Measuring the Results

Now that Mr. Chua acquired the funds he needed; he will also now make sure to pay-up the funds

needed to be paid to the bank where terms was agreed on.

Sustaining Growth

Since he already has a successful first branch, it should be much easier for him to sustain the growth of

the second one as he already has enough knowledge and experience on handling such business and would

never risk a huge sum of funds if he is not confident enough that it would succeed.

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