Cut Your Losses or Plunge Deeper into Debt? - CargoExchange.Net Pte Ltd

Nearly every entrepreneur faces this dilemma at one point or another: continue borrowing to keep the company afloat or face reality, pay out creditors, and call it a day. For Singaporean serial entrepreneur, Marianna Tan, the day of reckoning came in February 2001. As Professor Michael Pich and Mei Qi explain in this recent case, Tan’s company, CargoExchange.Net Pte Ltd, had just enough cash to keep afloat for another three months. They review her original idea for the business, the market outlook and competition, and ask which of three options seems most viable: search for more investment, change the current business model, or pull the plug and admit defeat.

by Michael Pich, Mei Qi
Last Updated: 23 Jul 2013

When Singaporean serial entrepreneur, Marianna Tan, started CargoExchange.Net Pte Ltd in 1999, she was already a seasoned professional, having previously launched two companies. Her idea for CargoExchange.Net Pte Ltd, a B-to-B e-commerce exchange for surplus ocean-going container space came while providing third-party logistics in warehousing, freight forwarding and international relocation needs to some of the world’s largest companies.

She saw an opportunity to establish a B-to-B e-commerce site, offering buyers and sellers of containerised cargo space to post anonymous bid and ask prices. (Anonymity was key, as it allowed sellers to protect their agreed-upon rates with long-term customers.) High transaction volume would allow for revenue generation, both from a 1% fee charged to both buyer and seller, and indirectly through membership fees and cross selling of related services.

But fifteen months after its inception (and three business models later), the CIO and Acting Head of Finance Greg Blackwood, an INSEAD MBA, took a hard look at the numbers. As Michael Pich, Affiliate Professor of Technology Management and Entrepreneurship, and Mei Qi, Senior Research Fellow explain, the B-to-B e-commerce craze had already started to wane and VC money was harder and harder to come by. With the company projecting another two years before it would turn a profit, Blackwood saw three viable options:

  1. Prove the value of their current business model to investors,

  2. Change their business model to one that could provide near-term profitability, or

  3. Pull the plug and use the remaining capital to ramp down operations and return what was left to original investors.

To help readers assess these options, the authors provide an overview of the market, the competitive landscape and a history of the company. How has the business model emerged and evolved over time? Is this a viable enterprise or is it simply the wrong business model? The case is particularly useful in courses on entrepreneurship and strategy.

INSEAD 2002

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