Analyzing the Case Café de Nicaragua - Cecocafene
Cecocafen: Providing Hope in an Unstable Market
Case Synopsis
This case explores the viability of an inexperienced coffee cooperative buying a dry processing mill in Nicaragua. The Center of Northern Coffee Cooperatives (Cecocafen) is only two years old and believes that it is vital to their social mission and business strategy that they control the entire production chain to improve quality and ensure consistency of its product. The cooperative faces substantial challenges in completing the transaction, including executing a successful business model in the face of extremely volatile market conditions and uncertain political and economic stability. Furthermore, there is no precedent to follow, as no cooperative has ever attempted to purchase a mill.
Only a thorough examination of the numerous risks and uncertainties facing Cecocafen will determine whether or not the transaction is feasible.
Objectives of the Case
By working through this case, students should develop an understanding of the political, economic, and social context around a strategic investment decision in an emerging market. Specifically, the case requires an analytical look at the various financing options available for enterprises that promote social welfare, the impact of nonfinancial returns in determining whether or not to accept or reject an investment, and the importance of evaluating real options in building a longer-term view of a particular scenario. In addition, the case asks students to evaluate both the explicit and implicit risks associated with a project or investment, explore alternative investment/project valuation methodologies in light of ambiguous or incomplete information, and understand the role of the cost of capital and cost of debt in analyzing financial returns.
To a lesser extent, the student should also consider the strategic implications of vertical integration. Primary objectives of this case include:
• Risk assessment of the coffee
Case Synopsis
This case explores the viability of an inexperienced coffee cooperative buying a dry processing mill in Nicaragua. The Center of Northern Coffee Cooperatives (Cecocafen) is only two years old and believes that it is vital to their social mission and business strategy that they control the entire production chain to improve quality and ensure consistency of its product. The cooperative faces substantial challenges in completing the transaction, including executing a successful business model in the face of extremely volatile market conditions and uncertain political and economic stability. Furthermore, there is no precedent to follow, as no cooperative has ever attempted to purchase a mill.
Only a thorough examination of the numerous risks and uncertainties facing Cecocafen will determine whether or not the transaction is feasible.
Objectives of the Case
By working through this case, students should develop an understanding of the political, economic, and social context around a strategic investment decision in an emerging market. Specifically, the case requires an analytical look at the various financing options available for enterprises that promote social welfare, the impact of nonfinancial returns in determining whether or not to accept or reject an investment, and the importance of evaluating real options in building a longer-term view of a particular scenario. In addition, the case asks students to evaluate both the explicit and implicit risks associated with a project or investment, explore alternative investment/project valuation methodologies in light of ambiguous or incomplete information, and understand the role of the cost of capital and cost of debt in analyzing financial returns.
To a lesser extent, the student should also consider the strategic implications of vertical integration. Primary objectives of this case include:
• Risk assessment of the coffee