MBA 520 Building Magnetic Levitation Train System & Disney Discussion Response Identify whether you support their investment recommendation or not, and exp

MBA 520 Building Magnetic Levitation Train System & Disney Discussion Response Identify whether you support their investment recommendation or not, and explain why. Do you foresee any risks that may prevent the chosen companies from realizing the anticipated benefits of the investment? Adam Seoudy
When researching the Walt Disney Company, it has been obvious
the company has significantly invested a lot of their future into
the burgeoning online streaming service Disney Plus. With the
streaming service set to run at a loss well into 2024 Disney will
have to rely on other business segments to maintain the
company’s financial health and provide enough cash flow to pay
the interest on the large debt that the company has taken on.
A look at the Disney financials shows that the company
generates over 75% of their profit in North America with 70%
coming through the Parks/Resorts and Media segments (Disney,
2018). With this in mind it is clear to see that the company
must try to ween themselves away from being so dependent on
the North American market. Therefore my investment
recommendation would be to build a Disney Park and resort in
Mumbai, India.
There are several pros to this opportunity, the first of which is
being able to lean into what is already a core competency of the
company. Theme Parks and resorts have been Disneys bread
and butter sine the first park was opened over 50 years
ago. With the cost of labor and building cheap, the cost to build
such a park/resort would be relatively low while at the same
time allowing the company to tap into what is a rapidly
expanding middle class in one of the worlds largest countries
and fast rising economies.
Ultimately the biggest issue I see with such a venture is the
initial start up cost and the time needed to build and establish
the resort. As mentioned previously, the company already has a
large debts from recent acquisitions so taking on more would be
unwise at this time. Linked to those debts are the large interest
payments that the company faces, payments that take a
considerable bite out of the free cash flow the company would
be able to reinvest into a park expansion opportunity. With this
in mind and the company so heavily leveraged in pursuit of their
online business/presence, taking on further debt or use of free
cash flow would most likely be unwise at this time.
References
Disney (2018). 2018 Annual Financial Report. Retrieved
from https://www.thewaltdisneycompany.com/wpcontent/uploads/2019/01/2018-Annual-Report.pdf
Brooke Andrews
For Tesla, Inc. I would recommend that they invest in building a
magnetic levitation train system, also known as a maglev train
system. Maglev trains are floating vehicles that utilize
electromagnetic forces to propel the train car forward (Boslaugh,
2014). This investment would be a new mass transportation
system that commuters would use on a daily basis to go to and
from work. This investment allows Tesla, Inc. to continue with
their mission of “…accelerating the world’s transition to
sustainability” (Tesla, Inc., 2019). Their current customer base is
consumers who are focused on reliable, sustainable, and
greener resources, and the maglev train fits in nicely with this
target. In addition, Tesla, Inc. is known for their electric vehicles
and is already trusted by consumers within that industry for
their transportation needs. The maglev train would allow Tesla,
Inc. to reach a broader network of consumers: those that are
commuting but not in a Tesla, Inc. electric vehicle.
The potential investment has a huge effect on budgeting and
related business decisions as it would require a large amount of
resources in order to run properly. When building a maglev
train, the cost to build the system is higher than the cost of the
traditional rail system we have in today’s society in America. The
cost to build a maglev system is anywhere from $18-55 million
per mile while the traditional rail system is $10-40 million per
mile. Depending on the material availability and region, the cost
per mile to build the maglev system could be comparable to the
cost of the traditional rail system (Vuchic & Casello, 2002).
However, the maglev system has a long-term cost advantage, in
that, the maglev trains are more efficient and cost effective to
maintain due to less wear and tear on the cars and rails as the
train uses magnets to propel itself forward (Boslaugh, 2014).
Additionally, “Maglev trains produce little to no air pollution
during operation, because no fuel is being burned, and the
absence of friction makes the trains very quiet (both within and
outside the cars) and provides a very smooth ride for
passengers” (Boslaugh, 2014). Therefore, Tesla, Inc. would be
investing in a new venture that is eco-friendly, similar to their
current products and services. The company would be required
to make business decisions in order to accumulate enough cash
flow to begin this project, obtain more investors, ensure
governmental cooperation with their project, and allocate
resources to the maglev system. It may mean taking resources
from other areas of the business until the project is complete, or
employing more individuals for this project. Due to the low
maintenance costs of this type of train system, it would likely be
a high initial investment and drop to a relatively low investment
to maintain when the maglev train is fully operational. This
would affect short term spending for the company so they could
afford the initial investment costs of the train; however, it could
mean a steady flow of income for Tesla, Inc. as they continue to
develop their electric vehicles. The benefit should outweigh the
cost, depending on factors such as land cost, materials cost and
availability, and the initial investment cost as the maglev train
would generate income and have relatively low maintenance
costs.
References
Boslaugh, S. E. (2014, January 28). Maglev train. Retrieved from
https://www.britannica.com/technology/maglev-train.
Tesla, Inc. (2019). About Tesla: Tesla. Retrieved
from https://www.tesla.com/about.
Vuchic, V. R., & Casello, J. M. (2002). An Evaluation of Maglev
Technology and Its
Comparison With High Speed Rail. Transportation Quarterly,
56(2), 33–49.

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