DUNE TECHNOLOGIES: AN ENCHANTING DREAM OR A DREADFUL
NIGHTMARE? CASE STUDY SOLUTION
e
pl
CASE SYNOPSIS
m
Sa
The case revolves around the decision to be taken by Mr. Abdul Kasim, managing director of Arar Infra
Contracting Co. LLC (Arar), on the viability of a business proposal to start a new company called Dune
Technologies (Dune), an enterprise-grade software and application design and implementation company
under Arar. The proposal would benefit Kasim and his partners to get an early-mover advantage in the
n
cloud-based fire safety systems industry, but the project viability and funding of the investment remain
tio
unanswered questions.
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So
OBJECTIVES
• Apply the industry analysis framework to evaluate an investment.
• Evaluate the financial feasibility of the project from the perspective of cash flow estimation.
• Evaluate the value of the investment proposal using capital budgeting techniques.
• Conduct a sensitivity analysis to determine the project feasibility.
• Critically examine the various sources of funding suitable for a new venture.
The Case Solution Starts From page 7
, e
pl
ASSIGNMENT QUESTIONS
m
Sa
1. How can Porter’s Five Forces model framework be used to analyze Dune? Is the proposed project a
strategic fit for Arar?
2. Does the project’s financial feasibility from the perspective of cash flow estimation have an impact on
n
the acceptance of the proposal?
3. Evaluate the value and viability of the investment proposal from the standpoint of capital budgeting
tio
techniques.
4. Conduct a stand-alone risk analysis of the project using sensitivity analysis. Explain why sensitivity
analysis is a useful tool in the capital budgeting decision-making process when economic and financial
lu
conditions are likely to change in the future.
5. “Financing of new ventures in upcoming industries continues to face multiple challenges.” Critically
So
examine the various sources of funding suitable for this project.
The Case Solution Starts From page 7
,ANALYSIS
e
1. How can Porter’s Five Forces model be used to analyze Dune? Is the proposed project a
pl
strategic fit for Arar?
m
The industry analysis can be done using various models, choose the appropriate
model depending on the subject/course handled. Porter’s Five Forces is a framework for analyzing the
Sa
competitive forces within an industry and would be the most suitable framework to understand the industry
ecosystem (see Exhibit -1).
This analysis is tailored for the cloud-based fire alarm system (CloudFAS) sector in the United Arab
Emirates (UAE).
n
tio
1. Threat of New Entrants: Moderate
lu
The threat of new entrants is moderate due to the need for significant capital investment in technology,
infrastructure, and regulatory compliance. Building a robust CloudFAS requires specialized knowledge,
partnerships, and integrated network connectivity to capture and analyze data that is broadcast in real time
So
to servers. However, as the industry is still in its initial stages, it could attract some new entrants looking to
establish a foothold in the UAE market. The growth of cloud computing serves as an incentive for new
entrants.
(Refer to “Industry Profile” in the case.)
2. Bargaining Power of Buyers: Low
Buyers are price insensitive and willing to spend on this new, enhanced CloudFAS, as they require the best
The Case Solution Starts From page 7
,5. “Financing of new ventures in upcoming industries continues to face multiple challenges.”
Critically examine the various sources of funding suitable for this project.
e
Equity Infusion via a New Partner
pl
This will involve inviting a new individual to join the LLC who will bring a new infusion of equity capital
m
to fund the project (e.g., AED 500,000).
There are two options here:
Sa
1. Active partner: Arar could look for someone with expertise in the field of cloud safety systems.
Workload can be shared and this will bring in more critical insight to the business, which appears to be
a “grey area” for the company. The new partner can potentially help resolve some of the confusion and
n
assist in steering Dune on the right track.
tio
However, the biggest challenge with this option would be convincing the existing board members to
allow a new active partner onboard. While there will be dilution of shareholding, and hence profits,
there is also a risk that decision-making power will be lost given the unfamiliar territory that comes
lu
with the new project, and this needs to be considered.
So
2. Sleeping partner: An alternative is to get a “sleeping partner” who will just provide equity infusion
The Case Solution Starts From page 7
, EXHIBIT -1: INTENSITY OF COMPETITIVE RIVALRY
Threat of New Entrants Competitive Rivalry
- High capital investment - Number of competitors
- -
- -
- Threat of
New
Entrants
e
pl
Intensity of
Competitive
m
Rivalry
Sa
n
tio
Buyers’ Power Suppliers’ Power
- - Number of suppliers
- -
lu
- -
So
Threat of Substitutes
- Availability of alternatives
-
-
The Case Solution Starts From page 7
, EXHIBIT -2: REVENUE DRIVERS
1. Revenue Drivers
Details 2024F 2025F 2026F 2027F 2028F
REVENUE
Total Revenue 1,543,500 2,268,945 3,063,076 3,930,947 4,877,948
YoY Increase (%) 47.0% 35.0% 28.3% 24.1%
No. of units sold 700 980 1,260 1,540 1,820
YoY Increase (%) 40.0% 28.6% 22.2% 18.2%
No. of clients (buildings) 5 7 9 11 13
Net Client Additions 2 2 2 2
Max. no. of floors per building 7 7 7 7 7
Apartments per floor 5 5 5 5 5
Alarms per apartment 4 4 4 4 4
Selling price per unit (AED) - incl.VAT 2,205 2,315 2,431 2,553 2,680
YoY Increase (%) 5.0% 5.0% 5.0% 5.0%
e
Selling price per unit (AED) pre VAT 2,100 2,205 2,315 2,431 2,553
YoY Increase (%) 5.0% 5.0% 5.0% 5.0%
pl
GP Margin (%) 22.6% 23.4% 24.1% 24.8% 25.5%
Value-Added Tax (to govt) 105 110 116 122 128
m
VAT Rate (%) 5.0% 5.0% 5.0% 5.0% 5.0%
Sa
n
tio
lu
So
The Case Solution Starts From page 7
NIGHTMARE? CASE STUDY SOLUTION
e
pl
CASE SYNOPSIS
m
Sa
The case revolves around the decision to be taken by Mr. Abdul Kasim, managing director of Arar Infra
Contracting Co. LLC (Arar), on the viability of a business proposal to start a new company called Dune
Technologies (Dune), an enterprise-grade software and application design and implementation company
under Arar. The proposal would benefit Kasim and his partners to get an early-mover advantage in the
n
cloud-based fire safety systems industry, but the project viability and funding of the investment remain
tio
unanswered questions.
lu
So
OBJECTIVES
• Apply the industry analysis framework to evaluate an investment.
• Evaluate the financial feasibility of the project from the perspective of cash flow estimation.
• Evaluate the value of the investment proposal using capital budgeting techniques.
• Conduct a sensitivity analysis to determine the project feasibility.
• Critically examine the various sources of funding suitable for a new venture.
The Case Solution Starts From page 7
, e
pl
ASSIGNMENT QUESTIONS
m
Sa
1. How can Porter’s Five Forces model framework be used to analyze Dune? Is the proposed project a
strategic fit for Arar?
2. Does the project’s financial feasibility from the perspective of cash flow estimation have an impact on
n
the acceptance of the proposal?
3. Evaluate the value and viability of the investment proposal from the standpoint of capital budgeting
tio
techniques.
4. Conduct a stand-alone risk analysis of the project using sensitivity analysis. Explain why sensitivity
analysis is a useful tool in the capital budgeting decision-making process when economic and financial
lu
conditions are likely to change in the future.
5. “Financing of new ventures in upcoming industries continues to face multiple challenges.” Critically
So
examine the various sources of funding suitable for this project.
The Case Solution Starts From page 7
,ANALYSIS
e
1. How can Porter’s Five Forces model be used to analyze Dune? Is the proposed project a
pl
strategic fit for Arar?
m
The industry analysis can be done using various models, choose the appropriate
model depending on the subject/course handled. Porter’s Five Forces is a framework for analyzing the
Sa
competitive forces within an industry and would be the most suitable framework to understand the industry
ecosystem (see Exhibit -1).
This analysis is tailored for the cloud-based fire alarm system (CloudFAS) sector in the United Arab
Emirates (UAE).
n
tio
1. Threat of New Entrants: Moderate
lu
The threat of new entrants is moderate due to the need for significant capital investment in technology,
infrastructure, and regulatory compliance. Building a robust CloudFAS requires specialized knowledge,
partnerships, and integrated network connectivity to capture and analyze data that is broadcast in real time
So
to servers. However, as the industry is still in its initial stages, it could attract some new entrants looking to
establish a foothold in the UAE market. The growth of cloud computing serves as an incentive for new
entrants.
(Refer to “Industry Profile” in the case.)
2. Bargaining Power of Buyers: Low
Buyers are price insensitive and willing to spend on this new, enhanced CloudFAS, as they require the best
The Case Solution Starts From page 7
,5. “Financing of new ventures in upcoming industries continues to face multiple challenges.”
Critically examine the various sources of funding suitable for this project.
e
Equity Infusion via a New Partner
pl
This will involve inviting a new individual to join the LLC who will bring a new infusion of equity capital
m
to fund the project (e.g., AED 500,000).
There are two options here:
Sa
1. Active partner: Arar could look for someone with expertise in the field of cloud safety systems.
Workload can be shared and this will bring in more critical insight to the business, which appears to be
a “grey area” for the company. The new partner can potentially help resolve some of the confusion and
n
assist in steering Dune on the right track.
tio
However, the biggest challenge with this option would be convincing the existing board members to
allow a new active partner onboard. While there will be dilution of shareholding, and hence profits,
there is also a risk that decision-making power will be lost given the unfamiliar territory that comes
lu
with the new project, and this needs to be considered.
So
2. Sleeping partner: An alternative is to get a “sleeping partner” who will just provide equity infusion
The Case Solution Starts From page 7
, EXHIBIT -1: INTENSITY OF COMPETITIVE RIVALRY
Threat of New Entrants Competitive Rivalry
- High capital investment - Number of competitors
- -
- -
- Threat of
New
Entrants
e
pl
Intensity of
Competitive
m
Rivalry
Sa
n
tio
Buyers’ Power Suppliers’ Power
- - Number of suppliers
- -
lu
- -
So
Threat of Substitutes
- Availability of alternatives
-
-
The Case Solution Starts From page 7
, EXHIBIT -2: REVENUE DRIVERS
1. Revenue Drivers
Details 2024F 2025F 2026F 2027F 2028F
REVENUE
Total Revenue 1,543,500 2,268,945 3,063,076 3,930,947 4,877,948
YoY Increase (%) 47.0% 35.0% 28.3% 24.1%
No. of units sold 700 980 1,260 1,540 1,820
YoY Increase (%) 40.0% 28.6% 22.2% 18.2%
No. of clients (buildings) 5 7 9 11 13
Net Client Additions 2 2 2 2
Max. no. of floors per building 7 7 7 7 7
Apartments per floor 5 5 5 5 5
Alarms per apartment 4 4 4 4 4
Selling price per unit (AED) - incl.VAT 2,205 2,315 2,431 2,553 2,680
YoY Increase (%) 5.0% 5.0% 5.0% 5.0%
e
Selling price per unit (AED) pre VAT 2,100 2,205 2,315 2,431 2,553
YoY Increase (%) 5.0% 5.0% 5.0% 5.0%
pl
GP Margin (%) 22.6% 23.4% 24.1% 24.8% 25.5%
Value-Added Tax (to govt) 105 110 116 122 128
m
VAT Rate (%) 5.0% 5.0% 5.0% 5.0% 5.0%
Sa
n
tio
lu
So
The Case Solution Starts From page 7
