Opening Pandora's Box Case Prep

Problem/Issue Statement

What is the problem?

The problem with Pandora is that it doesn't know how to maintain their operating costs. Chief strategist and founder of Pandora, Tim Westergren, is trying to figure out how to balance the interests of the Venture Capitalist investors, while also run his company as he had initially planned. Pandora is facing an increase in their growth rate which at its current rate, the company would drain its cash by the end of the subsequent year.

Pandora lacks financing; and the symptoms are that due to high growth rate it might run out of money to run its business as a desired by higher management. If nothing is done, then the company is facing a possibility to go out of business.

Situation Assessment

The context of the problem is having the company to initiate a positive cash flow. The company would also need to reduce operation costs, negotiation of pricing, mitigation costs, advertisement growth, provide better quality options for consumers, and possibly tie in contracts with other companies such as car manufacturers etc…

List of Plausible Alternatives/ Evaluations

• Advertisement/ Marketing (SEM Full Throttle)- Pandora should focus on advertisement growth. With the help of advertisement and marketing, Pandora can benefit from search engine marketing (SEM) and general marketing spend because of its ability to see what music is trending for which specific users and allow the consumers to enjoy it. This will allow greater revenue by allowing more customers to come in. Another type of advertisement option is by maximizing greater space on their website and applications by advertisements. This will allow a greater cash flow entrance for Pandora and can make up for the loss that they might be facing from consumers.
• SEM Halt- Pandora is currently attracting customers by their marketing techniques such as SEM which allows capturing customers through search tools. You can also attribute segment marketing to SEM. If Pandora currently cannot keep up with their growth, then they should slow or halt the SEM in order to allow the revenue become higher then costs. They can slow it down until Pandora can see that they can manage the growth.
• Initial Public Offer-Pandora is facing money issues and need financing. The answer would be to introduce the market with Pandora and allow money to flow that way. The public and consumers would be in charge of investing in Pandora and allow Pandora to become a better provider with missing options and innovations to customers.
• Stand Down- If Pandora does absolutely nothing, their growing market will become “too big to handle”, and Pandora will be out of the party with no financing to keep up. Pandora will eventually become out of business.

Recommendation

Quality- The quality recommendation would be to allow the investment coming in from the outside public. This would allow the public to invest in Pandora which is in desperate need of it.

Logical- The logical recommendation would be to allow the SEM to slow or stop. The reason why Pandora is not maintaining the cash flow is because it is growing and not enough cash is being pumped in to stable the growing. So if the SEM is stopped, that would let the cash inflow offset the growth.

Presentation- The presentation should elaborate the recommendation as the important factor. Since I believe the quality recommendation should be the optimal one that would bring the most value to Pandora, the cash intake from the IPO should be shown in a graph. The growth and cash inflow should be presented in a graph along with illustrations to show the benefit of solving the problem. Lastly, other investment opportunities should be stressed with the new cash that is coming in.

Thank you,

Jim Lozada