In the class presentation, our guest said that the company currently was passing some hard time, which reminds me about the cash flow circle of business.

Urthecast get a partnership with RSC, and its revenue mainly comes from the web advertising, application platform sales, media content sales and earth observation sales. Although, from Porter’s five industry forces perspectives, the company have exclusive comparative advantage compared to other companies, the company also has the cost leadership, the buyers’ powers are not weak, and the threat from new entrant would be very low, the company is under huge risk because the cash flow circle of the company is too long.

Usually company purchase the raw materials, get the inventory, and sell the inventories and get the cash to purchase raw materials again. (The cash flow circle of normal business can be seen clearly from the diagram above. )First, the company like Appnovation involves huge money investment to do the purchase which is that agreement in this case. On the other hand, the time spent on getting the agreement and turn that into sales takes an extremely long time, so the cash flow circle is too long for a company especially when they reached the deadline of agreement. If they cannot get fresh cash flow during the none-profit period. The company might go bankrupt.

Therefore, persuading new investment to stimulate the cash flow would help the company to survive from the difficult time. Also the company might work on shorter the cash flow of the company (I do not know if that is possible but it is worth a try.)