Haveloche Corporation is a research organization that is dedicated to designing and patenting electronics. These patents are sold to large electronics firms and generate a great deal of profit for Haveloche if they are useful to these electronics manufacturers. However, not all of the patents are a guaranteed success, so there is a great difference in the number of successful patents obtained as well as the amount of the company's earnings. The history of Haveloche Corporation indicates fluctuations in their earnings, number of employees, and success in patenting immediately useful electronic products.
In 1994, the company went public because other research firms had beaten the company to several important patent projects. It used its status as one of the largest pure research firms to develop its reputation in the industry. However, in 2001, Haveloche Corporation was forced to reduce the amount of work being performed and reduced its number of employees due to an economic downturn. In 2003, Haveloche again took advantage of higher industry demand and expanded to meet these increased research needs.
The CEO of Haveloche Corporation has been asked to make a presentation to a class of finance students. In the course of preparing for his presentation, the CEO gathered several years' worth of data in regard to the corporation's dividend policy. Problems One of the major problems in this case is the fact that the CEO of Haveloche Corporation is unable to decide which dividend policy is best for the organization. Despite collecting several years' worth of data, Mr. Grange was unable to find evidence of one policy working better than another. In addition, Mr.
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Grange conducted research into dividend policy and found that the information available was sparse and did not conclusively recommend one policy over another. This lack of valuable information on dividend policy also affects Haveloche Corporation internally, as Mr. Grange is unable to determine which dividend policy would be most effective for the organization. Without instituting a policy that considers the needs of both the corporation and its investors, the company may be making incorrect business decisions. This case illustrates the importance of business research and practical applications in the field of finance.
Solutions One solution to these problems would be to conduct internal research as opposed to reading and applying external research and theory to the unique characteristics of Haveloche Corporation. Mr. Grange could conduct this research by gathering past dividend data, reviewing past financial statements, and studying historical stock prices both before and after company dividends were announced. Because this research would be more targeted to the company itself, it would most likely prove to be more useful than canned research that was generated from researchers in a different industry.
Because research firms are unique in how they conduct business, and Haveloche Corporation is particularly unique due to its fluctuating size and gains, specific research would better allow Mr. Grange to decide what type of dividend policy would be most beneficial. In addition to conducting his own research on behalf of Haveloche Corporation, Mr. Grange could also conduct practical applications of this research. If his research determined that one type of dividend policy would be beneficial to the company, Mr. Grange could attempt to implement this type of dividend policy and closely follow the results.
In conducting this type of study, Mr. Grange would need to closely watch the financial indicators of the company both before and after the announcement of dividends under the new policy. If the implementation of the policy generates positive results, Mr. Grange might decide to use that policy in the future. If the policy does not generate the results that Mr. Grange expects, he can repeat this observation process with another type of dividend policy. By conducting internal research and applying that research to business functions, Mr. Grange can better position Haveloche Corporation to be a competitive force in the research industry.
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