SOLVING THE WUMI BAKERY AND SWEETS LIMITED LIABILITY COMPANY CASE STUDY

DECISION PROBLEM

Wumi needs to decide if she should close shop and return to Nigeria or get a local investor to partner with or bring in Angel investors and operate as a foreign company from outside Qatar because her business is close to commercial expansion and has no money for expansion.

BRIEF HISTORY OF WUMI BAKERY AND SWEETS LIMITED LIABILITY COMPANY

• In the last quarter of 2015, Wumi, a Lawyer and Company Secretary in Nigeria, relocated to Qatar with her oil worker husband and two sons.
• In 2017, Qataris and residents woke up to the shocking news that the country’s neighbours had instituted a blockade against her, causing scarcity of many items including the particular kind of bread that was a staple in Wumi’s home, and the only kind of bread their son would eat.
• Instead of their usual L’Usine bread, the shelves were filled with lower quality ones. This was when they realized that their favourite bread was imported from Saudi Arabia
• Wumi, who already loved to cook for family and friends, took to YouTube to learn to bake bread. Like their preferred bread, this one had to meet certain standards, including being free of preservative and other chemicals
• Demand for her bread grew as Wumi’s bread was of better quality than the ones that now filled the shelves
• In one six-month period, they realized they had made the equivalent of 1million naira in sales. It occurred to Wumi that she may have just hit on a very viable business opportunity, especially as the State of Qatar now actively supported local production.
• However, opening a business formally was going to require a lot more funding than they could muster from their own personal resources at the time, especially as her husband’s expatriate contract was expiring soon and they would no longer enjoy any further expat income and benefits if they stayed back in Qatar.
• Wumi’s bread was 40% more expensive than market leader Qbake; despite that, she struggled to keep up with the increasing demand. During the pilot, Wumi tested market resilience by increasing the price by 15% (from QAR6.5 to QAR7.5), yet sales volume was not impacted
• Legally setting up a business enterprise in Qatar requires that the company be Qatari owned and headquartered, which means that the business owner must be a national citizen (a local) or, the enterprise will need to partner with a local sponsor in a 51%-49% partnership split in favour of Qatari national.
• The enterprise can also decide to operate as a foreign company from outside Qatar, and to achieve this, it will have to set up a commercial agency either via a 100% Qatari entity, or individual agent to market and sell its goods, and have no physical presence in Qatar1
• Angel investors could however take as much as 20%-50% stake in any company they support
• In addition, they’d have to consider where they would now be based, as similar business conditions exist with Qatar’s neighbours. Besides, what are the chances that they will not be caught in the diplomatic web that led to the shutting down of borders earlier.
• If Wumi was able to raise QAR2,000,000 (Exhibit 5), she expected to be able to increase production from 750 loaves daily, to 2000 loaves in the first year, if she was only able to get the kind of funding she required. She felt she could double that in the second year and hit production capacity of 10,000 loaves by the 5th year.

OBJECTIVE

To sustain Wunmi bakery and sweets business

ALTERNATIVES

• To return to nigeria
• To partner with a local investor
• To get angel investors

CRITERIA

• Equity
• Legal issues
• Potential for the business to earn profit

PROJECTED RISK

• Legal issues with the local investor.
• Misalignment of values
• Issues around the volume of controlling shares.

RECOMMENDATIONS

• Get more than one local investor to dilute the ownership of the shares.
• Raise fund via investors using loans instead of equity.

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