Finance and Blockchain
According to the case, the company found itself on crossroads between leveraging technology and gaining a share in the market and choosing the appropriate sectors to generate significant revenues. Despite Dianrong being compliant with government directives, the recent wave of fraudulent cases in the p2p sector would create an unfavourable environment for business.
Thus, Dianrong is compelled to choose the appropriate measure to ensure sustainability. Therefore, the company must decide whether to pursue diversification aggressively in its current state. In this case, the objective of the company was to deliver value to lenders, borrowers and investors. Therefore, the company should make decisions while ensuring that the initial objectives of satisfying various stakeholders are fulfilled.
The nature of the collaboration would be determined by the company’s objectives. The primary goal of critically analyzing the method intended for the collaboration is to ensure risk-sharing in case of an incident. In this case, Dianrong needs to develop more adaptive capabilities to ensure the delivery of value to various stakeholders. The most essential aspect to investigate is whether the selected method has the capability to increase awareness about the company’s product in the market.
Thus, this approach will determine the most appropriate technique to maximize its stakeholder value. For instance, entering new markets requires the company to adopt a joint venture. As a result, it is possible to share the losses incurred during the process. On the other hand, a partnership would involve collaboration between Dianrong and another company to oversee business operations and share the generated profits and liabilities. This approach would allow the company to share losses in case the business happens to fail. The acquisition method would involve acquiring another firm. In this case, Dianrong is expected to investigate the current state of the company and examine its compatibility.
In this case, the company would allocate money according to the yields in the long run. Thus, Dianrong should focus much of the resources on M & A. By doing so, the long run will be characterized by financial performance and reducing risks. On the other hand, R&D is an essential element of the company. The R&D is associated with wide innovation in both government and private world. This approach helps companies in designing new products and improving their existing offerings. Thus, the US$100 million would be allocated between both the pursuits, with the M&A getting a large share of the finances. By doing so, Dianrong would increase its productivity, while minimizing risks arising from the approaches.
Since the current regulations led to an increase in costs of p2p, thus leading to the exit of the majority of p2p lending firms. The firm should work to revive the p2 industry in China by suggesting ways through which the sector can lower its operating costs of p2p. While the government’s focus was to establish a balance between technological innovation and social stability, it also negatively impacted the industry, leading to the exit of many firms. In this case, the fraud reputation should be addressed through blockchain measures.
The company should utilize this approach to revive the industry, amid the interference by the authorities. In this case, blockchain can be used to prevent fraudulent behavior and therefore revive the industry. Through the blockchain approach, all transactions and alterations made in the system would only be verified by the network participants. By adhering to a certain set of rules, network participants are able to identify whether the alterations were legitimate. Since all network participants would have to agree on granting access, criminals would find it difficult to engage in fraudulent activities. Therefore, Dianrong would work with the local regulations by offering an alternative means of ensuring social stability, while ensuring growth within the industry.
The company can utilize other technologies to expand its portfolio. For instance, Dianrong can use artificial intelligence has proved successful in other industries by automating a variety of processes and reducing operating costs. In this case, the company will utilize the opportunity to lower its costs, thereby ensuring sustainability in the industry (Veit, et al. 2017).
This technology will also work to counter the challenges posed by the Chinese authority guidelines that have resulted in the exit of various firms from the industry. As the financial sector continues to grow, defaulters continue to increase within the industry. Therefore, artificial intelligence will help in collecting insights regarding the needs of its clients. By doing so, the company will be able to offer value to all its stakeholders including clients. Since the company’s main objective is to utilize technology in increasing efficiency in the industry, it has not fully utilized its technology in enhancing its growth.
Reference
Malloy, C. J., Cohen, L. H., & Woo, A. K. (2017). Dianrong: Marketplace Lending, Blockchain, and’The New Finance’ in China.
Veit, F., Geyer-Klingeberg, J., Madrzak, J., Haug, M., & Thomson, J. (2017, September). The Proactive Insights Engine: Process Mining meets Machine Learning and Artificial Intelligence. In BPM (Demos).