6/12/2023 0 Comments Non numeric![]() Decision makers can act on their beliefs about what will be the likely impact on the total system performance if the new product is added to the line.Ĭomparative Benefit Model Assume that an organization has many projects to consider, perhaps several dozen. Sometimes careful calculations of profitability are not required. The Product Line Extension A project to develop and distribute new products would be judged on the degree to which it fits the firm's existing product line, fills a gap, strengthens a weak link, or extends the line in a new, desirable direction. ![]() Investment in an operating necessity project takes precedence over a competitive necessity project, but both types of projects may bypass the more careful numeric analysis used for projects deemed to be less urgent or less important to the survival of the firm. In large part, this action is driven by declining numbers of tuiton-paying students and the stronger competition to attract them. In a similar manner, many business schools are restructuring their undergraduate and MBA programs to stay competitive with the more forward-looking schools. Although the planning process for the project was quite sophisticated, the decision to undertake the project was bas H on a desire to maintain the company's competitive position in that market. It had become apparent to Republic's management that the company's bar mill needed modernization if the firm was to maintain its competitive position in the Chicago market area. The Competitive Necessity Using this criterion, Republic Steel undertook a major plant rebuilding project in the late 1960s in its steel-bar-manufacturing facilities near Chicago. If the project is required in order to keep the system operating, the primary question becomes: Is the system worth saving at the estimated cost of the project? If the answer is yes, project costs will be examined to make sure they are kept as low as is consistent with project success, but the project will be funded. Republic Steel Corporation (now a part of LTV Corp.) has used this criterion (and the following criterion' also) in evaluating potential projects. The Operating Necessity If a flood is threatening the plant, a project to build a protective dike does not require much formal evaluation. The project is "sacred" in the sense that it will be maintained until successfully concluded, or until the boss, personally, recognizes the idea as a failure and terminates it. The immediate result of this bland statement is the creation of a "project" to investigate whatever the boss has suggested. ," and there follows an undeveloped idea for a new product, for the development of a new market, for the installation of a new decision support system, for the adoption of Material Requirements Planning, or for some other project requiring an investment of the firm's resources. ![]() Often the project is initiated with a simple comment such as, "If you have the chance, why don't you look into. The Sacred Cow The project is suggested by a senior and powerful official in the organization.
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