1. The DIM Lighting Co. has had a decline of 15% in profit margins over the past year. 2. This subsidiary is part of a large corporation and operates as a profit center. 3. The company wants to stay competitive and profitable in today’s economy. New technologies are being developed by the competitors. Micro:
1. The proposed research project is considered “high risk” by members of management. Corporate is supportive of the idea but not ready to commit to the amount of money needed. 2. The initial investment for the “Light of the Future” is $1.2 million per year for the next two years with an additional $500,000 to begin production. 3. Money is needed for new equipment for current product which has an immediate payback. 4. Management is not confident in the financial figures provided by the accounting department. 5. The company needs to stay competitive while keeping up with current production.
1. The company has had a 15% decline in profit margins over the past year. 2. The company is trying to develop new products while keeping up with current production. 3. The new “Light of the Future” is considered a risky investment and management is worried about the amount of money needed to develop new product. 4. The company is also concerned on the amount of time required before payback on new product is feasible. 5. The management team is not confident in the financial figures presented at the meeting.
1. The management team needs to feel confident in the financial numbers presented by accounting. Without the confidence, an accurate decision cannot be made. Accounting needs to review and resubmit numbers to management team. 2. Also company needs total support and capital from corporate. A feasibility review of the project and its financial investment is needed before proceeding. 3. Research and Development may need to look at other potential projects that will have the same profitability but requires smaller investment and quicker payback period.
1. Review current financial records to gain confidence in numbers. 2. Review by R&D to see if any reductions can be made without sacrificing product quality and profitability. 3. R&D to research additional potential products for future production. 4. Insure that current production is meeting current customer requirements. Also look for cost savings in current production to offset 15% decline. 5. Once these items are completed, decision made and presented to corporate for support and capital for investment.