Professional Documents
Culture Documents
Roll No. 27
Topic
Submitted By
Abbas Jafri
Submitted To
Ahsan Maqbol
Submission Date:
Roll No. 27
11thApril , 2015
Abbas Jafri
Roll No. 27
The investment in the Stanhope Project would not tend to dilute the excellent
ROI achieved by ABI because it was in accordance with the new business
strategy of the company.
The strategy was to bid only on high margin products capable of sustaining their
margins over a long time.
ABI bid on BIG RED engines which would result in in 100 percent sourcing in
both the original equipment market (OEM) as well as the replacement market
with its high margins.
WILL THE COST IN NEW EQUIPMENT BE RETURNED BY EQUIVALENT REDUCTION IN
? LABOUR? WHERES THE PAYOFF
Yes the cost in new equipment will be returned by equivalent reduction in labor
as the company believes in maintaining small plants having maximum 480
employees.
Abbas Jafri
Roll No. 27
According to ABIs strategic plan new products would be pursued only when their
production process and design are of a proprietary nature and exist in areas
where its technical abilities help to maintain a long-time position.
ABI had a competitive edge in engineering of producing diesel engine
components combined with the flexible manufacturing system which would help
in producing engine components of other types with the same equipment.
Hence, in this manner, assets would be protected.
? DOES THIS PROPOSAL MAXIMIZE ROI, SALES POTENTIAL OR TOTAL PROFIT
This proposal will maximize the sales potential in the future for increased
volumes and other products that can be run on these machines.
Through time and experience, this equipment may also be used to manufacture
other versions of pistons for tractor engines
4. WHAT ARE OTHER FACTORS RELEVANT TO THIS ISSUE?
Factors like new business strategy of the firm, variation in demand forecasts,
manufacturing plan, operation & organization of the plant and certain financial
considerations.
Also factors like high tax-margins, loss of substantial volume to competition,
innovation and creativity, capital resource allocation, product designs are factors
may be relevant to this issue.
5. HOW DO CHANGES IN ASSUMPTIONS MENTIONED BY THE OTHER
MANAGERS AFFECT THE PROPOSAL?
The first manager makes assumptions that the sales forecasts may not be
accurate. The first manager is worried about the success or failure of the project.
This would not affect the proposal as one of the main characteristics of the new
plant is the flexibility offered by the FMS manufacturing system, thus it will be
able to work with a number of other materials, operational conditions,
productions rates and some other versions of the engine pistons.
According to the second manager the assumption of market loss to the Japanese
competitors seemed unlikely. Considering the increasing quality and competitive
prices, this hypothesis should be considered, although even in the worst scenario
the project is still profitable. Thus, it has not a great impact on Stanhope project.
The second manager is worried about the after-tax margins.
6. WHAT POSITION SHOULD JIM TAKE? WHY?
Abbas Jafri
Roll No. 27
Jim should recommend the project to Steve White. There will be the chances of
risks and failure, but ABI needs to protect their existing successful business, and
to pursue more such business so they need to invest in the Stanhope Project.
The risk will be managed up to that level where expectations of success and
large profits are very high. The project will also meets the business objectives of
the company, and will helps ensure that ABI will stand in a good technological
and strategic position in the market of diesel engine components.