Going for Growth by Investing in People, Products and Plant - Assignment Example

Going for growth by investing in people, products and plant 2 Introduction Investments are guided by entrepreneurial skills. Any decision to put money into any venture is guided by the probable returns from the same. There are many factors which considered when making such decisions. These include labor and production costs. . In this case, the Hazelwood Sandwiches Company seeks to carry out an extensive market research and investment appraisal. This is important in ensuring that the company stays relevant in the evidently dynamic market. Question 1 Before making an investment, it is prudent that one possesses an effective understanding of the market of operation. This is important in making an informed investment move. The process of studying the market and developing an understanding of the same is collectively referred to as investment appraisal. It involves a series of market evaluation through a number of mechanisms which result in the comparison of the business’ key objectives which are profitability under the existent market forces (Willey, 2012). There are a number of investment appraisal methodologies including net present value which investigates the ability of the market to repay the investment given the numerous present market factors such as inflation. One of the most preferred of these methods is the direct payback method in which the investor calculates the number of years it may take the business to return the initial investment. Some other investment appraisal method is the accounting rate of return which bases its assessment of the market on its ability to earn profit to the investment. Despite their different approaches to the appraisal, the methods safeguard the interest of the business by trying to determine its profitability and above all its longevity. The life of a business is of great importance to the investor since the longer a business stays viable, the more the investor earns. The company makes an extensive capital investment with the sole aim of achieving the business objective. Capital investment is the amount of money that the enterprise invests in fixed assets which are directly used before implementing its investment plan. In this case, the Hazelwood Sandwiches Company carries out an extensive market research and investment appraisal thereby ensuring that their company stays relevant in the evidently dynamic market (Tabbush, 2011). This includes enhancing the production process such as the machinery and the production plant. The company does this after staying in operation for some time; it therefore has an understanding of the market. Its decision to make such an expansive capital investment arises from the understanding that it has for the market. The company, just as any other desires, to stay active in the industry for as long as it takes. It therefore collects adequate information about the market and has its market facts right (Thomas & Michael, 2001). After determining the market size, the company determines its market share which is indeed the largest. The subsequent investment therefore arises from the desire to retain the position thus safeguarding both the profitability and the longevity of the company. The company has therefore mapped out its capital investment plan in phases to ensure that it does not become bankrupt in the process since such as scenario might have stifled the production process thereby either incurring debts or resulting in the eventual closure of the company. While purchasing fixed assets and improving the scale of production, the company also increases its working capital which is also part of capital investment. Question 2 The investment decision technique is synonymous to the investment appraisal method. The three discussed in the article are the playback method, the net present value, and the account rate of return (Alexander, 2010). Despite the fact that they all lead to an appropriate investment decision, they are different in their provisions and therefore possess unique advantages and disadvantages. The net present value bases its calculation and facts on the present market value; it evaluates the value of the currency as at present and the ability for the business to make sufficient in the market given the prevailing factors. The technique does not give much credit to the future market and therefore informs the investor on the appropriateness of the investment considering the present value of the product, the prevailing factors of production, and the existing market inflations. The net present value postulates that the money has more value now than it will ever have in the future owing to the fact that the future money is not there; the method works with the present realities (Iacobucci, 2012). Given its nature, the method is effective in strategizing short time investment; such investments last a period of not longer than one financial year and therefore needs more realistic investment that promises return on the investment within the year. However, the method fails to consider the fact that today’s money may have lesser value than tomorrow’s earning owing to the different market forces and may therefore discourage a profitable long time investment. The payback method is the most preferred investing decision technique. It involves determining the number of years it takes the business to return the capital investment (Chatterjee & Hevner, 2010). In doing this, the investor considers all the prevailing market forces and therefore sets a profit margin per year with which it works to determine the number of years it takes the investment to repay the capital invested. Its main advantage is that it is more realistic to the fact that a business takes time to yield returns on the investment. It gives the investor the profit oriented mindset. Furthermore, the methodology gives a mean aggregate against which the investor evaluates the performance of the investment per year and therefore revises his investment plan in case of a poor return. However, the method is less realistic and highly speculative. It fails to include the different market forces every different financial year presents thereby resulting in blind investments. The accounting rate of return, just as its name suggests, capitalizes on the profitability of the investment. Through this method, the investor ignores all the cash flows, bases his judgment on the projections of the profit per year, and determines an amount to expect every financial year. The greatest strength of the method is that it gives the investor a target to work for and therefore evaluate the progress of the investment (Bogomolova, 2011). However, it fails to consider the rest of the cash flow and may have some loss orientation should the cost of operation increase since the investor will use more money in the production process thereby incurring a short-term profit margin which is tantamount to a loss. Question 3 The human resource is the greatest resource in every product process. Despite the fact that most machines currently run the production process, there are certain roles only performed by humans thus making them of much essence to the process (Kotler, 2010). Investors therefore need to develop effective mindsets in their employees since they determine the rate of production. Motivation is an important aspect of management which deals with the development of a production oriented mindset among the employees thereby improving both the quality and the rate of production. Modern day managers have developed a number of ways to motivate employees key among which is the recognition of the role of remuneration in motivation. People seek employment primarily to earn a living; the employers must therefore ensure that every employee is paid effectively and in accordance to his or her roles at the company (Fournier, 1998). In determining the amount to pay every employee, the most important factor for consideration is the role every employee plays in the production process. People perform different roles depending on their technical knowhow. It is therefore appropriate to consider the academic level of every employee in the firm. This motivates them by creating a competitive environment thereby resulting in an overall benefit for the company since the competition among the employees improve both the rate and the quality of the product. The management of the Hazelwood Corporation motivates their employees effectively through the realistic reward of labor which is a factor responsible for the company’s growth within the region. Besides remuneration, the work environment plays an important role in motivating employees. The Hazelwood Sandwiches are developing an enabling working environment for all their employees by providing the necessary amenities capable of making them feel appreciated. With a gym, hairdresser, and an affordable restaurant, the employees access all the basic services within the company’s roof thereby minimizing time wastage. This is a wise investment plan since not only does it motivate employees to work harder but it also results in more revenue for the company. Since the labor market is dynamic, the company demands an increasingly educated workforce. It therefore becomes mandatory that the organization recruit an increasingly learned personnel. However, the most effective way of managing this is by providing employees with study leaves among other study incentives (Espinoza, 2012). By providing employees with study incentives such as leaves and scholarships, the organization benefits from an increasingly educated workforce which when coupled with the experience gained from working in the company for long results in increased profitability. Question 4 Lane (2005) asserts that human resources are indeed the greatest assets to every business. This explains the fact that every business attaches more importance on their employees and always strives to make them as productive as possible. The human resource determines the rate and quality of production. Furthermore, they can possibly stifle the production process and therefore earn losses to the company. The employers therefore work in close liaison with the authorities of the states to ensure compliance with the labor laws to maximize their profitability and retain the value of human life. Human resources, unlike other exhaustible resources directly used in the production process, have a slower rate of exhaustion and therefore benefit the organization. This makes them better resources for the production process than any other does. However, without appropriate management, the human resource becomes the most expensive and therefore inhibits both the profitability and the growth of the company. As stated earlier, every organization has a dream for longevity. The active life of the human resource coupled with the diversity of the resource makes it the most appropriate in sustaining the organization. During recruitment, the management sets out a clear explanation of the roles of every position. This implies that different people possess different technical know-how which thereby gives rise to specialization. According to the systems theory, the organization is like a system with various components all of which work in liaison for the attainment of the organizational goals. However, each component of the system is independent of the other and therefore operates as such. This requires effective labor division using department within the organization to ensure that there is no clash in the roles of every person in the organization. The human resource requires effective management which does not necessarily mean constant supervision and the development of bureaucratic offices but the development of an enabling environment to allow everyone perform to the best of his or her ability in the production process. The human resource management is therefore an integral department within every organization since it is entrusted with the recruitment of the best human resource for the company. In soliciting for labor, the department ensures accurate advertising of the opening. Before advertising the position, the department reviews the position and sets the most appropriate qualifications and remuneration for the positions. In determining the remuneration for every position, the department compares the roles of the position against the academic qualifications necessary for the assumption of the office. Industrial strikes accrue losses for the company yet they are the most preferred mechanism of expressing discomfort in the organization. Industrial strikes arise from unfavorable working environment created by the management. When the management fails to recognize the demands of the employees, the employees resort to their constitutional right of taking part in strikes most of which turn violent thereby accruing loses for the organization. Solutions Every company should always strive to remain relevant in the wake of changing times. One way of achieving this is through carrying out a performance appraisal. In so doing, the human resource department comes in as important too. The above case specifically focused on the Hazelwood Sandwiches Company which sought to carry out an extensive market research and investment appraisal to keep it relevant in view of changing times. Bibliography Alexander, B., 2010, International Financial Reporting and Analysis (5th edition). Oxford: Oxford university press. Bogomolova, S., 2011, Service quality perceptions of solely loyal customers. International Journal of Market Research, 53(6) 793-810. 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