Critical Issues in the Case of Clark and Company - Assignment Example

Name: Institution: Professor: Topic: Management for engineering Course: Date: Part A Question 1 Critical issues Responding promptly to the market changes is a major concern that companies have to address in order for them to achieve its objectives and goals. In order to engage the customer “inside” the organization as Tutek (2000, p. 535) put it, the conflict that exists between engineering and marketing must be dealt with for there to be successful improvement of existing products as well as development and commercializing of new ones. In the case of Clark and company there are critical issues that need to be addressed. For a company to carry out its functions properly it is very important for there to be a good organizational relationship between all the departments especially marketing and engineering. Griffin and Hauser (1996, p.201), found that general barriers between the two departments are differences in personality, culture and language, differences in organizational tasks and the physical barriers, formed by organizations, between the functions. For this case (Clark and company) the basic idea that there is no agreement between its core departments that is engineering and marketing poses a major danger to the company’s operations. Looking at the observations and assessment made on the company’s marketing and engineering departments it is evident that the level of disagreements between the departments is very high. This can be portrayed by the fact that instead of functional team members attending team meetings they spent most of their time working on their own “pet” projects rather than the required work. It is also a critical issue that none of the personnel in either department wants to take up charge of the project management. Another issue arises where the procurement manager literally refused to assign any of his staff to project teams. All this is because of the conflict between the marketing and engineering department on project management. Some studies carried out in the past found that lack of integration between engineering and marketing often leads to conflict (Weinrauch and Anderson, 1982, Crittenden et. al., 1993). The executive’s decision uncovers two other issues that need be looked at. First there is no confidence in their agreement to patch up things. This is a sign that without close supervision and intervention things could easily fall back to the previous state. The second issue is that despite the strong conflict between the two departments the managers cannot identify the initial cause of the conflict. Looking at the responses from the interviews conducted in both departments there is some critical issue that can be noted. First is poor communication. From the views of the employees one can easily note that communication between the two departments is can be termed as irrational. There is no mutual understanding and agreement between the two departments. This is evidenced by the comments made by some of the engineers. Where they believe that marketing department continuously gives orders and demands expecting the engineers to carry them out without considering their grievances. Second issue arising in this case is poor coordination between the departments. The engineering department feels that it is being overworked. The instead reason that work would be a lot easier if the marketers paid less attention to the projects under development. This in itself is a challenge as the customer views assessed by the marketers are important in developing successful products marketwise. Question 2 Obstacles preventing agreement between the engineering and marketing department to have a singular methodology for product development There are a few obstacles that prevent the agreement of the two core departments in Clark and Company. These are as a result of the negative culture of non cooperation in the company between its departments. This is evident as seen in the case where the two departments are in so much conflict that attempts to have a project manager failed. This is because of fear getting caught in between the silent wars between the departments that no one wanted to be the project manager. After examining the responses given during the interview sessions, the obstacles that hinder the harmonious working together of these two departments can be noted from the responses given by the staff of the two departments. As a result of poor communication the engineering department fails to understand the operations by the marketing department. This alone is a major hindrance to a good relationship between the two departments. For example engineering department believes that “…most of the time the problem is that marketing doesn’t know what they want up front. This leads to change after change.” Second both departments need to work together to be able to produce products that fit the customer preferences. The engineering department doesn’t realise this and instead prefers to work on its own without consultations with marketing department. Another obstacle between these two departments is brought about by the negative perception or insensitivity of the personnel in each department towards the other department. This evident following the response made by one of the personnel in the engineering department during the interview that; “Marketing personnel should spend their time at the country club and in bar rooms. This will allow us in engineering to finish our work uninterrupted!” On the other hand in the marketing department, lack of understanding towards the engineering department is an issue that needs to be addressed. During the interview one of the responses made by a marketing department personnel was “…we have to beat upon engineering to make sure that our marketing schedules are met.” This shows that the marketers want the engineering personnel to be on their toes full time. They want them to accept and implement impromptu demands without questioning back. The other obstacle leading to disagreement by this department is lack of planning. As much as they gave a strong reason for continuous changes to product development they still need to understand that, they are exerting too much pressure on the engineering department. This can be evidenced by the remarks made by the engineering manager. He states that they are currently working on 375 different projects yet the marketing department does not seem to care. Question 3 Advantages of a good product management for Clark and company’s on its operational methods Crittenden et. al. (1993) found that conflict between marketing and engineering is often caused by the need to manage variety in such things as the number and breadth of products, customization of product and product quality. This is the same situation that Clark Company is undergoing. This is why there it is very important for there to be a good project management established in the company. The project management will be able to enhance interdepartmental integration which is a very strong variable to a company’s performance. The engineering and marketing departments have to learn a lot from each other. In order to end the conflict, the two departments have to develop quality relations and integration amongst themselves. The project management will take the initiative to train the marketing people in product and process characteristics. On the other hand train the engineers about customer preferences and requirements and, marketing sales techniques. A study by Shaw and Shaw (1998) on conflict between engineers and marketers within United Kingdom based companies, resulted to a number of solutions that a project management process would fulfill. They recommended that it was important to provide the engineers with marketing training as a way of improving their correlation with marketers. On the issue of reducing conflict they advocated for; better communications, developing team work, increasing training and team building exercises. A good project management scheme would also ensure there is some formal or informal psychological training towards cultural differences. This will encourage the two departments, to reconcile mismatched goals and make them speak “the same language”, and realize that they are working towards the same ultimate goal (Tutek 2000 p.545). Another advantage of a good product management system is that the issue with the engineering department where they are overloaded by work can be solved. With this system there will be a clear and procedural flow of the products to be worked on grouped by the level of priority and importance. Part B Question 1 Net Present Value Net present value (NPV), is the most widely accepted economic method of evaluating project proposals. It is a technique that plays a big role in capital budgeting decisions. Also categorized as one of the time adjusted techniques it is credited for taking into account the time value of money. The technique suggests that cash flow arising at different time periods differs in value even if the figures are the same. The net present value evaluates capital investment proposal by finding the Present Value of the net cash flows discounted at the rate of return that is required by the investor. The NPV is solved by the equation: NPV = Cfo +  +  +  + …  =  t – is the time period Cf - expected cash flow Cfo - cash outlay Kd – required rate of return In investment critical decisions have to be made and it is important to have good knowledge of the outcomes of the decision before an investor can make it. This is what calls in the capital budgeting techniques such as the NPV and payback period. The reason why an investor would wait to receive a sum of money in the future is because of the incentives that is provided in terms of interest and reduced costs. Rationale of the NPV: A projects Net Present Value can be either positive (+) or negative (-). With a positive NPV it means that the funds generated by the project are sufficient enough to meet the initial cost of the investment and the operational costs. Plus there are enough surplus funds for the investor. A zero (0) NPV implies that the amount generated by the investor is sufficient just to meet the costs but there is no surplus generated by the project. In the situation of a positive (+) or zero (0) NPV, it is recommended the project be accepted unless there are many projects that are being compared in which case the one with highest NPV is taken. For a project with a negative NPV it shows that the cash flow generated by the project are not sufficient to cover its costs plus the initial cost of the project. It is usually advised that a project with such a trend (negative NPV) to be declined. Clark and Company’s project proposal can be evaluated according to the Net present value technique and Payback period to determine whether the project is profitable or not. To start with the NPV the project can be assessed as follows: The initial cost of the project: = £230,000 Yearly profit generated due to reduction of labour costs on employee: = £ 27,000 × 2 = £ 54,000 Annual maintenance cost (working capital) growing by 5% annually Year 1 = £ 7,500 2 = £ 7,875 3 = £ 8,268.75 4 = £ 8,682.19 5 = £ 9,116.30 6 = £ 9,572.11 7 = £ 10,050.72 8 = £ 10,553.25 9 = £ 11,080.92 10 = £ 11,634.96 Year Profit (£) Working capital (£) Machine value (£) Net Cash flows (profit less wkng capital + machine value) (£) PV factor @ 8% PV 0 (230,000) (230,000) 1 (230,000) 1 54,000 (7,500) - 46,500 0.9259 43,055.56 2 54,000 (7,875) - 46,125 0.8573 39,544.75 3 54,000 (8,268.75) - 45,731.25 0.7938 36,302.94 4 54,000 (8,682.19) - 45,317.81 0.7350 33,309.94 5 54,000 (9,116.30) - 44,883.70 0.6806 30,547.09 6 54,000 (9,572.11) - 44,427.89 0.6302 27,997.11 7 54,000 (10,050.72) - 43,949.28 0.5835 25,643.98 8 54,000 (10,553.25) - 43,446.75 0.5403 23,472.93 9 54,000 (11,080.92) - 42,919.08 0.5002 21,470.23 10 54,000 (11,634.96) 35,000 77,365.04 0.4632 35,834.98 NPV = total PV (from year 0-10) 87,179.51 NPV = 87,179.51 (positive) The project has a high positive net present value making it a good project to undertake. The project has an additional advantage as it can cover its running costs and still generate a surplus profit of up to 87,179.51 to the investor (Clark and Company). Therefore the advice to Clark Company is Invest in the project. The simple Payback period The simple payback period refers to the duration that a project would take to recover its initial cost. It is a very simple method that can be used in making quick decisions relating to capital budgeting. The method is discouraged in making major investment decisions as it has a number of disadvantages the major one being that it ignores the time value of money. It is advised that it should be accompanied by other methods before a decision is reached. The rule under this method is that a project should be accepted when it is payback period is equal (=) to, or less than ( Read More

During the interview one of the responses made by a marketing department personnel was “…we have to beat upon engineering to make sure that our marketing schedules are met.” This shows that the marketers want the engineering personnel to be on their toes full time. They want them to accept and implement impromptu demands without questioning back. The other obstacle leading to disagreement by this department is lack of planning. As much as they gave a strong reason for continuous changes to product development they still need to understand that, they are exerting too much pressure on the engineering department.

This can be evidenced by the remarks made by the engineering manager. He states that they are currently working on 375 different projects yet the marketing department does not seem to care. Question 3 Advantages of a good product management for Clark and company’s on its operational methods Crittenden et. al. (1993) found that conflict between marketing and engineering is often caused by the need to manage variety in such things as the number and breadth of products, customization of product and product quality.

This is the same situation that Clark Company is undergoing. This is why there it is very important for there to be a good project management established in the company. The project management will be able to enhance interdepartmental integration which is a very strong variable to a company’s performance. The engineering and marketing departments have to learn a lot from each other. In order to end the conflict, the two departments have to develop quality relations and integration amongst themselves.

The project management will take the initiative to train the marketing people in product and process characteristics. On the other hand train the engineers about customer preferences and requirements and, marketing sales techniques. A study by Shaw and Shaw (1998) on conflict between engineers and marketers within United Kingdom based companies, resulted to a number of solutions that a project management process would fulfill. They recommended that it was important to provide the engineers with marketing training as a way of improving their correlation with marketers.

On the issue of reducing conflict they advocated for; better communications, developing team work, increasing training and team building exercises. A good project management scheme would also ensure there is some formal or informal psychological training towards cultural differences. This will encourage the two departments, to reconcile mismatched goals and make them speak “the same language”, and realize that they are working towards the same ultimate goal (Tutek 2000 p.545). Another advantage of a good product management system is that the issue with the engineering department where they are overloaded by work can be solved.

With this system there will be a clear and procedural flow of the products to be worked on grouped by the level of priority and importance. Part B Question 1 Net Present Value Net present value (NPV), is the most widely accepted economic method of evaluating project proposals. It is a technique that plays a big role in capital budgeting decisions. Also categorized as one of the time adjusted techniques it is credited for taking into account the time value of money. The technique suggests that cash flow arising at different time periods differs in value even if the figures are the same.

The net present value evaluates capital investment proposal by finding the Present Value of the net cash flows discounted at the rate of return that is required by the investor. The NPV is solved by the equation: NPV = Cfo +  +  +  + …  =  t – is the time period Cf - expected cash flow Cfo - cash outlay Kd – required rate of return In investment critical decisions have to be made and it is important to have good knowledge of the outcomes of the decision before an investor can make it.

This is what calls in the capital budgeting techniques such as the NPV and payback period.

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