Developing a Business Case
According to Liu & Liang (2015), “[f]irms are struggling to achieve and maintain the competitive advantage in today’s turbulent business environment” (p.1019). Precision Steel Fabrication has the opportunity to review the option of purchasing Tube Laser technology that will advance the method in which materials are produced or continue to operate as the organization currently does but with increased investment into the workforce.
The purchase of relatively unproven and costly equipment would go against the risk-averse nature of Precision Steel Fabrication’s leadership. While the potential benefits of increased productivity and revenue are appealing, figures are based on projections and would heavily rely on the performance of the office furniture industry, which has been historically unstable.
Precision Steel Fabrication has achieved significant success within the market, using traditional methods and techniques, with a loyal and family-like workforce. While the investment opportunity exists, it would be viable to recuperate some of the employees previously terminated, with the view of raising morale, employee satisfaction and performance. The increased volume of output would allow Precision Steel Fabrication to accept more jobs and new customers without compromising the competitive advantage of offering the best manufacturing price package to its customers.
Description of Current Situation
Precision Steel Fabrication suffered significantly, as did other steel fabrication corporations, due to the United States of American economic recession starting in 2001. By the end of 2003, Precision Steel Fabrication has terminated the employment of forty-nine employees, equating almost half of the workforce. Both the office furniture industry and Precision Steel Fabrication began to recover in 2004, and with improved industry activity and sales forecasts, the reality of recuperating some of the terminated workforces is increasing.
With the increased sales forecasts, Precision Steel Fabrication is in the position to review the purchase of a Tube Laser, with the prospect of increasing productivity while decreasing manufacturing costs. However, the initial purchasing price of this advanced technology is substantial for an organization forecast to generate approximately $10 million in sales in 2014. The purchase price of the Tube Laser is estimated at $1 million, roughly 10% of the forecast sales for 2014. Therefore, this is a significant purchasing decision to be considered by Precision Steel Fabrication.
The organizational impacts involved in this decision are of paramount importance. Firstly, should the decision be made to purchase the Tube Laser, the advances in technology will require specific training for its operation? Secondly, due to the changes in the manufacturing processes, employees may have to be reallocated to different operational departments to prevent further workforce termination. Lastly, if Precision Steel Fabrication elects to invest its resources elsewhere, the organizational impacts may be spread across several departments with a potentially increased work force and subsequently increased sales potential.
Each of the potential impacts on Precision Steel Fabrication from the purchasing decision is driven by thorough forecasting of organizational performance.
The Proposal
As the estimation of sales, technological implementation, and competitor performance are ubiquitous risks, the proposal would be for Precision Steel Fabrication not to purchase the Tube Laser. According to Tsao (2014), “investment—but not overinvestment—in acquisition and retention will balance both short-term market share growth and long-term customer equity” (p. 10). The large overinvestment of forecast, not guaranteed, sales of 10 percent is a significant risk to the longevity of Precision Steel Fabrications. Committing to such a large amount, based on projections, albeit thoroughly calculated, figures do not follow the risk-averse nature of the organization.
The alternative would be to work towards the recuperation of the work force that was lost due to the economic recession. At peak performance, Precision Steel Fabrication operated $10.9 million in sales with a workforce of 105 employees. According to Van Jaarsveld, Kwon, & Frost (2009), “firms are increasingly searching for ways to enhance work force flexibility—their capacity to alter task allocation and labor force size in response to demand fluctuations” (p. 573). Working towards increasing our workforce still provides the necessary flexibility of employee reallocation, training or termination where required. This will allow Precision Steel Fabrication to adjust to the steel fabrication market conditions accordingly without significant and prolonged investment risks.
Precision Steel Fabrication is proud to be considered a family organization and has achieved great success in this continued approach. “Previous studies have reached an agreement on the positive relationship between job security and work performance” (Ma, Liu, Liu, & Wang, 2016, p. 124), therefore striving to recuperate the previously terminated workforce, in addition to maximizing employee flexibility can have a positive impact on employee performance and organizational output.
The Financial Justification
Investment in the Tube Laser creates increased stress on the productivity and output of the Precision Steel Fabrication workforce. A cost-per-hour analysis (see Exhibit 1) details the significant increase in cost per hour with the introduction of the Tube Laser. As the Tube Laser involves significant financial investment in a single asset, the risk can be considered to be extensively higher. Committing to a higher cost per hour relies on a consistent yet uncertain level of operation in a market which has experienced significant instability in recent years. “Portfolio managers achieve significant benefits in terms of risk reduction, and diversification benefits are shown to be larger for low-risk portfolios compared to high-risk portfolios” (Christensen, Christensen, & Gamskjaer, 2016, p. 257). In this case, the portfolio manager is Tripper Hawthorne, owner of Precision Steel Fabrication. Due to the perceived instability, despite the recent recovery of the office furniture industry, low-risk and diversified investments will increase firm securities. As the company earned the opportunity to produce parts for its customers by providing the best manufacturing price package (Levenburg & Scalabrino, 2010, p. 2), this competitive advantage may be compromised by any pricing impacts created by the purchase of such an expensive asset. While Precision Steel Fabrication must strive for competitive capability, investment in such technology would incur exponential strain on current resources and demands. Increased demands include training in the operation of the new technology, which is time-consuming and inefficient.
Additionally, the annual savings of running current operational procedures through the Tube Laser offers an insufficient difference (see Exhibit 2). This would compound the stresses and pressure on Precision Steel Fabrication, maximizing the potential sales impact figures of purchasing the Tube Laser. It is worth noting that this Tube Laser technology is also somewhat unproven in the office furniture industry. It was estimated that there were about fifteen Brodure tube lasers in operation in the United States in 2004 and Nakamura also offered an automatic steel bundle loader, but this was a new option, and only one existed in the world, in Japan (Levenburg & Scalabrino, 2010, p. 5-6). Jovanović & Pilić (2013) suggest there may be a “[l]ack of confidence in the ability of industry and/or authorities to identify and manage emerging risks may prolong time to market or prevent success of NTs (new technologies)” (p. 395). Therefore, the lack of significant financial rewards, coupled with the risk of implementing somewhat unproven technologies, should dissuade Precision Steel Fabrication from investing in Tube lasers.
Conclusion
Precision Steel Fabrication has an opportunity to promote the risk-averse nature of its leadership to identify an appropriate investment prospect. According to Chien-Hung, I- Shen, & Jia-Chern (2017), “[j]ob satisfaction has a noticeably positive impact on job performance” (p. 266), therefore the resources that have been identified for investment in the Tube Laser should be reallocated to increasing the workforce. This is a lower-risk approach, with the view of maintaining organizational values while continually striving to maximize competitive advantage by increasing operational output. This approach will also allow Precision Steel Fabrication to maintain current competitive advantages of offering the best manufacturing price package to its customers.
References
Berger, M. L., Howell, R., Nicholson, S., & Sharda, C. (2003). Investing in Healthy Human Capital. JOEM, 45(12), 1214. doi:10.9768/001
Chien-Hung, W., I-Shen, C., & Jia-Chern, C. (2017). A study into the impact of employee wellness and job satisfaction on job performance. International Journal of Organizational Innovation, 10(2), 253-269.
Christensen, M., Christensen, M. V., & Gamskjaer, K. (2016). Delegated portfolio management and diversification. Applied Economics Letters, 23(4), 255-258. doi:10.1080/13504851.2015.1068915
Jovanović, A., & Pilić, V. (2013). Dealing with risk–risk interdependencies and trade-offs in relation to the development and use of new technologies. Journal of Risk Research, 16(3/4), 393-406. doi:10.1080/13669877.2012.729528
Liu, Y., & Liang, L. (2015). Evaluating and developing resource-based operations strategy for competitive advantage: an exploratory study of Finnish high-tech manufacturing industries. International Journal of Production Research, 53(4), 1019-1037. doi:10.1080/00207543.2014.932936
Ma, B., Liu, S., Liu, D., & Wang, H. (2016). Job security and work performance in Chinese employees: The mediating role of organisational identification. International Journal of Psychology, 51(2), 123-129. doi:10.1002/ijop.12137
Tsao, H. (2013). Budget allocation for customer acquisition and retention while balancing market share growth and customer equity. Marketing Letters, 24(1), 1-11. doi:10.1007/s11002-012-9217-y
Van Jaarsveld, D. D., Kwon, H., & Frost, A. C. (2009). The effects of institutional and organizational characteristics on workforce flexibility: evidence from call centers in three liberal market economies. Ilr review, 62(4), 573-601.
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Question 
Assessment 2 Instructions: Developing a Business Case
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Develop a 3-5 page business case for the initiative you proposed in Assessment 1. Examine the feasibility and cost-benefit considerations over a 5-year period, analyze ways to mitigate risks, and complete a cost-benefit analysis.
Developing a Business Case
Introduction
Note: Each assessment in this course builds upon the work you have completed in previous assessments. Therefore, you must complete the assessments in the order in which they are presented.
As a master’s-level health care practitioner, you are expected to consider a number of factors when analyzing the feasibility of a new initiative. For example, you must consider the various types of risk (such as patient safety, physical plant, financial, or reputation), as well as the present and future value of the service line or economic opportunity in which you are investing. You must also balance your ethical and moral responsibility to provide quality care to patients and populations with your responsibility to protect your organization’s assets and economic viability in the near and long term.
Instructions
Develop a business case for the economic initiative you proposed in Assessment 1. Examine the feasibility and cost-benefit considerations of implementing your proposed initiative over the next five years. Analyze ways to mitigate risks and complete a cost-benefit analysis.
Note: Remember that you can submit all or a portion of your draft business case to Smarthinking for feedback before you submit the final version for this assessment. If you plan on using this free service, be mindful of the turnaround time of 24–48 hours for receiving feedback.
The requirements for your business case, outlined below, correspond to the scoring guide criteria, so be sure to address each main point. Read the performance-level descriptions for each criterion to see how your work will be assessed. In addition, be sure to note the requirements for document format and length and for supporting evidence.
Analyze the potential economic opportunities and risks associated with your proposed initiative.
How do the potential opportunities benefit your organization or care setting?
How could potential risks pose a threat to the financial security of your organization or care setting?
How do the potential economic opportunities compare to the potential economic risks?
Propose ethical and culturally sensitive solutions that address the risks associated with your initiative to the future economic security of your organization or care setting.
Which risks are potentially the most significant for your organization or care setting?
How could you modify your proposed initiative to mitigate those risks?
How have other organizations and experts in the field dealt with similar risks?
How do ethics and equality factor into your proposed solutions?
Are your solutions unfairly burdening or disadvantaging any specific groups?
How will this proposal affect community healthcare delivery outcomes?
What makes this a great opportunity for economic growth?
What potential issues should be considered?
Analyze the economic costs and benefits of your proposed initiative over a five-year period.
Use the Cost-Benefit Analysis Template [XLSX] for your calculations. Add the worksheet to your business case as an appendix.
Does your analysis warn against specific aspects of your proposed initiative?
How would you recommend that your findings be incorporated into decisions about the feasibility of your proposed initiative?
Propose ethical and culturally equitable ways of keeping costs under control while maximizing the benefits of your initiative.
What costs are you most likely to be able to control or reduce?
How would you go about ensuring this?
How could controlling or reducing these costs affect the benefits of your proposed initiative?
What strategies could you employ to maintain or maximize these benefits while controlling or reducing costs?
How do you plan to ensure that any cost controls or benefit reductions are ethical and equitable?
Justify the relevance and significance of the quantitative and qualitative economic, financial, and scholarly evidence you used to support your business case.
This criterion applies to any evidence you cited throughout your business case. Your evidence should be persuasive and relevant to your findings, proposals, and recommendations. Consider one or more of the following questions when citing support evidence:
How is the evidence relevant to your organization or care setting?
How is the evidence relevant to your proposed economic initiative?
How does the evidence illustrate a solution that has been successful in the past?
How does the evidence illustrate that an initiative or solution is likely to be a net benefit to the organization or care setting?
Write concisely and directly, using active voice.
Proofread your document before you submit it to minimize errors that could distract readers and make it more difficult for them to focus on the substance of your business case.
Apply current APA formatting to in-text citations and references.
Example Assessment: You may use the following to give you an idea of what a Proficient or higher rating on the scoring guide would look like:
Assessment 2 Example [PDF].
ADDITIONAL REQUIREMENTS
Your assessment should also meet the following requirements:
Format: Format your business case using APA’s current style. Use the APA Style Paper Tutorial [DOCX] to help you in writing and formatting your business case. Be sure to include the following:
A title page and references page. An abstract is not required.
A running head on all pages.
Appropriate section headings.
Length: Your business case should be 3-5 pages in length, not including the title page and references page.
Supporting evidence: Cite 4–5 authoritative and scholarly resources to support your business case. Be sure that your sources include specific economic data.
Portfolio Prompt: You may choose to save your business case to your ePortfolio.
Competencies Measured
By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment scoring guide criteria:
Competency 1: Analyze the effects of financial and economic factors (such as cost-benefit, supply and demand, return on investment, and risks) in a healthcare system on patient care, services offered, and organizational structures and operations.
Analyze the potential economic opportunities and risks associated with a proposed initiative.
Analyze the economic costs and benefits of a proposed initiative over a five-year period.
Competency 2: Develop ethical and culturally equitable solutions to economic problems within a healthcare organization in an effort to improve the quality of care and services offered.
Propose ethical and culturally equitable ways of keeping costs under control while maximizing the benefits of an initiative.
Competency 3: Justify the qualitative and quantitative information used to guide economic decision-making to stakeholders and colleagues.
Justify the relevance and significance of the quantitative and qualitative economic, financial, and scholarly evidence used to support a business case.
Competency 4: Develop ethical and culturally equitable economic strategies to address dynamic environmental forces and ensure the future security of an organization’s resources and its ability to provide quality care.
Propose ethical and culturally sensitive solutions that address the risks associated with an initiative to the future economic security of the organization or care setting.
Competency 5: Produce clear, coherent, and professional written work in accordance with Capella writing standards.
Write concisely and directly using active voice.
Apply APA formatting to in-text citations and references.