I need help on Analyse the main techniques,Starbucks might use,to evaluate potentiall major investment opportunties.
Analyse the main techniques,Starbucks might use,to evaluate potentiall major investment opportunties,ensuring the needs of the business and its financial management strategy are met.
Please use guide and include at least ten citations.First part – Select and justify investment appraisal techniques in order to ensure that investment decisions reflectthe financial management strategy of the businessCompare investment appraisal techniques for a range of typical investment scenarios in order to best meet theneeds of the businesso Payback periodo Net Present valueo Accounting rate of returnParagraph 1 (125 words, 3 citations)
o What is the nature and importance of investment decision making ( reference source) Why do companies make investment decisions – capital expansion, to grow the business, toenter into a new market, to launch a new product
o What are the key stages in investment decision making ( pg 90 in manual)o The use of investment appraisal techniques in companies Net Present Value Accounting Rate of Return Payback PeriodParagraph 2 (125 words, 3 citations)
o What is Net Present Value as an investment appraisal technique ( reference source)o The advantages and disadvantages of Net Present Value (reference source)o How would NPV be a suitable investment appraisal technique for your company (reference source)
Paragraph 3 (125 words, 3 citations)
o What is Accounting Rate of Return as an investment appraisal technique (reference source)o The advantages and disadvantages of Accounting Rate of Return (reference source)
Created pg. 16
o How would Accounting Rate of Return be a suitable investment appraisal technique for yourcompany (reference source)Paragraph 4 (125 words, 3 citations)
o What is Payback period as an investment appraisal technique (reference source)o The advantages and disadvantages of Payback period (reference source)o How would Payback period be a suitable investment appraisal technique for your company(reference source)
Second part – Analyse relevant non-financial factors and their importance in investment decision-makingHowever, there are a number of other factors that might need to be considered in investment decision making. Atrill(2014) summarises these factors as:
o Strategy: the overall strategy of the business needs to be considered. An investment opportunitythat might seem to be suitable following an investment appraisal might not be appropriate in termsof wider strategy.o Flexibility: some investment decisions are non-reversible. A business that seeks to retain flexibilitymight avoid otherwise profitable investment opportunities.o Creditworthiness: the provider of the source of finance for an investment opportunity needs to beassessed for creditworthiness.o Capability: the extent to which the business has the experience, skills and broader resources toundertake the investment.o Market reaction/competition: the response of competitors to a business’s decision to undertake ornot to undertake an investment.
Paragraph 5 (125 words, 3 citations)
o What are the non-financial factors that are used when making an investment decision? ( referencesource)o Identify examples for the non-financial factors
Sample Template will look something like this:
Non-Financial Factors in Decision-MakingWhile quantitative data is important in investment appraisal, it is only part of the decision making process and mustbe combined with other factors to reach a well-informed decision. Non-financial factors, identify less tangibleelements, with the potential to detect impending risks and competitive advantage that financial methods cannot(Moutinho and Lopes, n.d.) and are summarized by Atrill (2014).StrategyCoca-Cola’s growth strategy is focused on profitability, maximization of returns and growth investments, thatultimately lead to increased cash flow (Coca-Cola, 2021h). Its investments therefore, must be synchronized with thekey business outcomes. Thoroughly developed processes, strong project governance and communication must beimplemented from the start as any misalignment can affect inter-dependent functional areas, leading to poorperformance, hindered growth, increased spending and inevitably, reduced revenue (Abukhames, 2015).
FlexibilityAs the company seeks to invest in assets to drive growth, it must consider that such investments may be non-reversible. Its efforts are concentrated into the production of new types of products which may require highlyspecialized and costly equipment. Due to the current economic climate, impacted by the COVID-19 pandemic, thepossibility exists where the sale of the new products may not generate the desired profits, and so, affect the
Created pg. 17effectiveness of the equipment. The company may therefore end up with an asset lacking the ability to generaterevenue for the company.CapabilityCoca-Cola is attempting, to reduce its environmental footprint and transform its portfolio, by engaging in 100%recyclable packaging and modifying its sugar content, producing more nutritional drinks, by 2025 (Coca-Cola, 2021k).While the company does maintain a few low-sugar energy drinks and water, further adjustments may requirespecialized techniques, training and leadership competence to ensure the products are successful. Failure to do somay result in the product’s inability to launch, and be profitable and accepted by the market.Market Reaction/CompetitionThe success of a product relies heavily in understanding consumer acceptance. It involves examining the market size,unmet needs, competition and consumer groups, to direct its investment decisions, reduce risk and understandcompetitive advantage (Parsons, 2021). In 1985, Coca-Cola changed their formula resulting in intense customerdissatisfaction with the brand (Gorman and Gould, 2015). It may be assumed that proper market research was notconducted, and may have resulted in lost revenue and tarnished brand reputation.
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