• Week 4 Individual Project

Individual Project: Project Proposal

The senior management of your company has already made the strategic decision to allocate annual funding to each of the strategic business units (SBUs) within the company. A new executive (your Instructor) has been hired to head up your strategic business unit. This new executive was hired from another company in another industry, so he is still learning about your industry, your company, and your SBU.

You are a member of the organisation responsible for the management of a product portfolio in this SBU. There are a number of projects already in progress, but there has not been a good portfolio management process in place.

The first major act of your new executive was to establish a portfolio management group to develop and implement a portfolio management process for your organisation's SBU. You are a member of that team.

Your first task in this project is to develop Part I: Project Proposal of the module project. This is due no later than the end of week 4.

Part I: Project Proposal – due at end of week 4:

You should immediately:

  1. Choose an industry (your choice—but it is preferable for you to be familiar with the industry).
  2. Choose any company in the industry. You will need to be able to derive the company's high-level mission and strategies (from annual report, etc.). It does not necessarily need to be the firm that you work for, but you need to have some familiarity with the company. Your current or a past employer could be a good candidate.
  3. Invent a strategic business unit (SBU) that has some specified portfolio of products. This does not necessarily have to match the real world; make up a scenario if necessary.
  4. Invent the mission and strategies of the SBU. They should be consistent with the company mission and strategies, but they do not have to match the real world—i.e., make them up if necessary.
  5. This SBU, its mission, and its strategies are then the basis for the development of the project selection criteria and the portfolio management process.

Submit the combined Section A and Section B of Part I (the Proposal) to your Instructor, who will review the proposed scenario to see that you have created a reasonable scenario you can work with on the project for the rest of this course. You should summarise this portion within 2–3 pages.

Following approval from your Instructor, you should begin to address Part II of the project, which will detail the specific portfolio management process and criteria you would recommend to the management of the firm that you have selected. The specifics of Part II of the project are detailed below. Your submission will be due at the end of Week 6 of this course.

Your second task in this project is to develop Part II of the following project. This is due no later than the end of Week 6.

Part II: Project Outline – due at end of week 6:

In Part II of the project, you are asked to develop a set of project selection criteria and a high-level process for applying the criteria and managing the portfolio. In developing the criteria and process, you should follow the examples and the design of various systems that are contained in Kerzner (Chapters 15 and 16), in Rothman (Chapters 4 and 5), and in Morris and Pinto (Chapter 5). In general, it is expected that you will choose criteria that will improve shareholder value, which is driven by the four basic 'value rivers':

  1. Revenue Growth: Growth in the company's 'top line', or payments received from customers in exchange for the company's products and services.
  2. Operating Margin: The portion of revenues that is left over after the costs of providing goods and services are subtracted—the key measure of operational efficiency.
  3. Asset Efficiency: The value of assets used in running the business relative to its current level of revenues—the key measure of investment efficiency.
  4. Expectations: The confidence stakeholders and analysts have in the company's ability to perform well in the future—the key measure of investor confidence.

In addition, as illustrated in the examples in Kerzner and in the discussion in Rothman and in Morris and Pinto, there are other criteria that can be added at this point, such as strategic fit, degree of linkage to corporate strategy, and enablement of achievement of overall business objectives (e.g., market share, position in the market, etc.).

At this point, you may not have enough financial data or information to do rigorous calculations of NPV or other financial measures (this will come later). Therefore, your process should be similar to those in your three textbooks—especially in the examples in Kerzner and in the discussion in Rothman. That is, the processes should be higher level—and probably a point-based system.

The criteria that you choose should be consistent with the business environment for your industry, with your company's overall mission/strategies, and with the mission and strategies of your strategic business unit. You are proposing a process, not individual projects.
The deliverable for Part II is a written recommendation for the project selection criteria and a high-level description of a proposed portfolio management process. Since your manager is new to the industry, the company, and the SBU, you may need to provide more context/background info that he has not yet assimilated.

The proposal should be in the form of a memorandum to your manager (your Instructor) outlining your proposal. The memorandum should be no more than 12 pages, including figures and tables. It should be double-spaced, in 10- or 12-point font, and with one-inch margins. This is a summary for an executive, so be concise and to the point. The use of appropriate grammar, spelling, punctuation, and sentence structure will be part of your grade. You should not include any specific projects in this part; you are developing a selection process.

Part II: Project Outline should include necessary background information (no more than 2 of the 12 pages). Remember, your manager (your Instructor) is not yet familiar with this and has been kind of slow to grasp your proposal. It should include the following information.

  • A brief description of the industry and the key aspects of the environment of that industry
  • A brief summary of the mission and strategies of the overall company
  • A brief description of the mission and strategies of the SBU
  • A brief description of the existing organisational structure

In addition to the above, Part II: Project Outline should also include:

  • A description of the proposed portfolio process and the reasons it was selected (tie to strategies as appropriate)
  • A description of the proposed selection criteria, the method for applying the selection criteria, and the justification for both

What implications does the current organisational structure have on the implementation of this proposal, and what if any changes to organisational structure may be necessary?

Please make sure that you cite and reference all your outside sources properly, as per the Harvard Referencing System.

Use the Turnitin link below to submit your assignment.

Week 6 Individual Project

Individual Project: Project Outline

In Part II: Project Outline, the new executive (your Instructor) of your strategic business unit (SBU) asked your team to create a portfolio management process and project selection criteria for use by the SBU. Your executive is very satisfied with the work you did to create this process. In fact, he was so impressed with the process and criteria you defined, he has now asked you to be key players in executing that new process. What follows are the details that will comprise the final deliverable of the project.

Your third task in this project is to develop the final deliverable of the module project. This is due no later than the end of week 8.

Part II: Project Outline – due at end of week 6:

In the annual budget cycle,

  • Your SBU was allocated €24 million of funding for staff.
  • Your SBU is currently staffed with 100 people. The average loaded salary of your staff members is €240,000, which includes direct salary, all benefits (which are part of your budget), and all direct charges and capital charges (supplies, computers, travel, rental charges for the space you occupy, equipment, etc.).
  • In order to continue to employ all 100 staff members, you must allocate €6 million of funding each quarter.

It is Monday, April 1. The first quarter of the year has just concluded.

  • Your SBU spent €6.0 million of the annual funding in the first quarter.
  • Half of that spending went to projects that were finished in the first quarter and no longer require any budget.
  • There are three committed projects still in progress, which have the following characteristics.

Project / Delivery / 1Q / 2Q / 3Q / 4Q / Total
Funding Available for Q / €6.0M / €6.0M / €6.0M / €6.0M / €24.0M
Project A / 6/30 / €2.0M / €2.0M / - / - / €4.0M
Project B / 9/30 / €1.0M / €2.5M / €2.5M / - / €6.0M
Project C / 12/31 / - / €1.0M / €3.0M / €3.0M / €7.0M
Sunk Cost in Other Completed Projects / 3/30 / €3.0M / - / - / €3.0M
Total Committed Funding / - / €6.0M / €5.5M / €5.5M / €3.0M / €20.0M

An important new project—Project D—has been proposed, and your executive has asked you to use the portfolio management process to determine whether to proceed with Project D and to identify the impact of the project on the rest of the programme. Project D must be delivered by December 31 and is estimated to require the following funding to meet that commitment.

Project D Required Profile
Quarter / Funding Required
2Q / €1.0M
3Q / €2.5M
4Q / €2.0M

You are to use the portfolio process you developed in Part II: Project Outline of the module project to determine how to manage the portfolio of existing and new projects. When looking at the funding required, you will not be able to maintain the work on all the existing projects and introduce the new one with its requirements.
The information that you have for the projects is the following:

Project / Description
A / Final R&D and commercial launch expenses for new product line—critical to protecting market share from aggressive competitors who are rumoured to be developing a similar product line
B / Product line extension (V2.0) for product line that has been quite successful initially in the marketplace and appears to be a successful new product
C / Product line rehab for product line that has not achieved the initial success desired, but should be successful with these design revisions in a market that is growing slowly
D / Exciting new product concept that will replace an outdated product where sales have been deteriorating over the past several years. The product promises (based on initial product market testing) to be a success within several years.

The results of the analysis using the selection process are the following:

  • Project A is viewed as higher priority than Project D.
  • Project B and Project C, however, are lower priority than Project D. That is, it is more important to make the requested schedule date for Project D than to maintain the committed schedule dates for Projects B and C.

Cash Flow Estimate for Project A (all figures are in €M Euro):

Cash Flow Item / Year 1 / Year 2 / Year 3 / Year 4 / Years 5–15
EBIT / –€4.10 / €2.25 / €4.65 / €8.50 / €10.27
Capital Investments / 6.90

Cash Flow Estimate for Project B (all figures are in €M Euro):

Cash Flow Item / Year 1 / Year 2 / Year 3 / Year 4 / Years 5–15
EBIT / –€1.10 / €1.50 / €3.36 / €4.50 / €6.40
Capital Investments / 4.10

Cash Flow Estimate for Project C (all figures are in €M Euro):

Cash Flow Item / Year 1 / Year 2 / Year 3 / Year 4 / Years 5–15
EBIT / –€1.70 / €1.80 / €2.30 / €4.30 / €6.30
Capital Investments / 4.70

Cash Flow Estimate for Project D (all figures are in €M Euro):

Cash Flow Item / Year 1 / Year 2 / Year 3 / Year 4 / Years 5–15
EBIT / –€5.10 / €2.10 / €6.00 / €12.00 / €13.50
Capital Investments / 8.2

Notes on Tables:

  • EBIT is defined as Earnings Before Interest and Taxes (revenues minus discounts minus cost of goods sold).
  • All equity financing is used so there are no interest charges.
  • Corporate tax rate is 30%.
  • Discount rate of 11% should be used.
  • Straight-line Depreciation should be used. In all cases, assume an average tax life of 15 years.
  • Assume tax-loss carry-forward applies to all cash flows.

Your report will show how you used your portfolio process to determine why you are going to commit to Project D and determine any impact on currently committed Projects A, B, and C, and you will write a short memo to your manager documenting the results of applying the portfolio process. Attached to the memo you are to include an executive summary project plan for Project D.

Since this is the first project using the new portfolio process and project selection criteria, you will be expected to present an overview of the process and criteria to your new executive. You will then need to present the results of your analysis and recommendation, including an overview of the executive project plan, to the executive as part of the gate review of Project D.

Note that in your discussion, you should identify the potential change management and political issues that might get in the way of successful implementation of this new system for changing the portfolio. Such changes are never easy, with various political motivations or change management issues surfacing. Your company is not different than others, but you need to articulate in your report what some of the issues might be and how you would recommend that management deal with them.

Preliminary Work (not for grade)

By the end of the week 6 class, you should:

  1. Choose and define 3 committed projects for your SBU portfolio that meet the guidelines of the generic definitions for Projects A, B, and C from above. They do not have to match reality, but they should be related to the industry and SBU you defined in Part I of the project. A one-paragraph description is fine for each.
  2. Choose a Project D using the guidelines of the generic definition for Project D from above to represent the new proposed project. Again, it does not have to represent reality, but it should be related to the industry and SBU you defined in Part I of the project.

Please make sure that you cite and reference all your outside sources properly, as per the Harvard Referencing System.

Use the Turnitin link below to submit your assignment.

Week 8 Final Project

Final Project

This week you will submit your Final Project for this module.

Justify the commitment of Project D using the portfolio process you defined in Part II: Project Outline. Make whatever assumptions are necessary (cash flows to fit NPV analysis, strategic alignment determination, etc.). Your team should prepare the following items for the report to be submitted to the Instructor:

  1. Recommendation Memo—Write a relatively short memo to your manager describing your recommendation for changing the project portfolio based on your portfolio process. Justify your decision on Project D and describe any impact on the rest of the programme (Projects A, B, and C) and your rationale for that impact. Attach whatever data is needed to back up your recommendation. This memo should be 6–8 pages (not counting attachments). No more than 6 pages of attachments for this part.
  2. Executive Summary Project Plan—Assume you are in the definition phase of Project D and developing an executive-level project plan that will be an attachment to your recommendation memo. It should follow the attached outline. This document should be at least 8 pages but no more than 18 pages, including any attachments.
  3. Commented Copy of Part I—Please provide a copy of the commented copy of your Part I: Project Proposal process document when submitting the final deliverable in this week. Make a note of any improvements made to your process as a result of trying to use it. (This is for reference and will not be graded.)

The documents should be double-spaced, in 10- or 12-point font, and with one-inch margins. These are documents for an executive, so be concise and to the point, and leave out the fluff. If you don't need additional pages to adequately document your plan, your manager will be happy with less as long as it is complete. For those challenged in math, the report can be as short as 12 pages and no longer than 30 pages. The use of appropriate grammar, spelling, punctuation, and sentence structure will be part of your grade.

Please make sure that you cite and reference all your outside sources properly, as per the Harvard Referencing System.

Use the Turnitin link below to submit your assignment.

  • Important - Week 8 Assignment

Posted on: Friday, July 4, 2014

Dear all,

Please note you will have to describe and justify the prioritisation of the 4 projects, A, B, C, and D. Show all your calculations and the way you arrived at your decision based on the additional information provided in week 6 Individual Project description. You may also use past material which you had developed over the last few weeks, so that you produce a complete report.