Essay about Art Inc.: Global Innovation’s Challenges Case Study

921 Words Jul 8th, 2012 4 Pages
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Essay Sample
From the Case we can tell that Peter Vyas has been very effective in dealing with the tricky situation of his Unit. He in fact managed to rebuild a low morale and a high turnover Unit selecting entrepreneurial minded people. He truly believes in the skills of his team and had faith in its project, which has been discharged by previous management, and succeeded in motivating the team to pick up the project again and develop it further. In Cynthia Jackson’s words, VP of the divison, he “seems

middle of document…

In fact, if we
assume that there are no interest expenses, and therefore operating income would match pretax margins, the projections
clearly show a high profitable investment, apart from the launch year where only the O.I. are 5% less than the target.
With some calculations, we can deduct that, given the 2M$ investment, the ROIC will be always higher than 20% and,
the sales growth, even though in a descending trend, stands in a range between 30% and 20%. Finally we can say that
the payback period is roughly more than 3 years, which, for a product with innovative technology, makes a rather safe
investment.
In the more likely case that capital loans are actually present, forecasted pretax margins could be lower than O.I.
Notwithstanding, two out of three index of profitability (sales growth and ROIC) are higher than ART targets, which still
makes the investment desiderable. Nevertheless it would be advisable for the team to acquire information on the WACC
and a target IRR in order to make more reliable assumptions on the profitability of the project.
Finally, there are further interesting possibilities for the product to be employed in the original application in developing
countries, these were not accounted for in the business plan but could be pursued if the product gives evidences of
market appreciation.
To sum up, considering the above mentioned economics, the strong commitment of the team, the applicability of the
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