Pan Europa Project Management Case Study
1418 WordsSep 13th, 20136 Pages
Pan Europa Foods
* Question 1 * a. Strategically, what must Pan-Europa do to keep from becoming the victim of a hostile takeover?
Answer: Pan Europa should not decrease the dividends of the shareholders to not devalue the stock price of the company. Instead should just decrease capital spending as what they board of directors have decided. In short, they should adopt strategies that should increase stock price not push it down to discourage buyout.
b. What rows categories in Exhibit 2 will thus become critically important in 1993? What should Pan-Europa do now that they have won the price war?
Answer: As suggested by their bank they should reduce their debt due to the high debt to equity ratio incurred during the price wars and…show more content…
Answer: Projects that have nonquantitative costs and benefits would include: * Projects that impact the company’s regulator compliance such as effluent treatment (environment) and warehouse automation (safety). * Several of the projects could impact the company’s image. For example, the snack food rollout could be positive because of its wholesome connotations while the acquisition of the schnapps brand could be negative. The effluent project could be positive by showing the company’s willingness to act on environmental concerns early. Similarly the automation project could be cast a positive step towards increased safety. The plant expansion project may be positive or negative depending on whether the community reacts to new jobs or factory encroachment. * * Question 5
Considering all the above, what screens/factors might you suggest to narrow down the set of most desirable projects?
1) I would recommend four screens be applied using the following factors:
* Does the project incurr a high cost?
Exceeds Tolerable Cost Value * Is the project a “Mandatory”?
Options – Yes/No * Does the project meet minimum IRR?
Options –Ok/Not Ok * Does the project meet maximum payback period?
Options –Ok/Not Ok * Does the project incur high risk?
Options –Ok/Not Ok * Does the project meet the current corporate strategy?
Options –Ok/Not Ok
What criteria would you use to evaluate the projects on these various factors? 2)
In January 1993, the senior management committee of this company has to decide which major projects the company should fund for immediate implementation. The board of directors arbitrarily set a limit of European currency units (ECU) at 80 million to spend on capital projects in 1993. But various managers have proposed projects totaling ECU208 million. Students must evaluate the completed discounted cash flow (DCF) analyses presented along with qualitative factors (mainly the strategic considerations and the internal politics of the company) and choose the projects to be approved.
The main objectives of the case are to explore the problem of resource allocation within corporations; illustrate and assess the impact of capital rationing on capital investment decisions; exercise and interpret the implications of classic tools of investment analysis (for example, net present value [NPV], internal rate of return [IRR], and payback); and to consider possible adjustments for differences among the projects in risk (for example, through the use of risk-adjusted discount rates), size (for example, through the profitability index), and life (for example, through using equivalent annuities or replacement chains or both); consider the impact of behavioral influences on financial decision-making. The roles in this case are overlaid with numerous possible conflicts among the decision-makers: cross-cultural, cross-functional, and political. The case illustrates the potential effect of those conflicts and provides some insights into remedies.