Methodology to Supplement Traditional Methods in Capital Investment Evaluation to Reduce Risk

Methodology to Supplement Traditional Methods in Capital Investment Evaluation to Reduce Risk

Most large manufacturing companies have greatly ventured into the capital investment market for most of their operations. That being the case therefore, such companies have benefitted from monopolies of scale in such virtual market scenarios. One of the global known producers for machinery commodities is Samsung. Since the year 1938 in Beijing, the company gets known for different commodities transportation since it started in South Korea. A lot of effort has got put into consideration especially by the founder Lee Byung-Chulis to make it a multinational corporation.

Samsung as a word has a meaning that is mainly three stars. The stars as well have a deep meaning that are meant to mean electronics, development as well as the information technology. The main aim of the paper in the case is therefore to analyze the type of technology utilized by the company in supplementing other methods especially traditional in capital investment evaluation within the markets that emerge. The company is however known to face threats of stiff competition. That mostly occurs from other companies that also operate in the same business of electronics such as Motorola and Nokia.

Methodology to Supplement Traditional Methods in Capital Investment Evaluation to Reduce Risk

Different commodities such as fertilizers, wool and sugar were greatly used by the company in its early stages. In order to facilitate capital investment evaluation in the various traditional methods, the company gets obliged to utilize different methods in the modern economy. The paper therefore considers the research method for the study. Different researchers get sent out by the company to different markets within the world. The researchers therefore function to look out for various potentials and the target market within a particular country to enhance the investment. It will be evident enough that electronics and Smartphone demand is very high within some of the developing countries.

According to research, it has therefore got established that within the developing countries, there is a very high demand for tablets. The production of the different smart phones should therefore get directed towards such countries by the company. Contrary to the opinion, there has been a steadfast decrease in the personal computers production when compared to the production of smart phones. In evaluating the capital investments methodology on the same case, it is also important to consider the demand probability of other new commodities within the market. A great example for our case is the wearable tech, a new technology that had to undergo what is known as feasibility studies prior to getting released into the market (Michell, 2015).

Rationale for the Methodology

Basically, the appropriate rationale for our given study provides that the company fails to manufacture goods and commodities that are not necessary and of less demand within the market today. The company moreover has put much focus on the different technological innovations to improve what they already have. An example is when the different researchers set out on the field works towards identifying different technological loopholes and develop a more advanced technological idea than the previous version. In that case, the threshold of the company can get lived up to through spreading of the different risks by the methodology to enhance different opportunities and strengths.

How Inflation Could Affect Planned Capital Investments in the Emerging Markets

In a particular investing company, the crisis of inflation could be a really great threat. That is more so true because the any nation’s economic status can greatly get reduced by the inflation crisis. There can be a dive of the purchasing power if at all the currency gets to be the same for any given type of state. Meager types of profits will therefore get made by the Samsung Company at this kind of investment area. In order to make the ends meet, the country on the other hand will work towards increasing the tax earned through retaliation. The business success for the same case will therefore get impacted negatively. When that is the case, the management will opt to avoid investing in that type of country. The investment bracket for the Samsung Company is not blind as it has perfect timing of the inflation signs. High rates of prices of goods and increased rates of taxes as well as civil unrest are clear signs of inflation in a country. The civil unrest within any given country can cause property destruction in any given country thus threatening business failure and closure (Michell, 2015).

A company has high chances of running at a loss if at all the rates of inflation happens to exceed the returns. A perfect example therefore is the strengthening of the consumers bargaining power if at all the commodities prices shoots up with no increase in the salaries and wages. Reduction in the demand will also lead to a reduction in the overall output. Inflation hence expected to come about with different effects such as incline in the preferences towards water and food for the purpose of purchasing electronics. In that type of scenario, Samsung as a company will get forced to focus on products that can out-shine the different rates of inflation. The main target in that case will be electronics.

An Approach to Performing an Accurate Evaluation of the Investments

Message boards get greatly utilized by the company for the purpose of identifying viable investment areas. A reconnaissance gets conducted by some individuals within the area of specific interest. The cost of some of the individuals tends to be higher than that of organizations at some cases. There is however some difference since there is minimal bias in the individual reports when compared to the message boards. The company can therefore opt to do further investigation during confirmation bias done at very high levels. At most cases, the confirmation bias will go handily with the increase in dissonance. The final result will be the meager profits. In most cases, confirmation bias gets curbed by the company through enhancing individual investigation and countering it with the final report. That is what caters for the confirmation evidence (Michell, 2015).

How Management’s Decisions can get affected by that Knowledge

In cases where different opportunities get outnumbered by threats, the management will come in for the purpose of identifying profit margins. Within the virtual community, the managers work to direct their investments in capital to the various feasibility studies. The final study should get able to compare the board report of the message to that of the confirmatory evidence of a particular individual. A report that is positive is much appropriate for a trial type of investment. The role of the confounding bias is as well the solemn responsibility of the managers especially within the virtual communities as it deals with the demand and supply (Jaeyon & Lee, 2016).

Within the developing nations, the management can also decide to work commodities that are cheaper such as tablets and other smart phones contrary to computers. We can therefore agree that the investment area and its suitability have an impact on their decision as they have a clear understanding of the market, and its demand and supply within the community.

How the Company would Increase Internal Capacity in North America Versus Increasing Market Globally

Since the year 2011, Samsung as a company has recorded 74% as the least margin in their profit. Much of the evidence for the same can get ascertained by the decline in the various Samsung commodities shipment. There also recorded a decrease in the shipment products by 24%. Within North America, high sales have been recorded by the Apple Company within the countries market. To enhance its operations within North America, much focus should get put by the country in the software improvement. That will enable it to be more distinct especially from the rest f the counterparts (Rowley & Yongsun, 2015). They should also work at their prices to ensure it is reduced in order to gain a global market. When that is achieved, other developing countries will not get a chance to forgo their products for smart phones that are cheap especially from India and China. The prices can get lowered through the use of low and mid end phones by the country (Michell, 2015).

In order to have a greater access especially globally, the company should also opt to merge with other upcoming companies. That is so because they have a great understanding of the different consumers which will help in selling their Samsung products.

Impact on Decision made about Expansion

The confirmation tests cost can greatly get cut down if at all the Samsung Company form alliances with India and China Smartphone producers that are upcoming. That is so because such upcoming companies avails the confirmation evidence. If that is the case, the company cannot lose any battles only by investing in the virtual community. Instead of exposing the whole company to the many threats, it is way better to spread the risks. A wider market can therefore get accessed through collaboration with small companies.

Benefits of using Sensitivity Analysis in Projects Evaluation for the Selected Company

The outcome of success of any given company is well predicted by a sensitivity analysis. The confirmation test can therefore get crosschecked at its best. It functions to provide the distinct relationship that occurs between the different variables and provides a highlight of how new investment can bring about success. Studies dealing with conducting feasibility can easily get reduced through the use of sensitivity analysis.

Sensitivity Analysis for a Competitive Advantage for the Company

Any decision at hand within the company can easily get evaluated through the use of sensitivity analysis. It most notably facilitated through employing the ‘What if’ technique. Different decision outcomes can easily get predicted by the company. A perfect example is the case where the company can analyze the impact of reducing electronics and smart phones prices through using sensitivity analysis. A decision therefore will get proved to be unsuitable if at all it has low scores. The analysis is more so important in displaying the different benefits and other risks within the company thus enabling it to make moves that are quick ((Rowley &Yongsun, 2015)

In conclusion, there is great need for the company to be competitive in nature. There are high chances for the Samsung Company to fall just like Motorola and Nokia if at all nothing is done to bring that change. Its future ventures are what greatly determine the overall success of the company within the emerging markets. There are however other threats faced by the company such as the Apple company that has good reputation especially within North America.