As a first-year student at the Lagos Business School, you have five courses during first semester part one, namely:
- Data Analytics
- Analyses of Business Problem
- Corporate Financial Accounting
- Business Ethics
- Management Communication.
All these courses are taken by different lecturers but it is amazing when we start drawing references from other courses. Most of the courses are interrelated, you would ask how right? Let me use a case to explain this. In the Analysis of Business Problem course, we treated a case about Eolica de Composite.
Summary of the case:
Eolica de Composite is a business that is into the manufacturing of a wide range of metals and composite parts for the aerospace, automobile, public lighting, and farm machinery industries. The company has three plants where they carry out their manufacturing, one in an urban area while the others were at satellite locations that are small towns away from the city where the main plant is located. However, they won a contract for which the existing capacity cannot cater, so they had to look for another plant. They had two options, one in the city not far from the main plant, while the other one was located at a satellite location. Meanwhile, the contract they won had a deadline that would attract a high cost if they fail to meet up.
Let’s talk about the characteristics of both options:
- Low population
- Difficult to dispose of after completion of the contract
- Few unemployed and skilled workers
- Electricity and water were $600,000
- No manufacturing industry
- Absence of national union for workers.
- Additional training costs would be required.
- High population
- Easy to sell-off
- A lot of skilled workers
- Electricity and water rates were $450,000
- Plenty manufacturing industry
- Presence of a national union for workers
- No training cost required
It is also worthy of note that sales in the industry were declining, hence they might not necessarily need to retain the plant after completion of the contract. Also, the company had a history of workers going on strike as a result of problems with the national union.
According to ABP, firstly, we need to follow the following steps:
- Identify the problem
- State the objective
- List the criteria
- Evaluate the criteria
- Make a decision.
The first convergence point is when we are evaluating the problem, we use tools and concepts from corporate financial accounting and data analytics such as marginal and absorption costing, probability, etc.
The identified criteria for making a good decision, in this case, is to know the financial implication and factors that can affect delivery such as union activities, availability of skilled workers, etc.
Therefore, we need to calculate the cost for both options using skills acquired in corporate finance class. Then other non-financial criteria are the impact of union, presence of skilled workers, etc. After this has been analyzed, since this decision is still based on some uncertain factors, we therefore need to assign probabilities. To know the likelihood of these identified factors crystallizing.
After a decision has been made, we would need to communicate our decision to management. Hence we need to write a report and present it to management – Management Communication course.
Thanks for reading.