LBS is a textile firm that designs fabrics for the wholesale market in the Northeast. The company over the last three years has experienced modest growth, but is now encountering significant competition from Asia. More and more weaving plants in the U.S. have closed, and price discounts from the East are forcing many firms to consider importing fabrics from abroad and to go directly to the weavers, as opposed to LBS.
LBS needs to consider a number of ways to expand its operation, but will need to invest in technology expansion. It has little experience with technology and currently has a 300-node network system running Windows (they have 400 people). The firm has a homegrown wholesale distribution and accounting system using a very old legacy system. LBS is thinking of replacing the ...view middle of the document...
) $2 M
E-business systems $4 M
R&D in textile design and new advanced products $3 M
Telephone and wireless technology $.5 M
Travel, training and misc $1 M
Total Funding $19.5 M
Thus, the investment in relation to the budgets is enormous. You have been asked to issue a report to management on your proposal; no one knows these numbers. Obviously LBS will need to finance this level of investment. You expect there to be many questions relating to why these investments are needed. You recognize that you would have no more than 30 minutes to present your report.
Based on the limited information you have, provide your report broken into the following sections:
Direct Revenue investments: what are the investments that can be measured against financial returns? You can assume such returns will be feasible and meet company standards. You must reference the financial measurements that we have reviewed in class and in your readings.
Indirect returns: using Lucas’ methods of non-monetary valuation, show the benefits from those investments that can be allocated to returns in some way—and how you will do it.
Cost of business issues: using Lucas’ Garbage Can Model and Conversion effectiveness, provide your argument as to why these investments are important.
Focus on what we have discussed in class and what you have read. Although you have some understanding of the amount of investment related to normal operating and capital investments, concentrate on the generic issues of what is challenging the business and what brings value. You can assume that you are 100% convinced of your plan—so you must reflect an enthusiasm and confidence in your report.