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This work is dedicated to the specific topic called “Investment decisions for German non-public multinationals in China”. It consists from summarizing and analyzing the information and thoughts, given in different works about this theme. The essay sheds light on the main argument of the definition and determining of various terms. The paper gives an opportunity to get full information, analyze it and find basic standpoints. Detailed review can allow getting the main ideas, advantages and disadvantages of a big amount of thoughts and arguments. Thus, I am going to show and illustrate all sides of this topic through this paper.
2. Concept of Investment Decisions
Previously, I think it will be appropriately to mention what the decision-making means. It is obvious that the decision making of each person is explained with collaboration. According to site source, good decision-making is an essential skill for career success generally, and effective leadership particularly. If you can learn to make timely and well-considered decisions, then you can often lead your team to spectacular and well-deserved success. However, if you make poor decisions, your team risks failure and your time as a leader will, most likely, be brutally short (http://www.mindtools.com/pages/main/newMN_TED.htm, pg 1). Decision-making can be described with different elements: high discretion or even threats to satisfaction of society. However, making a decision or solving some problem people usually have rather high risk of making a mistake or face with difficulties. To understand whole question better elements of decision should be discussed. However, a quantitative decision problem includes about six main parts. First is determining of an object itself that may be quantified. Next is determining of constrains. Then to make an area of alternative action courses become one of those under consideration. Then its costs and benefits should be forecasted. At last, decision issue application and a choosing of alternatives that are preferred take place.
Traditionally, investment decision is seemed to be a purchase or making assets, including future expectations of gaining benefits and objective of making. Primarily, it includes making use of financial sources in order to create an object/asset that will shortly after bring and yield returns to the company or organization. What are main considerations in making such decisions? They are seemed to be next: determine the investment scale and the company’s ability to allow it; how much time should pass in order to investment become yield returns; the period that is needed to pay back the investment; what profits and benefits are expectable and required from it and other.
2.1 Importance of investment decisions for a company
Traditionally, in the analysis of the investment decision two nuances or parameters are outlined – efficiency or productivity and risk. It is obvious that contemporary portfolio decisions make them definitely clear and understandable. However, Viadogas mentioned that investor along with investment profitability possibilities must have the characteristics of this possibility reliability or guarantee, which would determine the probability of each of the possibilities; when discussing investment strategies, sustainability reliability assessment is the primary issue (2007, pg 497–518).
Talking about the importance of investment decisions should be noticed some issues. Investment decisions makes the organization’s growth become higher during the long term; the risk of the company is influenced by them; huge fund amount commitment is included by them; investment decisions can be irreversible as well as reversible when talking about substantial waste; they are seemed to be one of the most difficult and complete decisions to make.
However, the benefits of investment decisions extend in to the long-term period (future). The level and way of growth of the company or firm are influenced by investments in assets with long term. The results can be different: from the one hand, a mistake in making a decision will lead to the disastrous for the company’s continued survival and ineffective expansion will cause huge operating costs; on the other hand, if the investment will be inadequate competition and maintaining of the market share of the organization become harder. In addition, the rate of company’s risk complexity can be changed thanks to a commitment of funds (long-term). The main standpoints and whole character of the organization is shaped by investment decisions. Moreover, investment decisions are mostly irreversible. If a company’s assets scrape, then this company will definitely get heavy wastes and losses. However, such decisions cause events, which are very hard to be predicted. The problem is that investment cash flows are really hard to be accurately estimated.
2.2 Special forms of investment decisions
In this part of my work, I want to notice that the one of the most important and needed things in investment decisions is a capital budgeting. According to Ackerman, capital budgeting refers to actions relating to planning and financing of long term projects. It involves an investment concept—a company must pay out funds now in the hopes of some future return. It is at the very heart of virtually all-financial planning. In many instances this perspective is not fully appreciated because the term “capital budgeting” has become too associated with the mechanics of DCF economics and yearly, short-term budgeting (1970, pg 341-351). Capital budgeting is definitely needed in decisions in marketing. Capital budgeting decisions are the best way to make organization’s activity successful and productive, as well.
Let me now talk about forms of investment decisions in full length. It is obvious that they can be such: actual business expansion, replacement and improving (or moderation), at last, expansion of business that has recently appeared. Another classification suggests such division of investment decisions: first, investment that is mutually exclusive, next, independent one and, at last, investment that can be defined as contingent one. I think it will be appropriately to depict all the forms in the graph table, which will explain main points of each form:
Expansion and Diversification
Replacement and Modernization
Mutually exclusive investment
An organisation might add capacity to the lines of goods that exists in order to make existing operation be expanded. The basic issue of its terms is to make operating efficiency better and to decrease the level of costs. Replacement decisions are seemed to be useful because of helping to introduce assets that are much more effective, accurate and economical. They also are likely to expand both revenues and reduce costs, as well. This investment usually serves the common aim or goal; moreover, it competes with each other. While one investment is undertaken, others investments must be included in future. Such investments are seemed to serve various aims and they traditionally do not compete with each other. Investment’s successful and profitability, further still, its accessibly way of existing of funds influence on the company’s ability to undertake both investments Such form of investments is defined as one that depends on projects; however, the one investment’s choice (or, strictly talking, necessitates of investments that were chosen) usually undertake one or even more other such investments.
According to Bavishi, typical investment decisions include the decision to build another grain silo, cotton gin or cold store or invest in a new distribution depot. At a lower level, marketers may wish to evaluate whether to spend more on advertising or increase the sales force, although it is difficult to measure the sales to advertising ratio(1982, pg 32-35). Specials forms of investment decisions are such: special sales orders, then dropping goods, territories, departments, and, at last, outsourcing, good’s mix, facilities using and future process.