ASSIGNMENT NO.1 – QUASAR COMMUNICATIONS, INC.

Synopsis:

Quasar had grown to a point where they could now differentiate their project managers by large and small customers, capital equipment projects and R&D. Quasar soon learned that there were unique problems attributed to each group of project managers.

Part A – Questions

1. Can 13 project managers be effectively controlled and supervised by one vice-president?
2. Can the thirteen project managers under this V.P. work effectively with the four product managers under the V.P. of marketing/sales?
3. Why does the R&D project manager have built-in conflicts?
4. Should marketing have R&D project managers reporting to them?
5. What are the major problems with small customer project management?
6. Should the project manager on large projects be permitted to perform marketing activities?

7. Should a company be willing to let some large projects fail?
8. Is it possible for a company to have such a strong technical community that technical integrity is more important than the Project itself?
9. Is it possible that capital equipment projects almost always take a back seat to other projects?
10. What specific problems appear in the management of large projects?
11. What specific problems appear in the management of R&D projects?
12. Are there any strengths in the current QCI organization?
13. What type of project management structure is QCI using?

Part B – Question

Describe eight (8) possible recommendations that you could make for QCI?

Company Overview

Quasar Communications, Inc. (QCI), is a thirty-year-old, $350 million division of Communication Systems International, the world’s largest communications company. QCI employs about 340 people of which more than 200 are engineers. Ever since the company was founded thirty years ago, engineers have held every major Position within the company, including president and vice president.
The vice president for accounting and finance, for example, has an electrical engineering degree from Purdue and a master’s degree in business administration from Harvard. QCI, up until 1996, was a traditional organization where everything flowed up and down. In 1996, QCI hired a major consulting company to come in and train all of their personnel in project management. Because of the reluctance of the line managers to accept formalized project management, QCI adopted an informal, fragmented project management structure where the project managers had lots of responsibility but very little authority.
The line managers were still running the show. In 1999, QCI had grown to a point where the majority of their business base was around twelve large customers and thirty to forty small customers. The time had come to create a separate line organization for project managers, where each individual could be shown a career path in the company and the company could benefit by creating a body of planners and managers to the completion of a project.
The project management group was headed up by a vice president and included the following full-time personnel:

1. 1. Four individuals to handle the twelve large customers
   2. Five individuals for the thirty to forty small customers
   3. Three individuals for R&D projects
   4. One individual for capital equipment projects

The nine customer project managers were expected to handle two to three projects at one time if necessary. Because the customer requests usually did not come in at the same time, it was anticipated that each project manager would handle only one project at a time. The R&D and capital equipment project managers were expected to handle several projects at once.
In addition to the above personnel, the company also maintained a staff of four product managers who controlled the profitable off-the-shelf product lines. The product managers reported to the vice president of marketing and sales. In October 1999, the vice president for project management decided to take a more active role in the problems that project managers were having and held view meeting with each project manager. The following major problem areas were discovered:

R&D PROJECT MANAGEMENT

1. Project manager: “My biggest problem is working with these diverse groups that aren’t sure what they want. My job is to develop new products that can be introduced into the marketplace. I have to work with engineering, marketing, product management, manufacturing, quality assurance, finance, and accounting.
2. Vice president: “Whom do you have the biggest problems with?”
3. Project manager: “That’s easy—marketing! Every week marketing gets an of the project status report and decides whether to cancel the project. Several times marketing has cancelled projects without even discussing it with me, and I’m supposed to be the project leader.”
4. Vice president: “Marketing is in the best position to cancel the project because they have the inside information on the profitability, risk, return on investment, and competitive environment.”

SMALL CUSTOMER PROJECT MANAGEMENT

Project manager: “I find it virtually impossible to be dedicated to and effectively manage three projects that have priorities that are not reasonably close. My low-priority customer always suffers. And even if I try to give all of my customers equal status, I do not know how to organize myself and have effective time management on several projects.”

LARGE CUSTOMER PROJECT MANAGEMENT

Project manager: “Those of us who manage the large projects are also marketing personnel, and occasionally, we are the ones who bring in the work. Yet, everyone appears to be our superior. Marketing always looks down on us, and when we bring in a large contract, marketing just looks down on us as if we’re riding their coattails or as if we were just lucky. The engineering group outranks us because all managers and executives are promoted from there.

CAPITAL EQUIPMENT PROJECT MANAGEMENT

Project manager: “My biggest complaint is with this new priority scheduling computer package we’re supposedly considering to install. The way I understand it, the computer program will establish priorities for all of the projects in-house, based on the feasibility study, cost-benefit analysis, and return on investment.

Assignment

Pietro Yon, a local businessman, owns and manages a number of retail stores that sell a range of homewares.
Pietro is a member of the local business Chamber of Commerce and has been asked to chair a committee to research and study the success of Samsung PLC. The Chamber believes that there may be some useful learning from this study which members of the Chamber could use. You have been asked to provide specialist support to the committee and you are required to produce a range of materials for members of the committee to use.

Task 1 Financial Data and Strategic Decision Making

You must produce a presentation for Pietro Yon to use at the next meeting of the Chamber of Commerce. The presentation should be based on your research of Samsung PLC and other relevant information. It must be accompanied by supporting notes.
Your presentation must include the following:

• An evaluation of the sources of financial data which can be used to inform business strategy. (1.1)
• An assessment of the need for financial data and information in relation to the formulation of business strategy. (1.2)
• An analysis of the risks related to financial business decisions. (1.3)
• A review of methods that can be used for appraising strategic capital expenditure projects and strategic direction. (3.1)

Task 2 Discussion Paper

A meeting has been arranged with Pietro Yon and other members of the committee and you have been asked to produce a paper for discussion which provides:

• An interpretation of the financial statements of Samsung PLC to assess the current viability of the organisation. (2.1)
• A comparative analysis of financial data using ratio analysis for Samsung PLC. You are advised to download consecutive year’s accounts from the Samsung PLC website. (2.2)

Task 3 Information Leaflet

Produce an information leaflet for the Chamber of Commerce to distribute to the members. The leaflet should assess the following:

• The impact of ‘creative accounting’ techniques when making strategic decisions. (1M1)
• The limitations of ratio analysis as a tool for strategic decision making. (2M2)
• The importance of cash flow management when evaluating proposals for capital expenditure. (3M1)

Task 4 Capital Expenditure Appraisal

Pietro Yon has been supplied with information from a component manufacturer who has asked for advice on the best project to accept for the purchase/replacement of a piece of machinery.
The company are considering selling their old machine that has a capital cost of £260 000 and replacing it with an up to date model costing £220 000. For immediate purchase, the company will receive £120 000-part exchange allowance.
Both the current and new machines are able to meet the expected company demand, estimated at:
Year              Units
1 90              000
2 50              000
3 30              000
After three years, it is predicted that demand will be zero due to the technological developments in the industry.
The following data has been provided for the existing and new machine:

Additional information

1. The selling price for each component is £5.00 and this will remain constant for the next three years.
2. The company expect the cost of direct materials and direct labour to increase by 5% each year.
3. The company predicts that repair and maintenance costs for the current machine will be £7000 per annum.
4. The current machine is expected to have a zero residual value at the end of year 3.
5. The company predicts that repair and maintenance costs for the new machine will be £1000 per annum.
6. The new machine is expected to have a £75 000 residual value at the end of year 3.

The company’s cost of capital is 15%
Extract from the present value table for £1 at 15%
Year            Units
1                 0.870
2                 0.756
3                 0.658
4                 0.572
Pietro would like you to produce a business report that can be given to the company offering advice on the best course of action for the purchase/replacement machine.

REQUIRED

Prepare a report that evaluates the capital expenditure proposals using appropriate financial techniques.