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Business, Pages: 1

Report – Financial Justification

Report – Financial Justification

The gross margin, R&D, sales margin, and capital costs of both Option A and B continuously grew for ten years. The sales growth of Option A is bigger than that of Option B after the second year. Hence, Option A has the best sales in ten years compared to Option B. The sales, in addition, are higher in Option A than in Option B after the second year, making the total margin of Option A, to be bigger than Option B in 10 10-year period. For the first two years, the capital costs, fewer R&D, and gross margin of Option A is lower when compared to Option B; then, after the third year has elapsed (Kerzner, 2019), it starts to grow faster than Option B. Furthermore, the sales of traditional cars will increase more in Option A than in Option B, just as the same with the sale of connected cars, which will grow by 10.2% more each year than in Option B.

Option A’s sales margins are much higher than Option B’s, and Option A is to give the company more profit than Option B. At the beginning of the first two years, both Option A and Option B have the same sales margin and gross margin (Tidd & Bessant, 2020). However, Option A becomes suitable after the second year as the profit margins are higher than Option B. Furthermore, the company should use Option A as the profits will be higher after ten years. Option A is the best when compared to Option B since it has a higher gross margin, less R&D, and lower capital costs for all the ten years’ predictions.

References

Kerzner, H. (2019). Innovation project management: Methods, case studies, and tools for managing innovation projects. John Wiley & Sons.

Tidd, J., & Bessant, J. R. (2020). Managing innovation: integrating technological, market and organizational change. John Wiley & Sons.

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Question 

Overview

You work as a middle manager for one of the top U.S. producers of luxury and mass-market automobiles and trucks. The company from the course scenario has decided to incorporate Internet of Things (IoT) technology in its vehicles (also called connected cars). Often, organizations have to choose from multiple innovative implementation options. The choice is usually determined by many factors, including the financial viability of each idea. In this assignment, you will compare the financial benefits of two innovation options and create data visualizations to help determine the option with the greater financial benefit. This assignment will help you make a recommendation for one of the two options in Milestone One.

Report - Financial Justification

Report – Financial Justification

Prompt

Create a series of charts in an Excel spreadsheet and a memo that compares the financial benefits of options A and B. The charts in your spreadsheet should include a comparison of financial forecasts from both innovation options (discontinuous and incremental). You should create the charts using the data in this Sales Forecast. Make sure to add titles to all your charts so you can clearly reference them in your memo. Consider the following points:

  1. Create a chart for sales forecast data.
    1.  Graph sales forecast data for total sales for options A and B on a three-dimensional stacked column chart.
      • Each column should show traditional sales on the bottom and connected sales on the top.
      • Both options may appear on the same three-dimensional chart, or you can make a separate chart for each option.
  1. Create a chart for gross margin forecast data.
    1. Graph gross margin forecast data for total sales for options A and B on a three-dimensional stacked column chart.
      • Each column should show traditional sales on the bottom and connected sales on the top.
      • Both options may appear on the same three-dimensional chart, or you can make a separate chart for each option.
  1. Create a chart for gross margin less R&D and capital costs calculations.
    1. Calculate gross margin less R&D and capital costs for options A and B.
    2. Graph total gross margin less R&D and capital costs forecasts to compare options A and B on a line chart.
      • Both options should appear on the same chart.
  1. Explain any conclusions you can draw from your data visualizations.
    1. Review the charts and discuss any conclusions you can make from those data visualizations.
    2. Explain whether option A or option B will provide your company the most financial benefit. You should reference your data visualizations to justify your explanation and conclusions.