W3_PieroAnticona_Continuing with company or letting the Office

1)    Step 1- Problem or Opportunity Statement

An owner of a company suddenly suffered angina pectoris and after a week of resting at home, he has decided to analyze if he might continue managing the company for the next five years or might rest at home and anticipate his retirement.

He is running a company for over 40 years. Last 5 years many competitors have appeared and market share is difficult to maintain. He is almost 70 years old, clients are more demanding and stress has increased in the last year, which has influenced his health.

On the other hand, he owns the property where he has built three floors, the building is located in a main avenue of the capital city and he thinks he can rent quickly his workshop (First floor). The third floor is not rented yet but he expects that economic situation in the country improves next years. His son got a mortgage of 15 years for construction of the building. He is still in the second year of his mortgage. Owner expects to have a fair income and cover all his charges at home. You also have to take into consideration that when he retires, he will get a small pension that will not cover all his current charges.

2)    Step 2 – Feasible Alternatives

For this case, as mentioned previously he will analyze

-       Continue Managing the company for five more years

-       Close the company and anticipate his retirement.

In addition, we will add a third option:

-       Sell the building and use the remaining money for his retirement

3)    Step 3- Develop the outcomes for each alternative

For each alternative the outcomes to analyze are:

1.    Continue managing the company

o   Future Income for next five years

o   Future Charges for the next five years

o   Cashflow

2.    Close the company and anticipate his retirement

o   Future income for the next five years

o   Future charges for the next five years

o   Cashflow

3.    Sell the building and use the remaining money for his retirement

o   Future income for the next five years

o   Future charges for the next five years

o   Cashflow

4)    Step 4- Selection of the acceptable criteria.

The following attributes will be considered for the selection criteria:

-      Positive Cashflow each year
-   Net Profit Per Year
-   Taxes
-   VAN
-   Level of stress

5)    Step 5- Compare the outcomes from each alternative analysis done in Step 3 against the minimum acceptable criteria from Step 4.

We are going to use Multi-Attribute Decision-Making methods.

Non Compensatory Models

1.       Dominance

Conclusion

Rent&Ret is eliminated. Sell&Ret Dominates Managing. Sell&Ret could be the best choice

2.       Satisfacing

Conclusion

As Rent & Retirement is already eliminated, Managing could be unacceptable. Therefore Sell & Retirement satisfies as the best choice

3.       Lexicography

Conclusion

Sell&Rent better than Mgmt

Compensatory Models

1.       Non Dimensional Scaling

2.       The additive weighting technique

6)    Step 6- Selection of the “best”.

For the selection of the best, we observe that Selling and Retirement is the best option because it complies with all the acceptable criteria. 
Nevertheless, the owner can decide to stay in charge of the company as long as he can handle stress better.

7)    Step 7- How to plan on tracking/reporting on the recommended choice. 

           If the best option is implemented, it is necessary to confirm the selling price of the building is quite close to the estimate. Also, it is required that charges do not increase or an unknown event does not appear. Otherwise, it will cause an impact on net profit and could not meet acceptable criteria again. It is recommended a monitoring and control of expenses during the year to validate that we are not going to exceed costs and we can maintain net profit positive.  

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8)    REFERENCES.

Sullivan, W. G., Wicks, E. M., & Koelling, C. P. (2012). Decision making Considering Multiattributes. In Engineering Economy (15th ed.). Harlow, England: Pearson Education Limited.

Company X Sells Reports from 2013 to 2018. Excel Spreadsheets. 

Company X Costs Analysis. Excel Spreadsheets.