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Strategic Considerations To Justify A Project

Many financial analysts are very skeptical of the use of strategic considerations to justify a project.

This opinion is largely based on the observation that some of the biggest investment disasters were undertaken based on a "strategic" rationale. However, this type of mind-set can lead to a form of managerial myopia in which the only projects that can survive the firm's acceptance hurdle are those for which future cash flows can be easily identified and forecast.

Comment on the validity of this statement (no computations required).

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The statement contrasts two types of processes involved in analyzing the probability of success of a project. Both have validity and both should be pursued before reaching a decision about going forward with a plan or project. Either approach by itself could possibly ignore important considerations upon which a project success might hinge.

The two approaches could be roughly segregated into qualitative and quantitative analysis. Both have their place and both are important. First we should examine the types of strategic considerations which could be involved. In my mind, strategic considerations present a broader ...

Solution Summary

The 376 word solution presents seven other factors that a business might take into consideration as part of the decision project to evaluate a project. These factors are above and beyond the concept of future cash flows.