A performance metric system for the long-term sustainability of a multi-national enterprise
- Authors: Buyers, John Ian
- Date: 2018
- Subjects: nternational business enterprises , Business enterprises -- Finance Sales management Marketing -- Management
- Language: English
- Type: Thesis , Doctoral , DBA
- Identifier: http://hdl.handle.net/10948/23526 , vital:30575
- Description: The purpose of this Qualitative research was to determine the metrics required to define the Long-Term Sustainability of a Multinational Enterprise (MNE). The study investigated and analysed how the individual subsidiaries of a listed organisation interpreted LTS and what measurements (metrics) were the most important in supporting this long-term approach. The research analysed questionnaires administered to managers from different disciplines within the organisation. This process sought to accumulate a set of responses and through the statistical analysis of these responses, in particular, extensive qualitative research was used to find a common thread of relevant metrics, which can be used presently and in the future to determine LTS. The researcher reviewed models and the literature to establish a set of questions for the construction of individual questionnaires. This was based on current theory combined with institutional knowledge and experience. The questionnaires were designed to provoke responses from management of their view of the important contributors to LTS. The individual questionnaires (Annexures I to VIII) comprised a series of focused questions and multiple-choice answers based on either 5 or 10-point Likert scales and a few open-ended questions. The main respondents were VPs, MDs, OMs, Human Resource Managers, Financial Managers, and Sales and Marketing Managers of the subsidiaries within the MNE. These “At the heart of an excellent manufacturing business rests the efficiency of its operations, the commitment of the people who manufacture the products, the level of motivation of the workforce, the passion of its salesforce and the innovation shown by its engineers” respondents were all best suited to answer questions at the required level of expertise, when taking into consideration the LTS of the organisation. The data obtained from the research was used to devise suggested scorecards that may be used as guidelines for current and future initiatives when considering LTS. Qualitative research methods were used in this research as they seek understanding of “how things work in particular contexts”. This allows for the building of new theory and the conceptual advancements of knowledge, starting with very general concepts which, as the research progresses, change their definition (Brannen, 2016). In qualitative research, researchers use themselves as the instrument, attending to their own cultural assumptions as well as to the data. to achieve imaginative insights into the respondents’ social worlds. (McCracken, 1988). Concepts and categories are relevant to qualitative research. as quantitative research is an exercise in analytical induction.
- Full Text:
- Date Issued: 2018
- Authors: Buyers, John Ian
- Date: 2018
- Subjects: nternational business enterprises , Business enterprises -- Finance Sales management Marketing -- Management
- Language: English
- Type: Thesis , Doctoral , DBA
- Identifier: http://hdl.handle.net/10948/23526 , vital:30575
- Description: The purpose of this Qualitative research was to determine the metrics required to define the Long-Term Sustainability of a Multinational Enterprise (MNE). The study investigated and analysed how the individual subsidiaries of a listed organisation interpreted LTS and what measurements (metrics) were the most important in supporting this long-term approach. The research analysed questionnaires administered to managers from different disciplines within the organisation. This process sought to accumulate a set of responses and through the statistical analysis of these responses, in particular, extensive qualitative research was used to find a common thread of relevant metrics, which can be used presently and in the future to determine LTS. The researcher reviewed models and the literature to establish a set of questions for the construction of individual questionnaires. This was based on current theory combined with institutional knowledge and experience. The questionnaires were designed to provoke responses from management of their view of the important contributors to LTS. The individual questionnaires (Annexures I to VIII) comprised a series of focused questions and multiple-choice answers based on either 5 or 10-point Likert scales and a few open-ended questions. The main respondents were VPs, MDs, OMs, Human Resource Managers, Financial Managers, and Sales and Marketing Managers of the subsidiaries within the MNE. These “At the heart of an excellent manufacturing business rests the efficiency of its operations, the commitment of the people who manufacture the products, the level of motivation of the workforce, the passion of its salesforce and the innovation shown by its engineers” respondents were all best suited to answer questions at the required level of expertise, when taking into consideration the LTS of the organisation. The data obtained from the research was used to devise suggested scorecards that may be used as guidelines for current and future initiatives when considering LTS. Qualitative research methods were used in this research as they seek understanding of “how things work in particular contexts”. This allows for the building of new theory and the conceptual advancements of knowledge, starting with very general concepts which, as the research progresses, change their definition (Brannen, 2016). In qualitative research, researchers use themselves as the instrument, attending to their own cultural assumptions as well as to the data. to achieve imaginative insights into the respondents’ social worlds. (McCracken, 1988). Concepts and categories are relevant to qualitative research. as quantitative research is an exercise in analytical induction.
- Full Text:
- Date Issued: 2018
An adaptive internet management model for higher education institutions in South Africa
- Boshoff, Ryno, Cullen, Margaret
- Authors: Boshoff, Ryno , Cullen, Margaret
- Date: 2018
- Subjects: Internet governance -- South Africa , Internet in higher education -- South Africa Internet -- South Africa -- Management Education, Higher -- South Africa
- Language: English
- Type: Thesis , Doctoral , DBA
- Identifier: http://hdl.handle.net/10948/17428 , vital:28331
- Description: It has become standard practice at Higher Education Institutions (HEIs) for their Internet management and relevant Information and Communication Technology (ICT) resources, specifically Internet resources, to be continuously investigated by HEI Management as well as by their users. The reason is that the Internet has become the foundation on which most ICT and business resources function and therefore is labelled as a distinctive competency for the HEI. HEIs, however, have limited ICT Internet resources and are expected to use these resources optimally, to ensure efficient and effective Internet connectivity on all campuses and to all users and systems. The management of Internet resources at South African Higher Education Institutions (SA HEIs) are the focus of this thesis. The primary purpose therefore, is to provide a proposed adaptive Internet Management Model for HEIs which will assist them to achieve prime value from their Internet management resources. This was realised by firstly; identifying the current Internet Management Business Models of the SA HEI landscape; secondly, determining what the Internet users of the Nelson Mandela University, a South African Higher Education Institute situated in the Eastern and Western Cape area in South Africa, were using the Internet for; thirdly, comparing these findings to the actual Nelson Mandela University Firewall data and lastly, using the combined findings to draw conclusions and create a proposed adaptive Internet Management Model for HEIs. This can assist the HEI ICT Management team to realign the Internet resources to match the current business and customer requirements. This thesis is an exploratory, mixed method study which consists of literature studies, surveys and cross sectional studies. The literature studies were conducted on secondary sources to identify the national and international governance structures that influence Internet management. The empirical study which consisted of two surveys was compiled from existing surveys as well as from literature studies and was completed by its respective respondent groups. The first survey was used to gain insight into what was considered the standard Internet Management Business Model at HEIs in South Africa. The second survey was used to gain insight how the Internet was being used at Nelson Mandela University by staff and students. Lastly, an extract of the Nelson Mandela University Firewall data were gathered and used to confirm or deny results from the previous survey. The findings of the first survey, HEI Internet Management Survey (HEIIMS), confirmed that the Internet and its relevant resources are extremely important to all HEIs. The HEIs Internet Management Business Models are to a large extent aligned with the National Research an Education Networks (NRENs) business models with some adjustments. The HEIs indicated that they cater for a large Internet community but do not differentiate between them. The findings do, however, specify that some differentiation does take place. The HEI Internet is provided to the Internet community at no cost and is funded by Council funds. The requirements of staff and students are mostly similar with some priority differences to key content needs. The Internet resources of the HEIs are very much aligned to support the physical infrastructure of the Internet. HEIs consider the NRENs to be key partners and suppliers with additional local suppliers used as secondary support. The second survey, Nelson Mandela University Internet Usage Survey (NMUIUS), indicated that there was a wide gap between how the Internet was used by the staff and students. The findings indicated that staff tend to be more aware of the policies and surrounding practices while students appeared somewhat unaware. The staff and students have different needs for the Internet and these needs also change slightly according to the time of day and day of the week. Regarding content access (including Firewall data), some of the users said Internet practices were true whilst others were false. The majority of those giving a false opinion said that said Internet practices were focused on activities linked to cyberloafing content. In addition, they stated that these activities were undersold, meaning that they said that they access the Internet content rarely while the Firewall data indicated that it was frequently being accessed and by many users. It was clear that the staff received a pleasant Nelson Mandela University Internet experience while the students received a slightly degraded Internet experience. The study concluded with the development of a proposed adaptive Internet Management Model for HEIs and recommendations and considerations on how to improve the current Nelson Mandela University Internet management strategy. This thesis makes a contribution towards the body of knowledge by identifying and discussing current national and international Internet Governance (IG) practices. It continues by identifying the current SA NRENs and their business models which overflow into the HEI landscape. This is followed by an investigation into the various HEI Internet Management Business Models, current usage of the Nelson Mandela University Internet and patterns of use and Nelson Mandela University Firewall data. The thesis will therefore assist readers to understand the effective and efficient management of their Internet usage requirements and the provision of Internet resources. This in turn, will confirm that the availability of the Internet for its users and systems becomes a productive, reliable and pleasant experience.
- Full Text:
- Date Issued: 2018
- Authors: Boshoff, Ryno , Cullen, Margaret
- Date: 2018
- Subjects: Internet governance -- South Africa , Internet in higher education -- South Africa Internet -- South Africa -- Management Education, Higher -- South Africa
- Language: English
- Type: Thesis , Doctoral , DBA
- Identifier: http://hdl.handle.net/10948/17428 , vital:28331
- Description: It has become standard practice at Higher Education Institutions (HEIs) for their Internet management and relevant Information and Communication Technology (ICT) resources, specifically Internet resources, to be continuously investigated by HEI Management as well as by their users. The reason is that the Internet has become the foundation on which most ICT and business resources function and therefore is labelled as a distinctive competency for the HEI. HEIs, however, have limited ICT Internet resources and are expected to use these resources optimally, to ensure efficient and effective Internet connectivity on all campuses and to all users and systems. The management of Internet resources at South African Higher Education Institutions (SA HEIs) are the focus of this thesis. The primary purpose therefore, is to provide a proposed adaptive Internet Management Model for HEIs which will assist them to achieve prime value from their Internet management resources. This was realised by firstly; identifying the current Internet Management Business Models of the SA HEI landscape; secondly, determining what the Internet users of the Nelson Mandela University, a South African Higher Education Institute situated in the Eastern and Western Cape area in South Africa, were using the Internet for; thirdly, comparing these findings to the actual Nelson Mandela University Firewall data and lastly, using the combined findings to draw conclusions and create a proposed adaptive Internet Management Model for HEIs. This can assist the HEI ICT Management team to realign the Internet resources to match the current business and customer requirements. This thesis is an exploratory, mixed method study which consists of literature studies, surveys and cross sectional studies. The literature studies were conducted on secondary sources to identify the national and international governance structures that influence Internet management. The empirical study which consisted of two surveys was compiled from existing surveys as well as from literature studies and was completed by its respective respondent groups. The first survey was used to gain insight into what was considered the standard Internet Management Business Model at HEIs in South Africa. The second survey was used to gain insight how the Internet was being used at Nelson Mandela University by staff and students. Lastly, an extract of the Nelson Mandela University Firewall data were gathered and used to confirm or deny results from the previous survey. The findings of the first survey, HEI Internet Management Survey (HEIIMS), confirmed that the Internet and its relevant resources are extremely important to all HEIs. The HEIs Internet Management Business Models are to a large extent aligned with the National Research an Education Networks (NRENs) business models with some adjustments. The HEIs indicated that they cater for a large Internet community but do not differentiate between them. The findings do, however, specify that some differentiation does take place. The HEI Internet is provided to the Internet community at no cost and is funded by Council funds. The requirements of staff and students are mostly similar with some priority differences to key content needs. The Internet resources of the HEIs are very much aligned to support the physical infrastructure of the Internet. HEIs consider the NRENs to be key partners and suppliers with additional local suppliers used as secondary support. The second survey, Nelson Mandela University Internet Usage Survey (NMUIUS), indicated that there was a wide gap between how the Internet was used by the staff and students. The findings indicated that staff tend to be more aware of the policies and surrounding practices while students appeared somewhat unaware. The staff and students have different needs for the Internet and these needs also change slightly according to the time of day and day of the week. Regarding content access (including Firewall data), some of the users said Internet practices were true whilst others were false. The majority of those giving a false opinion said that said Internet practices were focused on activities linked to cyberloafing content. In addition, they stated that these activities were undersold, meaning that they said that they access the Internet content rarely while the Firewall data indicated that it was frequently being accessed and by many users. It was clear that the staff received a pleasant Nelson Mandela University Internet experience while the students received a slightly degraded Internet experience. The study concluded with the development of a proposed adaptive Internet Management Model for HEIs and recommendations and considerations on how to improve the current Nelson Mandela University Internet management strategy. This thesis makes a contribution towards the body of knowledge by identifying and discussing current national and international Internet Governance (IG) practices. It continues by identifying the current SA NRENs and their business models which overflow into the HEI landscape. This is followed by an investigation into the various HEI Internet Management Business Models, current usage of the Nelson Mandela University Internet and patterns of use and Nelson Mandela University Firewall data. The thesis will therefore assist readers to understand the effective and efficient management of their Internet usage requirements and the provision of Internet resources. This in turn, will confirm that the availability of the Internet for its users and systems becomes a productive, reliable and pleasant experience.
- Full Text:
- Date Issued: 2018
Indigenous knowledge for agricultural development: a framework for potato farming in Bui division, North West Region of Cameroon
- Authors: Ngek, Shillie Peter
- Date: 2018
- Subjects: Agriculture -- Economic aspects -- Cameroon -- Bui , Agricultural industries -- Cameroon , Sustainable agriculture , Sustainable development , Indigenous peoples
- Language: English
- Type: Thesis , Doctoral , DBA
- Identifier: http://hdl.handle.net/10948/33703 , vital:32974
- Description: Over the years, people have planned and carried out their activities depending on their indigenous knowledge base. In agriculture, documented importance of indigenous knowledge has been noted in different ways such as in crop health management, soil nutrient management, and food processing and food preservation. Indigenous smallholder farmers across the world have developed techniques that reflect their intimate knowledge of their local environments and ecosystems to improve their agricultural yields and minimise postharvest losses. However, such indigenous knowledge techniques are rarely documented or enhanced to boost agricultural practice and ensure food security. The present study has identified potato farming in Cameroon as a potential contributor to the socio-economic development of farmers, their communities and their country. The potato farming industry largely consists of smallholder farmers, predominantly women, producing primarily of immediate consumption. Historically, these farmers have been sustaining their farms through indigenous knowledge and practices that are not being exploited to the fullest beneficial opportunities for these farmers. It has often been suggested that Western highly mechanised approaches should be implemented to commercialise these farms in order to access these benefits. These approaches of mechanisation require large capital outlays, which these smallholder farmers cannot afford, hence the approach taken by the present study to capitalise on the indigenous knowledge and practices of these farmers. The present study argued that working with the existing indigenous knowledge and practices of these farmers, a level of commercialisation, with the resulting job creation and economic benefits, could be achieved. This study has succeeded in identifying the causes of postharvest potato losses on the smallholding farms, the obstacles in reducing these losses and the techniques to reduce these losses. The study provides important recommendations to improve smallholder potato farming in Cameroon. By implementing the findings of this study, the Cameroon government, prospective potato farmers, entrepreneurs, traditional authorities and NGOs could make a significant contribution to the improvement of socio-economic conditions and the reduction of poverty levels in these farming communities.
- Full Text:
- Date Issued: 2018
- Authors: Ngek, Shillie Peter
- Date: 2018
- Subjects: Agriculture -- Economic aspects -- Cameroon -- Bui , Agricultural industries -- Cameroon , Sustainable agriculture , Sustainable development , Indigenous peoples
- Language: English
- Type: Thesis , Doctoral , DBA
- Identifier: http://hdl.handle.net/10948/33703 , vital:32974
- Description: Over the years, people have planned and carried out their activities depending on their indigenous knowledge base. In agriculture, documented importance of indigenous knowledge has been noted in different ways such as in crop health management, soil nutrient management, and food processing and food preservation. Indigenous smallholder farmers across the world have developed techniques that reflect their intimate knowledge of their local environments and ecosystems to improve their agricultural yields and minimise postharvest losses. However, such indigenous knowledge techniques are rarely documented or enhanced to boost agricultural practice and ensure food security. The present study has identified potato farming in Cameroon as a potential contributor to the socio-economic development of farmers, their communities and their country. The potato farming industry largely consists of smallholder farmers, predominantly women, producing primarily of immediate consumption. Historically, these farmers have been sustaining their farms through indigenous knowledge and practices that are not being exploited to the fullest beneficial opportunities for these farmers. It has often been suggested that Western highly mechanised approaches should be implemented to commercialise these farms in order to access these benefits. These approaches of mechanisation require large capital outlays, which these smallholder farmers cannot afford, hence the approach taken by the present study to capitalise on the indigenous knowledge and practices of these farmers. The present study argued that working with the existing indigenous knowledge and practices of these farmers, a level of commercialisation, with the resulting job creation and economic benefits, could be achieved. This study has succeeded in identifying the causes of postharvest potato losses on the smallholding farms, the obstacles in reducing these losses and the techniques to reduce these losses. The study provides important recommendations to improve smallholder potato farming in Cameroon. By implementing the findings of this study, the Cameroon government, prospective potato farmers, entrepreneurs, traditional authorities and NGOs could make a significant contribution to the improvement of socio-economic conditions and the reduction of poverty levels in these farming communities.
- Full Text:
- Date Issued: 2018
The development of an optimised decision based methodology for the replacement timing of frontline equipment utilised within the quarrying industry
- Authors: Basson, Kenneth Mervyn
- Date: 2018
- Subjects: Decision making , Industrial equipment Industrial equipment -- Maintenance and repair
- Language: English
- Type: Thesis , Doctoral , DBA
- Identifier: http://hdl.handle.net/10948/23647 , vital:30592
- Description: At present, frontline equipment employed at B&E International, and operating within the quarrying sector is typically replaced as soon as the operating expenses are deemed to be excessive. From a capital budgeting perspective, the trigger for signalling the replacement of equipment occurs when prescribed operating cost performance metrics are violated. In some instances, a further consideration for motivating the replacement of equipment is when the perception arises that the nonavailability of the equipment employed, results in financial losses being incurred by a company. It can therefore be argued that the current equipment replacement timing methodological approach adopted at B&E International is suboptimal in nature. The situation is further aggravated by the fact that in many instances, escalation of commitment manifests itself whereby unnecessary capital is repeatedly invested in order to extend the life of an asset resulting in a situation occurring whereby the required level of investment return is not achieved. In the event of these situations arising, the decision to replace an asset is prolonged as a result of the suboptimal investment decisions being made. The primary focus of this study is to provide a methodological equipment replacement framework that is based upon sound capital budgeting fundamentals. A comprehensive literature review of capital budgeting approaches that specifically focus on the optimal replacement timing of frontline quarrying equipment, did not yield any relevant studies that have been undertaken in this regard. This study did however investigate contemporary equipment replacement approaches based upon a capital budgeting paradigm and highlighted their respective limitations. Convincing evidence obtained, indicated that the most widely accepted method of identifying the optimal replacement timing of equipment occurs when the economic life of the asset is attained. This in itself would therefore infer that a cost minimisation approach is the most pervasive methodological approach adopted in order to identify the optimal replacement timing of equipment. When considering capital investment based decisions, it was found that the discounted cash flow based methodologies are the most widely used and accepted approach applied in the mining industry. Notwithstanding this, one major caveat manifests itself in that when considering the optimal replacement timing of front line equipment within the quarrying industry, the inclusion of uncertainty, flexibility and the associated financial risks was not evident. In order to model these effects, a probabilistic Net Present Value (NPV) approach was adopted and the required Discounted Cash Flow (DCF) models were constructed. Given the uncertainty of the expected cumulative R&M profiles for the asset classes constituting this study, an extensive statistical analysis was carried out in order to establish the required predictive Repair and Maintenance (R&M) models required for the DCF analysis by means of regression analysis. Further regression analyses were conducted in order to model the overall availability and utilisation metrics for the respective asset classes included in this study. The consequence of incurring downtime was investigated and the resultant DCF analysis yielded a significant impact on the Free Cash Flow (FCF) generated by the respective assets. The magnitude of the incurred consequential financial losses incurred as a result of the respective downtime was found to be significant when considering frontline equipment. In order to model the effect of, and the extent to which, the respective independent variables influence the static NPV outcome, a sensitivity analysis was performed. From this, the influence of the independent variables constituting the NPV model employed in this study, were observed. A Real Options Analysis (ROA) approach was initially employed in order to model the effects of FCF uncertainty and the results of carrying out this analysis indicated a minimal influence on the static NPV model referred to earlier. It was therefore concluded that from an equipment replacement timing perspective, the ROA approach did not provide a robust and accurate representation of the probabilistic NPV outcomes anticipated. In order to address these perceived shortcomings, an Monte Carlo Simulation (MCS) model was constructed and the requisite probability distribution functions representing the most influential independent variables determined from the sensitivity analysis were identified and subsequently analysed. The results of the MCS analysis yielded the expected NPV outcomes that were found to be far more conservative compared to the static NPV outcomes referred to previously. Furthermore, the concluding findings of this study indicate that in order to estimate the optimal time to dispose of an asset, a static NPV analysis must first be modelled and thereafter a probabilistic NPV analysis. The respective uncertainty aspects over the lifespan of the assets should be identified to be incorporated into the MCS model. This methodological approach therefore opposes the use of a strictly deterministic based approach and rather predicates the use of a probabilistic NPV based framework. This study further concluded that traditional DCF approaches fail to consider management flexibility in terms of adapting to uncertainty and to also reduce the possibility of “escalation of commitment” occurring as a result of sub-optimal equipment replacement timing decisions by management. The use and acceptance of the traditional DCF approaches are acknowledged, but in order to develop an equipment replacement methodological approach that considers uncertainty and risk on the one hand and also allows for the incorporation of real data over the assets lifetime on the other, the use of an MCS probabilistic NPV based model was found to be the optimal approach to be adopted. The result of updating the static NPV model with updated data as soon as it is obtained enables one to generate accurate probabilistic distribution functions required for the subsequent MCS analysis. By adopting this approach the study has concluded that one can obtain realistic and accurate NPV forecasts from the anticipated FCF estimates. The principal conclusion obtained from this study is that the optimal time in which to replace front line assets employed at B&E International is when the probabilistic net earnings profile, viz., NPV of the equipment is maximized.
- Full Text:
- Date Issued: 2018
- Authors: Basson, Kenneth Mervyn
- Date: 2018
- Subjects: Decision making , Industrial equipment Industrial equipment -- Maintenance and repair
- Language: English
- Type: Thesis , Doctoral , DBA
- Identifier: http://hdl.handle.net/10948/23647 , vital:30592
- Description: At present, frontline equipment employed at B&E International, and operating within the quarrying sector is typically replaced as soon as the operating expenses are deemed to be excessive. From a capital budgeting perspective, the trigger for signalling the replacement of equipment occurs when prescribed operating cost performance metrics are violated. In some instances, a further consideration for motivating the replacement of equipment is when the perception arises that the nonavailability of the equipment employed, results in financial losses being incurred by a company. It can therefore be argued that the current equipment replacement timing methodological approach adopted at B&E International is suboptimal in nature. The situation is further aggravated by the fact that in many instances, escalation of commitment manifests itself whereby unnecessary capital is repeatedly invested in order to extend the life of an asset resulting in a situation occurring whereby the required level of investment return is not achieved. In the event of these situations arising, the decision to replace an asset is prolonged as a result of the suboptimal investment decisions being made. The primary focus of this study is to provide a methodological equipment replacement framework that is based upon sound capital budgeting fundamentals. A comprehensive literature review of capital budgeting approaches that specifically focus on the optimal replacement timing of frontline quarrying equipment, did not yield any relevant studies that have been undertaken in this regard. This study did however investigate contemporary equipment replacement approaches based upon a capital budgeting paradigm and highlighted their respective limitations. Convincing evidence obtained, indicated that the most widely accepted method of identifying the optimal replacement timing of equipment occurs when the economic life of the asset is attained. This in itself would therefore infer that a cost minimisation approach is the most pervasive methodological approach adopted in order to identify the optimal replacement timing of equipment. When considering capital investment based decisions, it was found that the discounted cash flow based methodologies are the most widely used and accepted approach applied in the mining industry. Notwithstanding this, one major caveat manifests itself in that when considering the optimal replacement timing of front line equipment within the quarrying industry, the inclusion of uncertainty, flexibility and the associated financial risks was not evident. In order to model these effects, a probabilistic Net Present Value (NPV) approach was adopted and the required Discounted Cash Flow (DCF) models were constructed. Given the uncertainty of the expected cumulative R&M profiles for the asset classes constituting this study, an extensive statistical analysis was carried out in order to establish the required predictive Repair and Maintenance (R&M) models required for the DCF analysis by means of regression analysis. Further regression analyses were conducted in order to model the overall availability and utilisation metrics for the respective asset classes included in this study. The consequence of incurring downtime was investigated and the resultant DCF analysis yielded a significant impact on the Free Cash Flow (FCF) generated by the respective assets. The magnitude of the incurred consequential financial losses incurred as a result of the respective downtime was found to be significant when considering frontline equipment. In order to model the effect of, and the extent to which, the respective independent variables influence the static NPV outcome, a sensitivity analysis was performed. From this, the influence of the independent variables constituting the NPV model employed in this study, were observed. A Real Options Analysis (ROA) approach was initially employed in order to model the effects of FCF uncertainty and the results of carrying out this analysis indicated a minimal influence on the static NPV model referred to earlier. It was therefore concluded that from an equipment replacement timing perspective, the ROA approach did not provide a robust and accurate representation of the probabilistic NPV outcomes anticipated. In order to address these perceived shortcomings, an Monte Carlo Simulation (MCS) model was constructed and the requisite probability distribution functions representing the most influential independent variables determined from the sensitivity analysis were identified and subsequently analysed. The results of the MCS analysis yielded the expected NPV outcomes that were found to be far more conservative compared to the static NPV outcomes referred to previously. Furthermore, the concluding findings of this study indicate that in order to estimate the optimal time to dispose of an asset, a static NPV analysis must first be modelled and thereafter a probabilistic NPV analysis. The respective uncertainty aspects over the lifespan of the assets should be identified to be incorporated into the MCS model. This methodological approach therefore opposes the use of a strictly deterministic based approach and rather predicates the use of a probabilistic NPV based framework. This study further concluded that traditional DCF approaches fail to consider management flexibility in terms of adapting to uncertainty and to also reduce the possibility of “escalation of commitment” occurring as a result of sub-optimal equipment replacement timing decisions by management. The use and acceptance of the traditional DCF approaches are acknowledged, but in order to develop an equipment replacement methodological approach that considers uncertainty and risk on the one hand and also allows for the incorporation of real data over the assets lifetime on the other, the use of an MCS probabilistic NPV based model was found to be the optimal approach to be adopted. The result of updating the static NPV model with updated data as soon as it is obtained enables one to generate accurate probabilistic distribution functions required for the subsequent MCS analysis. By adopting this approach the study has concluded that one can obtain realistic and accurate NPV forecasts from the anticipated FCF estimates. The principal conclusion obtained from this study is that the optimal time in which to replace front line assets employed at B&E International is when the probabilistic net earnings profile, viz., NPV of the equipment is maximized.
- Full Text:
- Date Issued: 2018
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