-, a popular cosmetics company in Germany, has an performing favorably and growing at a constant e, with profits exceeding $900,000 in the last nancial 1r. The company now wants to expand its market by creating a new product range that is suitable for vegans, is free of chemicals, and has not been tested on animals. Sales figures in the cosmetics industry suggest this is a fast-growing trend, and Prac'ht' s recent market research suggests that ethics are an important consumer consid- eration when shopping for makeup. As part of the new product range, the organization also plans to launch a new brand image to demonstrate their conunitment to cruelty-free products. Paul, the business development manager, is currently assessing two investment oppor- tunities with entrepreneurs who are trying to get their ethical products to market. To help him reach a decision, Paul had sent the project proposals to two key decision makers within the organization and asked them to present their results at the monthly management meeting. Mia, a new employee responsible for the corporate social responsibility arm of the company, and Jonas, the financial director, assessed the proposals and presented their findings. Mia used a simple scoring model, based on the key strategic categories at Pracht, to evaluate the two projects. The categories she employed were 1) innovation, 2) ethics, 3) strategic fit, 4) building brand image, and 5) market reach. Using these categories, Mia and Jonas evaluated the two projects as shown here. The scores were 1= low, 2 = medium, and 3 = high. Project Echo Weighted Criteria Importance Score Score Innovation 1 3 3 Ethics 3 3 9 Fit to strategic goals 3 2 6 Raise company profile 2 3 6 Market reach 2 3 6 Score 30 Project Delta Weighted Crlterle Importance Score Score Innovation 1 1 1 Ethics 3 2 6 Strategic fit 3 3 9 building brand image 2 1 2 Market reach 2 2 4 Score 22 During the meeting, Mia argued that Project Echo was the most appropriate project to invest in due to their level of commitment to ethical practices and the level of innovation demonstrated, which would be fundamental in launching this type of product range. The entrepreneur had also demonstrated that they had an existing customer base that they could bring with them. Case Study 3.2 13! Jonas calculated the investment of the project using the payback period model. His findings were as follows: Project Echo Revenues Outlay: Year 0 $250,000 Year 1 60,000 Year 2 70,000 Year 3 75,000 Year 4 80,000 Year 5 500,000 Payback: 3 years 5 months Project Delte Revenues Outlay: Year 0 $250,000 Year 1 75,000 Year 2 90,000 Year 3 150,000 Year a 150,000 Year 5 600,000 Payback: 2 years 6 months Jonas argued that, nancially, Project Delta would ensure return on investment 12 months earlier than Echo, and projections show that at the five-year mark Delta would generate 16% more revenue for the company. At the end of the meeting, Paul is still unclear on which project to invest in. Should he invest in the project that makes the company the most money? This is ulti- mately the purpose of any businessto drive profits for shareholders and re-invest in growth. However, the re-branding of Pracht is also a fun- damental part of business growth, where ethics and responding to a growing market of customers who believe in chemical and cruelty-free products are impor- tant. Paul decides to re-visit the project screening tools to refine them before asking a wider selection of staff to evaluate the choices. Questions 1. Which project would you invest in based on the selection tools used? Be prepared to justify your answer. 2. 'What are the advantages and disadvantages of the tools presented in this case? 3. Wtcanyouleamfromthis casewhenconsidering what project selection methods might be suitable for use within an organization? Considering the tools presented in the case study, which is more relative and accurate in terms of deciding both the cash outlay and time value of money? Give the applicable reasons