Case Study 3.1 Keflavik Paper Company

Keflavik Paper is an organization that has lately been facing serious problems with the results of its projects. Specifically, the company's project development record has been spotty: While some projects have been delivered on time, others have been late. Budgets are routinely overrun, and product performance has been inconsistent, with the results of some projects yielding good returns and others losing money. They have hired a consultant to investigate some of the principal causes that are underlying these problems, and he believes that the primary problem is not how project are run but how they are selected in the first place. Specifically, there is little attention paid to the need to consider strategic fit and portfolio management in selecting new projects. This case is intended to get students thinking of alternative screening measures that could potentially be used when deciding whether or not to invest in a new project.

Questions (Restate the questions in your paper)

1. What does the Keflavik company manufacture?
2. What changed five years ago? Why?
3. Keflavik Paper presents a good example of the dangers of excessive reliance on one screening technique (in this case, discounted cash flow). Choose another screening method from the textbook and explain how using that one method might lead to similar problems as stated in the case study.
4. Assume that you are responsible for maintaining Keflavik's project portfolio. Name some key criteria that you would use in evaluating all new projects before they are added to the current portfolio. What screening methods do you think would work best for Keflavik?
5. What does this case demonstrate about the effect of poor project screening methods on a firm's ability to manage its projects effectively? What challenges were attributed to their project portfolio selections?