WEEK 2

Project Selection: 1.Aligning strategy with projects
2.Project investment criteria
3.Functional assessment

* Production * Marketing * Financial * Human resources * Administration

Selection Models:

Selection (or screening) models help managers pick winners from a pool of projects. Screening models are numeric or nonnumeric and should have: * Realism * Capability * Flexibility * Ease of use * Cost effectiveness

Project Screening & Selection Issues:

* Risk – unpredictability to the firm * Commercial – market potential * Internal operating – changes in firm operations * Additional – image, patent, fit, etc.

All models only partially reflect reality and have both objective and subjective factors embedded.

Project Selection Methods:

Non-numeric Models:

1.Sacred cow
2.Operating necessity
3.Competitive necessity
4.Product extension
5.Comparative benefit
6.Checklist
7.Simplified Scoring Models
8.Analytical Hierarchical Process

1. Checklist Model:

A checklist is a list of criteria applied to possible projects.

* Requires agreement on criteria * Assumes all criteria are equally important

Checklists are valuable for recording opinions and encouraging discussion

Drawback:
Does not allow comparison with other potential projects

2. Simplified Scoring Models:

Each project receives a score that is the weighted sum of its grade on a list of criteria.

Scoring models require: * agreement on criteria * agreement on weights for criteria * a score assigned for each criteria

Score = sigma ( Weight x Score )

3. Analytical Hierarchy Process:

The AHP is a four-step process:

1.Construct a hierarchy of criteria and sub criteria
2.Allocate weights to criteria
3.Assign numerical values