Student’s Name Professor’s Name Course Date Case Analysis: B&K Distributors The B&K Distributors case study is a real life scenario that requires readers to assist Jim Anfield, the project manager contracted by B&K and Nancy O’Neil, the sale VP at B&K to come up with valid ROI projections based on the information provided (Jeffery & Anfield, 2006). To assist the process, Anfield provides templates marked Exhibit 14 A, 14B, 14C and 14D. Within the overview of the case, Anfield determines that an investment in the web portal would lead to increased penetration to potential customers, reduction in their costs and an increase in the orders they receive. This information was adequately projected using exhibits 5,6,7,8 and 9 of the case study (Jeffery & Anfield, 2006). Nontheless, the project was still expected to incur costs towards implementation and these costs were equally projected. As per my analysis of the information, I determined that B&K would experience a 40.6% internal rate of return within five years which, according to the discount rate would be 12% if the web portal idea is not put to motion. This analysis therefore points towards the viability of the web portal as a profitable investment. Despite this, decesions made through financial analyses need to be subjected to a sensitivity test (Jeffery, 2010). A sensitivity analysis is required to determine the effects that will occur if the outcome of the project varies from what was initially thought. After the analysis Anfield and O’Neil need to consider a number of questions they may encounter before approaching the top level managers of B&K. They should for instance consider technical issues that may affect the portal as well as the dynamic nature of technology that may render the portal obsolete even before the payback period reaches. There is no definite answer for these hypothetical questions but in subsequent years, an IRR analysis may reveal similar risks affecting returns. The risk that is bound to be faced is evidenced by the fact that the projected IRR for three years is 3.3%. This is very low when compared to the discount rate of 12% that the company is set to achieve even if it fails to implement the project. If the project is faced by the technological risks mentioned above before the end of the three year period, the company will never get past a 12% NPV (Jeffery & Anfield, 2006). As per the projections, their cash flow is set to increase after the three year period but if they face the named risks, they will remain to have a negative NPV hence fail at their strategy. Their solution would be to identify any of these risks and project costs that may be needed to rectify them. From the projections, the other business analytics issues they may face is their projected market penetration. Predicting the future is difficult and even though projecting marketing penetration is an estimation, it needs to be as accurate as possible to yield positive results. According to the research done, once the web portal is up, B&K’s market penetration is expected to increase from 50% to 70% (Jeffery & Anfield, 2006). The strategic outcome is only bound to be beneficial if this number was understated to accommodate events that may stagnate the growth in penetration. If it was exaggerated, there is bound to be risk of experiencing a negative NPV given that a company’s NPV is sensitive to this aspect. My recommendation will be that they take caution to be as accurate as possible when considering certain estimations. There are many risks accompanying the web portal project. Despite this, If I were B&K’’s CEO, I would carry on with the project considering that the benefits outweigh the risks. If the project is not adopted and managed properly, competitors may swoop in and overtake them in adopting the technology. Reference Jeffery, M. (2010). Data-Driven Marketing: The 15 Metrics Everyone in Marketing Should Know (1st ed.). Wiley. Jeffry, M. Anfield, J.(2006). B&K Distributors: Calculating ROI for a Web-Based Customer Portal, HBSP Case: 5-404-764.
