When undertaking a capital investment, a company needs to be keen on the project to ensure that the project will be successful and to the benefit of the company. In the case of Nokia Corporation, adopting a laptop assembling machinery will assist the company make laptops with are fast selling in modern technology driven environment. The following are the main challenges that the company is likely to get:
There are chances that the machinery the company will adopt is not up to date with the current technology or alternatively it may not remain relevant for long periods of time before other systems better machines have been adopted. This may mean that the technology may become obsolete before the machine has yielded maximum result to the company. Another risk comes with the adoption is the chances that the demand of laptops will not be lasting; this will mean that the machine will remain idle in the company.
Currently, there are high chances that the company will b e sold some counterfeit machinery that will injure the company financially and even reputational wise, the machinery may thus end up injuring the company instead of improving its business and operation (McCracken, 2005)
Projects are affected by internal politics, organizational behavior and culture, when a proposal has been presented for approval, chances that some people will feel that it should not be implemented for various issues. Some may even want the finances be diverted for other projects or alternatively feel that there should be a certain way they should be followed for implementation, chances that some people will argue to benefit from the project are high leading to the delay or failure of the project (Lefley, 1997).
With current changes in global environments, and the capitalist economies that the world has adopted, there are chances that the project will be rated higher than it should be. This will work against chances that it will give its returns to the company as expected. When a project has been rated higher or have consumed higher than the expected rate, there are chances that the project may injure the company.
Some people inside the company may have the ill mind of overstating the project’s costs for their own benefit, this happens at the expense of the company that depends on the project for furtherance of business. To get financial gains from the company, the management will have the challenge of factoring the costs of initiation of the project to the final products that will be made as a result (Nthes, 2003)
When the company has adopted new machinery, which somehow is not in line with the primal business of the company, some stakeholders may not go well with the situation, they are likely to think that the business has changed to their disadvantage. Again, the shareholders may be called upon to give in some inputs in terms of capital injection or they may suffer a reduced return as the company finances the project, when this happens, then there are chances that the company’s reputation will be changed negatively.
The machinery adoption may face a change resistance from employees whop might wonder whether it has come to replace them or change the way they operate, when faced with such resistance, then chance of its success will be minimal (Advanced Excel Business Center, 2008).
Advanced Excel Business Center. (2008). internal rate of return. Retrieved from http://www.advanced-excel.com/internal_rate_of_return.html
ANthes, G. (2003) ROI guide: Net present value. Retrieved from: http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=78530
Lefley, F. (1997). Modified internal rate of return: Will it replace IRR?. Management Accounting, 75(1), 64-65.
McCracken, M.E. (2005) Capital budgeting. retrieved from: http://teachmefinance.com/capitalbudgeting.html