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Applied Research Technologies, Inc. (ART) is facing a strategic decision in its Water Filtration Unit. The long-standing project, currently named RIMOS, has faced two market introduction failures. Despite these setbacks, the technology continues to show promise and our analysis of the available data suggests successful market introduction of the product for residential irrigation is encouraging.
A SWOT and balanced scorecard analyses of marketing, finance and strategic human resource management were conducted in order to identify and decide upon potential courses of action. The following is a summary of our analysis for each respective area:
Our analysis indicates a potential market population…show more content…
Our analysis demonstrates the project will provide positive cash flows in the forecasted five-year period if the market penetration rate of .03% is met or exceeded and wholesale unit price is at least $1,000. Our analysis assumes the 20% ROI requirement, along with a 3% inflation rate to ensure cash flows in the NPV analysis meet or exceed an annual 20% ROI above inflation. In this case, ART’s 10/15/20 target requirements are met after year one. A negative NPV is observed if wholesale price or market penetration rates fall below $1,000, or .03%, respectively. To minimize the risk of financial loss and drain on division resources, divestiture of the current oil and gas filtration business could be used to partially fund RIMOS. The oil and gas filtration business units could be sold to a third party company looking to vertically integrate its operations.
Strategic Human Resource Management
Potential effects on organizational culture and human capital were considered for both go and no-go decisions on the RIMOS product. Our analysis suggests significant risks in talent retention, employee motivation and the integrity of ART’s entrepreneurial culture if the project is shut down. Our analysis anticipates at least partial divestiture of the Filtration Unit and has outlined strategic human capital management plans for each potential course of action.
Case | HBS Case Collection | February 2010
Applied Research Technologies, Inc.: Global Innovation's Challenges
by Christopher A. Bartlett and Heather Beckham
Applied Research Technologies, Inc. (ART) is a diversified technology company which has used its entrepreneurial culture and encouragement of innovation as an ongoing competitive advantage. The case concentrates on the challenges faced by Peter Vyas, the Filtration Unit manager, who must decide whether to request $2 million in project funding from the divisional vice president, Cynthia Jackson. Similar Filtration projects have failed twice before, damaging the credibility of the Filtration Unit and Vyas personally. Jackson has recently been challenged to turn around or shut down the unit. Students must determine a strategy from the perspectives of both a unit manager and a division VP. This two-tier focus provides the opportunity to analyze the management decision process at different levels of the organization. Topics include empowerment, project management, and managing innovation.
Keywords: Management Style; Managerial Roles; Management Practices and Processes; Reputation; Organizational Culture; Innovation and Management; Competitive Advantage; Entrepreneurship; Management Systems; Cross-Cultural and Cross-Border Issues; Technology Industry;