level 7
The following appeared in a memo from a vice president of a large, highly diversified company.
Ten years ago out company had two new office building constructed as regional headquarters for two regions. The buildings were erected by different construction companies – Alpha and Zeta. Although the two buildings had identical floor plans, the building constructed by Zeta cost 30 percent more to build. However, that building’s expenses for maintenance last year were only half been lower than that of the Alpha building every year since its construction. Given these data, plus the fact that Zeta has a stable workforce with little employee turnover, we recommend using Zeta rather than Alpha for our new building project, even though Alpha’s bid promises lower construction costs.
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正文
In the memo the vice president states that the company should hire Zeta to
construct their new building because one of the company's building built ten
years ago cost less for maintenance and Zeta has a more stable workforce. Although it could be doubtless that Zeta is able to take that job, the vice president should not make the arbitrary decision with such erroneous statement.
The vice president mistakenly assume that the buildings constructed by Alpha and Zeta are place in the regions with same condition. Different region has
different price for labor, material, and even land used for construction. A
building at, let's say, Buffalo, New York, would cost by no way the same as an
identical building at Manhattan, New York City. Thus if the two construction
company switch their working place with each other, building by Zeta could cost more.
Even if the vice president is able to prove that the two regions has similar CPI, indicating that the prices of labor, material, and land do not differentiate significantly to each other, the decision to use Zeta is still groundless
because the information from ten years ago could be outdated. The world,
especially business field, is changing at an incredible speed, a company that
used to dominate its part of business could suddenly bankrupt in a month or
two. that the building by Alpha cost 30 percent more ten years ago does not
necessarily lead to the same scenario today. Hence before put the project into
progress, the vice president should look insightfully how the two companies
would handle the job such as quality, timing, and service, never to mention
that Zeta could suffer from a tremendous loss and claim bankrupt. In that
situation the vice president does not even have the choice.
Finally, the mere fact that building by Zeta cost less for maintained provide with insufficient reason that Zeta should be hired for the new project. As mentioned above, the two region have different conditions that affect the cost to the buildings, the using frequency, business intensity, and geometrical feature such as weather and climate are all critical factors impacting the maintenance cost of the building. It is highly possible that the building by Alpha depreciates, therefore requires the company to put more budgets in this building's maintenance, much faster than that by Zeta owing to busier operation. So maintenance cost could not be counted as an indicator used to judge two construction companies.
In sum, until offering enough and strong evidence that Zeta's performance truly outscores Alpha's and that difference of the nature and business conditions
between the two regions where the old buildings locate are too tiny to be
significant, the vice president's argument is far from flawless.
2013年06月23日 14点06分