The Chief Operating Officer Of A Large Hospital In Riyadh
Analyze the Steps You Would Use In Determining Which One Will Be Funded This Year and Which One Will Be Funded Next Year
In every business entity, there is a need to make decisions which would help in the success of the firm. To come up with a choice, one has to analyse and evaluate the situation in the firm. One is required to think critically to come up with the best solution that would aid in the success of the business entity. In the business entities, there is the main factor of production which is capital thus one has to make the right decision on how to utilise the resource. In this case, decisions on how the capital would be used in the hospital activities require one to think critically and come up with the best remedy. To make the best judgment, one is needed to make the capital investment decision. The management team should be included in the process of the decision making so that there is a variety of ideas from the members.
The capital investment decision is all about how the management would make the judgment regarding how funds would be spent to procure capital assets. In our case, one would consider some factors before making decisions on the capital investment. Some of these factors may include how well an investment fits into the long-term strategy of the business (Levy, 2015). The investment should be a long-term one to ensure that the business continues to run effectively and efficiently. Having a short-term investment, the efficiency of the business might be affected. For example in our case, the hospital equipment such as the life supporting machine should be of good quality and a long-term one.
Besides, when making capital investment decisions, one should consider whether the investment would improve the capacity of the entity’s bottleneck operations hence increasing the throughput (Graham & Harvey et al., 2015). For instance, in this case, the investment should improve the operations in the hospital, therefore, aid in improving the services offered to the patients. For example, the hospital can embrace the use of new technology hence enhancing the services of good quality to their patients. Moreover, one should ensure that the firm has enough cash to purchase the intended assets. Besides, one should consider whether the cash flows from the investment would generate a positive return on the investment (Faccio &Marchica et al., 2016). Generally, the primary motive of the business firms is to make profit hence one should ensure that the capital investment would bring forth a positive return.
In our hospital case, one should consider some factors and also follow some steps to decide on which project to fund first. In the funding of the projects, there are some crucial steps which need to be followed. Some of these steps are notably identification of the project, the feasibility of the project, the sources of the project technology, sources of the project finance and the risk that might occur (Berechman, 2018). To have a successful project, all the above steps should be should be looked into. For instance, the feasibility plan would involve a detailed plan on the market, cost and also the objectives of the project. With a well-planned project, there is assurance of funding the project accordingly. Besides, it is necessary to be aware of the risks that might occur.
In this case, both projects are necessary since they are meant to improve the services of the hospital. If the hospital funds were enough, opting both projects would take the hospital to a higher level. Both projects have importance in their unique way. For instance, the building of the five-story park would ensure there is no congestion of vehicles around the hospital area. Also, the building of the park would improve the services of the hospital thus attracting more patients.
On the other hand, the project of upgrading the equipment and expanding the operation rooms has its significance. The expansion of the rooms would aid in having ample space hence accommodate more patients. Moreover, the upgrading of the operating equipment would help in the running of the hospital efficiently and effectively. Besides, the introduction of the robotic surgical assisting devices (DaVinci) would aid in easing then operation activities. The introduction of the new technology would improve the services of the hospital to the patients hence attracting more patients.
Since there are no sufficient funds, the best project to fund among the two is the project of upgrading the equipment and expanding the operation rooms. This is because by expanding and enhancing the operating equipment, the patients would receive better services. Moreover, by opting the expansion and upgrading of the operation equipment, it would create chances of improving the technology. The work done by the robotic surgical assisting devices would aid in ensuring the efficiency of the hospital services. Besides, the project would favour everyone regardless of whether they own vehicles or not as opposed to the project of building five-story Park. The project of upgrading and expanding of the operating room seems urgent since it deals with the lives of the patients. As in all hospitals, the priority is to save the patients’ life, in this case, the priority should be the patient thus the project on operation activities is considered.
Funding the project on the expansion and upgrading the instruments in the operating room is quite cheaper than building a five storey park. The cost of the project includes the following: robotic surgical assisting devices are approximately $ 300 million, materials used in expanding five rooms cost $ 350 million, operating instruments cost $ 150 million and the labour cost is $ 320 million. The total running cost of the project would be approximately $ 1120 million.
Generally, one has to consider the crucial factors before making any rational decision. In matters such as funding a project, one should evaluate and analyse the project to be financed before making any decisions. It is for the best if one includes the third party when making an important decision. In our case, I would consider funding the project dealing with the operation activities first then the following year we consider the building of a five-story park.