strategic analysis of mcdonalds in india

strategic analysis of mcdonalds in india McDonalds vision is to be the worlds best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile. Values. Our values summarized in Q.S.C V. Provide good quality, services to customer. Have cleanliness environment when customer enjoys their meal .The value of food product makes every customer is smiling. Executive Summary. This documentation is mainly about the business strategies of McDonalds in India how it applies their strategies to interact with external environment. This discussed the following Porters models to imply the companys strategies in detail; Porters Generic Strategy analysis.(Use to identify the strategies to select) Porters Value Chain analysis. (Use to identify the value chain activities to support the strategy.) As a fast food company, the rivals that it has faced in the Indian economy during the implementation the strategies they applied, and the strategy changes according to different situations reports from this document. Porters generic strategy analysis of McDonalds is mainly on its unique characteristic applied in India, companys commitment dedication driven to reach the success in the Indian market. It shows McDonalds Business strategies that took place during the banking crisis which lead to global economy recession how it affected the Indian economy. Through Porters Value Chain Analysis this document tries to highlight McDonalds primary activities support activities of their production process, applied in India. Through this analysis, it shows the factors influencing the company performance, coordination between firms in the industry their quality support services as well. Also, report tends to discuss the situation of other competitors in the industry, their performance and position in the Indian market. Finally, this report implies that low cost focus strategy can keep a company to survive in the recession. Also, it can achieve low cost focus strategy through their logistic systems, reducing food wastes and increasing effectiveness of employees. Introduction. Mc Donalds, was originated in USA (California) in 1954, and has become one of the successful fast food chains in the world. Also one of the most recognized and established brands in the world. To such a development it helps some successful business strategies which lined to its external environment (Macro environment) and the industry environment (Micro environment). This document discussed the success of McDonalds especially in India and the strategies that they followed to reach the current position. Also, this provides a discussion of an analysis of why the company selects those strategies in response to the changing external environment to reach the goals. The company was able to establish around 30,000 franchising stores in 119 countries, targeting around 47 million people each day and it generates about $ 15 billion revenues annually. In India, McDonalds is a 50-50 joint partnership business between McDonalds corporations [USA] and two Indian businessmen. It took them six years with an investment of 4 billion to build up their supply chain properly in the Indian market. Their first restaurant in India was opened in 1996 at New Delhi. By introducing differentiated menu products according to the Indian taste, improving logistics systems with better supplier relationships it began to spread all over the country rapidly. Now the company expanded in 34 cities in India by covering 132 outlets. N. Jadhav A.Shaikh 2010, Supply chain management, Perishable products (Restaurant chain)[Presentations], viewed [ 19/12/2010], http://www.slideshare.net/sunilmbsingh/mcdonalds-final (Diagram 1) Porters Generic Strategy Analysis: Porters generic strategies framework provides a major contribution to the development of the strategic management the company can achieve to their competitive advantages by differentiating their products and services from its competitors through low costs. Mc Donalds targeted their products and services by a broad target through covering most of the market places. Also, it attains competitive advantage through market segmentation using Porters differentiation focus strategy. 8.1 Differentiation strategy of McDonalds: In differentiation strategy, fast food chains need to be more selective in which products to offer more creative in their promotion strategy. McDonalds offers specialized (Regionalized) version of its menu. This leads to differentiate the products from other competitor products as well. Mc Grilled sandwiches in US Canada. Mc Chicken Premiere Zesty chicken in UK, France, Italy Belgium. To overcome their healthy issues Mc Donalds added salads other lighter options to its menu encourage people to visit more often. Product adaptation in India- Vegetarian selections, No beef or pork items, McMasala Wide variety of menu items according to the Indian menu items; Vegetable non vegetable products. Health conscious items. Local flavors. Food preferences India B. Craig K. R. Dickson, 11th December 2007, Supply chain management, Mc India ppt[Presentations], viewed [ 19/12/2010],http://www.slideshare.net/KRDickson/McIndia-Final-ppt (Diagram 2) Mc Donalds premium line: They have introduced a group of products in early 2000s. It includes McDonalds larger chicken sandwich, salad line coffee products. Grilled chicken sandwiches are targeted different demographic markets. Mc Cafes located in Australia within the McDonalds restaurant. Types of restaurants: Counter service drive through (With indoor outdoor seating in Delhi.) McDrive locations near highways offer no counter services or seating. McCafà © restaurants within the same McDonalds restaurants. (They increased sales by 60% from this strategy.) Expansion for the following locations as well; More distribution centers within 500 km radius. Satellite cities near Mumbai Delhi. Cities with tourist appeal and eating out culture. Petrol stations, railway bus stations in around Delhi. Shopping malls and movie complexes (Delhi Mumbai) Differentiating promotion programs: McDonalds focused on superior price performance during the time of economic crisis. Point of sales (POS) promotion programs. Combo meals. (Customers get more discounts through this.) Lottery for winning its products. Sampling activities to taste their products to a discount price. Internet promotions. TV and other media promotions. To differentiate with their competitors McDonalds tried to focus on its unique campaign. Im lovin it campaign to attract family. Feature artists to attract teenagers. Introduces wireless technology platform, by allowing their customers to access internet by creating an innovative environment. 8.2 Cost leadership strategy: Under Porters competitive strategies, McDonalds uses an overall low-cost leadership strategy to reduce cost increase sales. Higher profits resulting from sales through lower prices than competitors as the unit cost is lower. Mc Donalds is having a biggest market share out of completive fast food restaurants. Therefore, they increase sales by reducing price than competitors. Food Items McDonalds Subway KFC Pizza Hut Dominos Burgers Pizzas Rs 20- Rs 70 Rs 65- Rs 135 Rs 25- Rs 175 Rs 55- Rs 175 (Regular) Rs 35-Rs 140 (Regular) Combo Meals Rs 49- Rs 119 Rs 45- Rs 175 Rs 55- Rs 150 Rs 120- Rs 250 Rs 120- Rs 230 Beverages Rs 25- Rs 50 Small- 300ml Rs 35- Rs 45 Small 300ml Rs 30- Rs 55 Small 300ml Pet beverage MRP 600ml Rs 30 600 ml Deserts Rs 12-Rs 25 Rs 20- Rs50 Rs 15- Rs 65 Rs 40- Rs 60 Rs 25 100 ml Cup of Baskin Robbins (Diagram 3) Market share (worldwide): Company Stores Countries Market share McDonalds 31108 120 33.06% Burger King 11455 58 13.68% Wendys 8811 22 11.69% Hardeess 3295 15 2.78% Jack in the Box 2000 1 3.67% (Diagram 4) McDonalds India: Network competitors Company Outlets (No.) Cities Covered McDonalds 132 34 Pizza Hut 137 34 Dominos 220 42 Subway 131 32 KFC 34 09 (Diagram 5) Bruce Craig, Keith R. Dickson, International Business Management, Network competitors [Online], available at: http://www.slideshare.net/KRDickson/McIndia-Final-ppt [20/12/2010] Through adding 700-900 restaurants annually, McDonalds enter new markets through lower prices. It shows a great barrier to entry for competitors to enter the industry. Through its strong centralized authority tight control, standardized procedures McDonalds takes most an efficiency approach. Key elements of McDonalds business strategy; Adding 700-900 restaurants annually. Giving low price products, Extra offers through new menu items. Highly selective in granting franchises. Selects most convenient places to customers. Focused on limited product lines through maintaining the quality. Extensive advertising. Proper HR management through equitable wage good training. McDonalds cost leadership strategy growth strategy is based on; Adding new restaurants. Maximizing sales sales in existing restaurants. Improving profitability (globally) Success behind their business lies in the maximum of Think global, act local. They ensure that their structure fits with the international environment, but also have internal flexibility geographically. McDonalds has twice the market share of its closest competitor, Burger King. :

Historical Evaluation of the Book Survival in Auschwitz Essay

When Hitler began his career as a politician, he was always obsessed of eliminating the Jews in Germany. This â€Å"elimination† did not necessarily mean extermination of the said race, but nevertheless would involve too much savagery and cruelty. In 1930, Hitler became chancellor of Germany, a post he held until 1932, and began instituting anti-Jewish legislations. Jews were not permitted to hold any government office. They were also barred from using public utilities and services, and worst, their citizenship was cancelled. When Hitler became dictator in 1933, he issued several orders to army and police units to begin the construction of concentration camps to hold prisoners. Many prisoners were transferred to these concentration camps. It was reported that they experienced torture and unwarranted murder. When the war broke, concentration camps were filled with Jews. Originally, the plan was to ship the Jews to Madagascar, a French colony (since Germany already defeated France during the war). 1 Because of lack of transport ships, Jews were forcibly transferred to the east where several concentration camps were being built. The â€Å"trip† to these concentration camps were not pleasurably; more accurately horrible. Jews were sealed in the trains. For six days, the Jews had to suffer the lack of water and food, and poor ventilation system. There was no toilet in the cargo section of the train. Escape was impossible since German soldiers are guarding every section of the train. Jews caught jumping off the train were shot. Worse, the section where the said Jews escaped would have to be liquidated. This was the policy of the German military at that time. Contents of Levi’s Book The book is essentially divided into 18 parts, organized into three themes (journey, life in the concentration camp, and war survival). 2 These are the chapters of Levi’s: 1) The Journey, 2) On the Bottom, 3) Initiation, 4) Ka-Be, 5) Our Nights, 6) The Work, 7) A Good Day, 8) This Side of Good and Evil, 9) The Drowned and the Saved, 10) Chemical Examination, 11) The Canto of Ulysses, 12) The Events of the Summer, 13) October 1944, 14) Kraus, 15) Die drie Leute vom Labor, 16) The Last One, 17) The Story of Ten Days, and 18) A Conversation with Primo Levi. Each of these chapters reveals the factual events that occurred during the deportation of Jews to the Auschwitz concentration camp. The first chapter deals on the capture of Levi by Italian Fascists on December 13, 1943. Although he supported Mussolini during his yearly years in power, he was considered an enemy of the Italian Fascist army because of his Jewish leanings. When he fled to the mountains during the early course of the war, he was left with nothing but a couple of personal effects: a pair of shoes, a small firearm, and a bag of canned goods. When he was captured, he was immediately sent to the SS camp in Northern Italy. The next chapters deal on the life of Levi on the concentration camp. At the end of January 1944, he was sent to the Auschwitz concentration camp along with 150 Italian Jews. At their first arrival, several Jews were shot on the orders of the camp commandant. The reasons for the shooting were never made clear by the chief sergeant of the work cells, but during the next days shooting of prisoners became a common sight. The visit of the German doctors to the concentration camp, according to Levi, was initially welcomed by the Jewish prisoners in the belief that medicines would be distributed in the camp. It turned out that the doctors were invited by the camp commandant to take blood samples from selected Jews. These Jews would be transported back to Germany as part of an experiment. In October 1944, the Auschwitz camp commandant issued an order to liquidate some of the populous sections of the ghetto. Families became worried as German soldiers indiscriminately opened fire to women, children, and the old. Men of adult age were immediately shot. One of the families, according to Levi, was praying in unison when an SS unit came and shot them. Some pleaded to German soldiers to spare the lives of children, but to no avail. The SS was instructed by the commandant to shot all Jews found in the selected section of the camp. Those who will ignore the order will be immediately shot. Life in the Concentration Camp (Levi’s Account of Auschwitz) Levi’s book fits well to historical documents proving the atrocities committed by the Nazis to the Jews during the Second World War. His accounts of Auschwitz were invariably a supplementary record of war trials and criminal investigations of the Jewish High Tribunal. 3 His accounts however were highly accurate and devoid of emotions. It was as if the book was a photographed version of reality. Every prisoner in Auschwitz was supposed to work at least 16 hours a day. Not to do so would mean torture and with great probability death. Children were separated from the old. The old were machine gunned in a nearby SS camp. The children were sent to the â€Å"special treatment† house in Germany or in German-occupied territories to be gassed. Able-bodied men and women were â€Å"employed† as laborers, taking many different jobs a day. Those who were disabled were automatically shot. It was even noted that no prisoner would survive in Auschwitz for even four weeks. It was the policy of the Germans to kill all the Jews transported after a month. This would make liquidation and transport more efficient. After the last batch was killed, a new batch would be sent to the camp to be killed. Added to that, any German caught of fraternizing with the Jews would suffer the penalty of death. This policy was in accord with Nazi philosophy which requires every German to discriminate the Jews, take their properties, and possibly their lives (it was even noted that during Hitler’s time, crimes against Jews were relaxed. The courts were ordered by the Fuhrer not to proceed with crimes against the Jews, because they were not German citizens and should not be accorded with the rights and privileges of a German citizen). Sleeping was not also allowed. Anyone caught would be instantly killed. When anyone begged for mercy, the SS would take the pleasure of torturing him/her. 4 Killing would be the finale. Sometimes, a thousand people were killed in a day. In Auschwitz alone, an estimated 1. 5 million Jews were killed during the duration of the war. These killings were done sometimes for sanitary purposes, sometimes for recreation, sometimes for the abject order of the camp commandant. The Jews were provided with food periodically by the SS. The distributed supplies of food were however insufficient to augment the prisoners’ labor nutrient requirements in the concentration camp. Many times, Jews were not given food because there was either a scarcity of such or by the order of the camp commandant. It was also the policy of the Nazis to starve the Jewish race and to let them die in shame and pain. It was of no doubt that everyday many Jews in the camp die because of malnourishment and hunger. Clothing was not provided by the SS; the Jews were left on their own. They were ordered to bring their best clothing to the concentration camp, along with their personal effects. Their houses in the cities would be turned over to the German state. 5 Household equipments would have to be abandoned. There would be no room in the concentration camp for such â€Å"luxuries†. The German police â€Å"assured† them that their properties would be left unharmed. Such assurances were never made factual, for the Germans considered Jewish property as their own, in compensation of the Jewish traitorous activities during the First World War. The conditions of the Jews became more and more horrible as the war progressed. A new technology was invented by a corporal in the German army which can kill 10, 000 Russian prisoners in the Eastern Front. The so-called gas chambers were utilized to kill at least 20, 000 Jews a day per concentration camp. The efficiency of this newly discovered method eventually stimulated other SS commandants to adopt such method of execution. The â€Å"Final Solution of the Jewish Question† was almost solved have not Germany faced the situation of unconditional surrender. Levy made this assertion when he was invited as a witness in the Nuremberg trials. Conclusion The book written by Primo Levi, a Jew with a doctorate in chemistry was full of details portraying the miserable conditions of the Jews under the Nazi regime. 6 These miserable conditions, however, were not far removed from the obsession of the Nazis of their inherent superior qualities. The persecutions of the Jews during the Second World War were rooted in the deep hatred of the Germans to the Jews, of which was transformed into discrimination. This discrimination in due time was also transformed into political policies which highlighted the vagrant actions of the Germans against the Jews. The establishment of concentration camps, sufferings of the Jews in the concentration camps, and the desire of the Jews to be liberated from this system were historical facts, located in a milieu of social hatred and discrimination, imbibed in Hitler’s philosophy.

Space Race Essay - 1979 Words

We have always dreamed about reaching the heavens. From ancient civilizations to the modern day world, our obsession of going into space has grown from studying the stars to actual exploration of space. We have come a long way since primitive charts of constellations. From telescopes to satellites, we as a population have progressed greatly in the world of technology. In a mere forty years, we have had more technological advances than the Industrial Revolution. The Space Race has affected our everyday lives; we use the same technology that the astronauts used during their missions for example digital clocks (Dismukes http://spaceflight.nasa.gov). Many industries have benefited, communication companies, industrial manufacturers, and the†¦show more content†¦As the Germans were advancing in their knowledge, technology, and expertise in the field of rocketry, the purpose of rockets had shifted from military to a civilian project. The government had deemed the project unacceptab le, and terminated it. When the Germans showed the world that reaching the stars was not a far-fetched idea, it was possible to do an unbelievable feat of science and engineering. Although the German rocket project was terminated, they had started the basis of modern day rocketry. The dream was growing to enormous proportions. Various nations were interested in this technology, especially the U.S.S.R. and later the United States of America (Snedden 9). At Approximately the same time the government terminated the rocket project World War II was coming to an end. The Soviets had captured Germany; and seized the technology, physicists, and engineers, who had been working on the rocket project and later forced to work for the Russians (Neal 39). With the material seized during World War II, the U.S.S.R. established a space program. Twelve years later Russia launched the first successful satellite, Sputnik 1. Sputnik consisted of a sphere the size of a basket, with four antennae transmitting various amounts of information. As news of Sputnik spread throughout the world, it shocked and astounded theShow MoreRelatedThe Space Race746 Words   |  3 PagesThe space race was an important time in history, for the U.S, USSR, and the rest of the world. Soon after World War II, the Soviet Union and United States began a global battle, communism against democracy. Space became a huge entity in the war. Each side spend billions on besting each others achievements in what later became known as the famous Space Race. The Cold War was the United States capitalists, versus the Soviet communists. It wasnt an actual war, but more of a grudge, because thereRead MoreEssay On The Space Race707 Words   |  3 PagesThe Space Race Imagine you’re running in a race, all you have to do to win is run fast and go past the finish line first. Now, imagine you’re in another race, but to win you must walk on the moon! The United States and the Soviets had that kind of race during the Cold War, called the Space Race. According to the Merriam-Webster dictionary, a Cold War is â€Å"a state of political hostility between countries characterized by threats, propaganda, and other measures short of open warfare, in particularRead MoreEssay On The Space Race755 Words   |  4 Pagesexplore on Earth, Space is infinite. The Space Race was a historical competition between the Soviet Union and the United States for the first humans to reach the moon. Taking place during 1957-1975, the Space Race showcased the determination between the two nations to display who had the superior science and technology knowledge. 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Kennedy’s Address at Rice University on the nations space effort, â€Å"We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and m easure the best of our energies and skills, because that challengeRead MoreRemembering the Space Race733 Words   |  3 Pageswas not one that was fought with weapons or men, this battle was to prove the superiority of each country and would prove, to the world, which country had greater technology, science programs and by extension its political economic system. The space race was a competition between the United States and the Soviet Union, which would only end when the first men would walk on the moon and conquer the last frontier. The Cold War, a time of hostelry between the Eastern and Western Blocs. This periodRead MoreEducation Reform and its Impact on Space Race 1513 Words   |  6 Pageshalf of the twentieth century, space travel and the technology which powered it advanced far beyond what any prior civilization could imagine. Inspiring in humanity hope for a future not on Earth. An analysis of the effects of the NASA space program on the United States reveals a radical shift in educational policies, an influx of new an innovative technologies, and a renewed motivation and hope for the future. Perhaps the most significant impact of the space race came through education reform

Study On Forecasting In Oil Well Economics Finance Essay - Free Essay Example

Sample details Pages: 7 Words: 2033 Downloads: 1 Date added: 2017/06/26 Category Finance Essay Type Research paper Did you like this example? 1.0 INTRODUCTION The quest by oil companies, stakeholders and investors in petroleum resources to reduce expenditures on oil and gas projects while at the same time increasing profit has led to increased technological development in forecasting oil well economics before investments are made on these projects. One of such developments was the introduction of a computer-based software called Petro$ in 1994 for the purpose of petroleum economics evaluation. The report which is based on forecasting of oil well economics using the petro$ software is structured in four parts to show the data the file, sensitivity analysis, an excel spreadsheet showing how the forecast can be done without using the petro$ software (a comparison of both methods) and finally a critical review of the outputs obtained from the forecasting. Don’t waste time! Our writers will create an original "Study On Forecasting In Oil Well Economics Finance Essay" essay for you Create order 1.1 FORECASTING IN OIL WELL ECONOMICS Forecasting is the process of estimating unknown situations. In simplified term, forecasting sees the present as the key to the future. Every business, economic and investment decision making rely on forecasting since the future is not known with certainty. With forecasting, the areas of uncertainty that often surround decision with respect to capital investment, sales, costs, profits, production etc is reduced. Forecasting has turned out to be one of the most relevant aspects of planning given the uncertainty that the future holds. The need for forecasting cannot be underestimated as they can help in financial, production and economic planning, workforce scheduling and most importantly decision making. In a case where an economic downturn is envisioned, forecasting can help investors cut back on their investments. On the other hand, where a bloom seems probable, investors can use far reaching measures to maximize profits. The oil and gas industry being one that is capital-in tensive with majority of her projects requiring substantial and risky investments in acquisition, exploration, operation and maintenance, rely on forecasting. The decision to invest or not in projects in the oil and gas industry usually starts with critical decision making during the exploration phase of a new project or the expansion of an already existing one. Tools used in decision making for the analysis of project risk under conditions of uncertainty help companies determine the degree of success or loss, and will determine the decision of developing or abandoning the project. The development of a detailed cash flow analyses and a comprehensive and systematic evaluation of potential investments helps determine as accurately as possible, the expected returns in the investments under various conditions of uncertainty over the expected productive life of the project. To achieve this, the development of a realistic, sound and carefully structured cash-flow projection that wil l reflect the  initial capital expenditures  needed for the acquisition, development, operations and maintenance of the new oil or gas prospect throughout its anticipated productive life is of paramount importance. (Oxford Management Centre, 2009). Judging from the fact that most petroleum projects require large scale investment, it is often important that decisions on investment be made on a complete and thorough analysis of variables and uncertainties as the ability to assess the viability of investments and the real value of oil and gas assets is very critical to success. 2.0 METHODOLOGY FOR DATA GENERATION NAD DATA FILE The results obtained in this oil well economics forecasting were generated from two data sets. The projects cost currency is in million pounds ( £m). The first set, the base case was given while the other case was generated by changing the product prices. The input data used for these cases are shown in table 1. The results returned obtained from running these inputs in the petro$ software returned amongst other output the cash flow analysis; and production and prices as shown in tables 2 and 3. 3.0 SENSITIVITY ANALYSIS It is known from intuition that majority of the variables that decides any projects cash flow could be different from the values used in the analysis and that an alteration in a key input variable will definitely result in a change in the NPV. One simple method of determining the effects of a change in one or more inputs variables in a forecast is sensitivity analysis (Investopedia).Sensitivity analysis according to Megginson et al (2008) is a tool that allows analyst assess the impact of individual assumptions on decisions variable such as a projects NPV by determining the effect of changing one variable while others are kept constant. Changes in variables are assessed one after the other to identify the key variables. In sensitivity analysis, a base-case is developed via the expected values for each input while one or more variable is altered by a number of percentage points below and above the expected value, keeping all other variables constant. The input variable used fo r this is either increased or decreased to determine the projects NPV and IRR. This is one very useful tool for determining the consequences the actual outcome of a particular variable will have if it contradicts what the key prediction(s) was. (Besley and Birgham, 2008). The net present value is extremely sensitive to changes in the variable costs and product prices, moderately sensitive to units sold and growth rate changes and least sensitive to changes in the capital and fixed costs. In a case where the the uncertainty in the project is exceptionally high, the project maybe redesigned to eliminate the uncertainty (www.adb.org). The modelled scenario shows the sensitivity of the investment to changes in the product prices. Tables 4 and 5 shows the sensitivity report of the base case and scenario case respectively. Charts showing the output of the sensitivity run are illustrated in the figures 1-15 4.1 THE CONCEPT OF CASH FLOW ANALYSIS Being a generic term, cash flow may mean different thing to different people depending on the context. Simply put, cash flow is the movement of cash in and out of a project or business. Inflows of cash in a business usually arise from either of investing, financing or operations while outflows of cash arise from expenses. Analyzing any business cash flow is aimed at keeping a sufficient cash flow for the business and to give a basis for the management of cash flow. Results from a cash flow analysis can be used for the purpose of determining a projects value (rate of return), evaluating the risks in a business or investment, and to determine the potential of a business liquidity. Cash flow analysis is a very crucial aspect of a business operation as it determines the solvency of a business. Periodic cash flow analysis makes easy the identification of cash flow associated problems and can provide ways of improving the solving the problem. As far as possible, it is very cruci al that a positive net cash flow be maintained. 4.1.1 DISCOUNTED CASH FLOW In this report, the output generated by Petro$ was used to determine the discounted cash flow. Russ Bingham (2000) in DCF models and rate of return perspective sees the discounted cash flow as an approach of assessing performance. It uses the concept of time value of money for a project or an asset valuation. Discounted cash flow is a commonly used economic modelling tool for economic forecasting purposes where the analyst calculates the present value of a companys or firms future cash flows. It uses a companys cash flow projections and discounts them using a discount rate to arrive at a present value. This present value is then used as a yard stick to determine the investment potential. Basically, a DCF analysis tells how attractive a business will be. The opportunity of investing in a business may be good if the results of the DCF analysis exceed the current cost of the investment. As opined by Hilton (1991), the net present value (NPV) and the internal rate of return (IRR) are primary methods used in any DCF analysis. A few assumptions exist on the use of DCF analysis.  Ãƒâ€šÃ‚ ´ That the analysis is done in a perfect capital market;  Ãƒâ€šÃ‚ ´ Cash flows are handled as if they were done at the end of the year;  Ãƒâ€šÃ‚ ´The analysis treats cash flows used in investment as if they were known with certainty whereas the possibility of risk adjustments can be made in an NPV analysis to account for uncertainties in cash flow.  Ãƒâ€šÃ‚ ´ NPV and IRR methods of discounted cash flow assume all cash inflows are reinvested in other projects that will earn more money for the business. Practically, Hilton admits that these assumptions are seldom met. This notwithstanding, the method provides an effective means of analysing investments. 4.1.2 NET PRESENT VALUE (NPV) The net present value (NPV) is one of the discounted cash flow evaluation techniques. Because NPV gives absolutely considers the time value of money, it is seen as a sophisticated capital budgeting method that is determined by deducting a projects initial investment from the present value of its cash inflows and discounted at a rate equals to the companys capital cost. Often called the discount rate, this rate is the least return that must be earned on a project so that the companys market value remains unchanged. (Gitman, 2003). As a rule opined by Gitman (2003), a project should be invested in if the NPV equals or exceeds zero because the company will have a return that exceeds its capital cost and this will promote the market value of the company as well as its owners wealth. On the other hand, the project should not be considered if the NPV is not greater than zero as the project will give insufficient financial benefits to justify the investment especially when there are al ternative investments that will at least provide the rate of return on the investment. Theoretically, this implies that a company will choose all projects with a positive NPV. In summary, Gitman postulates that where a problem of choosing between two or more projects that yield positive net present value exist, the one with the greatest NPV be selected. Being one of the most frequently used techniques of calculating the feasibility of capital expenditures, NPV is a useful tool in investment decision making for the reasons that:  Ãƒâ€šÃ‚ ´ it appreciates the concept of time value of money that says a dollar earned today is worth more than than a dollar earned five years from now (Odellion Research, 2006).  Ãƒâ€šÃ‚ ´ it is the only appraisal technique where the outputs from its analysis has direct link on the wealth of the business (Atrill et al pg 454).  Ãƒâ€šÃ‚ ´ it gives depth and flexibility as the NPV equation can integrate other tools of fina ncial analysis like scenario analysis as well as adjust for inflation (Odellion Research,2006).  Ãƒâ€šÃ‚ ´ it integrates the risk affiliated with the project through the discount rate or expected cash flows (Odellion Research, 2006).  Ãƒâ€šÃ‚ ´ it removes inconsistencies in accounting as cash flows are not representative of accounting profits but benefits of the project.NPV also determines the expected cash flow produced from the project and integrates the unique risk of getting those cash flows. The following are factors that limit the applicability of the NPV method.  Ãƒâ€šÃ‚ ´ It is just known that a project has a +NPV or -NPV. It does not tell by how much or less the actual percentage of return is (Atrill et al, 2006).  Ãƒâ€šÃ‚ ´ It undervalues flexibility by not giving room to future changes as new information is gathered. In other words, it uses information obtained at the time of completing the analysis to arrive at conclusions. (Odellion Reasearch, 2006). 4.1.3 INTERNAL RATE OF RETURN Also known as economic return rate (ERR), the internal rate of return (IRR) is the discount rate (interest rate) at which the NPV of all cash flows equates zero.(investopodia). It is a commonly used capital budgeting technique by financial analysts to evaluate the viability and/or attractiveness of an investment. An investment is more desirable if its IRR is high. As such, a project with the highest IRR would most likely be considered the most excellent and undertaken first amongst a least of other projects with appreciable IRR provided all factors are common amongst the projects. It is easier to judge and make decisions using output from an IRR than other financial metrics (NPV) because of the ease of understanding and interpreting an IRR result. This notwithstanding, it should not be used in isolation but in conjunction with other comparable valuation metrics and the NPV when making a case for an investment decision.