Metropolitan Housing Project Company
Short Background of the Case
Metropolitan Housing Project Company (MHPC) was formed in 1982 to develop real estate properties for sale to the public. Their first project is the development of real estate property in Lagunaville, Laguna, which is found near the University of the Philippines campus in College, Laguna. Mr. Roy Roxas, the Project Manager since 1987, prepared a 3-year plan for the period of 1989-1991. Problem Statement
On March 1987, when Mr. Roy Roxas was assigned as the project manager of Metropolitan Housing Project Company (MHPC), the company had been performing poorly given that their cash balance was merely Php 110,755 and in comparison, its liabilities amounted to Php 13.75 million. Mr. Roy Roxas plans to improve the performance level of the company through his four-point objective in his 3-year plan. These four objectives are: (1) to settle all the liabilities relative to the project, (2) to increase the cash balance to Php. 2.348 million, (3) to complete site development and, (4) to sell all residential lots. Along with these objectives are several assumptions made. With the company depending solely on cash inflows for the success of its project in the span of three years, the company has no clear plans to attain these objectives. Which brings us to the question: What should the company do to attain the said objectives? The economy’s poor performance reflected the tyrannical rule of Marcos in the past years. Recent years have shown slight improvement although the economy is still suffering at 1988. With the present market situation and his company’s financial status, his objectives may not be attained. Furthermore, the multitude of assumptions he made makes the project more uncertain. It is also a concern that Mr. Roy Roxas who has only been a project manager for roughly two years may not have full knowledge regarding the operations of the company nor the present market situation. Areas for Consideration
Projected Cash Flows
Economic Environment (Conditions of the Target Market, completion of high way…)
Attain objectives with the company’s current method of operations
Metropolitan Housing Project Company can opt to attain objectives through operating in the same way as they have had before. Although they have strategic goals reflecting the company’s future, they don’t have specific tactical and operational plans to attain it. Furthermore, Mr. Roxas assumed a lot of critical aspects regarding the project. Mr. Roxas assumed that the purchasing power of the salaries of government employees would be maintained at its current level. This is critical to the success of the project because a lot of potential buyers will come from the University of the Philippines Laguna, which is ran by the government and is near Lagunaville. Hence, if the purchasing power of the employees would stay the same, there would be more potential buyers. This assumption is hard to make because there is constant inflation annually. Thus, it would be wrong to assume that the purchasing power of government employees would remain unchanged for 3 years without having sufficient information about the past inflation trends.
He also assumed that the Home Development Mutual Fund will take out some of their credit sales. Again, this is critical to the project’s success because doing so would increase the cash inflow available for the continuation of the project. In addition, he also assumed the availability of temporary financing facility where he can borrow funds to carry on the project.
Regarding the economic environment of the project, Mr. Roxas assumed that the highway leading to the Lagunaville site would be completed soon. The completion of this highway road is essential to attract potential buyers. The assumptions he made are not impossible to happen....
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