Dim Lighting Co.

Topics: Risk, Worst-Case Scenario series Pages: 2 (423 words) Published: June 14, 2011
Case Solution: The Dim Lighting Co.

I. Problems:

A. Macro

1. Will Dim Lighting be reactive? 2. Will Dim Lighting be proactive?

B. Micro

1. Will Jim West be influenced by thoughts of what a second year of un-obtained targets will do to his career in making this budget decision? 2. West feels threatened every time Spinks does not receive his demands or “wish list.”

II. Causes:

1. Previous unprofitable year. 2. Spinks’ past history of leaving a company that “lacked creativity and innovation”.

III. Systems affected:

1. Structural – the structure is a traditional functional structure. This may not encourage the development of new products and ideas. 2. Psychosocial – other departments feel threatened by Spinks. Also, Jim West feels he is under pressure to improve the profit margins immediately. 3. Technical – both the production manager and Spinks want money to upgrade technical aspects of the company. 4. Managerial – West feels caught between being innovative and trying to improve the bottom line immediately. 5. Goals and values – corporate headquarters does not seem to value risk taking and moving into new projects. If their rejection of the lighting proposal is indicative of their decisions, the company as a whole may become entrenched in old technology.

IV. Alternatives:

1. Before making a budget decision, West should contact corporate offices to see if additional funds are available for R&D. Spinks’ project would have a long-term effect on entire industry and possibly the parent company would contribute to the R&D project. 2. If additional funds are unavailable, the budget committee needs to make some compromises and come to a consensus-it should not be an all-or-nothing proposition. Funds should be allocated for both R&D and for upgrading essential equipment.

3. West should also ask the accountant, Preston, to make a three-tiered analysis of the project: (1) best-case scenario, (2) worst-case scenario, and (3)...
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