How Do You Win the Capital Allocation Game Harvard Case Solution & Analysis

Why companies often make bad investment decisions, and to continue to make mistakes, even after the weaknesses in their analysis of capital budgeting obvious? Because, according to the authors, they do not integrate capital budgeting in their overall strategy. Authors equity-based budgeting has six main functions: it is dynamic, it is an integral part of the company, it recognizes the sequence variants, a cross-functional, it aligns employee compensation in the allocation of capital, and it highlights the effectiveness-training. The three stages of this framework should take place simultaneously: first, to define the strategy of the status quo and how it should perform in order to maximize shareholder value. This strategy helps the company to identify a compromise between capital budgeting cycle time and risk. Second, create a system of evaluation of projects and preparation of capital allocation requests that match strategy. Finally, the development of culture in accordance with the strategy and evaluation system. "Hide
by John A. Boquist, Todd T. Milbourn, Anjan V. Thankor Source: MIT Sloan Management Review 15 pages. Publication Date: December 1, 1998. Prod. #: SMR034-PDF-ENG

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