ASSESSMENT TASK NO.
MS301 – MANAGEMENT SCIENCE
I. Answer the following questions briefly.
1. Give an example of a business situation that needs the application of management
science based on your personal experience.
A business situation that I think needs the application of management
science is Production and Operations, wherein, it is involved with the activities
relating to the manufacturing and delivery of goods and services. The manager
needs to decide to get the number of products with appropriate quality and
appropriate cost. Decisions are made with the goal of maximizing profitability and
enhancing productivity while meeting customer’s needs. Additionally, by using
management science, it is possible to successfully manage, control, and monitor
the efficiency of the supply of goods and services.
2. In your own words, what are the advantages and disadvantages of management
science? Explain your answer.
The advantages of management science are this can be very helpful when
solving problems that may be encountered in a business. This will increase the
organization’s ability to decide upon the appropriate management strategies.
Moreover, it can enhance the effectiveness and profitability, as well as the
production, and will lessen the production time of a business.
The disadvantages of management science are it is time-consuming since
it requires analysis and reorganizing of the organization, and it may be challenging
to figure out the most appropriate strategy or plan. For the employees, it
encourages them to work quickly and finish their tasks on time. Also, they are
required to strictly follow any instructions given to them by the manager.
II. CASE ANALYSIS
In 1996, the chairman of a shopping mall company with four branches in
Metro Manila was confronted with a crucial decision regarding the expansion
of one of its branches as part of its competitive strategy. A vacant property
located beside the branch along Espana in Manila was being offered for sale
to all the mall operators.
This shopping mall company started the operations of its fourth branch in
December 1997, and at that time, the company had just begun payment for the
loans used for its construction. To push through with the expansion in the
Espana branch, the company needs to borrow additional syndicated dollar
loans from the biggest banks in the country.
“If we will not expand, then another mall will buy the property beside the
Espana branch and would definitely further lower our market share since we
are already facing so many big competitors in the area,” was the chairman’s
main concern. However, the majority of the shareholders, fearing that the
company is already overleveraged, did not agree to the expansion plan. After
a series of meetings with the bank officials, who promised to give the full
financial support, the chairman decided to push through with the expansion
plan. This decision was not fully approved by the stockholders.
Then, during the last quarter of 1997, as the construction of the Espana
extension as almost 80% complete, the Asian Financial Crisis hit the
Philippines, which resulted in a sharp devaluation of the peso. The crisis had a
severe impact on the company’s cash flow because the company’s monthly
amortization on the dollar loans had almost tripled. The banks, foresaw the
forthcoming gloomy financial situation of the company, refused to provide the
rest of the loan proceeds. Without the additional funding, the construction of
the expansion area was never be completed. The lack of cash flow led the
company to file for bankruptcy.
a. Do you think the chairman made a very drastic decision without the proper
evaluation of the entire scenario and the full support of the stockholders?
Explain your answer.
Yes, when expanding a business, it is important to have a proper
evaluation to determine what works well and what could be improved
considering the future net worth, to make sure that the company is heading
in the right direction. Based on the scenario above, the chairman’s main
concern is that another mall will buy the property, so the chairman made a
drastic decision without properly evaluating the entire situation and the
stockholders were not entirely in favor of the expansion. Moreover, the
company’s stockholder is not the priority, the chairman only cares about
making money.
b. If you were the chairman, what information or data should you gather prior
to the decision for expansion?
As a business develops, you become eager to learn more about the
products or service offerings as well as an interest in expanding to new
markets. Additionally, there are opportunities and challenges to consider,
and these challenges require careful planning when deciding on what your
next steps should be. If I were the chairman, the first thing I would do is
monitor and maintain a positive cash flow to avoid future financial problems,
because too much debt increases the chance of the risk of default or even
bankruptcy. Second, I will conduct market research about expansion
opportunities in order to find the best location for a new store and to identify
areas for possible business expansion. Lastly, as I take my company to the
next level, I will ensure that I am effectively communicating with my
stockholders to gather feedback about the decisions as they have certain
rights, such as having voting rights associated with ownership and control
of a company or business.
