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Balancing act you are speaking for the executive board of a small oil company, … Question: Assignment 2: Balancing Act You are speaking for the executive board of a small oil company, Futu… Assignment 2: Balancing Act You are speaking for the executive board of a small oil company, Future Fuel, in Colorado. Your CEO and founder, Tom Bennet, is very avid supporter of sustainability and innovation. He insists that money invested now will pay off in big dividends down the road. You all have a legitimate concern for the environment and share and support Bennet in his personal and business philosophy. You are all also very aware of the momentum of the growing “green” movement. Your R&D (research and development) budget for seeking new renewable and viable alternative sources of energy has traditionally been between 22-24% of your operations revenue. You have decided to increase that budget line item to 35% for the next fiscal year on the strong recommendation of Bennet. Additionally, you have also decided to equip your headquarters and other 8 sites in the west with active solar energy systems and wind power generators. You are a publicly held company and your stock has been less than stellar in its last 3 quarters’ performance. Your third quarter just ended, and you are about to hold your earnings meeting. Your earnings after operating costs are modest. You are announcing your numbers and your plans to increase the R&D budget and installation of renewable energy systems.
Discuss the above scenario as the executive board of Future Fuel
What return on investment does your activity/enterprise require? Is this a strategic driver in itself, or simply the means by which you maintain your activities in support of your goal(s) from question 1?
Expert Answer
- Addressing the executive board of Future Fuel: The scenario in short is that we have discussed with Mr. bennet and we will be spending 35% of the operating revenue for seeking alternative sources of energy and this investment would be done targeting future growth i.e. we are expecting our revenues to increase in future and as concerned people of the society we should consider it as a corporate social responsibility and as a business team we are aiming higher revenues in future which is beneficial for both the society and the organization as a whole.
- Return that we are expecting out of this initiative in future is that fuel cost would decrease, we become less dependent for fuel on third parties, reputation in the market increases, revenue to a certain extent increases clubbed with decrease in costs incurred and lastly to ensure sustainable business that grows and sustains for long we are planning to take up the above described steps and hence it can be considered as a strategic driver as well because it is a well-planned project that would fetch us (organization) good amount of profits in future.
