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Measures of Project Success and Failure

Predominantly, timely completion of projects within the allocated budget is considered successful. However, different measures of success and failure of projects have been devised by different people (Macleod 2012).The automobile industry is part of the Australian economy. Noteworthy, high fuel prices shifted  customer preference to smaller imported cars in the year 2013-2014 as compared to locally manufactured automobiles. Annualized revenue was estimated to be 0.8% over the past five years (Ibisworld 2017) New automobile manufacturers face high entry barriers due to substantial large-scale production and machinery investments.

Predominantly, each project starts with defined processes, procedures and objectives. Eventually, failure to accomplish the defined processes, objectives and processes makes the project unsuccessful. Unsuccessful projects are characterized by negative user feedbacks, failure to meet deadlines, limited resources, unqualified personnel, low-profit margins, working way over the allocated budget among other indicators. However, Successful projects work within allocated budget and time, satisfy consumer expectations and use qualified personnel, high project margins among other features.

Predominantly, Economic profit is a measure of any economic project. Economic profit evaluates project profitability. Kia Australia capital cost must be way above the automobile project returns for success. A successful project is calculated by subtracting invested capital, average cost of capital from the net operating profit after taxation. Economic value added is also known as economic or residual profit.

Notably, the economic value added is solely based on current earnings of Kia Australia hence it helps evaluate current its project earnings. Thus an accurate and direct insight into project performance. Economic profit is a representation of value added by the proposed automobile project to Kia shareholders. Solely, economic profit is based on fact that any project must be able to cover its operating and capital costs for profitability. Economic value performance theory was developed by Stern Steward. However, this performance evaluation is a short term evaluation tool.

Primarily, the net present value is used to evaluate the project outcome. Notably, the net present value implies the value difference between cash inflow and outflow. Moreover, the net present value is used in budgeting to analyze project profitability. The present net value of Kia Australia cash flow exclusive of its initial investment is its net present value. Kia Australia should ensure that it has a high net present value to secure project viability. Projects with high net present value are considered more viable for potential investments. Notably, projects that are worth more than their cost are viable.

Net Present Value

Kia Australia s present net value ought to be greater than zero for the project to be viable thus a means of evaluating a business project. Thus the net value present rule which states that positive net present values result into positive investment and negative present value equals net loss. However, assumptions and estimates involved in the net present value makes it inconclusive in evaluating project profitability or otherwise. Major assumptions are the investment cost, returns of the project and discount rate. Similarly, the payback method is another evaluator of project success or failure. Notably, the payback method excludes time value of money.

Alternatively, internal rate of return evaluates the profitability or failure of any project. Notably, the discount rate of the internal rate of return slightly differs from the net present value. As a thumb rule, any project with higher return rates than opportunity costs is viable. Primarily, Kia Australia s should be higher than its operating costs. The internal rate of return measures actual project returns from cash flow .Usually, the comparison between the Kia Australia mandated investment return rate and the actual returns determine the success or failure of the ford mustang project .

However, the internal return rate Of Kia Australia can undermine the magnitude of the project. Often projects with high net present values have good rates of return over long periods of time. Also, projects with high internal return rates are likely to lapse after short period of time. Kia Australia s Calculation of its internal rate of return can help evaluate project performance. Usually, the internal rate of returns Kia Australia will have an annual evaluation of its project performance hence an advantage over the net present value evaluation criteria. Also, the internal return rate evaluation criterion is considered more conceptual as compared to net present value.

  Notably, the adjusted present value is a tool for evaluating investment performance while recognizing benefits of financing. The adjusted present value is the net present value of a project or company that is financed by equity inclusive of any financial benefits. Primarily, this method is credited for correct valuations. The adjusted present value method deals with net present value estimate, tax shields ,interest and the terminal value of the interest tax shield (Investopedia).The adjusted present value of a project determines project financial viability. Similarly, the adjusted present value is similar to the net present value.

Internal Rate of Return

Kia Australia company should  evaluate its adjusted net present value with cost of equity as the discount rate to enable it evaluate profit margins in tax deduction transactions. Noteworthy, the adjusted preset value evaluates the profitability of the Ford Mustang project Using this formulae, the company will be able to assess the debt capital tax relief figures. Notably, the adjusted present value incorporates net present value and the present value components in the project. All the financial aspects of Kia Australia will be factored in this evaluation.

Predominantly, Customer satisfaction is a guaranteed measure of project success or failure. Customer satisfaction can be evidenced by high sale records of the Mazda MXF. Dissatisfaction of potential customers is evidenced by low purchase rates of the Mazda Mxf and low production cycles of the automobiles. Kia Australia should incorporate User Participation by Mazda MXF users who are given project roles and tasks enabling better communication of their needs hence successful system implementation. (Wixom 2001) Mazda MXF Consumer feedback is used to assess success or failure of a project hence its importance.

The Ford Mustang project success can be evaluated feedback by external experts who evaluate the project context, process, product and deliverables. (UTS ePress) Successful marketing of a product can be measured by the level of popularity and sales volumes gets as evidenced by 100000 Ford Mustang sales volume following publications in time and Newsweek magazines in same week. High demand for the Ford Mustang was evidence of a successful project launch and marketing. Notably, a maximized profit as recorded in the sale of Ford Mustang is a definite indicator of success. Moreover marketing of the Ford Mustang at the world fair of 1964 was a great propeller of more sales of the mustang thus making marketing a tool for evaluating and enhancing project success (Autonews, 2014)

Kia Australia stakeholder satisfaction is another vital evaluator of the Ford Mustang project success. Normally, good returns for shareholders equals project success and low returns translate to project failure. Similarly, evaluation of project process and outcome determines the progress of the project hence making it easy to discern its success or failure. Similarly, Time, cost and value of the project are evaluated to determine project success or otherwise, (Nelson 2005) Competition between the Ford Mustang and the Chevrolet during the 1967-1968 is an indication of project success (Edmunds, n.d.) Generally, Product quality is a common evaluator of project success or failure. In the case of Kia Australia, Ford Mustang vehicle standards ought to be adhered to during and after the production process. In cases of  substandard Ford Mustang automobiles then the project is deemed to have failed. However, standard Ford Mustang are end products of a successful project. Additional resource allocation to an already allocated project is a failure in the project production process. Notably, process and outcome of a product are both factors for evaluation as to success or failure of the project.

Adjusted Present Value

Project evaluation helps to improve the product after the ford mustang project has been completed. Market reception to ford Mustang automobiles evaluates project success or failure. A positive response to the ford mustang evidenced by high demand spells is an indicator of project success. Negative response for the Ford mustang vehicles gives room for modifications hence improving the Ford Mustang. Product response is evaluated through the number of sold automobiles. Fewer sales translate to not so favorable product response. Product modifications based on user feedback are very instrumental in encouraging more product sales and product competition.

Conclusively, project evaluation is a key investment performance tool. Notably, profitability is a common motivator for project evaluation. Quality assurance is assessed during project evaluation. Usually, timely completion of a project within the allocated budget is a common measure of success. Fulfillment of defined processes and objectives of the automobile project is a considerable measure of success of the project. User participation provides an insight on improvement areas and commendable processes and procedures for better production of the project. Similarly, shareholder satisfaction is an issue of project success or failure experienced by investors during evaluation.

Reference List

Australian government. Business [Online] Australian Government. Available at https://www.business.gov.au/info/plan-and-start/develop-your-business-plans/industry-research/manufacturing-industry-fact-sheet [Accessed on 22 Mar.2017].

Autonews. Father of an icon. [Online] www.autonews.com Available at https://www.autonews.com/article/20140412/OEM02/304149996/lee-iacocca-looks-back-at-the-1964-sensation-that-was-ford-mustang[Accessed on 22 Mar.2017].

Edmunds, Ford mustang History [Online] www.edmunds.com.Available at https://www.edmunds.com/g00/ford/mustang/history/?i10c.referrer=https%3A%2F%2Fwww.google.com%2F[Accessed on 22 Mar 2017].

Frese, R, and Sauter, V(2003).Project success or failure e: What is success what is failure and how you can improve your odds for success? Available at https://www.umsl.edu/.Available at https://www.umsl.edu/~sauterv/analysis/6840_f03_papers/frese/.[Accessed on 22 Mar.2017].

Gallo, A. (2016).  Financial Analysis: A Refresher on internal rate of return, [Online]Harvard Business Review. Available at https://hbr.org/2016/03/a-refresher-on-internal-rate-of;return[Accessed on 22 Mar 2017].

Ibis world, Automobile industry in Australia [Online] www.ibisworld.com.Available at ttps://www.ibisworld.com.au/industry-trends/market-research-reports/thematic-reports/automotive-industry.html [Accessed 22 Mar. 2017].

Investopedia, Adjusted present value [Online] www.Investopedia.com Available at https://www.investopedia.com/terms/a/apv.asp[Accessed 22 Mar.2017].

Lujasz, l. Economics and Sociology: Net present value versus internal rate of return [Online] University of west Hungary. Available at https://www.economics-sociology.eu/files/05%5B8%5D.pdf[Accessed on 22 Mar.2017].

Mcleod, l.D. & Macdonell, S.G. (2012). A Perspective-Based Understanding of Project Success. Project Management Journal, 43, 68–86.
https://dx.doi.org/10.1002/pmj.21290. [Accessed 22 Mar 2017].

  Nelson, R.R (2005).Project retrospectives; Evaluating project success failure and everything in between [Online] University of Minnesota. Available at https://www2.commerce.virginia.edu/cmit/Research/MISQE%209-05.pdf[Accessed 22 Mar.2017].

UTS Express (2014).Organizational project management [Online] UTS e press. Available at https://epress.lib.uts.edu.au/journals/index.php/opm/article/view/3865/4345[. Accessed on 22 Mar.2017].

Wixom, Barbara H. (2001). “Am Empirical Investigation of the Factors Affecting Data Warehouse Success”, MIS Quarterly, Vol. 25 No.1, pp 17 – 41. [Accessed on 22 Mar.2017].

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