Johnson Controls is a worldwide company founded by Robert Johnson. He was an American industrialist and entrepreneur. Mr. Johnson drew inspiration from creating a scientific appreciation of effective sanitation and germ models. His primary objective was to create an easy antiseptic surgical procedure. The Johnson Controls Company diversified its commercial activities to include medical devices, pharmaceuticals, and packaged commodities. The company was able to oversee its expansion due to several studies and approaches. It has become one of the major healthcare companies across the globe due to its brand name of Johnson & Johnson (J&J). The business runs operations through three commercial portions. The first segment of the company deals with pharmaceuticals. The organization’s pharmaceutical commodities comprise of family planning, cardiovascular, nervous system and mental disorders, immunotherapy, gastroenterology, oncology, pain management, and allergy control drugs. This segment creates about 48% of the company’s revenue and about 59% of the J&J Company’s operating financial gains.
The second segment deals with medical devices and diagnostics. It includes patient care and surgical devices and equipment, coronary stents, diagnostic products, contact lenses, and joint replacements. This section accounts for about 37% of the organization’s revenue. It is also accountable for about 32% of the J&J Company’s operating finances. The third segment comprises of consumer products. This component accounts for about 18% of the company’s revenue. It also creates about 12% of the operating profits for the business. The organization has survived many historical episodes to develop a formidable commercial brand in the healthcare industry. It has achieved this aspect through effective strategic planning and efficient client care. This paper reviews the 2012 financial results of the Johnson Controls Company and the economic outlook of the firm.
The study provides a suggestion of a methodology of supplementing the ancient methods of assessment of the capital investments of the company. It also discusses the potential effects of inflation on deliberate capital ventures in China and likely methods of providing an objective evaluation of the investments. The report discusses the potential modifications of assessing the schemes to increase internal capacity in North America and expansion schemes in the global market. It also reviews how these facts may affect the company’s prospects for growth. The study examines the merits of applying sensitivity analysis in assessing the programs of Johnson Controls and how this design can provide a competitive edge for the company over its business rivals (Weygandt et al., 2012).
This paper makes an analysis of the documentation of the company’s profit margins and sales for the fiscal year of 2012. The projections indicate that the company had total revenues of $ 10.8 billion during the fourth quarter of the year 2011. The Johnson Controls Company had envisaged a rise in automotive production, in Northern America and China in its 2012 ventures (Schmidt, 2008). The company had also estimated an increase in financial gains with about 7% in the year 2012. The improvement would have been due to the company’s automotive projects. Also, the progress would have been an indication of the rise in world production in terms of quantity. The company adopted new approaches for market growth expected to create a minimum of $1.5 billion in 2012. In contrast, the production of automobiles stagnated in the European market as compared to the prospects of the year 2011.
This research outlines different methods that can supplement the traditional methods of evaluating the capital investments of the Johnson Controls Company. The first method entails the net present value. This technique assesses the organization’s cash inflow. It evaluates the possibility of a shortfall or excess after realizing the firm’s routine financial obligations. Venture capital appraisals of a company possess the capacity to achieve a positive net present value. A positive net present indicator may be essential in reducing the company’s risk. The second method the organization can use entails the accounting rate of return (ARR). This method links the financial gain that can be accrued by a project to the value of the initial capital investment to initiate it (Ball, 2008). This technique can be significant in evaluating the risk of investing in a project and whether it can create positive returns for the business. However, the method may not provide for the time worth of finances.
The other method comprises the IRR, (Internal Rate of Return). This paper describes the IRR as a concession method that assigns a rate of zero to the net present value. The design may be efficient in evaluating the applicability of capital investment. The technique may help the business to assess the viability of a project and overcome risks. The program may not be applicable if the expenditure on capital investment exceeds the IRR value. This research observes several implications of inflation on planned capital investment in China. Inflation may be disastrous to the Chinese economy. Chinese clients may be unable to buy products that have inflated costs. This fact may discourage savings in China because the worth of money may decrease with time. Inflation can also hurt planned capital investments. It may generate a decrease in the rate of economic growth. The Chinese economy may undergo several structural adjustments to sustain it. Inflation may induce difficulties for businesses to sustain themselves in the market.
The level of production of businesses may decrease as commercial enterprises may not realize a future demand for their products. Inflation may destabilize the money markets by increasing the risks of losses due to unpredictable interest and exchange rates. This report presents different designs that may be useful in assessing the worth of investments. One of the approaches includes a cost-benefit analysis. Benefits ought to be weighed against the liabilities in the cost and benefit balance sheet according to this method. The other designs may include profitability analysis, evaluation of production factor and indirect costs and financial interrogation of the profits and expenditure strategy (Wenz, 2012). The knowledge of inflation effects in china and different approaches on investment evaluation may have a significant influence on management decisions. It may inform organizations of whether to invest or not and the different risks that their investments may face.
This report evaluates several modifications that I would employ in assessing the projects. I would utilize the SMART analysis to increase internal capacity in North America. This design would help in ensuring that the company realizes high turnovers in the region. This aspect would improve the chances of project success. I would undertake constant project quality assessment to improve the internal capacity. I would also use profitability analysis to examine the project and increase the internal value of the market. The profitability index would be another approach I would employ to evaluate the Johnson Controls Company’s North America base. The technique assesses a business based on a calculation of worthiness per unit of its venture. It is a ratio of the amount of capital invested in the financial gain of the project. This aspect would help to offset the risk of failure of the project in case of threats. The payback period would be another efficient technique that would help in forecasting the time it would take to recover the original capital of the project. It would be an efficient way of interrogating the risk of the business. A short payback period would be more preferable than a longer one. I would employ a contrasting method to assess the rate of growth of the program in the world market. I would use the cost-benefit analysis to examine the performance of the project and its success in the global financial market.
One of the benefits of using sensitivity analysis in evaluating projects for Johnson Controls includes easy identification of variables that influence cash-flow projections. The other advantage constitutes an indication of parameters to extract extra information for company decisions and exposure of inappropriate firm projections. The sensitivity approach can provide a competitive advantage for the J&J Company against its business competitors. It may help decision-makers to appreciate the investment of the company in totality. It may explain the different aspects of investment in a comprehensive manner. This point may help the decision-makers to strengthen the weak aspects of the project and concentrate on pertinent challenges.
In conclusion, this paper underscores the essentiality of undertaking a critical evaluation of the project and having firm control of capital investments. The study illustrates the different approaches available for the J & J Company to examine its projects and ensure the success of the brand. The control of capital investment may be a crucial component to the success of the business.
References
Ball, D. (2008). International Business: Introduction and Essentials. London, UK: Longman Press.
Schmidt, R. (2008). International business and trade. New York, NY: New York Press.
Wenz, P. (2012). Take Back the Center: Progressive Taxation for a New Progressive Agenda. Massachusetts, MA: Massachusetts Institute of Technology.
Weygandt, J.J., Kimmel, P.D., & Kieso, D.E. (2012). Managerial accounting: Tools for business decision making (6th edition.). Hoboken, NJ: John Wiley and Sons.