In the making of financial decisions, it is important that research is done foist concerning the market that is being targeted. Financial decisions that have a huge impact on the business involve a lot in the stake. It is, therefore, crucial for one to have as much information about the market before considering any steps towards the intended market and business and the impacts those decisions might have as well as the risks associated with them. The better-informed one is, the better they might be in making decisions relating to the business, and thus they might be more able to make informed decisions concerning the steps they ought to make to improve and expand. The exercise focused on the types of decisions and the criteria used to arrive at such decisions in the case of Kroeker farm. It also looks at the pros and cons of the investment options identoified as well as the justifications considered in the making of such decisions.
In the case of the Kroeker firm, certain things need to be considered before deciding the next step in increasing production. The farm aims to expand its size from the current 500 acres to 1100 acres of hemp to increase its production and take advantage of the market boom. Peters sees an opportunity in adopting new technology that uses camera cultivators, which allow for narrow seeding in crop cultivation and which could potentially increase production in the firm as well as drive down the labor costs hence an increase in the profit margin. The technology is however expensive to install, and uncertainty quips in regarding its efficiency in weed cultivation, given that it has only been used in grain cultivation. Other than this, Peters also looks at the current technology used at the farm with hopes of upgrading it to accommodate the new acreage. The speed of the cultivator will also determine its productivity when the cultivation window arrives and the faster it is, the better for the business.
To arrive at an informed decision, Peters has to consider both the initial costs as well as maintenance costs of the two technologies and asses how it might affect the productivity in the long run. Those include both long term and short term advantages and disadvantages of adopting the specific technology, the potential for future improvement, the sale and resale value and the ease of application that comes with using each equipment. Also, given that the window of opportunity and period of usability per year is narrow, Peters could consider renting the equipment for use during the cultivation period and the advantages and disadvantages of such an approach. Peters would also need to evaluate the current financial position of the company as well as the available finances to procure and maintain the respective equipment.
Pros and Cons of Adopting the Technologies.
The decisions to be taken into consideration to decide on the most desirable technology to be adopted no doubt centres around the pros and cons of adopting the technology. The advantages of adopting the 2016 Einbock Chopstar technology include the reduced spacing that the technology offers, from 22 inches to 10 inches given its precision enhancement, which reflects an increase in the yield per acre. Technology allows crops to reach maturity faster than it normally takes. The labor requirement for productivity would also be greatly reduced due to a reduced weed pressure as can be achieved by using the technology. Weed management will also be more efficient when using this technology given the shorter maturity periods that could be realized by adopting the technology. The company will also need not purchase another tractor given that it is compatible with the existing ones.The camera technology, as with any other presents its challenges that may not be good for business. First, adopting the technology would come with initial investment capital that might be very high and subject to many performance risks. The use, for instance, might be hampered by increased operating costs given that the procurement cost is already high at over $120,000. The cost of training the employees to handle the machines could also be high given the necessity to give them an allowance to adapt to its use while bearing the cost of the blunders that come with it. The low resale value of the new technology equipment is of a high disadvantage since it would not allow for room to test and discard if unfavorable for the intended company goals.
The second option involves the purchase of a new planter and cultivator. This option will be beneficial as it would reduce the training costs needed to adopt the new technology as the workers are already familiar with this technology and thus no additional training required. The high resale value of the equipment will also allow the company room for reconsidering their decision if it is eventually found to be of low performance.
One disadvantage of adopting the new planter and cultivator strategy is that it would have limited use beyond hemp cultivation as opposed to the camera technology. The production is also likely to stagnate due to the increased maturity period as well as weed pressure resulting in a 20% reduction in crop production as opposed to adopting the alternative technology. Additionally, this option would involve the purchase of new and probably larger tractors despite having almost similar operation cost per acre as the camera technology.
Following the above considerations, it would seem more prudent for Peters to adopt the new camera cultivator technology if they are to increase the farm size to the desired acreage. This follows consideration of both the advantages and disadvantages of using each of them as discussed in the text. The new technology looks promising regarding production and cost reduction in comparison to the existing one despite the risks that would be involved in adopting it. However, as is common in business, risks are inevitable if one hopes to achieve a change.
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