Business Case Analysis

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Business Case Analysis

Conducting Life Cycle Assessment (LCA) and Life Cycle Costing (LCC) will give a product specific solution (i.e., which design or which process has the minimum impact to the environment and the lowest cost among many alternatives). However, businesses have family products manufactured at different locations to meet the customer needs throughout the world. In addition, businesses have to consider continual changes in competitive environment, product obsolescence due to frequent technological changes, political and economical uncertainties etc. in their decisions. Although sound decision making is the core of all managerial functions, one need to make the decision making process as objective as possible to create corporate memory and to improve the decision making process based on lessons learnt.

Business Case Analysis (BCA) is a structured methodology where alternatives are compared by examining business impacts (in terms of financial and non-financials), risks, and sensitivities. BCA looks at the enterprise wide perspective and assesses the holistic impact of the decision. Other names for a BCA are Economic Analysis, Cost-Benefit Analysis, and Benefit-Cost Analysis.

Similar to LCA and LCC, conducting BCA requires specialized skill and significant amount of time. Some of the fundamental building blocks to conduct a thorough BCA include:

  • Problem Statement
    The Problem Statement should provide the reasons for conducting the BCA, as well as define the analysis framework for the current deficiencies, additional requirements, or opportunities for improvement.
  • Ground rules
    Ground rules are the parameters and conditions within which the BCA is conducted. Some examples of ground rules are funding, life of a product, etc.
  • Assumptions
    Assumptions define aspects that are beyond the control of the BCA team. Some examples of assumptions are inflation, physical environment, etc.
  • Evaluation Criteria
    One of the most important components of BCA is to develop a set of evaluation criteria that enables a best value assessment. Best value is defined as the intersection of performance and cost, based on specific criteria.
  • Development of Alternatives
    Alternatives should include a wide range of all possible solutions from which feasible solutions for in depth analysis are selected.
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