What is the investment process

Investment process

In an idealized form, the investment process can be broken down into four phases:

1) Planning and decision-making phase (investment planning, investment decision),
2) Realization and control phase investment implementation),
3) control phase (investment control),
4) Improvement phase.

In the case of longer implementation phases (which can extend over several years), the control phase is followed by an improvement phase. This can be triggered by impulses that originate in investment controls. Discrepancies between the original expectations and the reality that has occurred can also be due to (unforeseen) technical progress. If, for example, new types of products are now in demand or new production processes are used, the originally expected payments can no longer be achieved; In view of the new information situation, the planned useful life can also prove to be illusory and must be checked. It is then to be considered whether an adaptation to the new situation can be carried out through suitable subsequent improvements or whether the project is better to abort. The idealized form of describing the phase structure of the investment process must not create the impression that the individual activities are actually only to be carried out in strict chronological order. Rather, there are feedback relationships both between and within the individual phases. There is feedback between control and implementation, for example, if a discrepancy between the planned and (previously) realized result that is detected in good time triggers improvement measures.

It may even be necessary to "jump back" to the planning and decision-making phase. New alternative solutions are sought and assessed before a decision is made on the most favorable form of improvement. An example of feedback within the planning and decision-making phase is when, when assessing the alternatives that have been developed, it must be determined that they do not correspond to the investor's objectives. Then namely, improved alternatives are to be looked for. If these are not to be found despite all efforts, it is even advisable to check whether the problem was formulated incorrectly and / or the goals were not set correctly. Currently, the pressure of the competitive forces forces every company to control the critical competitive factors (such as customer benefits, costs, prices, quality, service, environmental justice, time) in the complex ever better. This requirement applies particularly to the design of investment processes. A new plant or production line to be installed will only be able to contribute to achieving the economic objective if the above-mentioned factors are adequately taken into account in all phases of the process design.

The time factor requires, for example, to coordinate all activities so that the investment project is completed at the earliest possible (economically sensible) point in time. A late start of use can mean a loss of customers and thus of market share. Conversely, measures to (further and further) shorten the project duration can ultimately lead to excessive payments because the number of employees working at the same time and thus the coordination effort increases enormously. Thus, the benefits of shortening the project duration must always be weighed against the resulting higher expenses. For better control of the critical competitive factors when designing investment processes, it is advisable to resort to modern management methods and logistics concepts, such as just-in-time (optimal timing and coordination of activities in the implementation of the company process), lean management (creation of lean, i.e. efficient management structures oriented towards customer benefit in all process phases), simultaneous engineering (parallel execution of as many activities as possible in the context of R&D processes) and supply chain management (more effective and efficient design of the entire value creation process from the suppliers [and their suppliers] to the Customers [and their customers]). Working with network plans has proven to be a powerful tool for better mastering investment processes, especially in the implementation phase.

Controlling instruments can be used in every phase of the investment process. The main task of investment controlling is to coordinate the activities of all phases of the investment process in accordance with the company's objectives. At the same time, the departments involved in the investment process must be provided with the methodological tools they need to solve their tasks (e.g. suitable instruments for assessing the investment alternatives for the planning department entrusted with them).

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