If You Were President Of One Of These Railroads

Yi Post1if You Were President Of One Of These Railroads What Decisio

Yi Post 1. If you were president of one of these railroads, what decision would you make? Maintain current capacity and forgo additional revenue? Make the investment in additional capacity with the assumption that volume will continue to increase? Explain your answer.

I think when choosing to invest, whether it is building a new company or railroads that it can be extremely beneficial if the rate of return is worthwhile. So, research must be done in order to conclude, to include expected returns and the time frame in which to receive these returns. Nowadays, the issue of transportation finance by the government has generated considerable debate. Some people claim that it is more important to spend money on building new railroad destinations. We can all probably agree with that point, but it is necessary to take into account the advantages and disadvantages of both approaches.

In regards to investing for the new railroad, it would not be reasonable for railroads to have too much exposure utilizing building extra tracks and acquiring equipment and wagons to drive additional revenue. Extra investments with an assumption of that volume will continue to increase is a significant risk with no certainty of gaining the investment cost back on top of future increases in revenues. In today’s fluctuating economy, no guarantees are certain.

Could there be a shorter-term solution for the railroads other than acquiring more equipment and building more track that would allow them to generate revenue without making significant investments? There are several paybacks to society from investing in infrastructure, particularly in railroads.

By improving the system of roads, bridges, subways as well as railroads, it reduces costs while everything is done in less time. Also, it creates jobs, decreases the unemployment rate. In fact, people would have more money in their pockets, which translates into more consumption. Nevertheless, there are different variables to take into consideration before even acquiring new equipment. For example, there is external environment a company needs to look into, which includes the following: evaluation of the local taxation market, the competitiveness, political and financial environment, the law and regulatory conditions, the cultural and social backgrounds, and the external stakeholders such as the third parties and customers involved.

It is imperative to ensure that the use of different stakeholders and other external threats or opportunities is adequately evaluated and assessed. However, in terms of the internal environment, it is essential to understand the organization itself by evaluating the company's strengths, weaknesses, threats and opportunities, market indicators, competitive advances, internal stakeholders, organizational culture, assets, and objectives as well as strategies. However, with that being said, investment in capital assets has other ramifications or possible consequences not found in the typical day-to-day expenditures of a business. Once funds have been used for the purchase of plant and equipment, it may be a long time before they are recovered.

Unwise expenditures of this nature are difficult to retrieve without serious loss to the investor. Needless to say, imprudent long-term commitments can result in bankruptcy or other financial embarrassment.

ERIC’s POST Case 6-2 Rail Versus Pipeline Investment

If you were president of one of these railroads, what decision would you make? Maintain current capacity and forgo additional revenue? Make the investment in additional capacity with the assumption that volume will continue to increase? Explain your answer.

As president, I would more than likely maintain current capacity; however, I would take the necessary steps in appointing a team to perform a benefit-cost analysis. Building more tracks and acquiring more equipment requires a long-term steady volume investment (Novak et al., 2019, p. 228). Although large investments might result in short-term revenue increases, they may not satisfy long-term demand, which includes both ongoing maintenance and labor costs.

The uncertainty of long-term crude costs would present a significant risk for small oil and gas operators in northern regions, potentially impacting the entire industry (Novak et al., 2019). Gathering comprehensive data through a benefit-cost analysis, which monetizes relevant impacts, would help compare options and identify the most beneficial course of action (bca.transportationeconomics.org).

Could there be a shorter-term solution for the railroads other than acquiring more equipment and building more track? Possible solutions include subcontracting to other rail companies to generate additional revenue, leasing additional equipment or cars to meet demand while minimizing other costs, and utilizing intermodal transportation—combining multiple modes of transport to deliver services efficiently (bgiworldwide.com).

Pipelines are not a feasible solution at this time because their infrastructure is not sufficiently developed in this context. External factors such as infrastructure availability, regulatory environment, and market competition play critical roles in determining the viability of different transportation modes.

References

• Novak, R. A., Gibson, B. J., Suzuki, Y., & Coyle, J. J. (2019). Transportation: a global supply chain perspective (9th ed.). Boston: Cengage Learning.
• Outlook for Rail Crude Oil Transport. (2013, March 14). Retrieved April 2, 2020, from oil transport.pdf
• Transportation Benefit-Cost Analysis. (n.d.). Retrieved April 2, 2020, from transportationeconomics.org
• Intermodal transportation. (n.d.). Retrieved April 2, 2020, from bgiworldwide.com