The influence of competitive strategy on capital investment decisions

Abstract

Various authors have scrutinised the sole utilisation of quantifiable (financial) appraisal criteria in capital investment appraisal. They argue that the appraisal of capital investment proposals must concentrate on the capital investment process as a whole and not only on the selection phase. These authors suggest that capital investment opportunities and proposals must be sought within the parameters set by strategy. Therefore, the purpose of this study was to explore and to describe how decision-makers in the platinum industry experience the influence of competitive strategy on the capital investment process. Semi-structured interviews were held with strategic capital investment decision-makers within a major role player in the platinum industry. Respondents were selected according to the snowball sampling method. An analysis of the results indicates that competitive strategy does influence the capital investment process. This influence is particularly observable with regard to the initiation of capital investment ideas, the capital budget allocation and the strategic appraisal criteria utilised by decision-makers to screen capital investment proposals. The strategic capital investment process constitutes much more than just the selection of capital investment proposals. Therefore, the findings of this study signify the importance of considering the influence of competitive strategy on the capital investment process.