The IT centre is unlikely to add anything of value to another market segment and possible
target market – residents of Dodoma, the capital city. It is assumed that residents of the capital
city are far more likely to take such IT infrastructure for granted, and many of the schools in the
capital city would likely have, at least adequate, IT facilities. Thus, there would be no point of
differentiation within this particular market segment of making an investment in the IT centre.
On the other hand, if it decided not to invest in the IT centre then MSS may be perceived as
being an inferior product to parents, students and potential students currently residing in the
capital city. Parents would then be less likely to send their daughters to MSS and pay residential
fees, even if this option was 20% less expensive than city schools.
The dilemma may be seen as being similar to the ‘chicken or egg’ problem; which comes first?
New accommodation may open up a lucrative market segment – residents of Dodoma.
However, without MSS having adequate IT facilities, MSS may be seen as inferior and there
may well be no increase in demand for MSS if it builds the IT centre, amongst this market
segment. If on the other hand it is decided that the IT investment takes precedence, then the
residents of the capital city who may now view MSS more favourably would be limited in their
ability to send their daughters to MSS because accommodation would be in short supply.
The greatest advantage to the accommodation option is that it does open up a new market
segment and the opportunity for MSS to grow and expand as more girls from Dodoma would
It could be argued that the accommodation option would result in the teachers at MSS being
happier, and that this would help lower the high rate of labour turnover amongst teachers.
However, in my opinion, if we examine the root causes of the high teacher turnover at MSS we
see that poor IT facilities contribute as much to teacher disaffection as poor living
accommodation does. Each investment option, in effect, cancels each out because both go
some way to reducing the teacher dissatisfaction MSS currently experiences.
Another point to consider is that having a good functioning IT centre with a decent internet
connection would reduce the sense of isolation and remoteness teachers currently
experience at MSS. With good internet teachers would be able to communicate with friends
and family over email, messaging apps, social media and video applications such as Skype.
The investment appraisal does not paint a clear picture of which option would be preferable.
The results of the payback period are insignificant with a single month separating each option,
a period of time which would likely fall within the realm of the margin of error of cost estimates
and expected future cash flows of each investment.
The results of the NPV analysis are also insignificant and, again, well within margins of error.
The results of the ARR are more significant. A 1% difference between the two investments may
not seem that great of a difference, however an extra 1% per annum return on an investment
compounded across five years definitely favours the construction of the IT centre, assuming
that the cost estimates and expected cash flows are reasonably accurate.
The main problems in forecasting such figures include: