Capital investment decisions threaten to place a straitjacket on companies, according to a column by Peter Martin in today’s Financial Times.
The column points out that the process of building a new factory blocks out alternatives and freezes a company’s options and its internal clock. It uses the examples of Siemens, LG Group and Hyundai which targeted British regions in the mid-1990s. Siemens’ Tyneside plant opened and shut and the long-term survival of the other two look increasingly questionable.
Martin asks what companies can do to avoid this risk and gives several solutions. One of these is to look for investment decisions that can be made bit by bit and implemented quickly. This would minimise what it calls “the freezing effect”.
Financial Times 01/06/99 page 18
