So how can companies avoid the "sunk costs" caused by wrong decisions?
Posted: Sun Jan 19, 2025 4:19 am
When facing important business decisions, should we consider “sunk costs”?
1. Should enterprises consider “sunk costs” when making decisions?
For example.
Company B is developing a new product. The key personnel of the product and technical departments have invested 3 million yuan in 6 months. Now they have encountered technical problems and cannot develop the product smoothly. To continue, the same personnel will need to spend another 6 months and invest another 3 million yuan.
Should I stop or continue?
Person with question mark
Image source: pixabay.com
At this time, economists will tell you: If people are rational, they antigua and barbuda b2b leads should not consider "sunk costs" when making decisions.
Because no matter what choice you make, the 6 months and 3 million yuan you have already spent cannot be recovered.
It is difficult to make decisions without considering "sunk costs".
However, for enterprises, when making a decision, if they consider "sunk costs" too much, they will inevitably overestimate the cost of the project and easily make wrong decisions!
Motorola's "Iridium Project" is a typical example.
Motorola invested a lot of money in the "Iridium Project" and was very optimistic about the project. However, during the development process, the problems of the project gradually emerged and the market prospects were not very optimistic.
1. Should enterprises consider “sunk costs” when making decisions?
For example.
Company B is developing a new product. The key personnel of the product and technical departments have invested 3 million yuan in 6 months. Now they have encountered technical problems and cannot develop the product smoothly. To continue, the same personnel will need to spend another 6 months and invest another 3 million yuan.
Should I stop or continue?
Person with question mark
Image source: pixabay.com
At this time, economists will tell you: If people are rational, they antigua and barbuda b2b leads should not consider "sunk costs" when making decisions.
Because no matter what choice you make, the 6 months and 3 million yuan you have already spent cannot be recovered.
It is difficult to make decisions without considering "sunk costs".
However, for enterprises, when making a decision, if they consider "sunk costs" too much, they will inevitably overestimate the cost of the project and easily make wrong decisions!
Motorola's "Iridium Project" is a typical example.
Motorola invested a lot of money in the "Iridium Project" and was very optimistic about the project. However, during the development process, the problems of the project gradually emerged and the market prospects were not very optimistic.