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Cost-Benefit Analysis


The analysis in the cost-benefit context will always weigh the sum of all costs and the sum of all the benefits to see which is higher and whether the project is worth pursuing (Plowman, 2014), (Gollier and C., 2020). We look at the benefits and the costs in terms of monetary value. In this paper, we pick the organization issue of customer satisfaction among the many problems in a company, such as innovation and role assignment. The benefits rise from the current year of the start of the project to the final year; hence the project can be dubbed worthy of pursuit.

Stakeholders and Customer Satisfaction

When doing a cost-benefit analysis, the focus is to determine if a company is desirable or not desirable, which means all the company’s costs are summed and then weighed against the sum of all benefits. A company always has several parties involved in its creation and running, and the parties are what we call stakeholders. The stakeholder is the party interested in the company. They include employees, investors, customers, and the public. The outcome and fate of the company affect them. There two types of stakeholders they are internal stakeholders and external stakeholders. Internal stakeholders are directly affected by the company’s activities, including employees, investors, and customers. External stakeholders are those parties who are affected by the company indirectly. They include; the public and material supplies. The employees are directly affected by the outcome of the company in the cost-benefit analysis. The company will have to lay down some employees if the costs exceed the benefits. The investors will automatically shun the company leaving it unable to sustain itself. The consumers will face an insufficiency of products to consume since the company will likely shut down. The suppliers will lack the market for their materials because the company will reduce its buying of materials.

Customer satisfaction refers to the level of contentment of the customers they get from the services or products of a company (Kiptoo and S. J., 2018). Good quality services or products result in higher customer satisfaction, bringing more consistent customers to the company, hence higher profits and eliminating other similar companies in the volatile competitive world market. The customer’s satisfaction level depends on the quality, durability, and quantity of the goods or the services the company offers (Kiptoo and S. J., 2018). It is also dependent on the fact that it is affordable to many consumers in the market. Expensive products will not attract many customers, especially during the world’s difficult economic times of corona pandemics and the oil crisis. When it comes to the company to their prices, it should assess the quality of its products or services (Kiptoo and S. J., 2018). It is realistic for high-quality products to have higher prices. In addition, quantity always attracts more customers. Consider two similar companies producing similar products. The two have goods of equal quality, but one has a higher amount, the consumers will choose the higher quantity company. The issue of durability also determines customer satisfaction. Durability is the lifetime service of a product. The first customers will buy the first products of the company will serve as a test of the company’s products’ durability. The length that the products will determine the customers’ satisfaction. The longer they last, the higher the durability; hence, customers’ satisfaction is more elevated. The delighted customers will refer newer customers to the company, increasing sales.

CBA Evaluation

Using the risk management approach, where the company keeps track of its expenditure and revenue so that it won’t plunge into unnecessary losses, we can analyze the benefits and costs of a company. It will tell if the project is worth pursuing or not (Gollier and C., 2020). Examples of costs include the salaries the company pays to its employees, the bills for water and electricity consumption, the losses suffered by the company such as theft and damages, time lost by the lateness of workers, funds to buy raw materials, and sometimes sanction slapped to the company (Plowman, 2014). On the other hand, the benefits are the good things or gains the company receives. They include sales, subsidies, and the security enjoyed by the company and its products. The sum of all costs is then compared to the sum of all benefits, computing the difference to get the net benefits (Rowthorn et al., 2020). A positive net value gives the green light to the project. The company isn’t worth starting up when the total costs exceed the benefits (Gollier and C., 2020). It will consume more money and resources than the benefits of its products; such a company isn’t worth pursuing. In the template example, during the first year, the total costs stand at $124 100 000.00 while the full benefits stand at $95 100 000.00. The sum of all costs exceeds the benefits by $29 000 000.00. The first-year costs are higher than the total benefits giving the impression that the project isn’t worth pursuing. As a result, the company does internal and external benchmarking to improve its quality of staff, products, and production process. The benchmarking, in particular, enhances the quality of the products. In the subsequent year, the net benefits is a positive value of $12 586 274.51, implying that the company has taken a positive turn from the losses to the profits. The company’s net benefits of the company rose in the subsequent years. During the first year, the company’s satisfaction is still low but starts to increase in the following years probably because the company improved the quality of its products. When customer satisfaction rose, the sales also rose to a maximum value of $102 000 000.00 because the company improved the quality of the goods by embracing the new technology to improve products. As an example, the value proposition, long-lasting, easy-to-use, and energy-saving products boost the company’s sales as it is a marketing strategy in the competitive market.

At some point in time, the cost of materials is at $101 000 000.00 then drops to $90 000 000.00 probably because the company learns to be conservative by reducing wastage of materials. The saving of materials saves the company some money in cutting costs. That could result in getting an alternative, cheaper source of raw materials. Generally, the company has a net positive benefits value of $174 938 427.54, which it would analyze to see if it met its target. To some, the above net benefits value might be incredible, and to some, it might be below average compared to the heavy investment of feeding cash to the company. The company is beneficial in one word. It is worth pursuing, depending on someone’s goals and needs. If it satisfies one’s needs, they/can follow it (Rowthorn et al., 2020).


The risk management approach is the most appropriate way to predict when the company is more likely to make a loss. Doing so requires data on expenses and revenue, which is more like costs and benefits. Analyzing the costs and benefits, we can come up with ways to cut the total costs of the company and increase the full benefits of the company (Gollier and C., 2020). Such ways are the recommendations (Mouter et al.,2021). They include improving the technology of production, which will automatically result in high quality. It is advisable to hire more skilled workers to enhance production quality. The higher quality attracts more customers making the sales increase. The company should buy modern machines that are less bulky and consume less energy; therefore, cutting fuel and electricity consumption will cut the company’s costs. The company should also check on their wastage of materials. Wastage of materials should be minimized, and of course, the effect will reflect when the costs of materials go down. Sometimes when the company is almost about to face bankruptcy, it should lay down some of its workers to cut the costs of salaries, especially when the sales are lower and the production is beyond demand (Kirkby et al., 2018).

Context of Recommendations

The various recommendations each has got its context for logic. For example, suppose you continue to increase production when the demand for your products is deficient. In that case, you will need first to look at the quality of the products and how to improve their quality so that the demand for their products increases (Kirkby et al., 2018). When the quality of goods isn’t poor, the company must consider hiring highly skilled personnel to improve quality. It will also need to use quality raw materials and maybe shift to modern technology. Buying new modern machines will also be necessary to reduce fuel consumption and make production faster, especially when the demand exceeds the supply (Kirkby et al., 2018). If the company has more employees than it needs, it must lay down some to the level to sustain production smoothly without too much straining.

Relationship to Mission, Vision, and Strategy

Every company has got to have a value proposition; the reason someone should buy its products is a market strategy (Poulter H). A simple value proposition is long-lasting, easy-to-use, low-energy consumption products. The term low energy consumption alone will attract several customers because everyone always wants an energy-saving product that is durable and easy to use. This value proposition puts the company above its competitors (Poulter H). In line with the value proposition comes risk and quality management. Risk management will look at the costs on the company’s finances and their impact to find ways to reduce the effect if it is negative (Schiewe et al.,2019).

On the other hand, quality management looks at the staff, product, and production improvement to see that the brand and the company’s quality align with its mission and vision (Schiewe et al.,2019). The company’s mission is the purpose or values of the company, while the vision stands for the goals of the company. The company’s mission might be to be the best company, and its central vision is to make double returns the expenses. For the company to achieve its mission, it will need to do a cost-benefit analysis and identify its weaknesses and strengths. To be the best company, it will need to boost the quality of its products by using quality raw materials, hiring skilled workers, and using modern technology in its production (Mouter et al.,2021). When making double returns, the company will need to adjust its product prices to a realistic level affordable to many consumers in the market. All the above suggestions form a strategic way for the company to meet its vision and mission.

Additionally, for the company to improve itself, it must resort to benchmarking (Alsalem et al.,2019). There are two types of benchmarking (Zaidan et al.,2020). Internal benchmarking (Zaidan et al.,2020) is an internal comparison of results in a company with several branches of similar products. The other is external benchmarking (Zaidan et al.,2020), where the company has to visit another company doing better than them and compare data to see where to improve to compete well with the other similar companies in the market benchmarking (Alsalem et al.,2019). The benchmark will start with the types of materials used by the successful branches or companies, the machines used, and the skills employed in production (Zaidan et al.,2020). The company will then utilize the borrowed skills and techniques in their production and staff discipline to catch up with the other successful branches or companies. The risk management approach will predict a loss which can then be avoided while projecting profits and gradually propelling the company towards its mission and vision (Milion et al.,2021).


In any project, there is a reason why things are to be done the way they are being done, and that is what we call rationale (Camilleri and M. A., 2022). For example, if the quality of the products is not good, the company will need to look for quality materials required for production. When the company wants to reduce fuel consumption, it must leave the old bulky ways of production and embrace the modern technology ways of production (Mouter et al.,2021).


The assumptions are like the rules of noting down the accounting data in the recommended standard format recognized globally (Masud-All-Kamal et al.,2022). Examples are in all times of the company’s existence. All accounting records are done in a single format. All the data recordings have tangible evidence backing them up, such as invoices and receipts, all the accounting data of the company over a particular are recorded, and the owner’s transactions are not mixed with the company’s transactions (Masud-All-Kamal et al.,2022). Finally, all the costs and benefits of the company have been recorded in monetary materials (Masud-All-Kamal et al.,2022).


Any company that gives quality services or produces quality and durable products has higher customer satisfaction, resulting in many consumers of their products or services. It places the company on the shoulders of other similar companies because of its quality. The cost-benefit analysis compares all costs to all benefits to see which outweigh which (Plowman, 2014), (Gollier and C., 2020). If the benefits are more than the costs, then the company or the investment is good, but when the costs are more than the benefits, such a project isn’t desirable. The risk management approach can help the company is sustaining itself and see that it makes some profits (Milion et al.,2021).


Plowman, N. (2014). Writing a cost-benefit analysis.

Gollier, C. (2020). Cost-benefit analysis of age‐specific deconfinement strategies. Journal of Public Economic Theory, 22(6), 1746-1771.

Rowthorn, R., & Maciejowski, J. (2020). A cost-benefit analysis of the COVID-19 disease. Oxford Review of Economic Policy, 36(Supplement_1), S38-S55.

Camilleri, M. A. (2022). The rationale for ISO 14001 certification: A systematic review and a cost-benefit analysis. Corporate Social Responsibility and Environmental Management.

Kiptoo, S. J. (2018). An Analysis of the Role of Monitoring and Evaluation in Customer Satisfaction in the Banking Industry: A Case of Commercial Bank of Africa, Nairobi, Kenya (Doctoral dissertation, Daystar University, School of Human and Social Sciences).

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Kirkby, P., Williams, C., & Huq, S. (2018). Community-based adaptation (CBA): adding conceptual clarity to the approach and establishing its principles and challenges. Climate and Development, 10(7), 577-589. (Kirkby et al., 2018)

Mouter, N., Koster, P., & Dekker, T. (2021). Contrasting the recommendations of participatory value evaluation and cost-benefit analysis in the context of urban mobility investments. Transportation research part A: policy and practice, 144, 54-73. (Mouter et al.,2021)

Alsalem, M. A., Zaidan, A. A., Zaidan, B. B., Albahri, O. S., Alamoodi, A. H., Albahri, A. S., … & Mohammed, K. I. (2019). Multiclass benchmarking framework for automated acute Leukaemia detection and classification based on BWM and group-VIKOR. Journal of medical systems43(7), 1-32.

Zaidan, A. A., Zaidan, B. B., Alsalem, M. A., Albahri, O. S., Albahri, A. S., & Qahtan, M. Y. (2020). Multi-agent learning neural network and Bayesian model for real-time IoT skin detectors: a new evaluation and benchmarking methodology. Neural Computing and Applications32(12), 8315-8366.

Poulter, H. Embedding Social Value in Energy Regulation: An Analysis of Ofgem’s Customer Value Proposition in the Gas Distribution Sector.

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