The Vice President finds it odd that the manager of the Thompson division has added the full overhead cost and the profit margins to the bid price, which could have been more competitive.
Also, the Southern division is operating at the market price although it is also facing the similar problem of under utilization of its full capacity. He has also to see that the deal is fair to the other divisions as well, the Thompson and Southern divisions are in dire need of the business and it is in the interests of the company that they keep running profitably. The total cost to the company should be low. The commercial vice president is facing this unusual situation, where he has to decide whether to intervene into, and if yes what should he do and how?
He has a lot of options with him as to what to do, and to decide which is the best option is the problem faced by the Vice President. But at the same time the Thompson division is struggling to make profits, acceptance of the Thompson bid will make the Northern division lose out to the competitors. To decide as to what action to take keeping in mind the best interests of the divisions and the company is the decision problem faced by the Vice President of the Birch Paper Company.
Below mentioned points should serve as the criteria to the decision to be made by the Vice President. Divisions remain competitive in the market. It is the most important criteria, one division cannot be made profitable at the cost of the other, other divisions have to improve their efficiency as per the market standards, the decentralized model has worked well and delivered the results, and all the firms should operate as per the market standards.
Efficiency and competitive spirit of the divisions should not be compromised with. It is in the interests of the company that all the divisions remain healthy, they are given enough boost to remain competitive in the market. For this it is imperative that they are getting business. Any action that the Vice President takes is bound to have some short term and long term implications, it should be ensured that the decision ensures that in the long term the company and the divisions are to gain from it.
The action should not encourage the divisions to continue with their inefficient practices, instead it should encourage them in the long run to generate profits on their own without expecting any special favors from other divisions. This decision will give a boost to the operations of the Thompson and Southern division. They were in dire need of the business, also the cost to the company will be lowest in this case. This will satisfy criteria no 2. This will not satisfy Criteria no 1.
No intervention on part of the Vice President will prompt the manager of the Northern division to accept the lowest bid of the West Papers, this will ensure that the Northern division remains competitive in the market, and also the other Thompson division will be forced to align its price to that of the market, to improve its efficiency and compete in the market on equal lines.
This will satisfy criteria no 1. This bid will mean no business for the Thompson and Southern divisions, their condition will only get worse with it, their fixed costs will remain fixed and it will also hurt the interests of the company as a whole.
This will not satisfy criteria no 2. The deal long term implications will not have any adverse effect on the operations of the divisions, the divisions will be expected to match the market price and it will promote the competitive spirit among the divisions. This will satisfy criteria no 3. The Northern division will remain competitive in the market and also the other divisions will match up to the market standards. Also, this decision will bring some business to the ailing Thompson and Southern divisions.
They will generate some profit for them, this will certainly give some boost to their operations, although the quantum will be much lesser than it had been when the Thompson bid was accepted. But, nevertheless this will satisfy criteria no 2. This decision will positively encourage other divisions to keep the interests of the other divisions in mind when the cost of implicating it are not high, it will ensure competitive nature of the divisions, in the long run all the divisions and the company is bound to gain by this division.
As we can see from the above table, Alternative 1 fulfills only one criteria, whereas Alternative 2 two criteria, Alternative 3 fulfills all the three criteria, this is the best option that the Vice President should go with. He should communicate this policy to all the divisions. The following report will evaluate different types of policies and will make a recommendation as to the most effective for Birch Paper Company.
A personal link to the complete case study solution via email. We are a team of business students M. We use Paypal as our secure payment provider of choice. This case study analysis discusses the types of pricing policies which division of Birch Paper Company employs and how this lack of a uniform policy affects the company itself. This study focuses on the evaluation of the different types of policies.
It also makes a proposal as to what policy would be best employed by Birch Paper Co. Harlan; William Rotch Publisher: Not the questions you were looking for? Get an answer by submitting your own questions. Case analysis for Birch Paper Co. Synopsis Birch Paper Company is a medium-sized, partly integrated paper company that is comprised of four production divisions and a timberland division.
Key Issues No evidence of goal congruence amongst divisions.
Birch Paper Company- Solution - Download as Word Doc .doc /.docx), PDF File .pdf), Text File .txt) or read online. Scribd is the world's largest social reading and publishing site. Search Search5/5(1).
Birch Paper Company is a medium-sized, vertically integrated paper company, producing white and kraft papers and paperboard. It has four producing divisions and a timberland division which supplied part of the companyâ€™s pulp requirement; each division is operating independently headed by its respective division managers.
Birch Paper Company is a medium sized, partly-integrated paper company. It produces white and craft papers and paperboard. It has four producing divisions and a timberland division – The Thompson division converts the paperboard output into corrugated box and prints and colors the outside surface of . Careers A Career At White Birch – Learn about our culture.. We are a family-owned and operated company and it this aspect that distinguishes us. Although we operate four of the top 10 newsprint machines in the world, machines don’t make paper—people make paper.