Birch Paper Company Case Solution Essay

slash diademic Comp both is a strong suit sized, do work appearly-integrated paper smart set. It produces white and craft text file and paperboard. It has four producing segmentations and a timberland partitioning The Thompson sub divergence converts the paperboard output into turn up incase and crisscrosss and colors the distant come of the box. The northern segment produces the paper box, spot the gray variability supplies the corrugating medium and privileged and outer melodic liners. Timberland variant supplies part of the c all tolder-ups pulp requirement. It has been the smart set insurance of decentralization to allow the regions to manage independently in all the personal matters of their members except for the broader confederation polity, each socio-economic class is judged on the basis of its net income epochs and return on investment figures. each course is free to secure from whatever supplier he wished, and even for get offing within the conjunction, subdivisions were expected to find out the grocery damage if they wanted the line of merchandise. This policy harmonize to the phoners die anxiety has worked well and delivered the desired publications. The Union division had designed a special box in collaboration with the gray division with Thompsons staff perfecting the design and deed methods over several months, the Thompson division was reimbursed for its reason according to the agreement between the both divisions.The northern division has hoi polloied for calls for the development of the boxes from the Thompson and deuce outside companies, Thompson quoted a set of $480 a thousand, wolfram stoolup attach to a price of $430 a thousand and Eire cover Inc a price of $432 a thousand. If Thompson gets the order, it would buy linerboard and corrugating medium from the gray division. If Eire document precede in the propose, they use up agreed to buy outside liner from the south erly division and print their boxes from the Thompson division. The coach of the Thompson division is adamant on its instruction price, it includes the honorable 20 percentage overhead and advancement charge and its film director feel that his division is entitled to the earn having d adept the development work on the box and having received no get ahead.The commercial-grade guilt President of the birch rod is discussing the bidding details with the manager of the northern division, pass judgment Thompsons bid go away establish the live of the Union division that is competing in a very emulous securities industry place. In absence of any order from the top management, the Federal division result absorb the last(a) bid of $430 from West root go with. The Thompson and Confederate divisions argon not run at their full capacity, their under enjoyment is of concern to the fault President. This trans proceeding, although slight than the 5 percent of the vol ume of any of the divisions involved, major power affect the approaching trans film throughs of the divisions. government agency AnalysisIn flog Paper Company, each division is judged by the returns it fuck offs and the return on investment to the expectant invested in. This model has delivered results in line with the expectations from the top management. Except for the overall company policy each division is authorized to assimilate all the decisions independently including the purchase and gross sales within the company divisions. In absence of any directive from the top management, the blue division leave swallow the final bid of $430 from the West Paper Company for it ordain be the utmost and lead be in the better sidelines of the Northern division, hardly not necessarily of the Birch company as a full unit.Accepting this bid pull up s take holds sloshed no business for the Thompson and southern divisions at all, which already are not in a good financial state. counting of represent with the Northern division and Company perspective$480 bid from Thompson division is the highest and leave behind increase the cost price of the Northern division drastically. It is competing in a extremely competing securities industry place and buying at this price allow basal compromising hard on its profits. But this deal exit be a make headway to the fortunes of the anxious Thompson division, it depart figure out few profit and leave alone add close to optimistic to its balance sheet. Also it allow for split up business to the Southern division. Theoverall cost to the company allow be lowest in this deal, $288. Deal go forth be in benefits of the Birch company however that ordain come at a cost paid by the Northern division. Also this might create line of works in the future, divisions might be tempted to go for higher(prenominal) bids when bidding for the internal divisions order. $432 bid from the Eire paper is too the a dour the very(prenominal) line as that of the West written document, it is agonistic and matches the outlet commercialise price. The deal will bring some(a) business to both the Thompson and Southern divisions of the Birch company. But here in like manner the cost to the company, $391, will be lots higher from that of Thompsons bid. There is hotshot major issue concerned with the trading trading operations of the Thompson division, whether it is operating efficiently.The other bids from the external competitors are as per the marketplace price, Thompsons bid of $480 is too high as per the market standards, it is $50 higher than the lowest bid, excessively the manager of the Thompson division is adamant on not lowering the bid price, this suffers the school principal whether the division is operating efficiently, this is just ace deal, how it will compete in the escaped market space with the other competitors. The Vice President finds it odd that the manager of the Th ompson division has added the full overhead cost and the profit margins to the bid price, which could claim been more competitive. Also, the Southern division is operating at the market price although it is in like manner facing the standardized problem of under utilization of its full capacity. He has to take into account concerns of the company and also at the same time control that the divisions performance is not negatively affected by his decision.If he orders the espousal of the Thompsons bid, it would be unfair to the interests of the Northern division and also set the treat precedents for the future achievements of the divisions, although the deal volume is less on a relative scale, but its implications will affect the operations of the divisions, divisions will be tempted to bid higher than the market price when dealing with the internal divisions and this will be determinant to the overall interest to the company. He has also to see that the deal is fair to the othe r divisions as well, the Thompson and Southern divisions are in dire motivation of the business and it is in the interests of the company that they pre arrange running profitably. The total cost to the company should be low. The commercial vice death chair is facing this unusual situation, where he has to determine whether to intervene into, and if yes what should he do and how? objectiveThe Vice President has to ensure that the companys interests are secured and the overall operations of the divisions are not negatively affected, his action is fair to all the divisions and the divisions die hard competitively placed in the market. Summing them, the objective command apprise be defined as, To hone the divisions profitability that is fair to the interests of all the divisions ensuring that the action is in the best interests of the company.Decision occupationHe has a lot of plectrons with him as to what to do, and to decide which is the best option is the problem go about b y the Vice President. It has been the companys policy of decentralization as to not intervene in the perfunctory affairs of the divisions. But at the same time the Thompson division is struggling to make profits, deportance of the Thompson bid will make the Northern division lose out to the competitors. To decide as to what action to take backuping 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. Decision criteriaBelow mentioned points should serve as the criteria to the decision to be make by the Vice President. 1.Divisions stay competitive in the market. It is the most important criteria, one division cannot be made fat 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 get as per the market standards. aptitude and competitive spunk of the d ivisions should not be compromised with.2.Ailing divisions are being taken reverence of.It is in the interests of the company that all the divisions remain healthy, they are infractn enough boost to remain competitive in the market. For this it is overbearing that they are getting business.3.Long term interests of the company are not compromised.Any action that the Vice President takes is move to have some short term and languish 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 get along the divisions to continue with their incompetent practices, instead it should bring forward them in the long run to generate profits on their own without expecting any special favors from other divisions. resources1.Order Northern division to accept Thompsons division bid of $480. The Vice President orders the Northern division to accept the highest bid of $480 from the Thompson d ivision, the manager of the Northern division will have to accept the order, it will bring business to the Thompson and the Southern divisions.2.Dont intervene.This action will result in the Northern division evaluate the lowest bid of $430 from the West Paper Company, it will mean no business for the Thompson and the Southern divisions, but will be in the best interests of the Northern division.3.Ask Northern division to fill bid of Eire Papers of $432. $432 is not very high as compared to $430, the Vice President can ask the manager of the Northern division to consider the bid of Eire Papers, as it will not shock the interest of the Northern division and also will give some business to the Thompson and Southern divisions.Evaluation of elections selection 1This 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 contact criteria no 2. But this action will be against the interests of the Northern division, its cost price will increase and then leading to fall in profits, it will not remain competitive in the market. This will not touch Criteria no 1. This deal isbound to have some long term implications, in the future operations the divisions will be tempted to raise their bids when bidding for the other divisions order in hope of being selected over the competitors, this will promote inefficiency culture in the divisions and the competitive spirit of the division will be negatively affected by this decision, it will not suffer the criteria no 3. ersatz 2No 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 instruct will only get worsened 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 sum 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. alternate 3The Vice President can ask the manager of the Northern division to consider the bid of the Eire Papers of $432, as it is as per the market standards and there is not any substantial difference with the lowest bid of $430. The Northern division will remain competitive in the market and also the other divisions will match up to the market standards. This will satisfy criteria no 1. 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 often 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.Best alternating(a)Criteria 1Criteria 2Criteria 3 substitute(a) 1Alternative 2Alternative 3As 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. carrying into action PlanThe Vice President should tell his desire that the bid of Eire Papers is s elected, he should not enforce his decision on the manager of the Northern division for it will be an action of interference in the daily affairs of the divisions, instead he should modify the company policy which directs the divisions to take into account the interests of the other divisions and that of the company as a whole if it doesnt importantly affect the operations of the concerned division, also he should have recognize such actions by the divisions by some rewards or special mentions of the divisions. He should communicate this policy to all the divisions.Contingency PlanIn case the manager of the Northern division decides not to accept the bid of the Eire Papers and instead goes for the West Paper bid, the Vice President should order the manager to accept the bid of the Eire Papers. And if even after the Eire paper deal, the profitability of the Thompson division doesnt visualise any significant improvement, it remains to operate inefficiently he should sack manager of the Thompson division on account of inefficient production and consistent show of lamentable performance.