Birch Paper Company
Birch Paper Company is a medium sized partly integrated company that produces Kraft papers and paperboard. There are four producing divisions and one timberland division which supplies part of the company’s pulp requirements. The divisions are
- Northern Division - Southern Division - Thompson Division - Division 4 - Timberland
Each division is operating independently with its own division manager. Also, each division’s performance had been judged on its profit and return on investment (ROI). The company policy of decentralizing responsibility and authority for all …show more content…
Brunner is trying to gain an unfair profit for his division at the expense of an other division. By Mr Kenton accepting the lowest bid would mean in the future Brunner would have to bid market prices or he would not win the tenders which would result in falling profits for his division.
- for true decentralisation to work you must allow Manager to make decisions and all things being equal that is the best decision for Northern Division and in the long term for the company. - This issue has now gone to a management issue, with James Brunner refusing to meet the market price of $430 appears to be a bad management decision.
2 – the other option Mr Kenton has is to not accept the bid from West Papers Company because of the following reasons:
- The costs involved in Thompson Division would give higher profits to Birch Paper Company as whole and it also encouraging other divisions to buy / deal within the company.
- West Papers Company is not in the best interest of the company
However, the manager of the division as a management team needs to decide which bid they should accept with the transfer price policy that exists. All divisions had been judged independently on the basis of its profit and ROI.
(3) Should the vice president of Birch Paper Company take any action?
The vice president of Birch Paper Company should not take any action against their divisions as the divisions had been judged and made their own decisions