Beruflich Dokumente
Kultur Dokumente
Faculty of Management
Business Management 3rd year
Authors:
Piotr Bartenbach
Bartomiej Staszczyk
Dominik Wolski
Performance Measurement
Total cost:
$430 / 1000 boxes
Bid value:
$432 / 1000 boxes
Southern Division profit:
$90 x 40% = $36
3. Should the vice president of Birch Paper Company take any action?
It depends. If Kenton did not received any instructions from the top
management, he would be in position to simply accept the highest bid on
the offer. The problem is, that when Vice-President would decide to come
into the bidding process, his action could be perceived by the division
managers as a sign distrust towards them. Solution that has to be
introduced should not take into account only selected area of company but
whole bidding policy and system. Furthermore, there should be stated
clear situations and proper solutions to them as a set of standards to
follow in future events.
After having analyzed the transfer price system in the Birch Paper
Company we can say that it is dysfunctional. It is not totally wrong but in
fact the aim is not properly defined. If we take a look at their system we
can find out that they are much more focused on profitability and returns
on investments of individual sectors. Of course, it can be said that if
individual sectors are making a profit the whole company is profitable.
However, not in every case it works that way. One company should have
one common goal and that is what we can advise Birch Paper to do. They
need to start looking at the overall performance of the company not just
the individual departments.
5. Lessons learned.
From this case we were able to learn that company should not focus
only on individual sectors making a profit but on overall performance of
the company. Every sector should be profitable but their goals have to be
common. In situation when different sectors have different objectives it
might happen that goals of one sector would be contradictory to some
other sector.