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Birch Paper Co. – Case Solution

This case study analysis discusses the types of pricing policies that the 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.

​Neil E. Harlan; William Rotch Harvard Business Review ( 158001-PDF-ENG ) July 01, 1957

Case questions answered:

Involves transfer prices among three divisions of the company. The company’s upper management is lacking a transfer pricing policy that enables goal congruence amongst 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.

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Birch Paper Co. Case Answers

Synopsis – birch paper company.

Birch Paper Company is a medium-sized, partly integrated paper company that is comprised of four production divisions and a timberland division.

Each division is an “investment responsibility center,” and the company has observed improved profits and competitive position since the move to decentralize in the last few years.

The company would like to keep the decentralized structure in place but is now observing the conflict between its divisions with regard to transfer pricing.

One such example is the issue that has happened between the Thompson division and the Northern division.

While Thompson is able to produce a new display box for Northern and has excess capacity, its bid for price per thousand boxes produced is significantly higher (10%) than the bids from 2 outside competitors. Adding to the conflict was Thompson’s participation in the design and development of the display box.

The Company’s upper management is lacking a transfer pricing policy that enables goal congruence amongst 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.

• No evidence of goal congruence amongst divisions.
• The transfer pricing policy of the company is lacking.
• Upper management would show contradictory behavior by decentralizing the company while trying to influence and favor business interactions between divisions. This behavior sends conflicting messages to the divisions and could lead to disruptions and confusion.
• The Thompson Division has put a bid price that is higher than the bids from the 2 competitors.

Root Cause of Key Issues

• Birch Paper Company lacks a fair and equitable transfer pricing policy where incentives are possible for the supplying division and buying division.
• The move to decentralize the Company and set up the divisions as “investment responsibility centers” was done only a few years ago. The Company is still learning how to best manage…

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• July 1957 (Revised January 2003)
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Birch Paper Company

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Birch Paper Co.

By: Neil E. Harlan, William Rotch

Involves transfer pricing among three divisions of a company.

• Length: 2 page(s)
• Publication Date: Jul 1, 1957
• Discipline: Accounting
• Product #: 158001-PDF-ENG

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Jul 1, 1957 (Revised: Jan 2, 2003)

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Birch paper co. description.

Involves transfer pricing among three divisions of a company.

Case Description Birch Paper Co.

Strategic managment tools used in case study analysis of birch paper co., step 1. problem identification in birch paper co. case study, step 2. external environment analysis - pestel / pest / step analysis of birch paper co. case study, step 3. industry specific / porter five forces analysis of birch paper co. case study, step 4. evaluating alternatives / swot analysis of birch paper co. case study, step 5. porter value chain analysis / vrio / vrin analysis birch paper co. case study, step 6. recommendations birch paper co. case study, step 7. basis of recommendations for birch paper co. case study, quality & on time delivery.

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Case Analysis of Birch Paper Co.

Birch Paper Co. is a Harvard Business (HBR) Case Study on Finance & Accounting , Texas Business School provides HBR case study assignment help for just $9. Texas Business School(TBS) case study solution is based on HBR Case Study Method framework, TBS expertise & global insights. Birch Paper Co. is designed and drafted in a manner to allow the HBR case study reader to analyze a real-world problem by putting reader into the position of the decision maker. Birch Paper Co. case study will help professionals, MBA, EMBA, and leaders to develop a broad and clear understanding of casecategory challenges. Birch Paper Co. will also provide insight into areas such as – wordlist , strategy, leadership, sales and marketing, and negotiations.

Case Study Solutions Background Work

Birch Paper Co. case study solution is focused on solving the strategic and operational challenges the protagonist of the case is facing. The challenges involve – evaluation of strategic options, key role of Finance & Accounting, leadership qualities of the protagonist, and dynamics of the external environment. The challenge in front of the protagonist, of Birch Paper Co., is to not only build a competitive position of the organization but also to sustain it over a period of time.

Strategic Management Tools Used in Case Study Solution

The Birch Paper Co. case study solution requires the MBA, EMBA, executive, professional to have a deep understanding of various strategic management tools such as SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis.

Texas Business School Approach to Finance & Accounting Solutions

In the Texas Business School, Birch Paper Co. case study solution – following strategic tools are used - SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis. We have additionally used the concept of supply chain management and leadership framework to build a comprehensive case study solution for the case – Birch Paper Co.

Step 1 – Problem Identification of Birch Paper Co. - Harvard Business School Case Study

The first step to solve HBR Birch Paper Co. case study solution is to identify the problem present in the case. The problem statement of the case is provided in the beginning of the case where the protagonist is contemplating various options in the face of numerous challenges that Birch Divisions is facing right now. Even though the problem statement is essentially – “Finance & Accounting” challenge but it has impacted by others factors such as communication in the organization, uncertainty in the external environment, leadership in Birch Divisions, style of leadership and organization structure, marketing and sales, organizational behavior, strategy, internal politics, stakeholders priorities and more.

Step 2 – External Environment Analysis

Texas Business School approach of case study analysis – Conclusion, Reasons, Evidences - provides a framework to analyze every HBR case study. It requires conducting robust external environmental analysis to decipher evidences for the reasons presented in the Birch Paper Co.. The external environment analysis of Birch Paper Co. will ensure that we are keeping a tab on the macro-environment factors that are directly and indirectly impacting the business of the firm.

What is PESTEL Analysis? Briefly Explained

PESTEL stands for political, economic, social, technological, environmental and legal factors that impact the external environment of firm in Birch Paper Co. case study. PESTEL analysis of " Birch Paper Co." can help us understand why the organization is performing badly, what are the factors in the external environment that are impacting the performance of the organization, and how the organization can either manage or mitigate the impact of these external factors.

How to do PESTEL / PEST / STEP Analysis? What are the components of PESTEL Analysis?

As mentioned above PESTEL Analysis has six elements – political, economic, social, technological, environmental, and legal. All the six elements are explained in context with Birch Paper Co. macro-environment and how it impacts the businesses of the firm.

How to do PESTEL Analysis for Birch Paper Co.

To do comprehensive PESTEL analysis of case study – Birch Paper Co. , we have researched numerous components under the six factors of PESTEL analysis.

Political Factors that Impact Birch Paper Co.

Political factors impact seven key decision making areas – economic environment, socio-cultural environment, rate of innovation & investment in research & development, environmental laws, legal requirements, and acceptance of new technologies.

Government policies have significant impact on the business environment of any country. The firm in “ Birch Paper Co. ” needs to navigate these policy decisions to create either an edge for itself or reduce the negative impact of the policy as far as possible.

Data safety laws – The countries in which Birch Divisions is operating, firms are required to store customer data within the premises of the country. Birch Divisions needs to restructure its IT policies to accommodate these changes. In the EU countries, firms are required to make special provision for privacy issues and other laws.

Competition Regulations – Numerous countries have strong competition laws both regarding the monopoly conditions and day to day fair business practices. Birch Paper Co. has numerous instances where the competition regulations aspects can be scrutinized.

Import restrictions on products – Before entering the new market, Birch Divisions in case study Birch Paper Co." should look into the import restrictions that may be present in the prospective market.

Export restrictions on products – Apart from direct product export restrictions in field of technology and agriculture, a number of countries also have capital controls. Birch Divisions in case study “ Birch Paper Co. ” should look into these export restrictions policies.

Foreign Direct Investment Policies – Government policies favors local companies over international policies, Birch Divisions in case study “ Birch Paper Co. ” should understand in minute details regarding the Foreign Direct Investment policies of the prospective market.

Corporate Taxes – The rate of taxes is often used by governments to lure foreign direct investments or increase domestic investment in a certain sector. Corporate taxation can be divided into two categories – taxes on profits and taxes on operations. Taxes on profits number is important for companies that already have a sustainable business model, while taxes on operations is far more significant for companies that are looking to set up new plants or operations.

Tariffs – Chekout how much tariffs the firm needs to pay in the “ Birch Paper Co. ” case study. The level of tariffs will determine the viability of the business model that the firm is contemplating. If the tariffs are high then it will be extremely difficult to compete with the local competitors. But if the tariffs are between 5-10% then Birch Divisions can compete against other competitors.

Research and Development Subsidies and Policies – Governments often provide tax breaks and other incentives for companies to innovate in various sectors of priority. Managers at Birch Paper Co. case study have to assess whether their business can benefit from such government assistance and subsidies.

Consumer protection – Different countries have different consumer protection laws. Managers need to clarify not only the consumer protection laws in advance but also legal implications if the firm fails to meet any of them.

Political System and Its Implications – Different political systems have different approach to free market and entrepreneurship. Managers need to assess these factors even before entering the market.

Freedom of Press is critical for fair trade and transparency. Countries where freedom of press is not prevalent there are high chances of both political and commercial corruption.

Corruption level – Birch Divisions needs to assess the level of corruptions both at the official level and at the market level, even before entering a new market. To tackle the menace of corruption – a firm should have a clear SOP that provides managers at each level what to do when they encounter instances of either systematic corruption or bureaucrats looking to take bribes from the firm.

Independence of judiciary – It is critical for fair business practices. If a country doesn’t have independent judiciary then there is no point entry into such a country for business.

Government attitude towards trade unions – Different political systems and government have different attitude towards trade unions and collective bargaining. The firm needs to assess – its comfort dealing with the unions and regulations regarding unions in a given market or industry. If both are on the same page then it makes sense to enter, otherwise it doesn’t.

Economic Factors that Impact Birch Paper Co.

Social factors that impact birch paper co., technological factors that impact birch paper co., environmental factors that impact birch paper co., legal factors that impact birch paper co., step 3 – industry specific analysis, what is porter five forces analysis, step 4 – swot analysis / internal environment analysis, step 5 – porter value chain / vrio / vrin analysis, step 6 – evaluating alternatives & recommendations, step 7 – basis for recommendations, references :: birch paper co. case study solution.

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Marketing Process Analysis

Segmentation, targeting, positioning, marketing strategic planning, marketing 5 concepts analysis, swot analysis & matrix, porter five forces analysis, pestel / pest / step analysis, cage distance analysis international marketing analysis leadership, organizational resilience analysis, bcg matrix / growth share matrix analysis, block chain supply chain management, paei management roles, leadership with empathy & compassion, triple bottom line analysis, mckinsey 7s analysis, smart analysis, vuca analysis ai ethics analysis analytics, birch paper co. case study solution & analysis / mba resources.

• Birch Paper Co.
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Introduction to case study solution

EMBA Pro case study solution for Birch Paper Co. case study

At EMBA PRO , we provide corporate level professional case study solution. Birch Paper Co. case study is a Harvard Business School (HBR) case study written by Neil E. Harlan, William Rotch. The Birch Paper Co. (referred as “Birch Divisions” from here on) case study provides evaluation & decision scenario in field of Finance & Accounting. It also touches upon business topics such as - Value proposition, Costs, Organizational structure, Pricing. Our immersive learning methodology from – case study discussions to simulations tools help MBA and EMBA professionals to - gain new insight, deepen their knowledge of the Finance & Accounting field, and broaden their skill set.

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Case Description of Birch Paper Co. Case Study

Involves transfer pricing among three divisions of a company.

Case Authors : Neil E. Harlan, William Rotch

Topic : finance & accounting, related areas : costs, organizational structure, pricing, what is the case study method how can you use it to write case solution for birch paper co. case study.

Almost all of the case studies contain well defined situations. MBA and EMBA professional can take advantage of these situations to - apply theoretical framework, recommend new processes, and use quantitative methods to suggest course of action. Awareness of the common situations can help MBA & EMBA professionals read the case study more efficiently, discuss it more effectively among the team members, narrow down the options, and write cogently.

Case Study Solution Approaches

Three Step Approach to Birch Paper Co. Case Study Solution

The three step case study solution approach comprises – Conclusions – MBA & EMBA professionals should state their conclusions at the very start. It helps in communicating the points directly and the direction one took. Reasons – At the second stage provide the reasons for the conclusions. Why you choose one course of action over the other. For example why the change effort failed in the case and what can be done to rectify it. Or how the marketing budget can be better spent using social media rather than traditional media. Evidences – Finally you should provide evidences to support your reasons. It has to come from the data provided within the case study rather than data from outside world. Evidences should be both compelling and consistent. In case study method there is ‘no right’ answer, just how effectively you analyzed the situation based on incomplete information and multiple scenarios.

Case Study Solution of Birch Paper Co.

We write Birch Paper Co. case study solution using Harvard Business Review case writing framework & HBR Finance & Accounting learning notes. We try to cover all the bases in the field of Finance & Accounting, Costs, Organizational structure, Pricing and other related areas.

Objectives of using various frameworks in Birch Paper Co. case study solution

By using the above frameworks for Birch Paper Co. case study solutions, you can clearly draw conclusions on the following areas – What are the strength and weaknesses of Birch Divisions (SWOT Analysis) What are external factors that are impacting the business environment (PESTEL Analysis) Should Birch Divisions enter new market or launch new product (Opportunities & Threats from SWOT Analysis) What will be the expected profitability of the new products or services (Porter Five Forces Analysis) How it can improve the profitability in a given industry (Porter Value Chain Analysis) What are the resources needed to increase profitability (VRIO Analysis) Finally which business to continue, where to invest further and from which to get out (BCG Growth Share Analysis)

SWOT Analysis of Birch Paper Co.

SWOT analysis stands for – Strengths, Weaknesses, Opportunities and Threats. Strengths and Weaknesses are result of Birch Divisions internal factors, while opportunities and threats arise from developments in external environment in which Birch Divisions operates. SWOT analysis will help us in not only getting a better insight into Birch Divisions present competitive advantage but also help us in how things have to evolve to maintain and consolidate the competitive advantage.

- High customer loyalty & repeat purchase among existing customers – Birch Divisions old customers are still loyal to the firm even though it has limited success with millennial. I believe that Birch Divisions can make a transition even by keeping these people on board.

- Experienced and successful leadership team – Birch Divisions management team has been a success over last decade by successfully predicting trends in the industry.

- Little experience of international market – Even though it is a major player in local market, Birch Divisions has little experience in international market. According to Neil E. Harlan, William Rotch , Birch Divisions needs international talent to penetrate into developing markets.

- Birch Divisions business model can be easily replicated by competitors – According to Neil E. Harlan, William Rotch , the business model of Birch Divisions can be easily replicated by players in the industry.

Opportunities

- E-Commerce and Social Media Oriented Business Models – E-commerce business model can help Birch Divisions to tie up with local suppliers and logistics provider in international market. Social media growth can help Birch Divisions to reduce the cost of entering new market and reaching to customers at a significantly lower marketing budget.

- Lucrative Opportunities in International Markets – Globalization has led to opportunities in the international market. Birch Divisions is in prime position to tap on those opportunities and grow the market share.

- Age and life-cycle segmentation of Birch Divisions shows that the company still hasn’t able to penetrate the millennial market.

- Customers are moving toward mobile first environment which can hamper the growth as Birch Divisions still hasn’t got a comprehensive mobile strategy.

Once all the factors mentioned in the Birch Paper Co. case study are organized based on SWOT analysis, just remove the non essential factors. This will help you in building a weighted SWOT analysis which reflects the real importance of factors rather than just tabulation of all the factors mentioned in the case.

What is PESTEL Analysis

PESTEL /PEST / STEP Analysis of Birch Paper Co. Case Study

PESTEL stands for – Political, Economic, Social, Technological, Environmental, and Legal factors that impact the macro environment in which Birch Divisions operates in. Neil E. Harlan, William Rotch provides extensive information about PESTEL factors in Birch Paper Co. case study.

Political Factors

- Political consensus among various parties regarding taxation rate and investment policies. Over the years the country has progressively worked to lower the entry of barrier and streamline the tax structure.

- Little dangers of armed conflict – Based on the research done by international foreign policy institutions, it is safe to conclude that there is very little probability of country entering into an armed conflict with another state.

Economic Factors

- According to Neil E. Harlan, William Rotch . Birch Divisions should closely monitor consumer disposable income level, household debt level, and level of efficiency of local financial markets.

- Foreign Exchange movement is also an indicator of economic stability. Birch Divisions should closely consider the forex inflow and outflow. A number of Birch Divisions competitors have lost money in countries such as Brazil, Argentina, and Venezuela due to volatile forex market.

Social Factors

- Consumer buying behavior and consumer buying process – Birch Divisions should closely follow the dynamics of why and how the consumers are buying the products both in existing categories and in segments that Birch Divisions wants to enter.

- Leisure activities, social attitudes & power structures in society - are needed to be analyzed by Birch Divisions before launching any new products as they will impact the demand of the products.

Technological Factors

- Proliferation of mobile phones has created a generation whose primary tool of entertainment and information consumption is mobile phone. Birch Divisions needs to adjust its marketing strategy accordingly.

- 5G has potential to transform the business environment especially in terms of marketing and promotion for Birch Divisions.

Environmental Factors

- Consumer activism is significantly impacting Birch Divisions branding, marketing and corporate social responsibility (CSR) initiatives.

- Environmental regulations can impact the cost structure of Birch Divisions. It can further impact the cost of doing business in certain markets.

Legal Factors

- Intellectual property rights are one area where Birch Divisions can face legal threats in some of the markets it is operating in.

- Property rights are also an area of concern for Birch Divisions as it needs to make significant Costs, Organizational structure, Pricing infrastructure investment just to enter new market.

What are Porter Five Forces

Porter Five Forces Analysis of Birch Paper Co.

Competition among existing players, bargaining power of suppliers, bargaining power of buyers, threat of new entrants, and threat of substitutes.

What is VRIO Analysis

VRIO Analysis of Birch Paper Co.

VRIO stands for – Value of the resource that Birch Divisions possess, Rareness of those resource, Imitation Risk that competitors pose, and Organizational Competence of Birch Divisions. VRIO and VRIN analysis can help the firm.

What is Porter Value Chain

Porter Value Chain Analysis of Birch Paper Co.

As the name suggests Value Chain framework is developed by Michael Porter in 1980’s and it is primarily used for analyzing Birch Divisions relative cost and value structure. Managers can use Porter Value Chain framework to disaggregate various processes and their relative costs in the Birch Divisions. This will help in answering – the related costs and various sources of competitive advantages of Birch Divisions in the markets it operates in. The process can also be done to competitors to understand their competitive advantages and competitive strategies. According to Michael Porter – Competitive Advantage is a relative term and has to be understood in the context of rivalry within an industry. So Value Chain competitive benchmarking should be done based on industry structure and bottlenecks.

What is BCG Growth Share Matrix

BCG Growth Share Matrix of Birch Paper Co.

BCG Growth Share Matrix is very valuable tool to analyze Birch Divisions strategic positioning in various sectors that it operates in and strategic options that are available to it. Product Market segmentation in BCG Growth Share matrix should be done with great care as there can be a scenario where Birch Divisions can be market leader in the industry without being a dominant player or segment leader in any of the segment. BCG analysis should comprise not only growth share of industry & Birch Divisions business unit but also Birch Divisions - overall profitability, level of debt, debt paying capacity, growth potential, expansion expertise, dividend requirements from shareholders, and overall competitive strength. Two key considerations while using BCG Growth Share Matrix for Birch Paper Co. case study solution - How to calculate Weighted Average Market Share using BCG Growth Share Matrix Relative Weighted Average Market Share Vs Largest Competitor

5C Marketing Analysis of Birch Paper Co.

4p marketing analysis of birch paper co., porter five forces analysis and solution of birch paper co., porter value chain analysis and solution of birch paper co., case memo & recommendation memo of birch paper co., blue ocean analysis and solution of birch paper co., marketing strategy and analysis birch paper co., vrio /vrin analysis & solution of birch paper co., pestel / step / pest analysis of birch paper co., swot analysis and solution of birch paper co., references & further readings.

Neil E. Harlan, William Rotch (2018) , "Birch Paper Co. Harvard Business Review Case Study. Published by HBR Publications.

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Birch Paper Co. Case Study Solution

Birch Paper Co. Case Study Help and Solution

Birch paper co. and the case study solution process.

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For Birch Paper Co. to be successful, clients must fully understand their company’s culture, what works, and what doesn’t. The company provides a customized approach that helps companies realize measurable objectives through communications and promotes productive team work.

If you’re looking for an ideal place to conduct business, Birch Paper Co. is the perfect choice. Birch Paper Co. is a member of The Association of Professional Institute’s (TIPA) Case Study Solution Committee. TIPA conducts strategic communications research to promote excellence in research and communication.

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Case Study: Final Draft Birch Paper Company

Background 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 decisions except those relating to overall company policy, has been operated with the divisions. Company policy states that each division manager is free to buy from whatever supplier he/she wished and also it could be on sales within the company. Improvement has attributed upon the concept of decentralization that has applied to the company. (as the company’s profits and competitive position has been improved) 2. Facts The Northern Division had designed a special display box for one of its papers in conjunction with the Thompson Division, which was equipped to make the box. – Thompson Division was reimbursed for the cost of its design and development work – Thompson Division usually sourced its supply’s in house from the Southern division. In this case material cost $280 of the total cost of $400 per thousand boxes. 3 – Southern division sold its materials at market price of $280 with a cost of about $168 leaving it with a profit of $112 or 40%. – Northern division received 3 Quotes to make the box’s, – Thompson division : $480, – West Paper Company : $430 – Eire Paper Company : $432 5 – Eire paper would purchase outside liner from southern division for $90 per 1000 & it would be printed by Thompson division for $30 per thousand with a profit of $5 or 16%. 6 – Southern Division was running below capacity and had excess inventory but still charged 40% profit. 7 – Thompson Division at times was also running at below capacity but also charged 20% profit. ISSUES; There appears to be an issue on transfer pricing. – Transfer Pricing. There is an issue on transfer pricing. – Issue – Transfer pricing. – Why is transfer pricing an issue? Because Thompson division Manager does not want to meet the market price. – Why does the Thompson division not want to pay market price? Because the division manager wants to protect the divisions profits – Why does the Thompson division want to protect its profits? Because of company policy on Performance Evaluation, that each manager is responsible for their divisions profits. – Who owns the problem of company policy on performance evaluation.

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Top management own the problem as they are responsible for company policy. PERFORMANCE EVALUATION – Company Policy on Performance Evaluation. Each division has been judged independently on its profit and ROI. The companies great emphasis on judging each division on profit has lead to each division trying to maximise its profits margins even at the expense of other other divisions. This policy is also effecting goal congruence, as managers goals for increasing profits for their division at the expense of other divisions it is not helping the overall goal of the company.

The facts show that top management own the problem. This is because its not Thompson Divisions problem as they are free to quote whatever they like. It is also not Northern Divisions problem as they are free to accept the best quote that suits them. It should be noted that this problem may only be a short term problem and in the long term market prices force should even things out. 3. Questions Which bid should Northern Division accept that is in the best interests of Birch Paper Company?

Northern Division should accept the bid of $480 from the Thompson Division as Birch Paper Company would profit most overall from this bid. The Northern Division received 3 different bids: $480 – Thompson Division $430 – West Paper Company $432 – Eire Papers, Ltd [Calculation] Thompson Division tota Costs to Birch Paper = $288, being $400 made up of $280 for materials (linerboard and corrugating medium) and $120 for other costs.

However because Thompson sources its materials from Southern division who make a $112 profit on materials, the total Cost to Birch Paper Company is materials $168 + other cost $120 = $288 West Paper Company Costs = $430 Eire Papers, Ltd Costs to Birch Paper Company = $391 that being $432 less sourcing profits from Southern Division ($90 x 40%) = $36 and Thompson Division Contribution $5 = $391 Although the West Paper Company looks at first to be the best choice, the truth is to be the Thompson Division as it has the lowest cost if we assume that all transfer prices within the company were calculated at costs.

The lowest costs that associated within the company would make Birch Paper Company to earn the highest profits and revenues. [pic] Should Mr Kenton accept this bid? Why or why not? Mr Kenton has two options, 1 – To accept the lowest bid of $430 from West Paper. By doing so would result in the best interests for the Northern Division as it would gain the most profits . Other reasons to accept the lowest bid is – $430 is the true market price. Brunner is wanting more then the market price. Brunner is trying to gain an unfair profit for his division at the xpense 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. – 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 independently over the past years. The vice president of the Company should not be involved in the matters of divisions unless it’s relating to overall company policy or matters.

The policy of decentralizing responsibility and authority would be affected by any actions taken from the vice president as each division was both profit and investment centres as itself. Normally the vice president should not get involved in division matters as it would defeat the purpose of decentralised system, where managers make decisions for their divisions. However it would not be a bad idea for the vice president to remind Brunner of his responsibilities to the company of goal congruence. This is because of the unique situation that it would be a bad management decision not to meet the $430 for these reasons.

The market price for this instance is $430, and the only reason Thompson would not be willing to sell at market price would be only if he could get better price else where. Brunner wants to increase his profits by keeping his bid high where what he should be doing is improving productivity. The vice president could also take actions against the whole company to remedy the overall problems associated with this transfer pricing policy. (4) In the controversy described, how, if at all, is the transfer price system dysfunctional?

Does this problem call for some change, or changes, in the transfer pricing policy of the overall firm? If so, what specific changes do you suggest? The transfer price system is not dysfunctional because invariably it has been shown in the long term the market price is the best price and should be used. If market price were met then there would not be an issue. In the long term market forces would force Thompson division to pay market prices or they would start missing out on contracts which would effect their profits.

As mentioned the problem lies with the manager thinking he can increase his profits by keeping his bids high where what he should be doing is improving productivity. The company could introduce some policys that would allow the transfer pricing system to run more smoothly. These could include policy like forcing managers to accept market prices when purchasing internally. Reference http://www. slideworld. com/slideshow. aspx/birch-paper-company-case-study-ppt-2765141 http://www. 123helpme. com/birch-paper-company-case-view. asp? id=163833

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Birch Paper Co. Harvard Case Solution & Analysis

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birch paper company case solution

by Neil E. Harlan, William Rotch Source : HBS Premier Case Collection 2 pages . Publication Date: July 1, 1957. Prod. #: 158001-PDF-ENG

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Publication Date: July 01, 1957

Source: Harvard Business School

Involves transfer pricing among three divisions of a company.

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Birch Paper Co Case Study Solution

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Business is currently one of the most significant food chains worldwide. It was founded by Henri Birch Paper Co in 1866, a German Pharmacist who initially released "FarineLactee"; a mix of flour and milk to feed babies and reduce death rate. Business is now a transnational company. Unlike other international companies, it has senior executives from different countries and attempts to make decisions considering the entire world. Birch Paper Co currently has more than 500 factories around the world and a network spread throughout 86 countries.

The purpose of Birch Paper Co Corporation is to enhance the quality of life of individuals by playing its part and providing healthy food. It wishes to help the world in shaping a healthy and much better future for it. It also wishes to motivate people to live a healthy life. While making certain that the business is prospering in the long run, that's how it plays its part for a much better and healthy future

Birch Paper Co's vision is to offer its customers with food that is healthy, high in quality and safe to consume. It wants to be innovative and concurrently comprehend the requirements and requirements of its clients. Its vision is to grow quickly and provide products that would satisfy the requirements of each age group. Birch Paper Co envisions to establish a well-trained workforce which would help the company to grow .

Birch Paper Co's objective is that as presently, it is the leading company in the food market, it believes in 'Excellent Food, Good Life". Its mission is to provide its consumers with a range of options that are healthy and finest in taste as well. It is focused on supplying the very best food to its customers throughout the day and night.

Business has a large range of items that it uses to its consumers. Its items include food for babies, cereals, dairy products, treats, chocolates, food for family pet and mineral water. It has around 4 hundred and fifty (450) factories around the globe and around 328,000 employees. In 2011, Business was noted as the most rewarding company.

Goals and Objectives

• Remembering the vision and mission of the corporation, the business has actually laid down its objectives and objectives. These goals and objectives are noted below. • One objective of the company is to reach absolutely no land fill status. (Business, aboutus, 2017). • Another goal of Birch Paper Co is to waste minimum food throughout production. Frequently, the food produced is lost even prior to it reaches the clients. • Another thing that Business is dealing with is to improve its packaging in such a way that it would help it to minimize those complications and would likewise ensure the delivery of high quality of its items to its customers. • Meet global standards of the environment. • Build a relationship based upon trust with its customers, service partners, staff members, and government.

Critical Issues

Recently, Business Business is focusing more towards the technique of NHW and investing more of its earnings on the R&D innovation. The country is investing more on acquisitions and mergers to support its NHW method. The target of the company is not attained as the sales were expected to grow higher at the rate of 10% per year and the operating margins to increase by 20%, provided in Exhibit H.

Situational Analysis.

Analysis of current strategy, vision and goals.

The present Business technique is based on the idea of Nutritious, Health and Health (NHW). This technique deals with the concept to bringing change in the client choices about food and making the food things much healthier worrying about the health issues. The vision of this method is based on the secret method i.e. 60/40+ which just suggests that the items will have a score of 60% on the basis of taste and 40% is based on its dietary value. The items will be produced with extra dietary worth in contrast to all other items in market acquiring it a plus on its nutritional material. This method was adopted to bring more yummy plus nutritious foods and drinks in market than ever. In competitors with other companies, with an intent of keeping its trust over clients as Business Company has acquired more trusted by clients.

Quantitative Analysis.

R&D Costs as a percentage of sales are declining with increasing actual amount of costs shows that the sales are increasing at a greater rate than its R&D spending, and permit the business to more spend on R&D. Net Profit Margin is increasing while R&D as a percentage of sales is decreasing. This sign also reveals a thumbs-up to the R&D spending, mergers and acquisitions. Debt ratio of the company is increasing due to its spending on mergers, acquisitions and R&D development rather than payment of debts. This increasing financial obligation ratio present a threat of default of Business to its financiers and might lead a decreasing share costs. In terms of increasing financial obligation ratio, the company needs to not invest much on R&D and ought to pay its present financial obligations to reduce the risk for financiers. The increasing threat of investors with increasing financial obligation ratio and decreasing share prices can be observed by substantial decrease of EPS of Birch Paper Co stocks. The sales development of company is likewise low as compare to its mergers and acquisitions due to slow perception structure of consumers. This slow development likewise hinder company to more invest in its mergers and acquisitions.( Business, Business Financial Reports, 2006-2010). Keep in mind: All the above analysis is done on the basis of estimations and Charts given up the Displays D and E.

TWOS Analysis

TWOS analysis can be used to derive different methods based upon the SWOT Analysis provided above. A short summary of TWOS Analysis is given in Exhibition H.

Strategies to exploit Opportunities using Strengths

Business needs to introduce more innovative items by big quantity of R&D Spending and mergers and acquisitions. It could increase the marketplace share of Business and increase the earnings margins for the business. It might likewise offer Business a long term competitive benefit over its rivals. The worldwide growth of Business ought to be focused on market catching of developing countries by expansion, drawing in more consumers through customer's loyalty. As establishing countries are more populous than industrialized countries, it might increase the customer circle of Business.

Strategies to Overcome Weaknesses to Exploit Opportunities

Strategies to use strengths to overcome threats

Business ought to move to not just establishing however likewise to industrialized countries. It should widens its geographical expansion. This large geographical growth towards developing and established nations would lower the risk of prospective losses in times of instability in various countries. It ought to widen its circle to various nations like Unilever which operates in about 170 plus countries.

Strategies to overcome weaknesses to avoid threats

It ought to get and merge with those nations having a goodwill of being a healthy business in the market. It would likewise make it possible for the company to use its possible resources efficiently on its other operations rather than acquisitions of those companies slowing the NHW method growth.

Segmentation Analysis

Demographic segmentation.

The group segmentation of Business is based upon 4 elements; age, gender, income and profession. Business produces several products related to babies i.e. Cerelac, Nido, and so on and associated to adults i.e. confectionary products. Birch Paper Co products are quite inexpensive by practically all levels, however its major targeted customers, in regards to income level are middle and upper middle level customers.

Geographical Segmentation

Geographical segmentation of Business is made up of its presence in almost 86 countries. Its geographical segmentation is based upon 2 primary factors i.e. average income level of the consumer as well as the environment of the region. For instance, Singapore Business Business's division is done on the basis of the weather condition of the region i.e. hot, warm or cold.

Psychographic Segmentation

Psychographic division of Business is based upon the character and life style of the customer. For instance, Business 3 in 1 Coffee target those consumers whose lifestyle is quite busy and don't have much time.

Behavioral Segmentation

Birch Paper Co behavioral division is based upon the attitude understanding and awareness of the client. Its extremely nutritious products target those customers who have a health conscious mindset towards their intakes.

Birch Paper Co Alternatives

Birch Paper Co Conclusion

Birch Paper Co Exhibits