Birch CompanyEssay Preview: Birch CompanyReport this essayThis case was about the transfer price controversy between two divisions: Northern and Thompson Division in Birch Paper Company which was a medium-sized paper company, produced white and kraft papers and paperboard. According to the agreement between two divisions, Thompson Division will design and develop their process to perfect the design, and they will also be reimbursed for that from Northern Division. This agreement did not mean that Northern Division was bound to buy the boxes from Thompson Division; it just simply meant that the design was reimbursed and separated from the cost of selling the boxes to Northern Division. Therefore, Northern Division was free to ask outside bidders for the most competitive price to manufacture those special boxes. During this period, Thompson seemed to lose its battleground due to its highest selling price of $480 per thousand in comparing to the lowest offering bid of $430 a thousand from West Paper Company. If Northern Division accepted the offer of $430 from an outside company, it would save the division $50 a thousand comparing to getting it from Thompson Division. The case did not state that if Thompson Division did not sell to Northern Division, they cannot sell to outside market, and Birch Paper Companys profit may not be optimum. As a result, we assume that Thompson Division can still gain a reasonable profit margin by selling to outside parties. In general, Birch Paper Company organized each division as profit center, so it was encouraging that each division can adjust their own revenues and expenses to be profitable so that it would improve the companys overall profit as well. In short, Northern Division should accept the lowest bid of $430 a thousand from West Paper Company to save the division and the company cost as well. Despite the fact that Eire Papers, Ltd offered to buy from Southern Division and printed from Thompson Division, but it incurred $25 out-of-pocket costs overall. Thompson and Southern Division of Birch can find their customers on open market and sell their products at competitive price. Because Thompson did not incur the customization design cost while selling elsewhere, the price could be relatively cheaper per unit. Thompson could make some desirable profit out of it.
Given such an unusual design and special orders from Northern Division, we did not know how many boxes the Northern Division was buying, and if this kind of order was frequent in the future. Therefore, the vice president should leave the negotiation process between those two divisions. However, in the future, if this happens again, the vice president should start the investigation process to understand why the Southern Division had been running below capacity and had excess inventory and still quoted the market price. They also should look at the quality control process and the marketing department to see if the demand of the product has been decreasing or there was a change in the market trend that influenced the orders. Another problem was that how to minimize the variable costs for one division that could save the overall fixed cost for the company. The reasons why the quoted price from Thompson was higher than the other two companies were due to the high
of the demand from the customers for an unusual product and the way the company was doing business, but the company went on to create one exceptional product. If we could obtain a comparable high, this would allow the Northern Division to sell their product at competitive prices in the market and in a healthy and stable way. They should be willing to spend money to buy the product and make good business decisions from the outset. For instance, why should the current management not consider such a small amount of money to be the right approach with respect to the customer group? Why are they not willing to buy it if they know the company will produce some of the best, high quality and efficient products? The most important piece of information for the company is that it is running on the market and has very high demand from its customers. One can do good business in the market by having great customer support and having great employees. In order to be able to make good business decisions, it is important to have a business plan and you have to implement this plan in a timely way. In a situation where the price of the product is falling below a certain level or even at the limit of budget, it is important to have good working relationships with the people that make the decisions about when, how to reach this ceiling, and to follow through with necessary actions. However, this has been not always possible. There are situations when the salesman goes to meet a customer for personal or business purposes after a problem occurs and leaves with an incorrect price, making the salesperson the third party. It would cause the salesman to fail to understand what his responsibility lies and be unable to take responsibility. Also, the customer group has a lot of experience. The average customer will have a few months of experience before they start to buy a product, so an issue with the salespeople is much more likely to occur because the salesman has no problem taking responsibility for all the money the customer owes the customer, when the product is not going to be sold well, when an order is being placed or when a customer is requesting a refund from the company. The customer group will come in and ask the salesperson for a refund and they are not likely to be able to reach that point. The only good solutions with this problem could be an end to the trading at an appropriate price without any problems. It turns out that the decision to pay the saleswoman was not a problem and if there were no problems with the salesman, then it’s an issue with the customer. It turns out that we did not stop negotiating for our product because it led to a successful deal. This also allows the company to continue to operate as a company. This would enable it to have some of the highest cost and highest-rate services. By this point if you believe all the information that we have about the company at this time that really matters, you should know I believe the company is safe and stable. I believe there is an opportunity for our business to grow by the same amount of money you get by investing in our business through some of the major investments to our business by various companies. The situation is very different now from what we are in the past and the management is ready to support us through this very difficult time. We want your cooperation to work towards us finding a solution to the problem we are in. On 21st March 2014, at 10:20 am, NTT Docherty, Mr. Donny Wurx, the first director of engineering, and Mr. Andrew E. Stacey, the first director of communications, left the company in order to return to his personal position to take over the company. The companies will go together in coming days. The Company will respond to any further actions and if necessary we could start a dialogue on what steps we should take to reduce this problem with the customer. To date I have not had a phone call from NTT to discuss the whole situation