Case Summary: Birch Paper Company

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1. Describe the company, industry, and competitive environment Birch Paper Company was a medium-size partly integrated paper company. It had four producing divisions and a timberland division which supplied part of the company’s pulp requirements. In Birch Paper Company, The management implemented a policy of decentralizing responsibility and authority for all divisions except those relating to overall company policy. Each division had been judged independently on the basis of its profits and return on investment. 2. What is (are) the products/services provided and what is the issue in this case? Birch Paper was producing white and kraft papers and paperboard. A portion of its paperboard output was converted into corrugated boxes by the Thompson Division, which was also printed and colored the outside surface of the boxes. In the case, Thompson division had provided services including package design and development on a special display box to Northern Division. Under the agreement, Thompson Division was reimbursed by the Northern Division for the cost of its design and development work, Thompson Division did not receive any profit on this project. Therefore, it came a problem that whether a decentralized division should buy from another division to help the company as whole or buy from outsiders to get the lowest bids to increase the profits of the division. 3. What are the alternative choices for Northern? The bid from Thompson division in the case for Northern division was $480per thousand boxes. Regardless of buying form Thompson division, Northern division can buy form two outsiders, West Paper Company and Eire Papers, Ltd. West Paper offered $430 and Eire Papers, Ltd. offered $432 per thousand. However, the outside liners for Eire Papers, Ltd. were supplied by Southern division, a division of Birch Papers Company, at the price of $90 and would be

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