- Mayank Shah
Background and Critical Issues:
TerraCog is a privately held company specializing in high-quality Global Positioning Systems (GPS) and fishing sonar equipment. The company has a strong customer base of serious outdoor enthusiasts who value the durability and value-added features of TerraCog’s GPS units.
In spring 2007, the company embarked on a project to enhance their high-quality GPS handheld with satellite imagery; the project was named Project Aerial. The decision to develop the new enhancement resulted from increased customer demand, and lost market share to competitor Posthaste, who in October 2006, introduced BirdsI, the “only handheld GPS with satellite imagery”. By the end of 2007, TerraCog had developed a prototype of their version of a GPS unit with satellite imagery and planned to launch the product by the 2008 holiday season.
Emma Richardson, the new Executive Vice President, was tasked with the launch of the newly developed GPS unit - she needed to finalize decisions on costs, pricing, and initial production volume. Emma’s main focus as the new EVP was to move the company toward greater operational alignment and increase cross-departmental cooperation. This focus was in response to existing tension between the U.S headquarters in Chicago and the production team in China. The development of the new Aerial would no doubt add to this tension.
The design specifications of the Aerial GPS were handed off to the prod uction team; but sales and finance were running into problems with pricing due to increased production and design costs. Emma tasked Allen Roth, the Director of design & development, and Tony Barren, Director of production, with reducing the costs so that sales could meet their price point. They were successful in only reducing costs by 8%, but this was not acceptable to sales. With the current costs, sales would have to price the product at $475; $75 over its competitor. The VP of Sales, Ed Pryor warned that the team needed to find a way to price the product at $425 to stay competitive and regain some market share. After two unsuccessful meetings and much heated discussion involving representatives from sales, production, design and other members of senior leadership, a decision could not be reached on the price and Emma was left with making a “go/no-go” decision about the Aerial GPS unit.
Emma Richardson has inadvertently formed an inefficient cross-functional, problem-solving team tasked with making a decision on the price of TerraCog’s new Aerial GPS unit. Slow progress on making a group decision and disagreement over the proposed price point for the product may derail or even stop the launch of the product.
Relevant Theories and Models
Group decision making is widely used in organizations today. There are strengths and weaknesses to using this method and it often has advantages over decisions made by individuals. Groups generate more complete knowledge and information, and they offer increased diversity of views; both allowing groups to evaluate more alternatives and consider more input. Group decisions also foster acceptance of a solution due to increased support of the final decision by the group members. Despite these strengths, group decision making is also plagued with some weaknesses. Slowed decision making is one major weakness of group decision making. Reaching a decision within a work group is usually time-consuming since all parties may not agree on the proposed final decision. Group conformity and ambiguous responsibility also hinder group decision making. A desire for members to be accepted can result in squashing of any overt disagreement, and unclear lines of responsibility lead to little or no individual accountability. In addition to these weaknesses, group decision making also has negative effects on efficiency...