Birch Paper Company

Topics: Transfer pricing, Price, Economics Pages: 3 (923 words) Published: February 14, 2011
Birch Paper Company

Birch Paper company is a medium-sized, partly integrated paper company, producing white and kraft papers and paperboard. The company has four producing divisions and a timberland division. The responsibility structure of the Birch Paper Company and all of its divisions is a Profit or Investment Centre, which is stated in the case: For several years, each division had been judged independently on the basis of its profit and return on investment. Top management had been working to gain effective results from a policy of decentralizing responsibility and authority for all decisions except those relating to overall company policy. Since the change the company’s profits and competitive position have improved. Each division manager is free to buy from whatever supplier he wishes, and even on sales within the company, divisions are expected to meet the going market price if they want the business. The corporate-level strategy is related diversified as Birch Paper Company’s business units have the ability to share common resources and competencies; this is shown in the case: a portion of its paperboard output was converted into corrugated boxes by the Thompson division. Including Thompson, the company had four producing divisions and a timberland division, which supplied part of the company’s pulp requirements. 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’s staff for package design and development spent several months perfecting the design, production methods, and materials to be used. Birch Paper company’s mission would be a hold strategy as it is geared to protect the business unit’s market share and competitive position which is illustrated in the case by the company changing its policy. The company’s top officials believed that in the past few years the concept of decentralization had been applied successfully and...
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