Gb519 Unit 4 Paper
Unit 4: Decision-Making With A Strategic Emphasis: Earth Baby, Inc.
Kaplan University
GB519-04N Measurement & Decision Making
Professor: Gene Sullivan
Date: February 27, 2013
Decision-Making & Strategic Analysis
A common problem in companies today is the tendency of top decision-makers to neglect the long-term strategic goals and focus on short-term goals and profit. Although decision-makers must consider both short-term and long-term effects in making sound business decisions, relevant cost analysis and strategic analysis are significant aspects of the decision-making process (Blocher, Stout, & Cokins, 2010, p. 430). Without careful strategic analysis, decision-makers …show more content…
Earth Baby, Inc. produces organic baby food, clothing, and toys for health-conscious parents. With its introduction of a new line of premium organic baby foods and its excellent reputation for superiority, EBI is able to sell its products at prices higher than those of their rivals. The company distributes these products through high-end grocery stores, pharmacies, and specialty retail baby stores. The founder and CEO of EBI recently received a proposal from the vice president of Great Deal, Inc. (GDI), a large discount retailer. The vice president proposed a joint venture between his company and EBI, citing the growing demand for organic products and the superior distribution channels of his organization. Under this venture EBI would make some minor changes to the manufacturing process of some of its best-selling baby foods, which would then be packaged and sold by GDI. Under the agreement, EBI would receive $3.10 per jar of baby food and would provide GDI a limited right to advertise the product as manufactured for Great Deal by EBI. Initial calculations determined that the direct materials, direct labor, and other variable costs needed for the GDI order would be about $2 per unit as compared to the full cost of $3 (materials, labor, and overhead) for the equivalent EBI product. The CEO must decide whether or not to accept the proposed venture from
Kaplan University
GB519-04N Measurement & Decision Making
Professor: Gene Sullivan
Date: February 27, 2013
Decision-Making & Strategic Analysis
A common problem in companies today is the tendency of top decision-makers to neglect the long-term strategic goals and focus on short-term goals and profit. Although decision-makers must consider both short-term and long-term effects in making sound business decisions, relevant cost analysis and strategic analysis are significant aspects of the decision-making process (Blocher, Stout, & Cokins, 2010, p. 430). Without careful strategic analysis, decision-makers …show more content…
Earth Baby, Inc. produces organic baby food, clothing, and toys for health-conscious parents. With its introduction of a new line of premium organic baby foods and its excellent reputation for superiority, EBI is able to sell its products at prices higher than those of their rivals. The company distributes these products through high-end grocery stores, pharmacies, and specialty retail baby stores. The founder and CEO of EBI recently received a proposal from the vice president of Great Deal, Inc. (GDI), a large discount retailer. The vice president proposed a joint venture between his company and EBI, citing the growing demand for organic products and the superior distribution channels of his organization. Under this venture EBI would make some minor changes to the manufacturing process of some of its best-selling baby foods, which would then be packaged and sold by GDI. Under the agreement, EBI would receive $3.10 per jar of baby food and would provide GDI a limited right to advertise the product as manufactured for Great Deal by EBI. Initial calculations determined that the direct materials, direct labor, and other variable costs needed for the GDI order would be about $2 per unit as compared to the full cost of $3 (materials, labor, and overhead) for the equivalent EBI product. The CEO must decide whether or not to accept the proposed venture from