Unformatted text preview: business preferences are indentified with FTI at the time of their decision: •
• “Buy it, not build it” indicates that they has a preference for buying an established company as opposed to building one de novo. “Customer service is our focus” describes their preference for being a focused leader on the products they do sell through superior customer relationships and product expertise. Preference for edgebanding is the result of the high margins and growth potential for edgebanding. These preferences make it easy to see why the decision makers focused extensively on the acquisition alternative. An acquisition allows them to stick with edgebanding where they have a competitive advantage due to superior customer service and margins. Also, acquisitions leveraged their collective business experience. Also important were the following value preferences that FTI applied to their decision: •
• Timing: They would like to accomplish some form of breakout growth in the next 5 years. Risk: As small business owners with their combined net worth and livelihood wrapped up in their business, they could not afford to take a risk that could lead to bankruptcy. Other factors: They must preserve the kind of lifestyle that led them to buy FTI in the first place. These value preferences also tended to steer the couple towards the acquisition alternative. Acquisitions have a clear time frame that is less than 5 years and can be chosen to entail an acceptable level of risk. However, there is still uncertainty regarding the lifestyle factor, especially since the acquisition would have to be in a new geographic location. Many of the other alternatives presented the decision makers with unacceptably big trade‐offs. For example, they would have to sacrifice their preference towards purchasing companies in order to consider creating a new location de novo. Another example is that for the private equity alternative, they would have to make a big trade‐off regarding their lifestyle and risk value preferences. Robert and Dianne have established for themselves a rigid set of preferences for the way they want to run their business. The danger is that this may lead them to neglect taking an in‐depth look at all available alternatives. Another observation is that at the time of their decision, the acquisition alternative looked most appealing to the decision makers because they had uncovered so much information about this alternative. They had invested two months of effort in performing due diligence on CEB and this could have introduced a cognitive bias that steered them towards the CEB acquisition because this alternative looked more likely to succeed due to more information. This raises the point that maybe with more effort put into the other alternatives they also could have been made to be more attractive. Thus a final observation regarding step 2 of their decision making process is that the value of information played a huge role in the way the decision makers proceeded in developing the decision basis. Robert and Dianne comprised the decision team and their limited time had to be divided between day‐to‐day operations and researchin...
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- Winter '14