Key point pricing decisions cannot be delegated to a

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Unformatted text preview: ormance measure, some decisions cannot be delegated to revenue center managers. • Revenue maximization is not the same as profit maximization. • Key point: Pricing decisions cannot be delegated to a revenue center. E Mfg. Head Product B Mfg. Head Product A d d d Mkt. Head Product A ' Division Head Region A d ‚ d Mkt. Head Product A CEO Mfg. Head Product B r r r Mkt. Division Head r r rr Mkt. Head Product B 18 © Mkt. Head Product B This division knows both MR and MC for Region B Division Head Region B Armed with this information, top managers must set production plans and prices. This division knows both MR and MC for Region A d CEO This division transmits the firm’s MR. How are decisions made in the functional form? Mfg. Division Head ¨ ¨ • Compare to the Multidivisional Form M&S 452 — Strat and Org c 2008 Scott Schaefer Mfg. Head Product A ¨¨ ¨¨ ¨ This division transmits the firm’s MC. • Recall the Functional Form 20 – Four sources of interdependencies: ∗ External benefits and costs ∗ Interdivisional trade ∗ Interdivi...
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