Discussion 1 Fletcher Terry managers have been involved in many decisions over

Discussion 1 fletcher terry managers have been

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Discussion 1. Fletcher-Terry managers have been involved in many decisions over the years. Of particular importance were the decisions made in the 1980s when the com- pany was struggling to survive. Several states of nature took place in the late 1970s and 1980s over which managers had little or no control. Suppose the Fletcher-Terry management team wants to reflect on their decisions and the events that surrounded them, and they ask you to make a brief report summariz- ing the situation. Delineate at least five decisions that Fletcher-Terry probably had to make during that troublesome time. Using your knowledge of the eco- nomic situation both in the United States and in the rest of the world in addition to information given in the case, present at least four states of nature during that time that had significant influence on the out- comes of the managers’ decisions. 2. At one point, Fletcher-Terry decided to import its own private line of cutters. Suppose that before tak- ing such action, the managers had the following information available. Construct a decision table and a decision tree by using this information. Explain any conclusions reached. Suppose the decision for managers was to import or not import. If they imported, they had to worry about the purchasing value of the dollar over- seas. If the value of the dollar went up, the company could profit $350,000. If the dollar maintained its present position, the company would still profit by $275,000. However, if the value of the dollar decreased, the company would be worse off with an additional loss of $555,000. One business economic source reported that there was a 25% chance that the dollar would increase in value overseas, a 35% chance that it would remain constant, and a 40% chance that it would lose value overseas. If the com- pany decided not to import its own private label, it would have a $22,700 loss no matter what the value of the dollar was overseas. Explain the possible out- comes of this analysis to the management team in terms of EMV, risk aversion, and risk taking. Bring common sense into the process and give your rec- ommendations on what the company should do given the analysis. Keep in mind the company’s situ- ation and the fact that it had not yet tried any solu- tion. Explain to company officials the expected value of perfect information for this decision. Source: Adapted from “Fletcher-Terry: On the Cutting Edge,” Real-World Lessons for America’s Small Businesses: Insights from the Blue Chip Enterprise Initiative. Published by Nation’s Business magazine on behalf of Connecticut Mutual Life Insurance Company and the U.S. Chamber of Commerce in association with The Blue Chip Enterprise Initiative, 1994. See also Fletcher, Terry, available at CASE C19-37
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