Week 6 Discussions Strat and Man

Week 6 Discussion – Corporate Diversification Strategy and Its Impact on Social Responsibility – Strategic Management

As the CEO, you have decided to embark on a diversification strategy and have located a potential candidate to acquire and need to execute a complete due diligence on a potential acquisition. The purchase is an unrelated product and market as compared to your current business model.

You current product mix provides manufactured products to the automotive industry. In stark contrast the potential acquisition’s main focus is supplying monitoring devices for cardiac care units. The monitoring device company often donates to hospitals these devices to needy patients who cannot afford them and are a significant impact on the bottom line.

Discuss the key issues of the potential acquisition in terms of the risks and rewards of going forward. How will you determine if this is simply an overzealous CEO chasing a better “bottom line” or is it a viable option for improving the performance of the auto products company?

Lastly, how would you evaluate the impact of corporate social responsibility on the decision? If you acquired the cardiac device company would you continue its device donation program to the needy patients?


Chapter 9 (Triple Bottomline Strategy – 3 performance Dimensions)


Thompson, A., Petraf, M., Gamble, J., and  Strickland, A.J.  (2016) Crafting and executing strategy :The Quest For Competitive Advantage : Concepts and Cases (20th ed.).  New York, N.Y. : McGraw-Hill.


Week 6 Discussion – Outsourcing Decisions – Does Management Employ the Concept Correctly? – Managerial Accounting

In Chapter 9 on page 335: Incremental Analysis for Outsourcing Decisions; the text discusses several of the nuances that management teams employ when making "make or buy decisions" on a host of product or service related issues within their organization. Please develop your own pros and cons of the topic by doing some limited research on the internet and provide at least two positions (Pros – 2 and Cons – 2) for each for this week's discussion.


Crosson, S. V., & Needles, B. E. (2014). Managerial Accounting (10th ed.). South-Western Cengage Learning. 

FROM THE TEXT page 335:

Incremental Analysis for outsourcing Decisions

Outsourcing is the use of suppliers outside the organization to perform services or pro- duce goods that could be performed or produced internally. Make-or-buy decisions, which are decisions about whether to make a part internally or buy it from an external supplier, may lead to outsourcing. A company may decide to outsource entire operating activities, such as warehousing or human resources, that have traditionally been per- formed in-house. Outsourcing can reduce a company’s investment in physical assets and human resources, which can improve cash flow. It can also help a company reduce its operating costs and improve operating income. For example, because Amazon.com out- sources the distribution of most of its products, it has been able to reduce its storage and distribution costs enough to offer product discounts of up to 40 percent off the list price.

Outsourcing analysis

In manufacturing companies, a common decision facing managers is whether to make or buy some or all of the parts used in product assembly. The goal is to select the more profitable choice by identifying the costs of each alternative and their effects on revenues and existing costs. Managers need the following information for this analysis:

Information About Making

• Variable costs of making the item

• Need for additional machinery

• Incremental fixed costs

Information About Buying

• Purchase price of item

• Rent or cash flow to be generated from vacated space in the factory

• Salvage value of unused machinery

(Crosson 335)

Crosson, Susan V. Managerial Accounting, 10th Edition. Cengage Learning, 20130205. VitalBook file.

The citation provided is a guideline. Please check each citation for accuracy before use.


For example, for the past five years, Box Company has purchased packing cartons from Pappe, Inc., an outside supplier, at a cost of $1.25 per carton. Effective immedi- ately, Pappe is raising the price 20 percent, to $1.50 per carton. Box has space and idle machinery that could be adjusted to produce the cartons. Annual production and usage would be 20,000 cartons. Box estimates the cost of direct materials at $0.84 per carton. Workers, who will be paid $8.00 per hour, can process 20 cartons per hour ($0.40 per carton). The cost of variable overhead will be $4 per direct labor hour, and 1,000 direct labor hours will be required. Fixed overhead includes $4,000 of depreciation per year and $6,000 of other fixed costs. The idle machines will continue to be idle if the cartons are purchased. Should Box continue to outsource the cartons?

Exhibit 2 presents an incremental analysis of the two alternatives. All relevant costs are listed. Because the machinery has already been purchased, and neither the (Not Required for the discussion)

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