THE MUDGE PAPER COMPANY CASE STUDY

The Mudge Paper Company Case Study

The case study revolves around Lauren Becall, the head of the sales team at Mudge Paper Company and the salesperson in charge of supporting the companys largest customer, Barts Office Supplies. At one point, Lauren decides on the terms of Barts new contract without consulting her two colleagues to obtain their views. Laurens boss, the companys CEO John Crickett - advocates for group discussions and is concerned about Laurens choice to reach a decision alone.

Write two paragraphs explaining each of the parties point of view Laurens as well as the CEO. Explain your final decision on whether or not to go through with the sale as well as why this is your decision.

From Laurens end, the decision needed to be made immediately as Barts had promised to consider a competitors (King Paper) offer if Mudge did not give their response the same day. The CEO wanted an immediate answer so that he had a clear mind going into his Memorial Day holiday. Thus, Lauren may argue that she did not have the time to call for a meeting with her colleagues as this would have caused delays and cost the organization the contract with Bart. In Laurens view, Bart was a significant customer and Mudge could not risk the business relationship. Moreover, Lauren did not trust her colleague Griffith to serve Mudges best interests given his close relationship with Barts CEO. Her other teammate, Ronnie, was indecisive and often wanted to please both parties so would be of little help in the situation. For these reasons, Lauren chose to make the decision to accept Barts new terms alone, guided by the companys business interest. She understood that the new contract threatened the companys cash flow position, particularly because it meant that Mudge would forego more interest on late payment and increase the credit limit by $0.5 million. However, the contract would bring about $2.5 million in sales, as compared to $1.75 million as initially agreed upon. In Laurens view, the increase in sales volume was enough to offset the lost interest.

Lauren mentions that she was sure the CEO would be disappointed with her decision to act alone because he preferred group decision making. The CEO was sceptical about the contract because it increased the credit limit from $0.75 million to $1 million and increased the invoice payment terms from 30 days to 45 days. Both of these terms threatened the companys cash flow situation. Moreover, since Bart was still paying their invoices within 60 days as opposed to the 30 days in the agreement despite having no credit issues, the CEO believed that the company was only taking advantage of the existing business relationship. Despite the increased sales volume, the CEO is unlikely to have consented to Laurens decision to accept the new contractual terms set by Barts. In his view, the proposed plan would hurt the company and Lauren thus erred in deciding solo.

Generally, Lauren needed to consult with other team members before making any decisions to ensure that all members own the decision reached. The argument that Mudge would have lost the contract if they did not give a response the same day is not valid as Lauren reckons that this was unlikely and probably only a

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Individual decision-making may also be more advantageous in terms of minimizing group think. Griffith (2021) defines groupthink as a situation where members of a group focus on building and maintaining team cohesiveness as opposed to reaching the most appropriate decision for the organization. Individual decision-making provides avenues for team members to reason and think...

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The terms as per the new agreement, which Lauren approved alone, were:

Barts would purchase paper products valued at $2.5 million

The time limit for settling invoices would be 60 days, implying that only invoices that are 60days late would attract a 3 percent interest

Mudge would extend a higher credit limit of $1.5 million rather than $1 million

The new terms increase the allowable credit limit by $0.5 million and imply that the company foregoes interests on late payment that would otherwise have increased revenues. The total sales contract is projected to increase by $0.75 million. However, the facts state that a proposal to give interest-free loans for 60 days would be unsustainable for Mudge and would seriously threaten the companys cash flows. The increase in sales volume is not sufficient to offset the loss made on foregone interest payments and sustain the increased credit limit. As such, the company may need to renegotiate the new terms to push Barts to pay the 3 percent interest for invoices paid after 45 days and retain the credit limit at $1.5 million. Since Barts does not have credit problems, it is likely that they will accept the revised terms because they would still benefit from the higher credit limit.

In light of this, Lauren erred in reaching the final decision to accept Barts terms without consulting the rest of the team. Although she makes the decision promptly, she missed out on the gains of having multiple perspectives and ideas to consider before deciding. As Griffith (2021) points out, consulting the team members would have allowed for brainstorming and a wider understanding of the companys current cash flow situation and the sustainability of Barts proposals. This would ultimately have led to the realization that the proposed plan was unsustainable and allowed team members to give their ideas on how best to revise the terms to benefit Mudges business interests. Thus, individual decision-making in the corporate context is not advisable as it ends up consuming more time if the company is forced to renegotiate terms that had previously been agreed upon. Further, it places a huge burden on the individual decision-maker for instance,…