SECTION B- IMPACT OF RISK AND UNCERTAINTY ON ORGANISATIONAL PERFORMANCE
QUESTION 01- BERRY
Berry manufactures products which have a short lifecycle due to technological obsolescence. It aims to keep each product in production for at least 18 months so that it can recover the high cost of product development and make an acceptable profit before the product becomes obsolete. Berry has always manufactured its products in its home country of Danyland, from where all materials are also sourced.
Sales opportunity in Kiviland
An opportunity has been identified to export one of three newly developed products, Red, Blue and Green, to Kiviland, due to citizens’ increasing levels of income there. The rate of technological obsolescence is slower in Kiviland than in Danyland. The estimated levels of demand, selling prices and costs of the three products are shown in Appendix 1.
Stakeholders’ views on the risks of the Kiviland opportunity
Three of Berry’s key stakeholder groups, employees, directors and shareholders, have been consulted for their views on the proposal to export to Kiviland and, in particular, on which of the three newly developed products to export there.
The employees have a cautious approach to the proposal following the recent failure of another product launch. That product was withdrawn as it breached poorly understood safety regulations and a number of employees lost their jobs as a result.
The directors, all of whom are individually wealthy, have served on the board for many years and are keen to earn the large bonus which is currently offered solely on the total profit made by the new product over its lifecycle.
The shareholders neither avoid nor seek risk, but they are keen that the company considers the external environment in Kiviland in order to maximise performance there, whichever of the products is chosen to be exported. They have asked for a PEST* analysis of the environment in Kiviland to be produced. A first draft of this has indicated that the exchange rate between the Danyland dollar (D$) and the Kiviland dollar (K$) is a key economic factor which may affect performance. *Political, economic, socio-cultural and technological
a. Advise which of the three newly developed products each of the three key stakeholder groups would choose to export to Kiviland based on their respective risk appetites.