Week 5 Case 3: Greetings Inc.: Transfer Pricing Issues

1. Answer: I think the critical challenges for Mr. Burns is to find a good solution to setting the proper transfer price so that Wall Decor can generate the highest rate of return possible, and the transfer price to each store can be reasonable according to each store’s external market conditions. That is, Mr. Burns must bring change to the company’s transfer prices and keep both the business units, Greeting stores and Wall Decor, focused on the success of the overall company. On the one hand, Mr. Burns’ biggest fear is that the business units will take a narrow focus and be concerned only about their individual situation and thus hurt the overall company profits. His greatest problem is to keep Wall Decor and the individual stores working together to maximize the profit of the overall company and remain innovative. If not, Wall Decor will seek to sell to competitors in an attempt to increase