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Decisiom Trees

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Decision Tree
Gerber Product Company

A. Background of the Company:

Gerber was founded in 1927 in Fremont, Michigan by Daniel Frank Gerber, owner of the Fremont Canning Company, which produced canned fruit and vegetables. At the suggestion of a pediatrician, Gerber's wife Dorothy Gerber began making hand-strained food for their seven-month-old daughter, Sally. Recognising a business opportunity, Gerber began making baby food.

By 1928 he had developed five products for the market and six months later, Gerber's baby foods were distributed nationwide. The brand eventually became a major company in the baby food industry, offering more than 190 products in 80 countries, with labeling in 16 languages and controls eighty-three percent (83%) of the baby food market in the United States.

In 1994 Gerber merged with Sandoz Laboratories. Two years later, Sandoz merged with CIBA-Geigy to form Novartis, one of the largest pharmaceutical companies in the world. In 2007 Gerber was sold to Nestle for $5.5 billion.

In 1960 Gerber started selling its baby food in glass jars, which often found new life as household storage, especially in home workshops. Soon after, other items such as pacifiers, , baby bottles, and small baby toys were introduced.

Source: https://en.wikipedia.org/wiki/Gerber_Products_Company

B. Problem Encountered and Quamet Solution Used or Applied

Gerber used decision tree analysis in deciding whether to continue using the plastic known as poly-vinyl chloride or, more commonly, PVC.

Gerber management had to evaluate all of the current information, weigh the consequences of each action, and proceed on the most prudent course of action. In the latter half of 1998, Greenpeace announced that it had conducted scientific testing on phthalates and found them to be carcinogenic in lab rats. Further, Greenpeace claimed that the chemical leeches from the plastic over time and voiced particular concern with, “products that were aimed at small children and used to suck on or chew on.” Gerber knew that a vast body of scientific evidence indicates that phthalates are completely safe. However, once the Greenpeace announcement was publicized, the Consumer Product Safety Commission was spurred to issue a press release expressing new doubts.

A month before Christmas, the CPSC informed Gerber they would issue a press release advising parents of the potential dangers of phthalates, and Gerber would be named as one of the companies involved. This is the point at which Gerber implemented a decision tree.

Gerber basically faced two choices, neither of which was particularly beneficial. The firm could be reactive, wait for the announcement, and gauge consumer response before deciding on a course of action, or it could be proactive and aggressively pursue resolution of the problem regardless of the public’s response to the report.

C. Benefit to Gerber Company

Gerber projected eight possible outcomes on its decision tree. If the firm reacted proactively by discontinuing use of all phthalates, and the CSPC report simply issued a warning, Gerber predicted an 80 percent chance that the public would react favorably to Gerber’s responsiveness causing sales to increase over competitors who reacted more slowly. A potential nationwide revenue increase of $l million was entered into the decision tree. Given a proactive response and a favorable CSPC report, Gerber also recorded a 20 percent chance that sales would decline by $1 million due to the sensationalistic nature of the press coverage.

If the CSPC report is negative and a recall is issued, Gerber predicted 25 percent likelihood that it could preserve current sales through a proactive response. On the other hand, the firm placed a 75 percent probability that a recall would hurt sales by $1.25 million.

Four more alternatives were predicted in the event that Gerber waited for the CSPC report before taking action. With a favorable report and a delayed response, there was thought to be a 25 percent chance that sales would remain flat, along with a 75 percent chance that sales would decline by $2 million.

The worst case scenario is if Gerber remains passive and the CSPC report calls for a recall. In that case, Gerber optimistically predicted a 20 percent probability that it could still increase sales by taking advantage of companies who were less prepared for the report and actually gain approximately $.5 million. However, it was considered an 80 percent probability that significant volume would be lost.

Using a decision tree, Gerber concluded that its best option was to be proactive and initiate its own solutions without waiting for the CPSC report.

Source: https://gbr.pepperdine.edu/2010/08/how-gerber-used-a-decision-tree-in-strategic-decision-making/

D. Ethical Issues

In making objective decisions, ethical considerations may be missing or not factored in since they are not easily converted into financial data/terms. Such that a person may easily decide on what action to take based on the results of the decision tree analysis.

Manufacturing industries should also consider that the company should produce goods that are truly goods and are sustainable and for the common good.

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