Assume that you’re the director of one of the corporations listed below and have been presented with the business opportunity described in the scenario. Would you advise the corporation to accept the opportunity? Consider both the financial return expected and any related ethical concerns. ToyCo has just been informed that its wooden trains produced in China contain lead paint and can no longer be sold in the United States. However, a distributor offers to negotiate a deal with a foreign company to sell the trains in a South American country that has no laws addressing the presence of lead paint in children’s toys. BabyHealth is seeing decreasing sales of its powdered infant formula in the United States due to more and more mothers choosing to breastfeed their babies. In an effort to offset these losses, BabyHealth chooses to sell its formula in third-world countries. However, it is widely known that the water sources in these countries are often contaminated and not boiled prior to use. After producing 10 million versions of its new smartphone, PhoneLand discovers that due to a manufacturing oversight, some of the phones may catch fire if left in a car on a hot day. While the worst-case financial impact from the phones catching fire is $10 million in damages, recalling and repairing the phones will bankrupt the company.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter16: Bargaining

Section: Chapter Questions

Problem 16.5IP

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Assume that you’re the director of one of the corporations listed below and have been presented with the business opportunity described in the scenario. Would you advise the corporation to accept the opportunity? Consider both the financial return expected and any related ethical concerns. ToyCo has just been informed that its wooden trains produced in China contain lead paint and can no longer be sold in the United States. However, a distributor offers to negotiate a deal with a foreign company to sell the trains in a South American country that has no laws addressing the presence of lead paint in children’s toys. BabyHealth is seeing decreasing sales of its powdered infant formula in the United States due to more and more mothers choosing to breastfeed their babies. In an effort to offset these losses, BabyHealth chooses to sell its formula in third-world countries. However, it is widely known that the water sources in these countries are often contaminated and not boiled prior to use. After producing 10 million versions of its new smartphone, PhoneLand discovers that due to a manufacturing oversight, some of the phones may catch fire if left in a car on a hot day. While the worst-case financial impact from the phones catching fire is $10 million in damages, recalling and repairing the phones will bankrupt the company.

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