MT499 Unit 10 Strategic Decision Report Example

The Question as First Asked, Answered: An MT499 Unit 10 Strategic Decision Report to Halsey Hearing's Board

[Student Name]

Purdue University Global

MT499: Bachelor's Capstone in Management

Unit 10 Strategic Decision Report

[Instructor Name]

[Date]

Halsey Hearing, the pharmacy chain and every figure are composite estimates; the regulation and sources cited are real.

Executive Summary

The question has not moved since Unit 2: for the fiscal 2028 plan, should Halsey sell hearing aids under its own name in the consumer aisle, build an unbranded device for a drugstore chain, or stay with clinics and pay to strengthen them?

The answer: manufacture the store-brand device under a three-year contract.

Five numbers carry the case. Discounted at 10 percent, five years of the deal are worth $16.1 million today. Setup costs $4 million. Running the new team of fourteen costs $2.5 million annually. Clinic losses beyond roughly 1.9 percent a year would erase the deal's value. A board review is triggered at 1.5 percent.

The Company and the Market

Halsey earns $842 million a year, 62 percent of it, about $522 million, through independent audiology clinics, at a 59.4 percent gross margin. Its plant runs at 71 percent of capacity. A 2022 rule opened pharmacy and online sales of hearing aids to buyers with milder loss and no prescription (Food and Drug Administration, 2022), and two years later earbuds gained an authorized hearing-aid mode. Halsey's clinics now face a consumer aisle that can reach their patients first.

What Bears on the Decision

Of twenty-three factors examined, thirteen would change how a reader weighs the three answers. Two outweigh the rest. Halsey's relationships with independent clinics protect its largest revenue block, so any answer that turns clinics against it risks far more than it can gain. Its spare capacity, about 247,000 pairs a year, makes a store-brand contract nearly free to supply but caps an own brand by its fourth year. Christensen (1997) warns that established firms often lose new markets by guarding old customers, which is why staying out entirely was not treated as automatically safe.

The Three Answers Compared

The answers were scored on the five criteria fixed before any costing, with the same weights: value 20 percent, robustness 35 percent, clinic exposure 20 percent, reversibility 15 percent and capability fit 10 percent.

1. Own brand: $12.0 million present value; negative under two of three stress tests; highest clinic exposure; hard to reverse; weak fit. Score 1.55.

2. Store brand: $16.1 million; positive under two of three tests, including the chain leaving after three years; moderate clinic exposure; reversible at contract end; good fit. Score 3.8.

3. Clinic program: $17.3 million; negative or near zero under two of three tests; lowest clinic exposure; easily reversed; strong fit. Score 3.5.

Only a reading that weighs value above everything else would choose differently.

Why the Largest Estimate Lost

The board will ask first about the clinic program, so it receives a full answer. Its $17.3 million comes entirely from sales it would prevent from eroding: the estimate assumes clinic device sales would fall 2 percent a year without the program and 0.8 percent with it. Nobody can yet observe the first rate. If erosion without the program would be 1 percent, the program spends $45 million over five years to protect sales that were not seriously at risk, and the program ends about $25 million in the red. If the program slowed erosion only to 1.2 percent, it would roughly break even. The program may still prove wise, and the report recommends revisiting it once three more years of over-the-counter data show how fast clinic sales are actually moving. Lovallo and Kahneman (2003) describe how attractive forecasts crowd out attention to their weakest assumptions, and the criteria were fixed in advance to prevent exactly that.

Why Not the Own Brand

The own brand earns the largest margin per pair, about $265 before returns, but it fails under conditions close to the base case. Returns above about 25 percent, against 22 percent assumed, or volumes 30 percent below plan turn its value strongly negative. It also needs new assembly capacity in its third year and puts the Halsey name in direct competition with the clinics that sell most of its devices.

What the Mock Board Changed

The seminar hearing in Unit 6 did not change the choice, but it changed how the choice is protected. A plan to keep the deal quiet was dropped, because clinics would learn of it within weeks; a letter from the chief executive to the 400 largest clinic accounts now precedes any announcement. The thin $4.1 million value if the chain leaves after three years is now shown as the worst plausible result, not as comfort. And a director's suggestion became the 1.5 percent tripwire.

From Decision to Delivery

A retail supply unit of fourteen reports to the chief operating officer, not to sales, so that no one's bonus mixes clinic and retail revenue (Kerr, 1975). Regulatory labeling specialists, quality engineers, demand planners and a key account manager fill the roles Halsey lacks. Clinics hear first, the sales force two weeks later and the public last. The contract sets a minimum volume, a nine-month renewal notice, quality responsibilities and an advertising clause tied to tested performance. Six measures reach the board quarterly: pairs shipped against 55,000 in year one, defect credits under 3 percent, net margin per pair of about $95.70, complaints, clinic revenue against the tripwire and contract milestones. The figures match the decision memo; a reconciliation table is in the appendix.

Appendices

Four appendices support the report. Appendix A holds the three option sheets with every input, its basis and the annual cash flows. Appendix B holds the full stress tests and break points. Appendix C holds the external and internal evidence tables from Unit 4, including the ten factors set aside. Appendix D lists every estimate that stands in for a private figure, with the public number it was derived from, and reconciles each figure in this report with the decision memo and the implementation plan.

Limits

All three answers lean on figures Halsey keeps private: Halsey's cost per device, its clinic-level sales and the supply contract's terms. Each is marked as an estimate in the appendix, with its basis. Two new facts would most change the answer. A survey showing clinics ready to drop Halsey at rates above 1.9 percent would sink the store brand. Evidence that clinic device sales are eroding faster than 2 percent a year would strengthen the clinic program. Kahneman et al. (2011) recommend that a board know in advance what evidence would reopen a decision, and these two would.

References

Christensen, C. M. (1997). The innovator's dilemma: When new technologies cause great firms to fail. Harvard Business School Press.

Food and Drug Administration. (2022). Medical devices; ear, nose, and throat devices; establishing over-the-counter hearing aids. Federal Register, 87(158), 50698-50762.

Kahneman, D., Lovallo, D., & Sibony, O. (2011). Before you make that big decision. Harvard Business Review, 89(6), 50-60.

Kerr, S. (1975). On the folly of rewarding A, while hoping for B. Academy of Management Journal, 18(4), 769-783. https://doi.org/10.2307/255378

Lovallo, D., & Kahneman, D. (2003). Delusions of success: How optimism undermines executives' decisions. Harvard Business Review, 81(7), 56-63.