In lecture 14, we discussed how Costume Gallery “split” their manufacturing between China and New Jersey to change their relationship with demand risk and obtain both build-to-stock and build-to-order benefits. Then, in Lecture 15, we discussed how splitting business-model-design decisions is key in managing risk in new ventures.
The concept of “splitting a big bet into a sequence of smaller, less consequential bets” is instrumental in management. In this part of the exam, you will have to identify a case where “splitting decisions” was useful or could be useful. To do so, complete the following steps:
Describe a management decision and the information risks associated with this decision. This decision can be from an internship you have done, from a job you worked at, that you observed in practice, or from your personal life. (4 points)
What are the consequences and/or costs of getting this decision wrong? (3 points)
Describe how this decision can be “split (3 points) .”
How does splitting this decision change the relationship with the risks you described in point 1? (3 points)
What are the costs associated with splitting this decision? (2 points)
Note: Please be succinct. A few sentences for each point suffices.
Sample Solution