Byte Products, Inc is a company that produces electronic components that are used in personal computers. They are the leaders in their industry with 32% of the market share. Over the past several years their total sales are approximately $265 million. Now many new firms are coming into the market foreign and domestic. More companies in the industry means more demand, competition, and productivity. Byte Products, Inc is pleased that the market is growing. Unfortunate, Byte Product, Inc only has three manufacturing facilities running 24 hours 7 days a week.
Now since there is a huge demand for their product they can not keep up with three manufacturing facilities. If they can not keep up with their demand then their customers will go else where. The only way Byte can keep up with their demand is to move or build another manufacturing facility.
The long term solution is to build a state of the art manufacturing facility in the southwest of the United States. State of the art building is a great idea, but it will take three years to build and by then the company is out of the race and gone.
The short term solution is to move into an old manufacturing facility that use to produce electronic components. The factory has been closed for eight years and it is in a small town called Plainville.
Ten of the board members thought moving into the manufacturing facility in Plainville was a good idea. One of the board members that hardly ever speaks out said no about this short term solution. There were other solutions before the idea of moving into the Plainville facility.
For example, licensing Byte’s product and process technology to other manufacturers in the short run to meet immediate demand was possible. The licensing world be short term or just until the new plant is done. The problem to this solution was no manufacturer would shoulder the fixed costs of producing appropriate components for such a short term. The manufacturer would charge a premium to recover its costs. The Byte would have to increase the price on the product and that was unacceptable for there customers.
The other solution was to go overseas with facilities and licensing. Before the company went public the founders decided that all manufacturing facilities would be domestic. Plus the majority stockholders were not likely to support that idea. Top management did not like the idea of foreign licensing because they could not then properly control patents. They were afraid of low product quality.
James Elliot did not like Plainville as a long term solution because it is in a bad location and huge labor costs, warehousing expenses, and inadequate transportation links to Bytes customers. The advantages to moving there on a short term bases are: there is no need for any licensing, foreign or domestic, quality control remains firmly in the company’s hands, and increase in the product price will be unnecessary.
James Elliot the CEO of Byte Product, Inc goes in front of the board with the best idea and that is to go to Plainville until the state of the art facility is build in the southwest. It will take three months to get the factory up and running compared to three years. When the southwest building is finished then Byte Products closes down the factory in Plainville. Byte Product, Inc will not fall behind our demand for our products.
The solution is to go for the short term manufacturing facility in Plainville.
Now it is not down to a legal stand point but a moral one. Kevin William is one of the outside director that brought to Elliot attention that this not a solution. Mr. Williams wanted to bring to Mr. Elliot attention was another firm went into that factory many years ago and the town was great. Then that company moved out eight years ago and the town is gone. Then Byte Products is going to move in there and it is going to happen all over again.
Byte Products is going to hire 1200 or more people and will affect about 4,000 people counting families. Then the town will be booming and buildings will go up. Then value of the town will be better, and when the three years are up the town is gone.
When Byte Products closes the plant in Plainville they should give all the workers a severance package. Keep the plant going for the full three years and then tell the employees that the company is not making money off the Plainville’s factory. Close the factory slowly. Maybe Byte Products might find top management out of Plainville. Give all the employees could get stock options in the company. Just look for another factory to rent out.
Since there are more firms in the industry, and Byte Products has 32% of the market share. Byte Products, Inc could look at some of the other companies to merge with or buy out right. Then Byte Products will not fall behind in their demands.
The board does not agree on the Plainville’s factory because of endangering the community and could hurt the company in the future. Short term solution does not always help the company in the long term. The Plainville factory is not a good idea unless the company does not plan to close it within three years or when the other main building is done. I think since the company owes some much of the market share they should buy out one of their competitors.