Overview

Byte Products, Inc., headquartered in the midwestern United States, is regarded as one of the largest
volume supplier for the production of electronic components used in personal computers. Byte Products,
Inc., was a privately owned firm that has now entered to be a publicly traded company. The majority of
the stockholders are the initial owners of Byte, when it was still privately owned. The products that Byte
produces are primarily found in computers used for business and engineering applications. Byte Products,
Inc., has been the leader in this industry for the past six year with consistent yearly revenues of 12% and
total sales of approximately $265 million. Byte also has 32% of the market share.
The Board of Directors is consisted of 11 members: James M. Elliot, the Chairman of the Board, 3 inside
members and 7 outside members. The economy is stable and profitable, but that also means a lot of
competition in the market. This poses a great opportunity for the company to grow and gain more of the
market share. The only foreseeable real threat that the company will face is new competitors in the
market.
Problem
Unfortunately for Byte the demand for these computer components have increased and Byte simply can
not meet the demands. This dramatic increase in demand has allowed many new firms to enter into the
industry and have cause an increased number of competing firms. Although Byte management and
shareholders are pleased with the profits and growth of the market, it still faces a major issue of the
increase in demand. Byte currently operates three manufacturing facilities that operate 24 hours a day,
with three shifts, and 7 days a week. This constitutes the maximum production capacity that Byte can do
and can not increase its output.
James M. Elliott, Chief Executive Officer, recognizes the severity of the problem and states that if Byte
cannot increase its productions, then the buyers will look elsewhere for products. Moreover, if the lack of
production from Byte continues, it will simply encourage other firms to enter the market.
Alternative Solutions
The Board of Directors unanimously voted for the immediate construction of a new state of the art facility
to meet the increased demands. Unfortunately, the construction of the new facility will take three years to

be completed. Jim Elliot recognizes this gap and believes that the three year gap will be too long and
suggests developing short range solution while the facility is under construction. Instability of the market
and pressure to maintain leader status are the two factors for Elliots concern and suggestion for the short
range solution.
There were several solutions presented to Jim Elliot. The first solution was to license Bytes product and
process technology to other domestic manufacturers to meet the immediate demands. The second solution
was overseas facility and licensing. The third solution was to take over an abandoned facility, located in
Plainville, and use it to meet the short term demands.
Evaluation of Alternative Solutions
The first solution was suggested to license Bytes product and process technology to other domestic
manufactures. The idea of having someone else produce the product seemed like a good idea to some of
the staff. The solution suggested that this will be for the short term or until the new facility is completed.
Even though the idea was a good one, top management, including Jim Elliot, does not approve of this
idea. The disapproval of this idea is because the manufacturer that would take this offer would also charge
a premium cost to recover from the fixed costs of producing the components for a short term. The extra
cost that would take to produce the products would then have to be passed to the customers and that
would not be sensible nor would it be acceptable. For these reasons Byte would loose market share and
would drive away customers to other competitors.
The second solution called for overseas licensing and facilities. This option was also rejected by the board
of directors and Jim Elliot. The founders of Byte Products, Inc., has always believed that the companys
manufacturing facilities will all reside as domestic and that this strategy has served the company well in
the past. The other concern that top management had with this solution was that it did not want to release
any technologies to any foreign manufacturer and Byte would have a difficult time in properly controlling
the patents. Top management also was concern about foreign licensing because it would give them
proprietary information about how Byte operates its efficient production line. The rejection of both
solutions was also due to the fact that top management believes the quality of the products will be poor
due to the fact that it was produced by someone else and that would hurt the image of the company.
The third solution was to take over an abandoned facility for three years and refit it to be able to produce
the products to meet the increased demands. The facility, located in Plainville, was primarily used to

produce electronic components before it closed eight years ago. The facility can be leased immediately
and for a reasonable price. Even though this solution seems like the best choice, there are a few
drawbacks for it. One is that it is has a poor location in terms of higher labor cost, warehousing expenses
and no direct channels or transportation to Bytes suppliers. Secondly, even with the retrofit of the facility,
it will never be as efficient as the other three current facilities that Byte has, thus this facility would
produce lower revenues. Although there are drawbacks to this solution, there are positive points to this
solution. One is that there is no need for any kind of licensing, foreign or domestic. Secondly, the
company will retain quality control on the components produced. Lastly, the cost of producing and the
cost to customer will remain the same.

The Recalcitrant Director at Byte Products, Inc.: Corporate legality versus corporate responsibility
About the Company
BYTES PRODUCTS, Inc. is an American based company involved in the production of electronic
components incorporated in personal computers, mostly used for business and engineering applications.
The company has three plants at different locations in the U.S.A, which totals a current sale of about $265
million and has a market share of approximately 32%, making them the leader in the industry.
Summary
Mr. James M. Elliot, the CEO and Chairman of the Board at Bytes Products, Inc, noticed that the
company was beginning to face a number of crises. The existing three plants run on a 3shift working
schedule of 24hours a day and 7 days a week using up all possible production hours. It has now come to
the attention of Mr. Elliot that even if the three existing plans are running at its maximum production
level, there is still a high product demand percentage that is not being met. The companys overall supply
is unable to meet the demands of its customers which can cause a negative impact on the companys by
not being able to maintain its current market share.
Therefore, because of this dilemma Mr. Elliott has returned to the drawing board in search of a solution to
this problem. Mr. Elliott then made the decision to construct another manufacturing plant to produce
sufficient product to meet the demands of the customers. In order for this new manufacturing plant to be
built and become fully operational this process would take three years. In addition, there has been an
increase in competition in their sector of activities and a three year delay period will be deadly, as they
will see their share of the market suffer.
A number of suggestions were made for a temporary measure, but they were all turned down because it
seemed too risky. For example, a license agreement cannot be considered due to potential risks of a drop
in quality of the products and at the same time the sale of the companys secret. A price increase neither
can be considered as it will drive the consumers into the competitors arms. With all of these struggles, the
perfect solution still manages to be found. He was informed about an abandoned plant in Plainville, a
small town in the northeast, which could be renovated to fit the companys production at comparatively
lowest costs in a period of just 3 months. It could be operated for 3 three years and then close with the
completion of their own building at this proposed location.
Mr. James Elliott, presented his recommendation to the Board of Directors to purchase the existing plant
in Plainville as a temporary plant until the new one is online in 3 years. All on the Board except one (10
1) seem in favour of the proposal. The discussion between Elliott and Williams focuses on the impact on
the town and on the potential 1,200 employees needed in opening this temporary plant. The town and the

townspeople had gone through a catastrophic closing 8 years ago when the plant in question was closed.
After a lengthy discussion between Elliott and Williams, a recess in the meeting is called.

When the board meeting is reconvened, a major shift has taken place. The vote could be 74, or 65 for
the proposal, but Elliott desires a unanimous vote. As the case ends, Williams is asked if a compromise
can be reached. He responds, respectively, I have to say no. Another dilemma is yet to be experienced
by Elliot: If they go through with the idea of the plant in Plainville, should he tell the Plainville
community, which had previously been severely devastated by the closure of the company who owned
that plant, that their plan is just for 3 years or should he go ahead without saying anything and begin
production.

External Environmental Analysis

External Environmental Analysis trends which are likely to affect the industry in which Bytes Products,
Inc is operating are as follows;
Opportunities
* Job creation for the people in that vicinity of the plant.
* The company would be able to provide the products which are in demand thus maintaining their market
share
* Local entrepreneurs are made possible, e.g. shops, restaurants etc..
* The existing businesses would have a boast in sales.
* More families would migrate to be closer to their jobs, which would bring in revenue for the community
* Real-estate prices may increase because it is now an industrial community
* Need for new schools in the area
Threats
* The plant would be closed in three years causing the employees to become unemployed
* When the plant is closed, the people are forced to migrate again looking for a job once more
* Businesses would no longer be profitable in this community with the decrease in population
* This may give the company a bad image
* Real-estate prices may drop
* Not a good location for a production plant

* Because the production plant is temporary the banks may not want to grant loans and other financial aid
to the workers at this new plant since it is temporary

External Factors Analysis Summary EFAS

External Factors | Weight | Rating | Weighted Score | Comments |

Opportunities |
* Job Creation | .20 | 5.0 | 1 | Creating income |
* Economic growth | .15 | 3.5 | .56 | Increased market value |
* Demographic increase | .10 | 4.5 | .45 | Population growth |
* New business ventures for community | .05 | 3.5 | .18 | Entrepreneurs |
|
Threats |
* Economic collapse | .15 | 2.0 | .30 | Hyperinflation |
* Loss of jobs | .15 | 1.5 | .26 | Temporary employment |
* Reluctant creditors | .10 | 1.5 | .15 | Short term contracts |
* Company stigma | .10 | 2.0 | .20 | Damaged brand name |
| 1.00 | | 3.10 | |

Conclusion
After viewing all the possible options, if I were one of the board members at Bytes Products, Inc., I would
have not voted for the proposal of opening a temporary plant for the three years duration of the
construction of the permanent plant. Even though the temporary facility should be able to supply enough
outputs to meet current demand for three years until the permanent manufacturing facility is completed
and is fully operated, apparently the proposed temporary plant had a few shortcomings. Though these
flaws would contribute to higher costs and lower profits; the facility would be closed down when the new
facility operated in three years. So the proposal would not do much harm to the company in the long-run,
instead it would help by resolving the supply shortage problem the company faced but creates a long term
negative impact on the community when the company close its doors after three years.
If the board do votes for the reconfiguration of the temporary plant, I believe the Byte executives should
tell administrators and potential employees that this is a temporary plant for only three years due to
corporate responsibility. If the employees were not told the truth about this project, this would be
considered as an unethical behaviour on the companys part and it would later do serious damages to the
companys image, and resulted in undesirable outcomes to the health of the company in the later future.
The impacts that would have been passed on to Plainville would be huge when it is time for the plant to
close its doors after three years.
If the proposal was unknown for the public, it would then bring thousands of people into the town to seek
employment in the factory. Then the sudden increased population would need new schools, instructors,
utilities, housing, restaurants, and so forth. After that, employees would start to buy houses and begin to
settle down in the place as permanent residency with their families. When the factory closes down in three
years, people would lose their jobs and people would begin to migrate in search of jobs to support their
family elsewhere.
Since there was no conclusion for the proposal, I would suggest Elliott to postpone the vote until the next
meeting. In the meantime, Elliott and other board members should try to come up with a better proposal

to deal the supply shortage problem. My suggestion for this problem is that Elliott should do a complete
analysis on the matter, for e.g. production cost, start-up cost, maintenance cost as well as the profit margin
to see if it is feasible to purchase the abandon plant and turn it into a permanent operational plant for the
company, Bytes Products, Inc. this would be a win-win for the two parties involved if it should be
feasible.