The Solution!
One recommendation that has come to the attention of the Chief Executive Officer could help solve Byte’s problem in the short run. Certain members of his staff have modified him that an abandoned plant currently is available in Plainville, a small town in the northeastern United States. Before its closing with years before, this plant was used primarily for the manufacture of electronic components. As is, it could not possible be used to produce Byte products, but it could be inexpensively, refitted to do so in a few as three months. Moreover, this plant is available at a very attractive price. In fact, discreet inquires by Elliott’s staff indicate that his plant could probably be leased immediately from its present owners because the building has been vacant for some eight years.
All the news about this temporary plant proposal, however, is not nearly so positive. Elliott’s staff concedes that this plant will never be efficient and its profitability will be low. In addition, the Plainville location is a poor one in terms of high labor costs (the area is highly unionized), warehousing expenses, and inadequate transportation links to Byte’s major markets and suppliers. Plainville is simply not a candidate for a long-term solution. Still, in the short run, a temporary plant could help meet the demand and might forestall additional competition.
The staff is persuasive and notes that this option has several advantages: (1) there is no need for any licensing, foreign or domestic, (2) quality control remains firmly in the company’s hands, and (3) an increase in the product price will be unnecessary. The temporary plant, then, would be used for three years or so until the new plant could be built. Then the temporary plant would be immediately closed
CEO Elliott is convinced.