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 3–shift 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 company’s overall supply is unable to meet the demands of its customers which can cause a negative impact on the company’s 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 company’s 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 company’s 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 7–4, or 6—5 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 company’s part and it would later do serious damages to the company’s 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.