Ateneo de Davao University
E. Jacinto St. Davao City

CASE 1:

THE RECALCITRANT DIRECTOR AT BYTE PRODUCTS, INC.:
CORPORATE LEGALITY vs. CORPORATE RESPONSIBILITY

In partial fulfillment of the requirements for
MGT 426: Strategic Management
2:35 pm – 3:35 pm / MWF / C306

Members:
Castillo, Nikka Paula C.
Esparagosa, Maribeth
Morta, Winadel B.
Panaligan, Rosemarie D.

December 2, 2015

I. Background of the Study
Byte Products Inc., which is located in the Midwestern part of the United States, is known to be the largest producer of electronic components which is mostly used for sophisticated business and engineering applications. Byte Products, Inc. has been the top producer in the industry because it has secured a spot on the electronic computers market getting 32% of the market share. Their strong market share has consistently given them an annual increase of their revenues which eventually lead to total sales of approximately $265 million. Byte products currently have three (3) plants operating at full capacity. Because of the increasing demand of their products, Byte cannot simply meet the increase in demand. Several members of the board had presented solutions to the problem, but some has objected to the proposals.

II. Problem Statement
What strategy should Byte Products, Inc. implement in order to meet its demand problems and maintain its status as the industry leader of producing specialized electronic components?

III. Point of View
James M. Elliot, CEO and Chairman of the Board, recognizes the gravity of the problem in meeting the demands of its customers. He strongly believes that the three year period of the construction of a new plant is far too long thus insisted that a new solution for the problem be presented. He rejected the proposal of licensing Byte’s product to other manufacturers and overseas facilities. He considered one proposal which is to take over an abandoned facility in Plainville.

IV. Objectives
The objectives of this case are the following: * To come up with a strategy that addresses the dramatic surge in demand of Byte products * To come up with a strategy that is not only legal but also ethical.

V. Areas to Consider
STRENGTHS:

1) One of the largest volume supplier and industry in producing specialized electronic components for personal computers that are used for sophisticated business and engineering applications 2) Leader in electronic components industry (32% market share) 3) Very high total sales approximately $265 million

WEAKNESSES:

1) Lacking facilities to meet the growing demand of customer 2) No strategy for short term problems

OPPORTUNITIES:

1) Growth of its market 2) The ability to generate employment and livelihood in surrounding community 3) Company expansion can increase production of goods and lower the price

THREATS:

1) Increased number of competing firms 2) Instability of the market

VI. Alternative Courses of Action
ACA 1: Licensing bytes product and process technology to other domestic manufacturers
Pros: In the short run, Byte Products, Inc. will be able to immediately produce more products to meet the high demand.
Cons: Licensing entails additional cost and this cost would most likely be shouldered by the customer because the additional cost will be added to the basic price of a certain product. Increasing the price of their products because of the premium cost will drive away customers and will be forced to buy from competitors offering cheaper prices.

ACA 2: Overseas facilities and licensing
Pros: If Byte was to focus on increasing revenues and at the same time meeting the increasing demands of their product, licensing could provide guaranteed revenues. In a licensing agreement, different guaranteed licensing types of payments can be used as long as the licensee pays for the right to hold the license to the licensing company.
Cons: Top management’s concern is that they are not willing to risk licensing their products giving away proprietary information about how Byte operates in producing the electronic components. They are also concerned that there would be a possibility of a decrease in the quality of the product produced by the licensed company.

ACA 3: Take over an abandoned facility available in Plainville
Pros: Byte can temporarily occupy the abandoned facility to be able to produce the products to meet the increasing the demands, without sacrificing the quality of their products. The cost for producing the products would be the same thus, retaining the price of each product.
Cons: The facility is located in a place where it has been abandoned for more than 8 years now; this would entail higher labor cost, warehouse expenses and difficulty in transporting the goods because of lack of direct channels and transportation to their suppliers.

VII. Recommendation/Conclusion
Among the three alternative actions presented, the most feasible would be the ACA 3: Take over an abandoned facility available in Plainville. ACA 3 is the most feasible but still there are reservations to this course of action. Employing more than 1,000 workers would mean attracting more than 4,000 people to live in the town once again after leaving to seek employment outside Plainville. If Byte will stick to their original plan that is to use the abandoned plan for only three years just to meet its current demands in the short run, there are certain dilemmas the company would face. First, they would have a difficulty in finding creditors that would help them finance the project because they will only operate for three years. Secondly, their credibility would be questioned due to gross irresponsibility. What will happen to its employees after they will stop the operation? How about the community itself? Stopping the operation after three years would only repeat what happened to Plainville eight years ago. Due to these circumstances, we recommend that Byte should take over the abandoned facility not only in a short run but should also consider it for a long run.
Instead of shutting down the Plainville facility, they can also have the option not to shut it down after its original plan of operation for three years. This is in line with the opportunities presented in the case that Byte has the ability to generate employment and livelihood. Before doing so, they must first conduct a strategic plan as to determine the feasibility of continuing the Plainville operation in the long-run. Byte did not only help people get jobs but also did a favor for Plainville in bringing back what was once a community.
Taking risk is always a part of doing business. Our recommendation for Byte’s case would entail that they take the risk of operating in Plainville in a long run. Doing so will not only benefit their company but also doing something in return for the community. Besides, three years is a long period to make necessary adjustments and come up with a better strategy to create a market in Plainville. Also, we see the risk as worth trying for because if operating in Plainville for a long run will be a success it would help create opportunities for other industries to do business in Plainville. One example of this opportunity is the possibility of opening a better transportation link in the community. Lastly, the consideration of operating in Plainville for a long run is a decision which does not only entail making profit but also a decision that is ethical and socially responsible.