Byte Products, Inc.

Overview

The names of the organization, individuals, location and financial information for this case analysis have been substituted to preserve the original organization’s desire to be anonymous. Since this is a fictitious company there were no information available for research, all information is based on the case study.

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 Elliot’s concern and suggestion for the short range solution.

There were several solutions presented to Jim Elliot. The first solution was to license Byte’s 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 Byte’s 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