Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Section C
Case Notes
Case 1
The Recalcitrant Director at Byte, Inc.
1-
2
Corporate Legality versus Corporate Responsibility
I. CASE ABSTRACT
Mr. James Elliott, CEO and Chairman of Byte Products, Inc., presents his
recommendation to the Board of Directors to purchase an existing plant in
Plainville as a temporary plant until the new one is online in three
years. All on the Board, except one (10–1), seem to favor the proposal.
What ensues is the discussion between Elliott and Kevin Williams, board
member, over the proposal to purchase a plant with the intention of
closing it in three years.
Byte Products has three existing plants operating at full capacity
(twenty-four hours a day and seven days a week). The new plant proposed
to be built in the southwestern United States will require three years
The discussion between Elliott and Williams focuses on the impact on the
town and on the potential 1,200 employees of opening this temporary
II. CASE ISSUES AND SUBJECTS
Corporate Governance
Local Community Strategic Alternatives
Board of Directors’ Role Communications
III. STEPS COVERED IN STRATEGIC DECISION-MAKING PROCESS
(See Figure 1.5 on pages 52 and 53)
Case 1
The Recalcitrant Director at Byte, Inc.
1-
3
Strategy Formulation
Strategy
Implementation
Evaluation &
Control
IV. CASE OBJECTIVES
1. To discuss the social responsibilities of a corporation regarding
the opening of a temporary plant and it is closing on (a) town, and
(b) potential employees.
2. To illustrate the role of board members in strategic decisions.
6. To show how one vote of dissent can sway a vote of the board after a
long discussion of the pros and cons of a proposal. Point: the
V. SUGGESTED CLASSROOM APPROACHES TO THE CASE
1. We ask the students to vote on the pending proposal before the board.
2. This case is excellent as an open class discussion case. We get a
3. Divide the class into two groups representing Elliott and Williams.
Case 1
The Recalcitrant Director at Byte, Inc.
1-
4
5. Have the class list all the corporate stakeholders who will
be affected by this decision. List all the alternative
solutions and how each group will be affected.
VI. DISCUSSION QUESTIONS
1. If you were one of the board members, how would you have initially
voted for the proposal? What would your vote be after the recess in
the meeting? Why?
2. Should the Byte executives tell the town administration and potential
employees that this is a temporary plant for three years?
VII. CASE AUTHORS’ TEACHING NOTES
None were available for this case.
VIII. STUDENT STRATEGIC AUDIT/STUDENT PAPER
A lack of solid planning and forecasting has resulted in Byte’s
current facility shortage. Construction on a facility that will take
three years to complete, should not begin when current facilities are
working at 100 percent capacity around the clock, and demand continues
to escalate. The state-of-the-art facility, to be located in the
southwestern United States, will supply enough capacity to meet demand
when it opens in three years, but it does nothing to stem the tide of
Case 1
The Recalcitrant Director at Byte, Inc.
1-
5
abandoned for eight years.
Elliott is aware of some problems with the proposed plant. The plant
would never be an efficient producer of Byte products. Profitability
Another option available to Byte is licensing, both domestic and
international, of Byte product and process technology. Domestic
licensing would result in higher production costs and lower margins
since the higher costs could not be passed on to the customer without
losing market share. International licensing goes against Byte’s
philosophy of remaining a domestic operation. Additionally, patent
issues could not be properly protected in the international
environment. Finally, both domestic and international licensing could
result in lower product quality—another threat to Byte’s market share.
Opposition did come in the single, but very strong voice of Kevin
Williams, an outside director, who vehemently opposed the temporary
facility on the basis of corporate responsibility. Williams stated the
Examining the issue from an objective position, several items appear
to require discussion. The temporary plant may supply enough products
to meet demand, but the location is far away from the market.
____________
Reprinted by permission of the authors.
This may ultimately cause distribution and service problems. For the
employee, the temporary plant is not a good solution. Not knowing the
Case 1
The Recalcitrant Director at Byte, Inc.
1-
6
The location of the temporary plant tends to make it ineffective. Lack
of warehousing facilities and transportation systems add to the
A thoughtful consideration of all the issues involved, with the
opening of the temporary plant in New England, reveals much
conflicting information. In some ways, as compared with licensing, the
temporary plant seems like the solution. In other ways it seems like
Byte would just be starting more problems. Both licensing and the
temporary plant share the same drawbacks: high production costs, lower
Recommendations
Opening a new temporary plant may be an ideal answer to the lack of
capacity, but the New England location is far from ideal. Elliott must
weigh the problems associated with the new plant to the benefits of
increased capacity. If all forecasts confirm the need for the
increased capacity before the new state-of-the-art facility opens in
three years, then perhaps Elliott should seek an alternative location.
Since the new plant will be located in the southwest, perhaps
temporary space could be found there. Another alternative would be to
plan the production of the new plant to open in stages. Perhaps that
IX. EFAS, IFAS, AND SFAS EXHIBITS
Were inappropriate for this case.
Case 1
The Recalcitrant Director at Byte, Inc.
1-
7
X. FINANCIAL ANALYSIS
