Masters Technological Institute of Mindanao

Department of Accountancy

Case 1: The Recalcitrant Director at Byte Products Inc.: Corporate Legality versus Corporate
Responsibility

Case Analysis

Jay Rachel V. Pingke

Danna Pearl Suico

Raimah Saidamen

Landia Taib

Francis Loie Repuela

Moh’d Al-Fatih L. Moh’d Qasem

GOOD GOVERNANCE & CORPORATE RESPONSIBILITY

MGT 108 (A)
 Mr. Jonie A. Jumamil

October 17, 2020

I. Perspective Held and Objectives

This case study will analyze the insufficient planning of Byte Inc. resulting in a facility shortage/
deficiency.

II. Statement of the Problem

A.         Main Problem: Increase in Demand.

B.         Sub-Problems

1. A. New competitors in the market. 

2. B. Byte lacks facility to increase its production.

3. C. Buyers will look elsewhere for products.

III. Relevant Case Facts and Analysis

Byte Products, Inc., the industry leader in the production of electronic components usually used in
personal computers. Byte produces products that are commonly found in computers used for
business and engineering applications. Byte Products, Inc., was a privately owned firm and entered
to be a publicly traded company. It has always been the leader in this industry for the past six year
with consistent yearly revenues. Unluckily, due to a surge in demand, it allowed many new firms to
enter into the industry and have cause an increased number of competing firms. And unfortunately,
Byte simply cannot meet the demands for these computer components.

James M. Elliott, Chief Executive Officer, recognizes the severity of the problem and states that if
Byte cannot afford to postpone its increase in production. Then, Byte is in need of another facility to
be able to meet this 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 cannot increase its output. If the lack of production from Byte
continues, buyers will look elsewhere for products. It will simply allow newer firms to threaten
Byte’s current production leadership status, and will definitely increase the number of competing
firms.

IV. Alternative Courses of Actions

Mr. Elliott then made the decision to construct another manufacturing plant to produce
sufficient product to meet the demands of the customers. The new manufacturing plant to
be built and become fully operational this process would take three years. A three-year
delay period will be deadly, as their share of market will suffer.

Mr. James Elliott, 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. He then 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 favor of the
proposal.

V. Decision Analysis

A number of suggestions were made for a temporary measure, but they were all turned down
because it seemed too risky. For example, the town and the townspeople had gone through a
catastrophic closing 8 years ago when the plant in question was closed. 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. It will then be the impact on the town and on the potential employees needed in
opening this temporary plant.
Opportunities:

* The company would be able to provide the products which are in demand thus maintaining their
market share

* Job creation for the people in that vicinity of the plant.

* More families would migrate to be closer to their jobs, which would bring in revenue for the
community

Threats

* 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

VI. Conclusion

After reviewing the possible options, I will not be in favor for the opening of a
temporary plant for the three years. Though the temporary facility should be able to supply
enough outputs to meet current demand, the temporary plant had a few shortcomings. The
risk of having a temporary plant will definitely contribute to a higher costs and lower
profits. Since, the facility would be closed down it 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. The proposal will only create a long-term negative impact on the
community when the company close its doors after three years.

On the other hand, if and only the board do votes for the reconfiguration of the temporary plant,
I believe they should tell the employees that this is just a temporary plant for only three years
due to corporate responsibility. It would have been an unethical behavior on the company’s
part if the employees were not told the truth about this project. 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. The impacts that would have been passed on the company’s
image and resulted in undesirable outcomes to the health of the company in the later future.
VII. Recommendations

I would rather suggest for Elliot to do a complete analysis on the matter, for e.g. production
cost, start-up cost, maintenance cost as well as the profit margin. And 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. Elliott and other board members should try to come up with a win-win
better proposal to the two parties involved to be able to deal the supply shortage problem.

VIII. References
Executive-Summary-The-Recalcitrant-Director-at-Byte-Inc
https://www.chegg.com/homework-help/questions-and-answers
https://www.termpaperwarehouse.com/essay-on/The-Recalcitrant-Director-At-
Byte-Products