CASE STUDY: LIGHTWORKS OPTICS

Discussion Questions:

1. What is the problem or issue facing Dan Barber and the management team?
The founders of the company, Lightworks Optics, aspire to sell their shares to the ESOP trust in a
leveraged
buyout in 2012, in order to follow that plan they need to improve its revenue and profitability
significantly
starting from now(2007).
The current issue they are facing is whether to expand the production facility to handle High
Volume
Production Facility, if so what kind of path they need to follow.

2. Who are the parties to the focal decision, and what are their interests?
- The parties to our focal decision are the employees. Since it’s an employee-owned
environment in the company, the support of whole organization was critical. All of them
basically wanted to not make any changes and were comfortable doing business as it was.

3. What are the advantages and disadvantages of each of the options presented in Exhibit 7?
- Option 1 - No change was the most preferred option by most of the management team so no
conflicts in between the team.

- Option 4 - Makes it easier for engineers and quality inspectors to go back & forth as various
projects dictated, But it does not necessarily satisfy DCAA requirements. Also, revenue increases
to 18 to 22 million dollars so it’s profitable

- Option 5&6 - Operating plant in Vista cheaper than Tustin, but not as cheap as Mississippi. But
still, it would satisfy the DCAA rules and enable the company to charge less for overhead.
Option 6 is a good plan with an expected revenue increase to $30M. and option 5 also is giving
increased revenue as compared to doing nothing.

- Option 7- Makes it easier for engineers and quality inspectors to go back & forth as various
projects dictated. May affect the culture of the business. Revenue increases but also extra lease
gives a cost to the company.

- Option 8 - Opening a plant in Mississippi (low labor cost region) would be expensive initially
but has the potential of lowering labor costs significantly over the long term. May not be able to
maintain it’s ownership culture.
4. What do you think Dan Barber and the management team should do next, and why?

- They should keep the present business running because if they expand, the employees will not
be happy with the decision and might lead to the loss of company culture (which is the core
value of the company).

- The core values matter more than looking at the profit right now.