Wayside

Bradford Industries Ltd. (Bradford) located in Bangor, Maine, was a producer of non corrugated boxes of fisheries industry. In March 1993, Bob Stevens, the owner and president of the company, was faced with a crucial decision regarding the firm’s future direction. He had just received the results of a major marketing study done by a firm of outside consultants.

Bob was assessing several alternatives: to invest in a new plant, thereby increasing the productivity; to upgrade production equipment, thereby expanding into new markets; to do both; to wait for another year before reaching a decision; or to investigate divestment opportunities. The facility and equipment expansion projects were of comparable size, and both appeared attractive, but Bob had to be realistic about firm’s available resources.

BACKGROUND:

The Northern New England market for non corrugated packaging was almost evenly divided into institutional and consumer segments. The institutional market segment was a low-margin, low-technology commodity business dominated by the regional producers. Half of the institutional segment was in the fish industry, with the balance in miscellaneous near markets. The higher-margin, higher technology consumer market was dominated by non corrugated producers. The regional institutional market was under pressure, while the non regional consumer market showed a bright future.

Bradford was a successful company within the institutional market segment, with an account base that was primarily composed if fish processing plants. The company had established itself as the market leader in Maine for 5-20 pound, wax coated, non corrugated institutional fish boxes. However, dependence on this market segment presented some inherent difficulties to Bradford:

* The fish processing business was seasonal. Several profitable months of positive cash flow were followed by several months of negative cash flow.

* The fish processing business was in crisis, with demand expected to...