Sustainability

To build a more sustainable firm, Arborite must consider the following four factors.

Durability

In a capital intensive industry such as HPL, the fixed assets, including the facility and equipment will continue to retain its value. Most players in the space are able to compete from a capital perspective and with newer machinery, the overall cost of production will be lower. A new state-of-the-art facility costs $70 million while a smaller option costs $35 million with an adjusted 150% in variable cost. Arborite can explore these options, but there is evidence this may not be the most important issue to address. With Arborite’s older machinery, maintenance and plant overhead may be a concern. However in terms of unit production, neither maintenance nor plant overhead cost varied with increased volume at Arborite’s larger plants. This suggests that Arborite’s facility and equipment is durable and they can continue to produce at the rate of their competitors while keeping costs low.

Transparency

From an operations perspective, the HPL creation process is very transparent. The basic manufacturing method has not changed for 20 years and as indicated by Exhibit 7, the competition has optimized their operational cost in each of these areas, most of which is contributable to the newer facilities and equipment.

Transferability

From a cost perspective, Arborite has advantages in marketing and sales. However, this does not provide them with a sustainable advantage. Compared to the rest of the market, the marketing and sales team lack training and reach. While competitors are speaking with architects, designers, and OEMS, Arborite is providing high level service with no sales incentive or specific targets. Although this decreases cost, it results in less revenue opportunity in the long run. A plan must be put in place to alter the culture of the firm and more specifically, the sales and marketing department.

Replicability

A sustainable advantage for Arborite is their...