Question 1: a) Why does the company debate whether they keep the Rockford plant or not? Explain b) Identify the advantages and disadvantages of closing the plant down from the stakeholders' perspective. c) In addition to cost, what would be the additional factors that you need to consider?

Answer 1 Gonzales Co. is currently producing computers and printers where its’s Rockford plant is used for production of printers. It is observed that the plant is not able to generate any gains in last several years and company is burning its funds on the plant. Therefore, to stop the burning of funds on the plant, it is very important for the company to decide whether company should close the plant. It is very critical for the company to take the plant closing decision because there are some expenses which will still continue even if company closes the plant and therefore company has to compare current losses with the losses it will make after closing the plant. Therefore, company is debating to decide whether to close the plant or not. The company is also required to consider all stakeholders because the plant closure decision will affect all the stakeholders. Some stakeholders will enjoy advantages and some stakeholders will suffer disadvantages due to closure of the plant. Therefore, from the stakeholder’s perspective, following are the advantages and disadvantages. Advantages: Shareholders will save their money invested in the company as company will stop burning money on this loss-making plant and so it will eventually result in higher value to shareholders. Coca-Cola is in urgent need of storage near its factory and if Rockford plant is closed down, Coca-Cola will get storage facility for its products and therefore plant closure is advantageous for Coca-Cola. Disadvantages: Labors (Direct and Indirect) who are working in the plant for production of printers will have to leave the job as the plant closes and therefore plant closure will be disadvantageous for them as they will have to search new job. Direct material suppliers will lose the customer for their material and therefore plant closure is disadvantageous for them. Advertisers will also lose the income from company if company closes the plant. While taking important decision to close the plant or not, the company needs to consider costs as well as other factors which are not related to costs but are still important. Following factors other than costs that the company should consider: The company may lose huge customer base who purchase printers from company as the printers are produced only at this plant and if company closes this plant, then whole customer segment will go to competitor. This may have effect on sale of other products produced by the company in the minds of its customers. There will be legal consequences when company decides to close the plant. Company needs to take care that it’s decision is in accordance with the labor laws. As many labors will lose their job, there may be some legal consequences to the company.