Should ABC build a second e-waste factory?

Should ABC build a second e-waste factory?

• A. Expansion should be automatic regardless of market conditions.
• B. Expansion should only occur if marketing demands it.
• C. Expansion is never advisable.
• D. ABC should consider expansion if demand, supply of e-waste, and profitability are strong, but it should also assess risk, costs, and whether the competitive advantage is durable.

Answer: (D)

Expanding capacity should be based on a clear view of future cash flow, not just optimism. For a second e-waste factory, you’d want strong signs of demand for processing, a reliable and growing supply of e-waste to feed the plant, and a profitability outlook that justifies the investment. But you don’t stop there: you must also weigh the costs of building and running the new facility, the risks involved (like construction delays, higher financing costs, regulatory shifts, or price volatility), and whether your current competitive advantage can be sustained with more scale. If demand, supply, and profitability look solid and your competitive edge is durable, expansion is sensible. If any of these elements are weak or the risks too high, it’s wiser to proceed cautiously or not at all.

Expanding capacity should be based on a clear view of future cash flow, not just optimism. For a second e-waste factory, you’d want strong signs of demand for processing, a reliable and growing supply of e-waste to feed the plant, and a profitability outlook that justifies the investment. But you don’t stop there: you must also weigh the costs of building and running the new facility, the risks involved (like construction delays, higher financing costs, regulatory shifts, or price volatility), and whether your current competitive advantage can be sustained with more scale.

If demand, supply, and profitability look solid and your competitive edge is durable, expansion is sensible. If any of these elements are weak or the risks too high, it’s wiser to proceed cautiously or not at all.