¶ … Jeff should give greater priority to a smaller facility with possibility of expansion or more into a larger facility immediately.
Jeff should give priority to the larger facility. The larger facility offers Jeff much more benefit over its initial cost, relative to the smaller facility. As eluded to within the case, the demand for Jeff's business is growing exponentially. Research has shown that data is growing at nearly 30%-40% per year in many companies. According to computer world, in 2011 alone, 1.8 zettabytes (1.8 trillion gigabytes) of data will be created in America. This number is equivalent to every U.S. citizen writing 3 tweets per minute for 26,976 years. In addition, over the next decade, the number of servers managing the world's data stores will grow by ten times (Mearian, 2013). Jeff therefore will need an operation to handle the coming wave of data so that he can adequately serve clients. A study conducted by the IDC indicates that by 2020, overall date will grow by 50 times. Furthermore, Since 2005 annual investments by enterprises in hardware, software and cloud services technologies, along with the staff to manage information, has increased 50% to $4 trillion. Even banks around the world are investing extensively for the impending demand of big data (Hargraves, 2013). Concepts such as big data prove that the need to put paper documents on CD's is growing. Companies are becoming more reliant on technology as competitive forces create massive demand for miniaturization and seamless transfer of information. Companies are therefore willing to spend large amounts of money for the proper storage and handling of sensitive information. As information grows at the indicated level of the IDC report, Jeff must be ready to serve his large clients in an appropriate and timely fashion. As such, the large facility will facilitate the overall growth in data and the need to put it on CDs. Social data is also becoming important for companies as they utilize social networking to better ascertain consumer sentiments regarding a product. All of these trends bode well for Jeff and his business. Data is growing exponentially. Therefore, Jeff will need a bigger facility to house the coming trend in data usages worldwide.
In addition emerging markets will also take part in the pending globalization of business activities. Jeff's business relies extensively on delivery of documents and other forms of paper documents. As such geographic boundaries are in many instances nonexistent. A company with global operations can easily send information to Jeff's location in the same manner a domestic company can. The price to ship documents and the time lag will be much higher for the international business. However, innovation could help abate or diminish the influences of these negative impacts. Emailing encrypted data in a zip folder, documents that will be transferred to a CD, would be a viable option. As such, Jeff will need a bigger facility as international companies become interested in his services.
Finally, a bigger facility will help Jeff financially due to economies of scale. In general, many of Jeff's expenses are fixed in nature. The facility, the equipment needed to transfer information to the CD's, the scanners, and the computers are all fixed assets (Sullivan, 2003). As such, their price remains relatively constant over time. By producing more units over a large amount of fixed costs, the cost per unit decreases. For example, assuming that Jeff's fixed costs are $100. The cost of using the fixed assets will remain $100 irrespective if Jeff produces 10 CDs or 1000 CDs. If Jeff only produces 10 CDs the unit cost per CD will be $10 ($100 in fixed assets divided by 10 CDs). However, if Jeff produces 1000 CDs, the unit cost per CD will be 10 cents. Using the information from above, Jeff can reasonably expect more demand for his services. Therefore, it is also reasonable to assume that Jeff will produce more CDs over his fixed cost structure....
growing company specializing in transferring the hard copies documents such as bills, invoice and mailing list into CD. Since Data Tech has started the operations, the company is enjoying stream of orders as more companies are migrating into paperless environments. Jeff started the company in his two-car garage and was able to sign a contract with two large corporations. He was also envisaging signing another contract with another corporation.
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