Trans-America Paper Company
Trans-America Paper Company
Upgrading the current plant in Malaysia is a good decision for Trans-America Paper Company (TAPC.) The facility will get a billion-dollar upgrade from WIG, and TAPC invests no capital whatsoever. In addition, the only major negative economic impact is the undetermined loss of profit in the profit split with WIG. However, just upgrading the plant is one-half of the best decision. TAPC’s mission statement is clear. The priorities of the company are, in order of importance, “economic, environmental, social, and governance development.” Therefore, by basing the decision solely off the mission statement, TAPC should also build a co-generation plant to produce electricity. By pursuing both options, TAPC maximizes its priorities - long-term return on investment, social responsibility, and positive environmental impact.
Short-term profitability
In America, the primary objective of a publicly owned company is to create wealth for shareholders. TAPC’s mission statement reflects that belief. However, to be precise, the objective of TAPC is to create wealth through “superior long-term profits and improving equity long-term.” As a result, for TAPC, the immediate profitability of a decision is not as important as the long-term sustainability.
The decisions to upgrade the current facility with WIG and build a co-generation plant will negatively affect the firm’s immediate profitability. For instance, the decision to split profits with WIG (51:49) will reduce the profit made on the facility. In addition, there will be reduced productivity because of the construction processes on both facilities. Moreover, the capital investment to build the co-generation plant will only further limit the immediate profitability of the facility. Therefore, this combined option has no short-term benefit.
Sustainability of Profit
While the decision to pursue both options has no short-term benefit, short-term profit is not the priority of the company.
Upgrading the current plant in Malaysia is a good decision for Trans-America Paper Company (TAPC.) The facility will get a billion-dollar upgrade from WIG, and TAPC invests no capital whatsoever. In addition, the only major negative economic impact is the undetermined loss of profit in the profit split with WIG. However, just upgrading the plant is one-half of the best decision. TAPC’s mission statement is clear. The priorities of the company are, in order of importance, “economic, environmental, social, and governance development.” Therefore, by basing the decision solely off the mission statement, TAPC should also build a co-generation plant to produce electricity. By pursuing both options, TAPC maximizes its priorities - long-term return on investment, social responsibility, and positive environmental impact.
Short-term profitability
In America, the primary objective of a publicly owned company is to create wealth for shareholders. TAPC’s mission statement reflects that belief. However, to be precise, the objective of TAPC is to create wealth through “superior long-term profits and improving equity long-term.” As a result, for TAPC, the immediate profitability of a decision is not as important as the long-term sustainability.
The decisions to upgrade the current facility with WIG and build a co-generation plant will negatively affect the firm’s immediate profitability. For instance, the decision to split profits with WIG (51:49) will reduce the profit made on the facility. In addition, there will be reduced productivity because of the construction processes on both facilities. Moreover, the capital investment to build the co-generation plant will only further limit the immediate profitability of the facility. Therefore, this combined option has no short-term benefit.
Sustainability of Profit
While the decision to pursue both options has no short-term benefit, short-term profit is not the priority of the company.