Managing Declining Businesses

The factory was five years old and was already a strategic misfit. It had become ill‐suited for processing the raw materials the company could hope to buy. Although the factory operated efficiently enough, it could only process those particular grades of crude materials that were becoming increasingly scarce, hence expensive. Faced with insufficient long‐term supplies of the appropriate raw materials, the company's management recognized that the plant—indeed the entire business—was probably doomed to obsolescence within the next fifteen years, but it could not shut down the plant immediately. The company kept the obsolete factory operating while facing an uncomfortably near‐term horizon date and an unpleasant strategic choice regarding its future participation in this industry. While it deliberated, the company tried to avoid losing many of its key workers and valued managers who might leave if they knew that exit or abandonment were being contemplated.