Decision to set up of a new company diversified into downstream business

Once there was a large organization supplying a lot of raw material to its customers who were then make use of such material to produce their products and supply to the end user market. The organization was very good in controlling its quality and being a leader in the market, it took a major share of the market.

New companies appeared and getting into the same business as the organization and the market become more competitive. One of the major problem faced was that those new companies do not manage to achieve as good quality of product as the organization, and for capturing the market, those new companies started to cut down in their price supplying to their major customers who were once the customer of the organization.

As a leader in the market, the organization will then have to make a serious decision on what they should do. They basically had only two options:

1. To slash down their profit and sell at cheaper price to their long timer customers.
2. To maintain their market pricing, in which they will most likely lost their customers who are looking forward for cheaper supply to those newcomer.

This is a very important decision and it includes a lot of inter-related complication. The organization, however finally decided to maintain their market status and decide to get into setting up new business which is downstream of their existing business so that they can be their won customer. This can only be done if the organization is large and very rich. As this is the fact and thus they manage to set up a new company.

Beside financial stability, human resource is one of the major prerequisite. As the organization was supplying material to its customer and they have a great lab which carried out various study and analysis to help their customer developing their product, there were quite a number of technical staffs who are familiar with technical requirement of the downstream products. Thus the organization finally picked one of their competent staff from technical department and started their process to set up a new company.

Moral of the story:
This is same as one of the teaching in 5000 years old I-Ching teaching which sound as "Qiong ze Bian, Bian ze Tong"(穷则变，变则通).
Literally, it means "once you come to the end of a certain path and found to be no way out, change your self and somehow there is a hidden path waiting for you.". To make it simple, it means "Think out of the box" whenever you run out of idea.