• Fresh Juice Industry (Tianjin) – Decision Making in the Face of Rising Rents

Abstract

Sunjuice Co., Ltd. expanded its new factories in Tianjin and Guangdong in 2014 due to the insufficient capacity of its headquarters in Kunshan plant. For these two sites, the company decided to start with plant rental and then to buy the land for building its own factory if given a promising future. The construction of the new plant was suspended for half a year due to the haze control reinforced by the government, resulting in a serious delay in the progress of the project and need to extend the lease. At this time, the landlord requested to raise the monthly rent from RMB120 thousand to RMB300 thousand. Mr. Ming-Hsien Wu, the general manager rejected this rent increase since it was unreasonably large and much higher than the average rent in the nearby area. In the face of the landlord’s arrogance, Fresh Juice Industry (Tianjin) had to promptly figure out feasible actions and use the decision-making process as the basis for judging the options. What would the options for Tianjin Fresh be at this time? Among those options, what factors should be taken into account? And how should decisions be made?

Keywords: Decision Making, Transaction Cost Theory, Cost Forecast, Rent Increase, Production Capacity