In March 2015, the managing director of VariCut Electronics Component Company in Shanghai, China, was contemplating whether the company should shift its business focus from label printing to label printers. Because of fierce competition and a slowdown in the company’s 12-year-old label manufacturing business, the company was finding its competitive advantage hard to sustain. In contrast, the company’s emerging business of producing label printers had been doing well, with 30 per cent annual growth. Although the label manufacturing business had begun to struggle, it was still the main source of company revenue (80 per cent). It was uncertain whether the company’s survival and growth could be sustained if it decided to give up the label manufacturing business in order to focus on label printers. Should the company give up the label manufacturing business to make way for the label printer business? Or should it consolidate the two businesses and transition to the label printer business gradually?
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