Bottleneck

Your client is a bottle manufacturer supplying beverage company X. X is considering a tie-up with the IPL that could double bottle demand, but the client cannot meet the potential volume with current capacity. The client must choose between placing an outsourcing order now and investing in an R&D software upgrade that may be delayed; assess the options financially and recommend a course of action.

Compare the expected profits of outsourcing, investing in R&D, and doing neither, then assess the value of being able to delay an outsourcing commitment until the tie-up decision is known.