Supply, Demand, and the Demise of Clark Foam

Essay by savanahbaby December 2006

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This analysis discusses an article by Price & Luna (2005) in which they discuss the sudden December 5, 2005 closure of Clark Foam, the maker of over 90% of the world's foam core material for the manufacture of surfboards. The abrupt closure caused a massive economic trickle down effect on the entire global surfboard industry, affecting surfboard availability, demand, price, and jobs. The controversial reasons for the closure involved allegations by Gordon Clark, owner of Clark Foam, and the role played by various local, state, and federal government environmental agencies.

In the early 1950s, Gordon Clark joined forces with Hobie Alter, designer of the Hobie Cat sailboat, to pioneer the very first surfboard made of foam covered with fiberglass. This design breakthrough rocked the fledgling surfboard industry by creating surfboards over 75% lighter than traditional wooden surfboards. Production of foam surfboards involved significantly less labor time and material costs, hence allowing for increased output.

The readily available supply of lightweight surfboards fueled a marked increase in the number of surfboards. With thousands of new surfers came the demand for more foam "blanks" produced by Clark and Alter. Clark realized the current and future potential of their product and in short order bought out Alter to form Clark Foam. The economic decision rule that Clark followed, marginal benefits exceeding marginal costs, was wildly successful. The product perfected by Clark in the early 1960s remained virtually unchanged until Clark Foam's recent closure, leading to Clark becoming one of the wealthiest persons in the surfing industry..

Clark notified his major buyers via a seven page fax that effective immediately all Clark Foam operations would cease. Clark cited "crackdowns" by government related to his manufacturing processes use of certain hazardous materials as the reason for closure. However, several government...