Axeon NV – group assignment
Group B1
Ami Albihn
Huijie Li
Jiaoru Qian
Patchara Thaisrivichai
Wenli Ye
Question 1: What do you feel about the initial
analysis? Was there, in your opinion, anything
wrong with it?
Seems reasonable:
• Clear proposal - easy to see how the project will be profitable
Actually not reasonable:
• The sales part is over-optimistic
• Analysis for sales based on confidence rather than evaluation
• The profitability view came only from the Hollandsworth perspective
Question 2: Is construction of the new factory
in the UK in the best interest of Axeon?
No. It is a better choice to keep the production in the Netherlands, because:
• Saved fixed cost
• In the Netherlands (production of 1000 tons will save £240/ton)
• Not building a new factory in the UK
• Increase of variable cost due to shipment to the UK can be compensated by a
decrease overall production cost
(£60 × 400 tons = £40 × 600 tons)
• The cost for building the new factory in the UK exceeds the cost for changing the
production in the Netherlands
• If the better quality AR-42 is only produced in the UK, it might create conflicts in the
the future
Question 3: Why did Mr van Leuven behave as
he did?
Approved at first:
• The proposal itself is profitable
Hold another meeting:
• Problems with the proposal: too optimistic of sales
producing complication
• Not express opinion: let managers express their own idea without influence
need more time for reflection and evaluation
Say different to other managers and Ian:
• Other managers: let them consider Axeon.N.V as a whole company
• Ian: let him feel that the result won’t only be influenced by Axeon Dutch
Question 4: Discuss what transfer price should
be established if AR-42 is supplied from the
Netherlands to the UK?
According to financial situation, three methods can be applied:
• Quasi market-based transfer price
• Negotiated transfer price
• Full cost plus markup transfer price
the transfer price should between £2560/ton—£3346/ton
Take the company’s current situation into consideration:
• Negotiated transfer price is not suitable
• Quasi market-based and full cost plus markup transfer price can both be used
My recommendation:
• choose the full-cost-plus markup transfer price
• giving the Hollandsworth relatively more markup than the Axeon Dutch
Question 5: What is Axeon’s corporate strategy?
• Corporate strategy = diversification strategy ( related or un-related)
• capturing inter-divisional synergies
• identifying and managing strategic uncertainty
• Axeon uses Related-diversification:
• Focus on their core business strategy: industrial chemicals
• Diversify in order to exploit economies of scope
• The company has a relatively elaborate planning and budgeting system
• Uses an incentive compensation system
• Transfer pricing problems, require considerable communication
Question 6: What do you believe to be the CSFs
in Axeon?
Objective
Candidate critical success factors
Maintain a large supply of industrial chemicals
(quantity)
• Efficiency
• Setting up more factories in subsidiary
locations when it is considered profitable
Improve the quality of their products when
possible
• Appoint highly skilled people into the
organization
• Encourage proposals of incremental
innovations
Achieve organizational synergy
• Standardized planning and budgeting
procedures
• Suitable transfer price setting between
subsidiaries
Flexibility
• A high degree of decentralization
Maximize sales
• Provide incentive compensation systems
• Take advantage of the geographical expertise
of foreign subsidiaries
Question 7: What do you believe to be the
KRAs in Axeon?
Because the company is dependent on its production and sales, the key
recurring activities are:
• Purchasing the raw materials and manufacturing
• Marketing and sales
Question 8: discussion Axeon in terms of its
centralization/decentralization?
High Degree of decentralization (results control) e.g. incentives
- Advantages:
1.
To attract right personnel
2.
Geographical and cultural reasons: less cost
- Disadvantages: manufacturing division
1.
Internal competition of products
2.
Difficult to control subsidiaries, disputes
Question 9: What should Mr. van Leuven do?
•
Solve the problem
1.
2.
3.
•
private communication, explain in detail
offer to buy their patent
transfer price should be reasonable
Prevent similar problems in the future
1.
Action control: scrutinized expenditure approvals
2.
Cultural control: Codes of conduct
3.
Results control: Create a good balance between Decentralization
(sales) and centralization (manufacturing)