AXEON CASE

1
AXEON CASE

• Group A4
• Jie Cao, Laurentine, Asako, Zeynep, Jonathan

2
Agenda
Q1 Initial analysis Q2 Alignment of factory in
the UK and Axeons interest Q3 Reasons for Mr
van Leuvens behaviour Q4 Claculation of
transfer price Q5 Axeon's corporate strategy Q6
Critical success factors in Axeon Q7 Key
recurring activities in Axeon Q8 Axeons
centralisation / decentralisation Q9
Recommendations for Mr van Leuven
3
Agenda
Q1 Initial analysis Q2 Alignment of factory in
the UK and Axeons interest Q3 Reasons for Mr
van Leuvens behaviour Q4 Claculation of
transfer price Q5 Axeon's corporate strategy Q6
Critical success factors in Axeon Q7 Key
recurring activities in Axeon Q8 Axeons
centralisation / decentralisation Q9
Recommendations for Mr van Leuven
4
Ians investment proposal (initial analysis)
offers
room for improvements
Problem
Solution

• Initial Investment of 1,4 million does seem
  very low for a new chemical factory
• Discount rate of 8 seems too low
• No inflation is considered
• Sales forecasts doubtful
• Flat variable cost over 7 years is unrealistic

• Review the investment proposal and create an
  sensitivity analysis
• Sensitivity analysis for different rate of
  borrowings and inflation rates
• Engage an independent market research agency in
  order to estimate the potential market size
• Include a growth factor on the cost side

Evaluation

• Basic structure is ok, but the investment
  proposal should be refined
• More effort, time and money has to be spent in
  order to generate a truthful analysis

Alternatives

• Costing, pricing and forecasting sales based on
  Simulation (Monte Carlo)

5
Agenda
Q1 Initial analysis Q2 Alignment of factory in
the UK and Axeons interest Q3 Reasons for Mr
van Leuvens behaviour Q4 Claculation of
transfer price Q5 Axeon's corporate strategy Q6
Critical success factors in Axeon Q7 Key
recurring activities in Axeon Q8 Axeons
centralisation / decentralisation Q9
Recommendations for Mr van Leuven
6
The construction of the factory in UK-

- pros and cons
Q2 Is construction of the new factory in the UK
in the best interest of Axeon?

• Close to the market
• Smaller transportation costs
• Diversify production
• risk sharing, potential
• decentralization
• Motivated management to implement the project
• No currency risk

-
Cons

• Dutch factory is producing the product already
• Lack of skilled workers
• Huge investment into new factory
• No economies of scale used

Pros
7
Agenda
Q1 Initial analysis Q2 Alignment of factory in
the UK and Axeons interest Q3 Reasons for Mr
van Leuvens behaviour Q4 Claculation of
transfer price Q5 Axeon's corporate strategy Q6
Critical success factors in Axeon Q7 Key
recurring activities in Axeon Q8 Axeons
centralisation / decentralisation Q9
Recommendations for Mr van Leuven
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Mr van Leuvens behaviour
Facts

• After the dispute between parent and subsidiary
• Postpones his answer stops the meeting without
  decision
• Delegates a lot, asks every time advices

• During the dispute between parent and subsidiary
• Doesnt take part to the discussion in the board
  meeting
• Has changed his behavior decisive to indecisive

• Before the dispute between parent and subsidiary
• Gives a too fast first answer
• Has a subjective behavior

Reasons

• Personal limitation
• - Lack of leadership
• - Lack of confidence
• Lack of direction
• Lack of motivation
• - Doesnt motivate

• Personal limitation
• - Lack of leadership
• - Lack of making decision power
• Lack of direction

• Personal limitation
• - Lack of management skills
• - Lack of organization, has
  not prepared and analyzed enough before
• Lack of direction
• - Problems of procedure

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Agenda
Q1 Initial analysis Q2 Alignment of factory in
the UK and Axeons interest Q3 Reasons for Mr
van Leuvens behaviour Q4 Claculation of
transfer price Q5 Axeon's corporate strategy Q6
Critical success factors in Axeon Q7 Key
recurring activities in Axeon Q8 Axeons
centralisation / decentralisation Q9
Recommendations for Mr van Leuven
10
Claculation of transfer price
Facts
Important factors
Further consideration
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Agenda
Q1 Initial analysis Q2 Alignment of factory in
the UK and Axeons interest Q3 Reasons for Mr
van Leuvens behaviour Q4 Claculation of
transfer price Q5 Axeon's corporate strategy Q6
Critical success factors in Axeon Q7 Key
recurring activities in Axeon Q8 Axeons
centralisation / decentralisation Q9
Recommendations for Mr van Leuven
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Axeon's corporate strategy
Facts
Problems
suggestions
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Agenda
Q1 Initial analysis Q2 Alignment of factory in
the UK and Axeons interest Q3 Reasons for Mr
van Leuvens behaviour Q4 Claculation of
transfer price Q5 Axeon's corporate strategy Q6
Critical success factors in Axeon Q7 Key
recurring activities in Axeon Q8 Axeons
centralisation / decentralisation Q9
Recommendations for Mr van Leuven
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Critical Success Factors in Axeon
Facts
low
high
Value of sales
low high
CSF
15
Agenda
Q1 Initial analysis Q2 Alignment of factory in
the UK and Axeons interest Q3 Reasons for Mr
van Leuvens behaviour Q4 Claculation of
transfer price Q5 Axeon's corporate strategy Q6
Critical success factors in Axeon Q7 Key
recurring activities in Axeon Q8 Axeons
centralisation / decentralisation Q9
Recommendations for Mr van Leuven
16
Key Recurring Activities in Axeon
Facts
low
high
Value of sales
low high
KRA
17
Agenda
Q1 Initial analysis Q2 Alignment of factory in
the UK and Axeons interest Q3 Reasons for Mr
van Leuvens behaviour Q4 Claculation of
transfer price Q5 Axeon's corporate strategy Q6
Critical success factors in Axeon Q7 Key
recurring activities in Axeon Q8 Axeons
centralisation / decentralisation Q9
Recommendations for Mr van Leuven
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Axeons centralisation / decentralisation
Facts

• Highly decentralized corporate policy

• Subsidiaries management and decisions
• Ians autonomy in production method, marketing
  strategy, financial planning, organization
  changes the first year

• Subsidiaries selling
• Assume responsibilities of sell
• Take the final decisions

• Subsidiaries production
• possibilities to produce competitive products
  and tp propose new one
• Possibility to propose to build new factory

Discussion

• Advantages of decentrlization
• time saving
• closesr to market

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Agenda
Q1 Initial analysis Q2 Alignment of factory in
the UK and Axeons interest Q3 Reasons for Mr
van Leuvens behaviour Q4 Claculation of
transfer price Q5 Axeon's corporate strategy Q6
Critical success factors in Axeon Q7 Key
recurring activities in Axeon Q8 Axeons
centralisation / decentralisation Q9
Recommendations for Mr van Leuven
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Recommendations for Mr van Leuven
Facts
Suggestions