Erik Seeman

AXEON CASE STUDY

Group C5Erik Seeman

800117-0136

Erik Seeman

Initial Analysis

No alternate plans or worst case scenario

No analysis of what the production costs would be in the Netherlands, for export to the UK

Expansion/export plans

Erik Seeman

Is construction of the new factory in the UK in the best interest of Axeon? General analysis:

No, because of:

Profit analysis

Risk

Yes, because of:

Showing trust

Internal competition

Easier expansion

Erik Seeman

Why did Mr van Leuven behave as he did?

No clear MCS Not driven by incentive programs A “hot potato” that needs a more

thorough analysis

Erik Seeman

Transfer price if AR-42 is supplied from the Netherlands to the UKMarket price Marginal cost

Full cost Full cost + mark-up

Negotiated Dual Pricing

Erik Seeman

What is Axeon's corporate strategy?

Decentralisation

Related diversification

Specialisation

Expansion

Erik Seeman

Critical success factors in Axeon

Establish a transfer-pricing system which encourages growth

Establish a more diverse MCS

Establish a better bonus system

Erik Seeman

Key recurring activities in Axeon

Manufacturing Sales Marketing R&D Finance Administration

Erik Seeman

Centralisation / decentralisation

Factors supporting decentralisationLocal information (by subsidiaries)Constrained upper management timeGreater need for training of lower-level managersFeasible incentive costsProduction or service processes that require little coordination across organisational unitsLow level of centralised information needed for local units to function

Common TrademarkBonus Programme

Erik Seeman

What should Mr van Leuven do?

Conclusion: Don’t build the new factory

Change bonus system Apply cultural control in order to make

the subsidiaries work for the good of the company

Introduce a common trademark