Behavioural Management Control Seminar Case study: Axeon N.V. Group C6 Isabelle Allais, Sarah Beucler, Raphaëlle Brustel, Camille Jandrain and Warren Oakes

#1: Feelings about the initial analysis (1) Ian: Capable manager Good knowledge of UK market Experience of profit centre manager Company: fairly decentralised system Managers: lot of scope to individually explore business opportunities

#1: Feelings about the initial analysis (2) Approved by UK experts Very complete No overestimated profits 6 months spent developing it Falls within the corporate strategy But: Conflict with the Netherlands The Netherlands want the benefit, are afraid by the possibiliy that the others can be successful

#2: Interest for Axeon to build a new plant in UK? (1) PROS CONS Being on the UK market makes it flexible More profit and less investment if production in the Netherlands Still profitable after 7 years Market penetration still possible Morale problem + lack of autonomy and trust in upper management if not placed in the UK Advantages of Production in Netherlands (longer production runs, lower set-up costs, larger raw materials)

#2: Interest for Axeon to build a new plant in UK? (2) PROS CONS Ways to finance in UK and support of UK board members Experience of the difficult process of porduction in the Netherlands Competition breeds innovation Money coming into English banks + jobs and a greater image of the company in England More security producing it in the Netherlands, less risky concerning investment Exceeds the 12% threshold for investment yield

#3: Explanation of Mr van Leuven behaviour (1) First meeting: Do not know the details “on the floor” Believe in manager (Theory Y) Proposal already approved by the Hollandsworth board meeting

#3: Explanation of Mr van Leuven behaviour (2) Second meeting: Does not want conflict or to be involved: Ian: been in the company for a few years Netherlands people: been in the company longer ‘Power play’ & Theory Z Range of views & more knowledge Change of balance within the company

Different possibilities: #4: Which transfer price if AR-42 supplied from the Netherlands to the UK? (1) Situation: no financial structure in place for ‘global accounts’ Different possibilities: Negotiated transfer prices: not a good idea: bad relations between Ian, Oosterling and Backler Ian not as influential in the company as the other managers

#4: Which transfer price if AR-42 supplied from the Netherlands to the UK? (2) Full cost transfer prices: not incentive for the UK and the Netherlands Market-based transfer prices: not a good option: the transfer costs from the Netherlands to the UK not include

#4: Which transfer price if AR-42 supplied from the Netherlands to the UK? (3) Dual-rate transfer prices: Difficult to implement Marginal cost (plus a fixed lump-sum-fee) transfer prices: good solution for both sides the Netherlands: pay for the variable costs the UK: still make profits fair compromise: the Netherlands: reward for their production the UK: generate profits

#5: Axeon's corporate strategy Unrelated interdependence corporate strategy high decentralisation no focus on the core business little communication bonuses key performance indicators subsidiaries are autonomous Dutch Production in a related diversification: leading to problems with transfer prices etc.

#6: CSF in Axeon Money: Quality: Product or service development: revenue and growth Quality: essential for the chemical industry Product or service development: increasing business and attracting new customers in different markets. Ian works on other projects

#7: KRA in Axeon Distributing Promoting Manufacturing Maintaining quality and value (training people) Allocating resources could be one of the KRA

#8: Decentralisation in Axeon Relative autonomy Individual reward incentive based system

#8: Centralisation in Axeon Approval needed for product and project development Problems in interrelations Producing the good in the Netherlands

#9: What should Mr Van Leuven do? Involve the company as a whole Schedule a board meeting with all the subsidiaries Ask for an external assessment on the productivity Adapt the decision to the UK situation Implement Cultural controls

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