1. Axeon N.V ME2028 Behavioural Management Control
Case Analysis
Axeon N.V ME2028 Behavioural Management Control
Group B6
Presented by: Olivia Hue Cyrielle Peillon Roberto Lanz Ismael Valero
10/11/2008

2. Senior VP Dutch Operations
Situational Analysis
New investment proposal by Ian Wallingford, managing director of Axeon N.V ‘s England
subsidiary:
The construction, in England, of a AR-42 plant
Different reactions:
Sales and marketing
Manufacturing
R&D
Finance
Director Mfg
Marc Oostering
Director Sales
Geert De Rijcke
Managing Director
Anton Van Leuven
Managing Director Hollandsworth Ltd
Ian Wallingford
Senior VP Dutch Operations
Willem Backer
Saraceno S.p.a
KAG Chemicals
--- Opposite For the project Indecisive

3. Q1.What do you feel about the initial analysis?
Detailed
Analysis:
Project feasible and attractive
Should have specified and shown figures about the market study
Main problem:
Two possible options:
- constructing a new factory in Britain
- buying the product from Netherlands
He voluntarily forgot to speak about that last option
Why is it a problem?
The whole company which could have a better gain
Interest of Ian’s subsidiary
Complete

4. Q2. Is construction of the new factory in the UK in the best interest of Axeon?
Positive impacts
Negative impacts
Growth for Axeon
Same competence in two different subsidiaries
More responsive to the customer’s expectations in UK (faster)
Increase the risks of failure
In England, the employees will be more motivated
New challenge, excitement and commitment
Not the cheapest option for Axeon
Respect the decentralization and subsidiaries policy
Subsidiary’s empowerment
Interest in their development and initiative
Loose of legitimacy
Decrease of subsidiaries’ employees motivation and trust
Risk of resign

5. Q3. Why did Mr Van Leuven behave as he did?
Two opposite clans with different interests, different power and different influence:
Against the project
Willem Backer (Netehrland)
Geert De Rijcke (Netherland)
Marc Oosterling (Netherland)
Arnold Koonts (Netherland)
For the project
Ian Wallingford (Hollandsworth)
Board Managers in Hollandsworth
Part of the main company
Historical culture
72% of the sales
Powerfull, experienced and competent on the product
They advice him to refuse the proposal
14% of the sales.
Motivated, innovative
Investment justified
Confidence in Mr Van Leuven
Not yet competent on the product
They want the proposal to be executed
Competition and no communication between the two parts
Influence problems
Profit or decentralized management?
No real gap between the two propositions’ profitability

6. Q4. Discuss what transfer price sould be established if AR-42 is supplied from the Netherlands to the UK?
There are different transfer-pricing alternatives:
Market prices £3,700
Marginal costs
Full costs
Negotiated
Full costs plus a mark-up
Marginal costs
Variable manufacturing
£2,060
Internal Price
Full costs
Variable manufacturing
£2,060
Fixed manufacturing
£240
Internal Price
£2,300
Full costs plus a mark-up
Variable manufacturing
£2,060
Fixed manufacturing
£240
Mark-up (20%)
£460
Internal Price
£2,760

7. Q5. What is AXEON’s corporate startegy?
Different independent subsidiaries
Decentralised organisation
Results controls
Objectives settled
Bonus plan providing rewards
Action controls
Action Accountability
Preaction reviews
Personnel controls
Empowerment of the subsidiaries and his employees
Selects and places competent employees
Train employees

8. Q6. What do you believe to be the CSF in Axeon?
Current key success factors
Money: revenue growth and profit margins
Cost leadership: the product has to be as cheaper as possible
R&D: they try to constantly develop new products, meet new demands, find new markets and acquire new customers
Expertise of the subsidiaries: They have to be competent in their field
Autonomy of the subsidiaries but with a strategy’s coherence: initiative, creativity, empowerment
Profit: They want the subsidiaries to reach a target and evaluate them on results achieved

9. Q6. What do you believe to be the CSF in Axeon?
Advisable key success factors
External communication between the subsidiaries and Axeon
Internal communication: improve the internal communication in order to improve the employees motivation ( integrate employees in the global strategy) and so the performance
Internal competition: define which company should produce what product in order to avoid competition between them

10. Q7. What do you believe are the key recurring activities in Axeon?
Profits and sales controls to measure the subsidiaries’ performance
Processes related to each new project:
- Initiation – R&D
- Pre-Study
- Axeon Board Meeting
- Planning
- Execution
- Implementation
- Control
- Closure

11. Q8. Discuss Axeon in terms of its centralisation / decentralisation
Current situation
Subsidiaries need to justify new investments in their own market.
Subsidiaries can sell whatever the mix of products they want
The prices of the products are fixed by Axeon Dutch sales organisation and the subsidiaries can decide if they want to sell them or not.
Managers can propose development new product and possible build their own manufacturing plants.
The salary of the managers depends on the subsidiaries profit
The subsidiaries can produce the product that they deemed appropriated.
Proposal
Internal competition between the subsidiaries and Axeon, they should rationalize the production
They should not compete in the same market with other products of the company.

12. Q9. What should Mr Van Leuven do?
To solve this problem:
From the economical point of view
Should not accept the project
More profitable to produce in the Netherlands
Sell the product to the UK subsidiary at the transfer price £2,760
Nevertheless, in our opinion
Should not focus in the final economical analysis
Ian saw the business and made a complete analysis for the project, justifying the whole investment
Not only Ian but all the subsidiaries’ managers will think is not worth it to search and propose the development of new products
Headquarter managers never saw the opportunity of selling the product in the UK
Should have seen the opportunity years ago
Thus, Mr Van Leuven should accept the proposal

13. Q9. What should Mr Van Leuven do?
To avoid any similar problem:
The problem comes from the bonus plan
Each subsidiary will to increase profit
Each manager wants to be rewarded
It is a personal interest conflict
Rewards regarding profits and others non monetary performance (idea, innovation) should be established