Atrops, Schäfer, Schmidt, Stäcker, Trebing Behavioural Management Control 6. Dezember 20151 Behavioural Management Control Seminarquestions The Aexon Case

Atrops, Schäfer, Schmidt,Stäcker, Trebing

Behavioural Management Control

21. April 2023 1


Seminarquestions

The Aexon Case

Group D2

Group members: Susanne Atrops 860304-A164Kathrin Schäfer 811219-A328Fabian Schmidt 850127-A137Christian Stäcker 840214-A116Sebastian Trebing 851005-A215



21. April 2023 2The Aexon Case

Question 1: What do you feel about the initial analysis? Was there, in your opinion, anything wrong with it?

First, the analysis seems to be a good business idea • Big market potential for AR-42in the UK (800tons)• Actually no sellings from Aexon in UK

Estimations seem to be overoptimistic• Is it realistic to cover half the market after three years?• Are production difficulties considered properly?




Is it realistic to cover half the market after three years?

• Totally unknown on the new market (0 tons sold actual)

• Covering quarter of the market value in the first year

• Estimated growing rate of 50% per year

• Target of 400tons per year reached in third year.

• 400tons just in UK by 600tons in the rest of the world market.




Are production difficulties considered properly?

• The analysis mentions no production difficulties

• No comment on technical challenges

• Mr Oosterling mentions complications in production process

``…even with trained workers, who have long experience´´

• Experienced workers can be called in from

Netherlands

Lack of information to validate the question



21. April 2023 5

Question 2: Is construction of the new factory in the UK in the best interest of Axeon?

Working Capital in the NL lower than estimated in UK• If NL produces for the UK market: 160 vs. 190 (in UK)

NL production obviously not at its capasity maximum:• AR-42 for the UK market can additionally be produced in NL

Fixed costs per ton in NL decrease with higher outputVariable production costs in NL lower than in UK

• Higher than in UK when including shipping and duty• Unknown fixed costs in UK disable complete comparison

Preferred method: Enlarge production in NL



21. April 2023 6The Axeon Case

Question 3: Why did Mr van Leuven behave as he did?

Some quotiations by Mr van Leuven during the case:

``…the decision seems to be clear.´´

``…seemed (just) to sit there and listen.´´

``…did not back me up…´´

``…key importance for the whole company.´´



21. April 2023 7

Passiv: • Does not make the decisions for the other managers • but shows the company’s direction and • supports the development of ideas

Without making decisions, he does not take the responsibility, so the other managers cannot lean back and refer to his decisions when problems appear

They are supposed to find agreements on their own

The Axeon Case




Question 4: Discuss what transfer price should be established if AR-42 is supplied from the Netherlands to the UK.

You have to consider the short and the longterm




Short term:

• Just consider the variable • plus shipping and UK import

Fix costs are sunk costs. It is already invested.

Long Term:

• Including fix costs and mark up

Price per ton = 2060 + 360 + X

2060£/ton




Negotiated Price:

• Transfer price has to be negotiated

•Without producing, Hollandsworth has still the promotion

costs and want a mark up

• Promotion costs after third year: 250£/ton

Market price: 3700 £/ton

Total costs: 2670 £/ton

Negotiation basis: 1030 £/ton

Mark ups or lower price to increase market share



21. April 2023 11

Question 5: What is Axeon‘s corporate strategy?

• diversification into headquarter and 3 subsidiaries

• related business (producing chemical products)

• Manager are free to decide with products they offer

→ Rivalry between products within company

• Managers are encouraged to develop new products and establish plants → investment in their own markets must be justify

The Axeon Case



21. April 2023 12

• interdependence among the subsidiaries should be high

• competition between subsidiaries

→ not effective

• Managers has to communicate with each other to avoid business competition

→ Ian takes no active part in the discussion between the managers, because they have to unify each other

The Axeon Case



21. April 2023 13

Question 6: What do you believe to be the critical success factors in Axeon?

Axeon:

• Effective and efficient positioning of subsidiaries on the market

• Hiring of capable managers for the subsidiaries (PC)• Maximization of economic profit • Enhancing market share• Entering new markets

The Axeon Case

By acquisition



21. April 2023 14

Hollandsworth Proposal:

Reaching the Target of 400 tons sold AR-42 per year• All calculations of the proposal are based on this• Without it payback time will never be reached• New project else wouldn‘t fit Axeons yield demands• No need for an additional brand with fewer sellings

New Plant must be able to produce the aimed amount AR-42• Oosterling brings up problems in the Dutch plants• Even experienced workers have problems• Dutch workers could help their UK colleagues

The Axeon Case



21. April 2023 15

Question 7: What do you believe are the key recurring activities in Axeon?

• annual planning and budgeting process

• profit sharing for the subsidiary managers

• transfer price negotiation

The Axeon Case



21. April 2023 16

Question 8: Discuss Axeon in terms of its centralisation / decentralisation.

Defintion Centralisation:

• Decision making• Most decisions are made by the top management• Top managers have reputation of being “detail

oriented”• Managers often tend to reserve for themselves many

of the most critical decisions that fall within their authority

• Impossible to centralize all critical activities

The Axeon Case



21. April 2023 17

Basically:

• Style of Axeon’s top level managers was to emphasize a high degree of decentralisation -> Subsidiary managers had considerable autonomy

• Little attempt to rationalize the company production• Mr Ian Wallingford had considerable freedom

after the Board-Meeting all these thesis were satisfied

Dispute between Parent and Subsidiary

The Axeon Case



21. April 2023 18

Influence of: • Report of Director of Manufacturing• Report of the vice president finance

Result:

• The Point that Mr. Leuven has the power to decide if the project will be allowed or not, shows a high grade of centralisation in the company

• However there is a big difference between the predetermine company structure and the actual practise

The Axeon Case



21. April 2023 19

Considering advantages and disadvantages:

• Pro:

– To satisfy the company’s philosophy (decentralisation)– Keep the worker-motivation on a high level– Mr. Ian Wallingford is very important for the company

because of his experiences, knowledge and abilities– To promote new ideas and innovation– extension of the company

Question 9: What should Mr van Leuven do?

The Axeon Case



21. April 2023 20

• Contra:

– Financial point believing in the knowledge of VP Finance and Director of Man.

– Overhead costs and variable costs too high– Cheaper possibility is available– Plant in Netherlands is max. on 60% of capacity

The Axeon Case



21. April 2023 21

• Result:

Mr Leuven has to decide what is more important:

Following the companys strategy of decentralization, he should build up a plant in UK

Regarding the actual capacity used, he should produce in Netherlands.

If he decides so, he has also to change the company‘s philosophy, due to authenticity

The Axeon Case



21. April 2023 22

Our Recommendation:

• Considering probably difficulties of production start• Using of free capacity in Netherlands and• Interrest of company development due to decentralized

philosophy

• First enlarge production in NL and export to UK• While building plant and ramp up production in UK

carefully

Win-Win-Situation

The Axeon Case

Documents

Atrops, Schäfer, Schmidt, Stäcker, Trebing Behavioural Management Control 6. Dezember 20151 Behavioural Management Control Seminarquestions The Aexon Case