8/3/2019 Based on the Information Given We Know That Clayton Industries Inc

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Peter Arnell faced three possible courses of development which were outlined during a few daysanalysis of the current situation. First of all, Italian managers offered to remain on the same path and tryto revitalize the company by stirring up production efficiency and expanding market share outside of theItaly. Alternative option was proposed by Carlos Sanchez who headed the Spanish company andproposed to start production of absorption chillers in Italy, and by joint efforts take the leading position inthe market of absorption chillers. And, finally, the third option was proposed by Arnnels financial directorwho proposed to wait till economical situation is stabilized and during that period, revitalize organizationalresources and capabilities to develop strength for re-entering the competition battle.

As we know before making significant changes in a corporate-level strategy there is a need forstrong analyses of past and present data and estimation the current performance of organization. PeterArnell, the newly appointed president of Clayton SpA, asked for 60 days to understand the situation anddevelop a strategy for the company, but swift progress of events diddled Arnell out of the chance fordetailed analyses of the situation, thus it would be very risky to offer convert capacity to absorptionchillers, which associated with significant investments and long-term stages of phase-out and re-structuring. Also Arnell knew that his predecessor, Paolo Lazzaro, was terminated due to his decision towait until the situation normalizes, which eliminates the preference to the third option proposed by Arnellsfinancial director who gave the choice in favor of retrenchment strategy. Taking into account all factorsdescribed above accompanied by economical uncertainty due to the economic crises the most optimalstrategy for current situation is the first one, in other words, they should aim organizations efforts at

improving the existing production line. First of all Clayton SpA experienced growth and high sales bycontributing significantly to Clayton Industries Inc. revenues and the main reason for the recent poorperformance is an economical recession of 2008-09. In this case the biggest challenge for the

organization will be competing with a newly-appeared product-substitute on the market (absorption

chillers which have more innovative features and fit better customers requirements) and Asian chiller

producers which offer lower prices and has lower life-cycle. On this initial stage Clayton SpA can use

benchmarking techniques in order to find the most efficient production technology (for example, Asian

technology) and turn around its performance. Thus, if available at this stage investments will be

efficiently used to improve and optimize the production technology in order to become more

competitive Clayton SpA may expect sales increases, as compression chillers are in a high demand and

still hold 85% of the market. Moreover, while improving production technology Clayton SpA should pay

attention to the environmentalists requirements: as being social responsive they will improve the

organization image. Clayton SpA also faces problems in market penetration outside Italy which present

only 7% of overall market share due to the high European national brand preferences. But, at the same

time Asian companies experience high sales rates and growth due to low prices and offered product of

high quality, from which it can be concluded that by offering competitive product Clayton SpA also will

increase the European market share. By this step Arnell will bring the company nearer to the goals

announced by Dan Briggs, which implies the company to be in the top four in European market within

four years, as in 2009 year Clayton SpA was in a fifth place, lagging the predecessor by 5%. Also it is

obvious that it would be difficult to achieve 10/10/10 plan, which implies decrease of receivables and

inventories by 10 days, and cut in headcount level by 10%. In reality Clayton SpA does not satisfy these

requirements as receivables and inventories were both above 120 days. In the case with receivables

Clayton SpA can gradually decrease the period for receivables by announcing discount for those

customers who will pay within the new shortened period (it is also important that payment periodshould be consistent with that of competitors ). Also, to cut the inventories over the extended period

Clayton SpA should change supply chain processes, production scheduling and adjust production volume

to the seasonal demand. At the same time they should react more swiftly to marketplace changes

because it would have fewer inventories to buffer demand swings. In order to reduce the headcount by

10% Arnell can use the opportunity of permanent layoffs which were permitted in Italy or implement

the Cassa Ingrazione Guardagni. In this case the company keeps good relationships with local laws and

unions and, at the same time, meet the requirements of the announced plan.