Axeon N.V.

1837 Words Mar 6th, 2007 8 Pages
Executive Summary This report presents a case involving problems at a chemical manufacturing firm, Axeon N.V. having grown into a multinational Company, problems have emerged; do to ineffective performance measurement systems and lack of strategic control. The following management report describes and analyses those problems and presents solutions and recommendations.

With headquarters in the Netherlands, Axeon N.V. operates three subsidiaries; in the U.K. Scandinavia and Southern Europe. The subsidiaries have considerable autonomy to determine their product mix and the setup of new manufacturing facilities. Case analysis revealed serious defects in the Company's operation resulting from poorly designed performance measurement systems and
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To support these doubts even further, detailed analysis, done by key managers at the headquarters, indicated that the proposal was indeed uneconomical.

Situational Analysis The conflict presented in this case is caused by the fact that the Company has grown from being a small, simple operation, into a complex multinational, without ever implementing proper strategic control and performance evaluation systems. When analyzing the underlying elements, it is apparent that the Company's performance control system was counterproductive, causing subsidiaries to compete with one another, as if they were outside competition. Managers were rewarded based on the performance of their own subsidiary alone and not on the basis of Axeon as a whole. In other words: The Company was rewarding A when wanting B.

Fundamental Analysis of the Proposal The circumstances surrounding the proposal to manufacture AR-42 in the U.K., clearly manifest the flawed performance control system, mentioned above. After reviewing the arguments set forth, it is clear that the U.K. management would receive a greater reward for manufacturing and selling AR-42 themselves, than if they would buy it for resale from the factory in the Netherlands. On the other hand, managers in the Netherlands would have been rewarded if the U.K. did not manufacture the chemical but would have bought it from the Netherlands.

However, whereas the U.K. subsidiary neither had experience in
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