Diamond Chemicals Case Analysis

The company started off producing 20,000 units of mountain bikes. We did not change the production quantity. Last year our forecast sales were 24,000 when we only sold 19,866; therefore we thought it would be best to leave production at 20,000 bikes. Having excess inventory, we concluded that 20,000 units should be enough considering our quality has not changed and our advertising will not increase the sales dramatically. Although we had the choice to produce as much as 30,000 units, we felt as though we did not have sufficient money to increase production. We were interested in allocating the money towards marketing as opposed to production. We realized that without awareness, no matter how many units we make, sales would be inefficient.

For centuries, diamonds have been regarded as one of the most valuable commodities in the world and the industry has evolved into billions of dollars. At the top, De Beers dominated the entire industry worldwide, from exploration to retail selling. However, it has a reputation of a monopolist, where it influences supply and demand. The two critical factors that De Beers carefully maintained throughout the century to remain in monopoly was to create the illusion of the scarcity of the diamonds and to keep the prices high. Realizing the benefits of the cooperation and the dangers of the oversupply, most

The company has been functioning well in terms of generating profit and demand so far. However, there will be a 20% increase in demand for the next month of operations as predicted by management, and the production and supply management's problems may come as a problem they can no longer afford.

The Rose Company is building a new plant to reduce cost, improve the quality of products, and maintain competitive leadership by gaining a slight production advantage. The main obstacles to be overcome are the commissioning of a new plant, new methods and process, and administrative reporting issues. As the newly hired General Plant Manager, I plan to resolve these issues by insisting that all plant communications flow through me, instituting training for plant personnel and setting operational expectations.

We see clearly in the movie how the factors of production is used: land, labour, and entrepreneurship. Land is the resource where diamonds are found, and in Blood Diamond we see how the RUF uses a form of alluvial mining and open pit mining on the land. The men would find the diamonds by digging and shoveling in rocks that are eroded by rivers and streams. The result of this is disastrous to the land because of the enormous amount of soil that is removed to obtain the diamond. Also wasted rocks from the mining can leak harmful substances back into the water. Blood Diamond did an admirable job at depicting the realities of how

The second strategy, referred to as a "Cold Idle Status", would keep the plant on “alert” to ramp-up to full rate production in one month from turn-on only if the market makes a full recovery. This may appear to be an attractive option. However, the market only reaches a full recovery under the most optimistic scenario in 2004. Therefore, the probability of regaining profitability, paired with the annual incremental recurring cost of $6M for payroll and skeletal staff makes this a risky approach. The fixed costs associated with a Cold Idle approach outweigh the probability-discounted revenue. This approach, without an investment to improve our yield, is not recommended.

In the case of Mendel Paper Company which produces four basic paper products lines at one of its plants: computer paper, napkins, place mats, and poster board. Although the plant superintendent, Marlene Herbert is pleases with increased sales he is also concerned about the costs. The superintendent is concerned with the high fixed cost of production, the increases in fixed overhead and even variable overhead. He feels that the production of place mat should be discontinued. His reason for the discontinuation is that the special printing is driving up the variable overhead to the point where the company may not find it profitable to continue with the line. After reviewing the future predictions of the

There is certainly a market for this product. It is the market that is currently dominated by asbestos pad and micarta slab users, and is comprised of uneducated (about cushion pads) and price-sensitive customers. Prior to CMI’s involvement, “the pile-driving industry had paid very little attention to cushion pads.” There was no dominant manufacturer, little-to-no branding, and ambiguous distribution channels.

In my opinion the company should reject the project as the ARR is much less than expected and the payback period is nearly as long as the maximum payback period which could put company to danger.

Linda Metzler the production planning manager is the main responder in this case, she has to come up with another optimal alternative that will have to be submitted to the plant’s General Manager. The plan has to be approved by the general manager for roll out starting next year.

Overall, we have decided that the Merseyside project should be accepted based on the achievement of Diamond Chemicals decision criteria. The project produces a positive NPV of €6.07, holds an IRR greater than their cost of capital at 21.4%, has a payback period less than 6 years at 5.71 years, and adds to earnings per share by generating an extra £.0203 per share. This project satisfies all 4 decision criteria requirements, making Morris’s choice easy in deciding to continue funding the project. Lucy Morris and Diamond Chemicals should go forward with the Merseyside project.

2. Should the Byte executives tell the town administrators and potential employees that this is a temporary plant for 3 years?

Assistant Plant Manager: Although the Assistant Plant Manager made a few good points about EPC, I agree with the executive committee on the refusal to accept the EPC project. Due to the economic grounds of this project there isn’t a way that you could be able to make this happen, especially with the recession. Along with that, because it has a negative NPV it is not a wise decision to make even if you add it to the polypropylene line renovations. Although the improved cash flow would be great, the executive committee is correct on rejecting the project.

The project would result in a negative NPV since the EPC market is small. Tewitt claims this negative NPV would be offset by Greystock’s renovation plan. The committee rejected the plan based on economic reasons. In my opinion, Tewitt’s plan is a waste of money to spend in something that holds a small part of the market rather, the money should be spent on something that have a high impact on the market. Also, I have my suspicions about Tewitt’s plan, mainly because of his comment to Greystock and Morris after the committee rejection. In that comment “ in a hushed voice” he told Morris and Greystock that their anuual bonuses are begged to the size of this operation. This makes me think that Tewitt’s plan has a self-interest tied to it, which presents an obvious agency problem. Therefore, I strongly reject his proposal.

Generally speaking, the legal system didn¡¦t play a very active role in this case. First of all, the India government could do more on digging the truth of the gas leak out and set a more strict standard to regulate such dangerous