Essay on Victoria Chemicals Plc (a): the Merseyside Project

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Victoria Chemicals, a major player in the global chemical industry that supplies polypropylene, polymer that used to manufacture carpet fibers, packaging, automobile parts to the customers in Europe and the Middle East. Apart from numerous small producers, the company also receives the threats from the other seven major competitors.

The company owns two plants in Europe, one being Merseyside Works, England and Rotterdam Facility, Holland. Both plants were built in 1967 and are identical in scale and design. James Fawn, the Vice President and Manager of Intermediate Chemicals Group, is in charge of both plants.

In the year 2007, there is a drop in financial performance within the company. Earnings have dropped
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During this period, Merseyside Work’s customers will be buying products from its competitors as Rotterdam Facility will be functioning at its maximum capacity and it is not possible for them to satisfy the demand. To this point, Frank Greystock mentions that the loss of customers is only temporary.

Victoria Chemical owned tank cars that transported propylene gas from 4 refineries in England. The Transport Division that responsible for managing the tank cars, has been oversaw the movement of materials throughout the company. And therefore, the allocation of tank cars to Merseyside increased in anticipation of growth from the proposed renovation. And now, the allocation made excess capacity. The company can increase the production but they need to purchase rolling stock to support the growth in other areas and the purchase cost 2 million pounds in 2010, the depreciation is 10 years.

The Transport Division believes that the cost of tank cars should be included in initial outlay of Merseyside Works capital programme. The director of ICG sales thinks that the recession will reduce the demand for polypropylene, and thus lead to an excess supply of polypropylene. To combat this, the firm will shift capacity from Rotterdam to Merseyside, and Merseyside will cannibalize Rotterdam.

However, controller Frank Greystock refuses to believe the director of ICG Sales, and therefore did not included charges for loss of the business in analysis.
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