1. Platzhalter für das Titelbild AXEON CASE Group A4 Jie Cao, Laurentine, Asako, Zeynep, Jonathan

2. 2Management Control Systems | Axeon Case |11 Nov 2008 Q1: Initial analysis Q2: Alignment of factory in the UK and Axeon‘s interest Q3: Reasons for Mr van Leuven‘s behaviour Q4: Claculation of transfer price Q5: Axeon's corporate strategy Q6: Critical success factors in Axeon Q7: Key recurring activities in Axeon Q8: Axeon‘s centralisation / decentralisation Q9: Recommendations for Mr van Leuven Agenda

3. 3Management Control Systems | Axeon Case |11 Nov 2008 Q1: Initial analysis Q2: Alignment of factory in the UK and Axeon‘s interest Q3: Reasons for Mr van Leuven‘s behaviour Q4: Claculation of transfer price Q5: Axeon's corporate strategy Q6: Critical success factors in Axeon Q7: Key recurring activities in Axeon Q8: Axeon‘s centralisation / decentralisation Q9: Recommendations for Mr van Leuven Agenda

4. 4Management Control Systems | Axeon Case |11 Nov 2008 Problem Ian’s investment proposal (initial analysis) offers room for improvements Q1: What do you feel about the initial analysis? Was there, in your opinion, anything wrong with it? Solution Evaluation Alternatives Initial Investment of 1,4 million £ does seem very low for a new chemical factory Discount rate of 8% seems too low No inflation is considered Sales forecasts doubtful Flat variable cost over 7 years is unrealistic Basic structure is ok, but the investment proposal should be refined More effort, time and money has to be spent in order to generate a truthful analysis Costing, pricing and forecasting sales based on Simulation (Monte Carlo) Review the investment proposal and create an sensitivity analysis Sensitivity analysis for different rate of borrowings and inflation rates Engage an independent market research agency in order to estimate the potential market size Include a growth factor on the cost side

5. 5Management Control Systems | Axeon Case |11 Nov 2008 Q1: Initial analysis Q2: Alignment of factory in the UK and Axeon‘s interest Q3: Reasons for Mr van Leuven‘s behaviour Q4: Claculation of transfer price Q5: Axeon's corporate strategy Q6: Critical success factors in Axeon Q7: Key recurring activities in Axeon Q8: Axeon‘s centralisation / decentralisation Q9: Recommendations for Mr van Leuven Agenda

6. 6Management Control Systems | Axeon Case |11 Nov 2008 Close to the market Smaller transportation costs Diversify production risk sharing, potential decentralization Motivated management to implement the project No currency risk Dutch factory is producing the product already Lack of skilled workers Huge investment into new factory No economies of scale used Con‘s Pro‘s The construction of the factory in UK- - pros and cons Q2: Is construction of the new factory in the UK in the best interest of Axeon? + -

7. 7Management Control Systems | Axeon Case |11 Nov 2008 Q1: Initial analysis Q2: Alignment of factory in the UK and Axeon‘s interest Q3: Reasons for Mr van Leuven‘s behaviour Q4: Claculation of transfer price Q5: Axeon's corporate strategy Q6: Critical success factors in Axeon Q7: Key recurring activities in Axeon Q8: Axeon‘s centralisation / decentralisation Q9: Recommendations for Mr van Leuven Agenda

8. 8Management Control Systems | Axeon Case |11 Nov 2008 Facts After the dispute between parent and subsidiary Postpones his answer: stops the meeting without decision Delegates a lot, asks every time advices During the dispute between parent and subsidiary Doesn‘t take part to the discussion in the board meeting Has changed his behavior: decisive to indecisive Before the dispute between parent and subsidiary Gives a too fast first answer Has a subjective behavior Reasons Personal limitation - Lack of leadership - Lack of confidence Lack of direction Lack of motivation - Doesn’t motivate Personal limitation - Lack of leadership - Lack of making decision power Lack of direction Personal limitation - Lack of management skills - Lack of organization, has not prepared and analyzed enough before Lack of direction - Problems of procedure Mr van Leuven‘s behaviour

9. 9Management Control Systems | Axeon Case |11 Nov 2008 Q1: Initial analysis Q2: Alignment of factory in the UK and Axeon‘s interest Q3: Reasons for Mr van Leuven‘s behaviour Q4: Claculation of transfer price Q5: Axeon's corporate strategy Q6: Critical success factors in Axeon Q7: Key recurring activities in Axeon Q8: Axeon‘s centralisation / decentralisation Q9: Recommendations for Mr van Leuven Agenda

10. 10Management Control Systems | Axeon Case |11 Nov 2008 Claculation of transfer price Facts Important factors quate the subsidiaries the same price as they quoted agents in all countries negotiable pricing, based on costs no mark-up is taken into account in Ian‘s proposal variable manufacturing cost, eg raw materials, labours - 2000 GBP/ton in UK; 1860 GBP/ton in Netherland transportation cost from Netherlands to UK (If Netherland to UK) - 100 GBP/ ton from Netherland to UK UK import duty (If Netherland to UK) - 100 GBP/ton from Netherland to UK curreny rate between Euro and Pound (If Netherland to UK) Further consideration actual transfer price depends on negotiation result between manufacturing and sales-need more information about how to cut the profit cake actual size of the profit cake depends on the actual sale price and cost – need more information about the sales price and manufacture costs actual costs and price depends on exchange rate between UK and EU- need more information to do the estimation of curreny rate between Euro and Pound

11. 11Management Control Systems | Axeon Case |11 Nov 2008 Q1: Initial analysis Q2: Alignment of factory in the UK and Axeon‘s interest Q3: Reasons for Mr van Leuven‘s behaviour Q4: Claculation of transfer price Q5: Axeon's corporate strategy Q6: Critical success factors in Axeon Q7: Key recurring activities in Axeon Q8: Axeon‘s centralisation / decentralisation Q9: Recommendations for Mr van Leuven Agenda

12. 12Management Control Systems | Axeon Case |11 Nov 2008 Axeon's corporate strategy Facts Problems suggestions business established in chemical industries actions taken in diversified geographic area decentralized, loose production & sales instant yearly evaluation and reward, fat bonus package revenue & profit focused, based on yearly target more transportation cost due to diversified business area lower trust building speed due to distant places harder to understand and communicate due to individual operation of each business part conflicts in business interests due to decentralized and loose production & sale short-term and selfish behaviour due to reward and evaluation system long-term evaluate indicators, eg, job satisfaction rate of employees, amount of improvements long-term reward system, eg, replace yearly bonus partly by stock share design programs to build close relationships among departments, branches and areas, eg, monthly meeting of senior managers, corporate weekly press of latest activities of each business part earlier involvement in project planning,eg, build Gate-Stage model and work together from ideation

13. 13Management Control Systems | Axeon Case |11 Nov 2008 Q1: Initial analysis Q2: Alignment of factory in the UK and Axeon‘s interest Q3: Reasons for Mr van Leuven‘s behaviour Q4: Claculation of transfer price Q5: Axeon's corporate strategy Q6: Critical success factors in Axeon Q7: Key recurring activities in Axeon Q8: Axeon‘s centralisation / decentralisation Q9: Recommendations for Mr van Leuven Agenda

14. 14Management Control Systems | Axeon Case |11 Nov 2008 Critical Success Factors in Axeon Facts Critical Success Factor(CSF) What is really needed to accomplish the company‘s goal. CSF in Axeon ・ To sell appropriate products to each market ・ To develop new products ・ Differentiation against the competition ・ The autonomy and morale of subsidiary CSF Value of sales low high

15. 15Management Control Systems | Axeon Case |11 Nov 2008 Q1: Initial analysis Q2: Alignment of factory in the UK and Axeon‘s interest Q3: Reasons for Mr van Leuven‘s behaviour Q4: Claculation of transfer price Q5: Axeon's corporate strategy Q6: Critical success factors in Axeon Q7: Key recurring activities in Axeon Q8: Axeon‘s centralisation / decentralisation Q9: Recommendations for Mr van Leuven Agenda

16. 16Management Control Systems | Axeon Case |11 Nov 2008 Key Recurring Activities in Axeon Facts Key Recurring Activities(KRA) What is not so important, but happens again and again in the company. KRA in Axeon ・ manufacturing along production methods ・ market research ・ financial planning KRA Value of sales low high

17. 17Management Control Systems | Axeon Case |11 Nov 2008 Q1: Initial analysis Q2: Alignment of factory in the UK and Axeon‘s interest Q3: Reasons for Mr van Leuven‘s behaviour Q4: Claculation of transfer price Q5: Axeon's corporate strategy Q6: Critical success factors in Axeon Q7: Key recurring activities in Axeon Q8: Axeon‘s centralisation / decentralisation Q9: Recommendations for Mr van Leuven Agenda

18. 18Management Control Systems | Axeon Case |11 Nov 2008 Axeon‘s centralisation / decentralisation Facts Discussion Highly decentralized corporate policy Disadvantages of decentralization Difficulties to take decision Managers conflict of interests The previous point was about efficiency. The proposal to build of a new factory is a problem of investment which is a more trouble point. Axeon tries to solve the problem by a centralization way. Subsidiaries management and decisions Ian’s autonomy in production method, marketing strategy, financial planning, organization changes the first year Subsidiaries selling Assume responsibilities of sell Take the final decisions Subsidiaries production possibilities to produce competitive products and tp propose new one Possibility to propose to build new factory Advantages of decentrlization time saving closesr to market

19. 19Management Control Systems | Axeon Case |11 Nov 2008 Q1: Initial analysis Q2: Alignment of factory in the UK and Axeon‘s interest Q3: Reasons for Mr van Leuven‘s behaviour Q4: Claculation of transfer price Q5: Axeon's corporate strategy Q6: Critical success factors in Axeon Q7: Key recurring activities in Axeon Q8: Axeon‘s centralisation / decentralisation Q9: Recommendations for Mr van Leuven Agenda

20. 20Management Control Systems | Axeon Case |11 Nov 2008 Facts Suggestions Ian: + British Market knowledge - Subjective (tend to overestimate) * took 6 months headquarter: - British Market knowledge(-) + Objective (a little tend to underestimate) * took 1 month It is not effective to say just Yes or No to this proposal simply Negotiation can be a better choice take into consider the real situation, resources are limited, especially time Initiate another research by using a time limitation (1 month) Estimation of sales and costs again and more exactly (divided into 2 parts) Sales: external consulting company (market research) Cost: internal Audit (company research) Recommendations for Mr van Leuven