Axeon N.V.
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 inefficient strategic control. These defects have led the Company to reward subsidiary managers for focusing solely on their subsidiaries short-term revenue and profit but not for contributing to the long-term optimization of shareholder returns. The case also presents an apparently profitable proposal, made by the U.K. subsidiary, that subsequent an approval by the board of directors becomes a matter of controversy as its alleged profitability is questioned by management at Axeon's headquarters. Case analysis reveals that not only is the proposal incorrectly constructed but is furthermore unprofitable and would not have been presented if proper performance management systems had been in place. This report recommends rejection of the above mentioned proposal and that Axeon implements effective performance management systems to ensure congruency of management and Company goals.
About the Company Axeon N.V is a multinational Company specializing in the manufacturing of industrial chemicals. With headquarters in the Netherlands, the Company has over the years acquired subsidiaries in the U.K., Italy and Sweden. The subsidiaries are responsible for sales in the U.K., Southern Europe and Scandinavia, respectively, accounting for 8%,
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 inefficient strategic control. These defects have led the Company to reward subsidiary managers for focusing solely on their subsidiaries short-term revenue and profit but not for contributing to the long-term optimization of shareholder returns. The case also presents an apparently profitable proposal, made by the U.K. subsidiary, that subsequent an approval by the board of directors becomes a matter of controversy as its alleged profitability is questioned by management at Axeon's headquarters. Case analysis reveals that not only is the proposal incorrectly constructed but is furthermore unprofitable and would not have been presented if proper performance management systems had been in place. This report recommends rejection of the above mentioned proposal and that Axeon implements effective performance management systems to ensure congruency of management and Company goals.
About the Company Axeon N.V is a multinational Company specializing in the manufacturing of industrial chemicals. With headquarters in the Netherlands, the Company has over the years acquired subsidiaries in the U.K., Italy and Sweden. The subsidiaries are responsible for sales in the U.K., Southern Europe and Scandinavia, respectively, accounting for 8%,
Bibliography: Harvard Business Review, september- october 1988 - Measuring Cost Harvard Business School - 9-193-070 - Accounting for Indirect Costs Harvard Business School - 9-197-076 - Introduction to Activity-Based Costing