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Formosa Plastic Group Case Study

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Formosa Plastic Group Case Study

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EXECUTIVE SUMMARY

Formosa Plastic Group (FPG) was founded in 1954 and headquartered in Taipei, Taiwan with over 47,000 employees. FPG was the largest private diversified chemical company that produced and sold a broad range of products which mostly related to plastic. It also operated 6000 bed hospital, medical college, a nursing school, and a technical college.

FPG was organized into three major corporations and other affiliated companies. Those three major corporations are Formosa Plastics, Nan Ya Plastics, and Formosa Chemical & Fibre Corp, and each corporation were consist of several divisions. Most of the administrative functions of the company were centralized in order to take the economies of scale for granted. FPG had set up a strategy to be the low cost producer in the commodity market since it was the products sold by most of the company’s chemical divisions.

The company’s and its division’s performance were measured based on it return on investment (ROI). There were no corporate assets allocated to the divisions. Moreover, plants and product groups were considered as profit center, distinct production processes and group of machine were cost center, and nonproduction-oriented units were consider expense center within the divisions. The performance of the company was monitored closely by the FPG’s president every month by having a comprehensive meeting with senior managers.

THE PROTAGONISTS

Based on our discussions and analysis, we have come out with two protagonists in this case. They are the FPG’s president, whose name was not mentioned, and the Polyolefin Division general manager, Mr. Hsiao Chi-Hsiung.

The FPG’s president is the one who is responsible to monitor the performance of the company. Every detail about the business was discussed in particular in a monthly performance review meeting including sales, the competitive situation, future trends, and future products. This is to ensure that the...