Peter Arnell is in a tough situation and faces difficult challenges to revive Clayton SpA, Italian subsidiary of US based Clayton Industries Inc. Clayton SpA has recorded 3 consecutive years of losses and hence gathered attention from its senior management. As the economy struggles to come out of recession, Peter Arnell faces 3 possible courses of development to swing the Italian subsidiary out of red. Peter’s problems are exacerbated by the environmental concerns, rising variable costs (steel) and tough competition from competitors (advanced and innovative products). Clayton SpA took a direct hit and witnessed a 19.4% drop in the sales in the first half of 2009, resulting in receivables and inventories well both above 120 day sales.
Arnell had three choices to revamp the struggling company – 1) Restore Brescia’s profitability 2) Fund new absorption chiller’s plant in Spain 3) Improve operational efficiency while they wait for the current crisis to get over. We now analyze the pros and cons for each of these options. Restore Brescia’s profitability:
Pros: a) From a macroeconomic standpoint product development initiative it will help increase demand and will eventually push growth in the green b) Will be able to make the best use of what’s available to help promote growth. c) Motivate teams to push the products as euro centric rather than region centric. d) In line with the Brigg’s belief – “great opportunities always reside inside crisis” e) Buis empowering country managers and encouragement to take initiatives is an indication that she will be support this idea. Cons: a) $5 million price tag consumed in year 1 (Clayton lost $24.2 million in the last 6 months, Clayton SpA recorded a drop of 19.4 million) b) regaining market share is going to be a tough ordeal c) Brigg’s negative outlook to penetrate and gain 3rd or 4th market share in commercial air conditioning...