Clayton industries

Topics: Chiller, Supply and demand, Employment Pages: 6 (1675 words) Published: December 3, 2013


1º Executive summary:
Clayton Industries has been beaten by the current economic situation. But there is one European subsidiary that is suffering more than the rest. The Italian plant is having deep losses and needs to be re-established. The European head has appointed a new plant director in Italy to make this factory profitable or to take another decision to face the current scene and the possibility of growing in few years.

2º SWOT Analysis:
Support from the direction.
Strong political relationships in Italy.
New facilities.
The current strategy delivers losses more than 1 million per month. Receivables and inventories are both above 120 days sales.
Not flexible production lines.
The Labour Union won’t be receptive to layoff plus tough local laws. The current stall in real estate and no suitability to new buildings. Decreasing demand of compression chillers.
Low prices by competitors and more advanced technologies.
Likely market growing in future.

3º Statement of the challenge:
The manager has to offer a suitable solution to generate profits and win share market. He also has to find the way to compete with more technological and cheaper competitors in his own market and European market. Is the chiller compressor a bid for the future?

4º Development of alternatives:
The Italian subsidiary has different ways to tackle these issues. The manager has to decide between three strategies well differentiated.

1. Boosting the plant efficiency and revitalize the chiller line: The Italian managers bet for this option, but the company would have to invest about $5 million, and most of that amount would be spent in the first twelve months. The trend for this line of products is decreasing, so likely, it not faces a long-term growing strategy. 2. Restructuring the plant to face the growing demand of absorption chillers: The Spanish manager thinks that it would be better to phase out the current line of product to start to produce absorption chillers to face the growing demand. It could be a good option, but the company has currently lot of losses and this guideline need a great investment. If the parent company cannot subsidize 1 million losses per month, it hardly could face 15 million of investment plus the current losses until the Italian company become profitable. 3. Get focused into efficiency measures and take more time to study the possibilities: The Italian finance director advise us to focus our strengths into efficiency measures to cut down the losses in order to take more time to study the viability of other strategies for at least six months or until the situation is cleared. It’s a no-nonsense alternative, since even Buis thinks that the economy is going to growing up, we have hard losses currently and to face new investments or take another guideline without cut down the haemorrhage is very risky to the company’s future not only Italian, but European too. 4. Invest into Spaniard company:

It could be a good option, but Buis has bet for the Italian company. Furthermore, we would have to take harsh position to do gradually a massive layoff and face the Italian laws.

5º Evaluation criteria: Timing, investment, to overcome the current tendency (Absorption chillers), possibility to grow (in the future after the crisis) and bosses agreement. Alternative/Criteria (Low 1-3-5 High)

Overcome tendency
Possibility to grow
Bosses agreement
Boosting the plant efficiency & revitalization
Absorption chillers production
Efficiency measures to get time
Invest in Spain

Mrs Buis bet for a speedy economic revitalization in European area, and she wants to give another option to the Italian plant to worth its value. But the factory has an important loss of money per month, and the whole company cannot afford it. So, the first step is to...
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