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1- What was wrong with Mr. Wallingford’s original AR-42 proposal? Should the proposal have been accepted by the Hollandsworth and Axeon boards od firectors? What should Mr. van Leuven do now regarding Mr. Wallingfor’s AR-42 proposal?
2- What, if anything, should be done to prevent issues like this from occurring again?
3- Is construction of the new factory in the U.K. in the best interest of Axeon N.V.?
4- What transfer price would be appropriate supposing the plant were not built and AR-42 was shipped from the Netherlands to the U.K.?
5- What should Mr. van Leuven do?
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…...

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