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,
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for a chemical called AR-42. Even though the chemical was already manufactured by Axeon in the Netherlands, it had never before been sold in the U.K.The U.K.'s subsidiary's plan was based on a new technology, designed by the subsidiary, to store and apply AR-42. The U.K. subsidiary manager claimed that with this new technology the subsidiary would rapidly develop a 400 ton annual market for AR-42 in the U.K., almost as large as Axeon's, already existing, 600 ton, worldwide market for the chemical.Having designed the plant with assistance from the Corporate Engineering Division in the Netherlands, the U.K. Managing Director presented his plans to the U.K. division's board of directors. Since the plans indicated that the endeavor was profitable, the plan was accepted and subsequently presented to the board of Axeon in the Netherlands that voted unanimously to allow construction of the plant. Subsequent discussions among managers at the headquarters caused Axeon's managing director to start doubting the proposal's actual profitability and strategic relevance. To support these doubts even further, detailed analysis, done by key managers at the headquarters, indicated that the proposal was indeed uneconomical.Situational Analysis The conflict presented in this case is caused by the fact that the Company has grown from being a small, simple operation, into a complex multinational, without ever implementing proper strategic