Corporate Strategies: Clayton Industries Inc.
Clayton Industries Inc. Lorenzo Mazzeo - 652821
Peter Arnell arrived in Brescia in late September 2009, and suddenly he had to face some daunting challenges due to the global recession: sales recorded a sharp decline of 5.3% in 2008 and a drop of 19.4% in the first half of 2009; Clayton SpA was in the third consecutive year of losses and accumulating more than 1 million US Dollars??per month; receivables and inventories are both above 120 day sales. In addition, the Italian market was split between low-priced foreign imports (Asian products) and Italian brands and offering neither the former, nor the second, Clayton was losing its product share in the market. Overall, the company
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Arnell estimated that this option does require about 15million, over a timeframe of five years. But even if this project requires a higher investment, this amount can be spread over a period of five years, rather than the 5million in one year of the previous alternative, thus guaranteeing a higher NPV of investment. In addition, even if it is true that the current market size for the absorption chillers is only 15% and this market is still at its initial stage, as Carlos Sanchez said “absorption chillers is the market of the future” and in fact, in Spain they accounted for 35 million in 2008, 48.5% of the total revenues (72.2 million), already far more profitable than compressor line had ever been. And so, even if it is true that the company is facing a very difficult challenge in terms of liquidity and it is currently reporting a net loss (-6.7 million in the first half of 2009), absorption chillers have many important advantages that could increase sales: they are less carbon-intensive, use water instead of the ozone-depleting refrigerants that compression system required; and while these latter rely on electricity, absorption chillers are driven by heat, often from waste hot water, and are increasingly solar-powered. Moreover by producing these “eco-friendly” chillers, it would be possible to meet also the growing demand in Scandinavia, Spain and Germany, where environmentalists emphasized the importance of respecting our Nature and