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Summary

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by

Ana Maria Flores

on 9 December 2013

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Transcript of Summary

CLAYTON INDUSTRIES:
PETER ARNELL, COUNTRY MANAGER FOR ITALY

Summary
Objectives
Questions
Conclusions
1. There was not an alignment between C.E and the country's local situation
Objective 1
was Founded in 1938.
Business: Window-mounted room AC/sold for residential and light-commercial applications.
In the 80's the company perceived 2 opportunities: American market (commercial sector) and European market (residential + commercial)
Clayton Industries
Clayton N. America
Clayton Europe
Coliss, UK: Manufacturer of home heating, ventilation, and AC
Fontaire,, Brussels: Manufacturer of fans and ventilating equipment
Control del Clima, Spain: Manufacturer of control of climate control products
Aeropuro, Italy-Brescia: Manufacturer of compression chillers
Clayton Europe
C.E appointed 4 country managers.
Responsible for
sales of the full line

of Clayton products in their home country and their allocated
export markets
in Europe
Progress was slow. AC was in only 7% of Italian homes and 11% Spain's vs. 71% US
Europeans =AC expensive American luxury that harmed the environment
Europeans had different needs and preferred national brands
Sales outside Italy accounted for only 12% of the total
Simonne Buis
2001-Became the president of C.E
Country Managers will hold responsibility not only for national sales but for Europe -wide profitability of products produced in their plants
Focused on increasing the operational efficiency of Clayton's diverse portfolio of inherent plants
Encourage the subsidiaries to collaborate between each other
Recession
In 2009, Dan Briggs became the new CEO of C.I
Set 2 priorities:
reduce capital use and bring costs under control
great opportunities reside inside crisis
10/10/10 plan
Top 4 in 4
Urgent
To do list
Problems- Clayton SpA
Sales declined-19,4% 2009
Receivables and inventory were above 120 days.
Headcount reduction faced tough local laws
10/10/10
Top 4 in 4
It generated only 12% of sales for the rest of Europe

5th place in the European chiller market-7%
Peter Arnell
New country manager of Italy
Captain of Royal Marines
Expanded Clayton's distribution network from 4 distributors in England to 14 UK -Ireland
Military discipline
Bold actions

He assessed the company
He needs to make a decision about the company's future
3 Options
Understand the country manager's struggle to align corporate strategies and regional priorities with local conditions, and to do so while operating within occasionally conflicting needs and objectives.
Corporate Strategies
Regional Priorities
Local conditions
10/10/10
Post recession expansion
Top 4 in 4
National sales responsibility
Europe-wide profitability of products produced in its plant
Low sales
7% Europe market share
Receivables and inventories above 120 days
Tough local laws regarding headcount reduction
Only 12% of sales-Europe
Chillers -55% of Italily revenues
Objective 2
Explore the ways in which effective implementation not only requires an understanding of external strategic opportunities and threats, but also a sensitivity to internal organizational interests and constraints.
Weaknesses
• The company lagged commercial customers
• AC systems fit poorly with Italian buildings
• Lack of marketing capability needed to sell other products
• The chillers are expensive and lack innovative features
• Monthly losses of $1 million

Strengths
• Strong preference in the Italian market for local products
• Disciplined, intelligent, and driven manager, Peter Arnell.
• Political relationships that supports large projects in Italy
• Good relationships and communication between country managers

Opportinities
Threats
• 5th position companies in the chiller market with only 7% of overall market share.
• Perception of AC as a environmentally harmful luxury
• Preference for local brands rather than international ones
• Commercial costumers favored Asian products = lower life cycle costs and efficient design.
• Italy’s labor union
• Increase in steel prices

• To leverage the European market by changing the chiller line to
absorption chillers.
• To become a more environmental friendly company
• To expand its market share in Italy by implementing a sales marketing plan and revitalize the compression chiller line.

SWOT
Question 1
1. Evaluate Peter Arnell’s first two months as general manager of Clayton SpA. What are the main challenges he faces? How well is he dealing with them?
Question 2

2. Review the three possible courses of action outlined on the last page of the case. As Arnell, which plan would you recommend to Dan Briggs and Simonne Buis next week? What problems and constraints might limit your strategic recommendation? How could you deal with those issues?
Options
Option 1
Who?
Italian managers.
what?
To concentrate on restoring Brescia’s profitability and ensuring its long-term viability
How?
Programs to boost plant efficiency, product development initiatives to revitalize the compression chiller line, and a sales and marketing plan to expand market share outside Italy.
How much?
$5 million
Option 2
Who?
Carlos Sanchez
What?
Changing the product from compression chillers to absorption chillers.
How much?
$15 million. Required layoffs and restructuring
Option 3
Who?
Financial Director
What?
To focus on efficiency measures and restore profitability while still studying possible strategic solutions for at least another 6 months
Option suggested
Option 2: Absorption Chillers
New opportunities
New market to exploit
Innovation
Future
Good sign -Spain is doing great


Constrains/limitations
$15 million investment
Labor Union
Recession
Buis
Dealing with issues
Buis: Prove that absorption chillers are more than a niche market
Get Buis on board
Convince the labor union this is the best option not only for the company, but for them as well
Get the best our of the recession but taking opportunities and thinking ahead
Question 3
How would you convince your bosses to back your recommendation? How would you roll out your preferred strategy?
1. Arnell needs to ask them to trust him.
2. He has to make it clear of the importance to agree up on an immediate, risky, yet achievable solution because time is running out.
3. He needs to make evident the reasons why people are not buying the products made by Clayton SpA.
4. Compare the three alternatives and really show with numbers and pros and cons that changing the product line from compression chillers to absorption chillers is the best solution
5. Blue ocean strategy
EBITDA
Question 4

Was Arnell the right choice to be country manager for Clayton SpA?

2. A blue ocean strategy is more suitable for the company
3. Implementation will be very tough, however it will create a better future for the company
10/10/10 challenge
- Cut receivables and inventories to 10 days -> At the moment 120 days
- Decrease of 10% in employees -> Strong influence of labour units
- Negative turnover of 1 million -> other subsidiaries cannot back this up
Conclusion: Not possible to do in the time period given.

Top 4 in 4
Get in the top 4 of Europe with market share within 4 years
- Italy is currently number 5 with 7% market share -> Competition is 36%, 23%, 16% and 12% market share.
- 55% of sales are in Italy done.
Others:
The company lacked commercial customers (political relations only)
Commercial customers preferred Asian products (lower lifecycle cost and efficient designs)
products were perceived as expensive and behind competitor’s innovation features
AC central system units fit poorly in Italian buildings

Arnell’s attitude:
Military discipline
Daring actions
Italian background
Proactive attitude
Full transcript