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Behavioural Management Control

This case study explores the complexities of management and inter-company dynamics at Axeon N.V. It highlights the challenges faced in UK market expansion, particularly in establishing a new plant. Key topics include the initial analysis of profit potentials, the influence of Dutch headquarters on decision-making, and the importance of transfer pricing strategies. The seminar emphasizes effective corporate strategies, the need for collaborative communication, and cultural controls to align the interests of decentralized subsidiaries. Insights from expert managers contribute to understanding these dynamics.

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Behavioural Management Control

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  1. Behavioural Management Control Seminar Case study: Axeon N.V. Group C6 Isabelle Allais, Sarah Beucler, RaphaëlleBrustel, Camille Jandrain and Warren Oakes

  2. #1: Feelings about the initial analysis (1) • Ian: • Capable manager • Good knowledge of UK market • Experience of profit centre manager • Company: fairly decentralised system • Managers: lot of scope to individually explore business opportunities

  3. #1: Feelings about the initial analysis (2) • Initial analysis: • Approved by UK experts • Very complete • No overestimated profits • 6 months spent developing it • Falls within the corporate strategy • But: • Conflict with the Netherlands

  4. #2: Interest for Axeon to build a new plant in UK? (1)

  5. #2: Interest for Axeon to build a new plant in UK? (2)

  6. #3: Explanation of Mr van Leuven behaviour (1) • First meeting: • Do not know the details “on the floor” • Believe in manager (Theory Y) • Proposal already approved by the Hollandsworth board meeting

  7. #3: Explanation of Mr van Leuven behaviour (2) • Second meeting: • Does not want conflict or to be involved: • Ian: been in the company for a few years • Netherlands people: been in the company longer • ‘Power play’ & Theory Z • Range of views & more knowledge • Change of balance within the company

  8. #4: Which transfer price if AR-42 supplied from the Netherlands to the UK? (1) • Situation: • no financial structure in place for ‘global accounts’ • Different possibilities: • Negotiated transfer prices: • not a good idea: bad relations between Ian, Oosterling and Backler • Ian not as influential in the company as the other managers

  9. #4: Which transfer price if AR-42 supplied from the Netherlands to the UK? (2) • Full cost transfer prices: • not incentive for the UK and the Netherlands • Market-based transfer prices: • not a good option: the transfer costs from the Netherlands to the UK not include

  10. #4: Which transfer price if AR-42 supplied from the Netherlands to the UK? (3) • Dual-rate transfer prices: • Difficult to implement • Marginal cost (plus a fixed lump-sum-fee) transfer prices: • good solution for both sides • the Netherlands: pay for the variable costs • the UK: still make profits • fair compromise: • the Netherlands: reward for their production • the UK: generate profits

  11. #5: Axeon's corporate strategy • Unrelated interdependence corporate strategy • high decentralisation • no focus on the core business • little communication • bonuses • key performance indicators • subsidiaries are autonomous • Dutch Production in a related diversification: • leading to problems with transfer prices etc.

  12. #6: CSF in Axeon • Money: • revenue and growth • Quality: • essential for the chemical industry • Product or service development: • increasing business and attracting new customers in different markets. • Ian works on otherprojects

  13. #7: KRA in Axeon • Distributing • Promoting • Manufacturing • Maintaining quality and value (training people) • Allocating resources could be one of the KRA

  14. #8: Decentralisation in Axeon • Relative autonomy • Individual reward incentive based system

  15. #8: Centralisation in Axeon • Approval needed for product and project development • Problems in interrelations • Producing the good in the Netherlands

  16. #9: What should Mr Van Leuven do? • Involve the company as a whole • Schedule a board meeting with all the subsidiaries • Ask for an external assessment on the productivity • Adapt the decision to the UK situationImplement Cultural controls

  17. Thank you for your attention

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