Clayton Industries
RUNNING HEAD: CLAYTON INDUSTRIES CASE ANALYSIS
CLAYTON INDUSTRIES
A Case Analysis
Table of Contents Executive Summary 1 Company Background 3 Problem Statement 5 Internal Factors 5 External Factors 6 Analysis 7 Industry 7 SWOT 7 Alternatives 9 Revitalize Clayton SpA 9 Absorption Chillers 11 Recommendations 13 Considerations of Peter Arnell 13 Reduce Capital Use 14 Reduce Costs 14 Rationalize Product Line 15 Align for Growth 16 Conclusion 18 References 19 Appendix 20
Executive Summary
In the midst of a global recession, Clayton Industries is challenged by a diminishing demand for their product and rising variable costs. These issues are further compounded by stiff market competition that threatens the existence of their most profitable product. This analysis focuses on the Italian subsidiary, Clayton SpA. Italy’s Brescia plant is no longer profitable; it faces declining sales, increased production expenses, and high personnel costs. The previous president concentrated his efforts internally in Italy, ignoring his regional responsibility for marketing compression chillers (A/C units) throughout Europe. Successor Peter Arnell has been tasked with meeting corporate initiatives and restoring profitability. Three choices are available: revitalize and further invest in the Brescia plant, change the product line to absorption chillers, or study strategic options for at least six months while focusing on efficiency.
Arnell is facing several critical decisions. Researching options for the next six months while focusing on increasing efficiency is the best option for Clayton SpA. Current and future political, financial, and economic constraints should be further evaluated before a final action plan is devised and implemented.
Background
Clayton Industries, based in Milwaukee, Wisconsin, is an international company specializing in residential and commercial air conditioning (A/C) systems. Clayton began operation in 1938 by
CLAYTON INDUSTRIES
A Case Analysis
Table of Contents Executive Summary 1 Company Background 3 Problem Statement 5 Internal Factors 5 External Factors 6 Analysis 7 Industry 7 SWOT 7 Alternatives 9 Revitalize Clayton SpA 9 Absorption Chillers 11 Recommendations 13 Considerations of Peter Arnell 13 Reduce Capital Use 14 Reduce Costs 14 Rationalize Product Line 15 Align for Growth 16 Conclusion 18 References 19 Appendix 20
Executive Summary
In the midst of a global recession, Clayton Industries is challenged by a diminishing demand for their product and rising variable costs. These issues are further compounded by stiff market competition that threatens the existence of their most profitable product. This analysis focuses on the Italian subsidiary, Clayton SpA. Italy’s Brescia plant is no longer profitable; it faces declining sales, increased production expenses, and high personnel costs. The previous president concentrated his efforts internally in Italy, ignoring his regional responsibility for marketing compression chillers (A/C units) throughout Europe. Successor Peter Arnell has been tasked with meeting corporate initiatives and restoring profitability. Three choices are available: revitalize and further invest in the Brescia plant, change the product line to absorption chillers, or study strategic options for at least six months while focusing on efficiency.
Arnell is facing several critical decisions. Researching options for the next six months while focusing on increasing efficiency is the best option for Clayton SpA. Current and future political, financial, and economic constraints should be further evaluated before a final action plan is devised and implemented.
Background
Clayton Industries, based in Milwaukee, Wisconsin, is an international company specializing in residential and commercial air conditioning (A/C) systems. Clayton began operation in 1938 by
References: Anonymous. (Dec 2006). Overseas Wages Not Always Worth It. Manufacturing Engineering, 137(6), 28-30. Bartlett, C.A. & Barlow, B.H. (2010). Clayton Industries: Peter Arnell, country manager for Italy. Harvard Business School Case Study, 4199 (Rev. May 18, 2010). Boston: Harvard Business School Publishing. The Business Link. (2010). The Business Link. Retrieved May 23, 2011, from Canada Business: http://www.canadabusiness.ab.ca/index.php/legal/48-credit-and-collections McKenzie, R Porter, M. E. (2008). The Five Competitive Forces That Shape Strategy. Harvard Business Review, 86(1), 78-93 Global Recession: (2008-2009) Termination of key players: Controller, QC (Derived from Exhibit 3, Bartlett & Barlow, 2010, p.10) Appendix (cont.) Figure 3: Operational Cash Flow-EBIDTA Comparison between Brescia and Barcelona Plants (Derived from Exhibit 2, Bartlett & Barlow, 2010, p.9) Figure 4: Operating Profitability-EBIDTA Margin Comparison between Brescia and Barcelona Plants (Derived from Exhibit 2, Bartlett & Barlow, 2010, p.9)