Victoria Chemicals
Group Paper Analysis, Team 4
4/22/2010
Victoria Chemicals (B) Group Case Study
Introduction Victoria Chemicals’ Intermediate Chemicals Group (ICG) is evaluating two mutually exclusive proposals on their capital expenditures. The Liverpool and Rotterdam plants have compiled separate proposals. Each proposal had the potential to increase the polypropylene output by 7 percent for their plant respectively. Victoria Chemicals could not view a 14 percent increase companywide being feasible, but agreed half of it would. The board would approve only one of the projects. James Fawn must support one proposal and then submit it to the board for consent.
Background of Firm
Victoria Chemicals, a major competitor in the worldwide chemicals industry, is a leading producer of polypropylene, which is a polymer known for its strength and malleability. Merseyside is where the production of polypropylene pellets begins. These pellets are refined gas received in tank cars known as propylene. In the first stage of the production process, polymerization, the propylene gas was combined with diluents in a large pressure vessel. The second stage produces a finished plastic which is extruded into pellets for shipment to the customer. There are two plants that produce polypropylene for Victoria Chemicals. The two plants are located in Liverpool, England, and Rotterdam, Holland. The plants were built in 1967 and are identical in scale and design. These two plants supply Victoria Chemicals’ European and Middle Eastern customers. It has been estimated that there are seven major competitors of Victoria Chemicals in its market region (Exhibit 1) and numerous small producers.
Statement of Situation Lucy Morris, the new plant manager, found that the previous plant manager limited capital expenditures to necessary maintenance and that routine maintenance had been delayed to the point that it was now necessary. She has found that there are numerous opportunities for
4/22/2010
Victoria Chemicals (B) Group Case Study
Introduction Victoria Chemicals’ Intermediate Chemicals Group (ICG) is evaluating two mutually exclusive proposals on their capital expenditures. The Liverpool and Rotterdam plants have compiled separate proposals. Each proposal had the potential to increase the polypropylene output by 7 percent for their plant respectively. Victoria Chemicals could not view a 14 percent increase companywide being feasible, but agreed half of it would. The board would approve only one of the projects. James Fawn must support one proposal and then submit it to the board for consent.
Background of Firm
Victoria Chemicals, a major competitor in the worldwide chemicals industry, is a leading producer of polypropylene, which is a polymer known for its strength and malleability. Merseyside is where the production of polypropylene pellets begins. These pellets are refined gas received in tank cars known as propylene. In the first stage of the production process, polymerization, the propylene gas was combined with diluents in a large pressure vessel. The second stage produces a finished plastic which is extruded into pellets for shipment to the customer. There are two plants that produce polypropylene for Victoria Chemicals. The two plants are located in Liverpool, England, and Rotterdam, Holland. The plants were built in 1967 and are identical in scale and design. These two plants supply Victoria Chemicals’ European and Middle Eastern customers. It has been estimated that there are seven major competitors of Victoria Chemicals in its market region (Exhibit 1) and numerous small producers.
Statement of Situation Lucy Morris, the new plant manager, found that the previous plant manager limited capital expenditures to necessary maintenance and that routine maintenance had been delayed to the point that it was now necessary. She has found that there are numerous opportunities for