Clayton Industries Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Clayton Industries Case Study Solution

Company Background

Clayton Industries Inc. was incorporated in 1938 in Milwaukee. The company’s business relates to selling of window-mounted room air conditioners for residential and light-commercial enterprises.To grow the company, Clayton Industries Inc. grasped two opportunities in 1980. The opportunities were related to the expansion in the North American commercial sector and residential commercial market in Europe.

In the country of Europe, Clayton industries Inc. acquired four companies Fontaire a Brussels based company which manufactures fans and ventilating equipment, AeroPuro a Brescia Italy based company manufacturing compression chillers for large public, commercial and institutional installations, Control del Clima a Barcelona-based company that manufactures climate control products for commercial and industrial enterprises and Corliss a U.K based company that manufactures home heating, ventilation, and air condition(HVAC) systems.

In the European market,Asian producers have a good position and the consumers of European market prefer national brand over others.Moreover, non-compliance of Clayton products’ design to Europe homes make the growth slower than anticipated.

The above factors affect more drastically to Italy as the sales from this country accounted for only 12% of the total sales. To improve the performance of Europe market, the company took significant steps to improve the efficiency of the operations. The company also encouraged country managers to collaborate with other subsidiaries so that the performance of Europe market can be improved.

During 2000 to 2009 Clayton Inc. reported revenue was 45% of the global revenue but after the global recession of 2009, the profit margin of the company drastically deteriorated.Therefore, it becomes vital for the company to develop an effective strategy so that it can regain the market share and revenue after the recession.

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? And how would you grade Peter Arnell’s first two months as subsidiary generalmanager in Clayton SpA?

Challenges

Many challenges are faced by the company while operating in Europe. In Europe, the air conditioner market is considered asa well-developed market because customer sees air conditioner as an American luxury item.

However, in 2009 after the global economic recession, the sales from Italy declined significantly by approximately 19% which was an unanticipated decline. To improve the performance of the country the country CEO Peter Ar nell intends to close down some of its facilities and intends to reduce the labor force of the company.

Along with these problems, there are some other problems which deteriorate the overall position of the company .The company has un competitive products lines in European country moreover the increase in cost upsets both bottom line and the top line of the company. The company also faces labor union problems, has a low customer base in Italy, faces severe competition from Asian companies who provide economical products to the customer.

Overall we can conclude that the main problem of Clayton SpA relates to the high price of its products with nil tangible value associated with them. To overcome this problem company intends to restructure its product line by reducing cost and building a scale.

Evaluation of First Two Months

After becoming the subsidiary manager of Clayton SpA Arnell faced many problems.At the second day of his work four officials from Federazione dei Lavoratori della Manifatture started lobbying against Arnell and claimed that he is sent to close the Brescia plant. Arnell wisely dealt with the situation and convinced these officials. Along with this, he also negotiated the long-term debt and postponed them till the next quarter. Furthermore, to improve the position of the company he diverted himself from his family to work and asked from the employers to postpone their holidays. Moreover, he also met with employees individually and askedto help them to develop the strategy for the company as this will enhance the motivation of the employees.

Grade to Peter Arnell first two-month performance

As Arnell effectively dealtwith all the issue and made appropriate efforts to improve the position of the company, therefore, we will grade him 3. (grade1is consideredas effective manager and 5 as ineffective manager)

2. Evaluate the three possible courses of action?

Evaluation of Alternatives

Target

The main targets of the company are:

To increase the market, share of Clayton SpA from 7% to 15% within four years (Four in Four objective)
To reduce Receivables Days, Inventory Days by 10, 10 days and Headcount by 10% (10/10/10 objective)

Clayton Industries Harvard Case Solution & Analysis

Option 1- Review the Compression Chiller Line

In option 1, the company has to invest 5million in the next 12 months in its existing manufacturing facility. Moreover, theaddition of new compression chillers will make the company in line with other Asian competitors.Furthermore, due to adopting option 1, the technology will be improved which will enhance the efficiency of the compressor along with this, this will also enable the company in reducing average cost as economies of scale can be obtainedthrough this option. Moreover, the advanced technology will replace the need of labors and hence after this option the dependency over the labor force will reduce significantly and the technology will require lower marginal capital cost as compared with the marginal cost of labor.

Furthermore, this option is also in line with the core objectives of the company as this will expand the company into new markets. And due to this diversification, the overall position of the company and revenue will be strengthened as after this company will earn profit from diversified sources which are considered as more stable revenue..................

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