Clayton Industries: Peter Arnell, Country Manager for Italy case analysis
Question:
Questions 1.a. Evaluate Peter Arnells first two months as general manager of Clayton SpA.
1.b. What are the main challenges he faces? 1.c. How well is he dealing with them?
Question 2.a. Review the three possible courses of action outlined in the last page of the
case. As Arnell, which plan would you recommend to Dan Briggs and Simonne Buis next
week? 2.b. What problems and constraints might limit your strategic recommendations?
2.c. How could you deal with those issues? (For each option, create a table of pros and
cons)
Question 3.a. How would you convince your bosses to back your recommendations (be
prepared to defend your preference with convincing arguments backed by strong data
analysis). 3.b. How would you roll out your preferred strategy?
Question 4. Was Arnell the right choice to be country manager for Clayton SpA?
Introduction
Clayton Industries Inc. was founded in Milwaukee in 1938. The company had built a
successful business around window-mounted room air conditioners, which it sold for
residential and light-commercial applications. In the early 1980s, Clayton expanded in
Europe by acquiring four companies: Corliss in UK, Fontaire in Belgium, Control del
Clima in Spain and AesoPuro, Italy-based manufacturer of compression chillers for large
commercial, public, and institutional installations. Clayton Europe appointed four country
managers, who all had responsibility for sales of Clayton products in their home country
and their export market in Europe.
In 2001, Simonne Buis, president of Clayton Europe, set targets that required to slash
costs, build scale, or both. Over the next seven years, Europe became major growth engine
for Clayton, increasing its share of the companys global revenue from 33% in 2000 to 45%
by 2009. However, as the economic crisis deepened in 2009, Buis established two plans
for all country managers: a) to achieve a 10/10/10 plan to cut both receivables and
inventories by 10 days, and reduce headcount by 10%; b) to prepare plans showing how
the product would be in the top four in European market share within four years (Top Four
in
Four objective).
For Clayton SpA (Italy) that would be a real challenge. The company recorded a 5.3%
sales decline in 2008, followed by a 19.4% drop in the first half of 2009 (loosing more
than $1 million a month). As a result, receivables and inventories were both above 120
days sales. Moreover, the sales of chillers line generated only 12% of sales of the rest of
Europe, and Clayton SpA was in a distant fifth place with a 7% market share. Peter Arnell,
new manager of Clayton SpA, also faced other issues, such as the facts that customers
preferred Asian chillers products more due to lower lifecycle costs and more efficient
design, Europeans preferred familiar brands and low-priced imports, they perceived air
conditioners as a luxury which harmed the environment, tough local laws and tense union
relationship, staffing level were still 20% to 30% too high, and 27% increase in steel price
in the past two years.
As mentioned in the case, there are three possible options for Peter Arnell to decide which
can help Clayton SpA achieve its goals: restoring Brescias profitability and ensuring its
long-term viability, changing the product line by shifting from compressor chillers to
absorption chillers, or focusing on efficiency measures to restore profitability while
studying the various strategic options for at least another six months or until things became
clearer. He would then have to show Claytons management board his analysis, plans for
turnaround, and the results expected to achieve.
Questions 1.a. Evaluate Peter Arnells first two months as general manager of Clayton
SpA. 1.b. What are the main challenges he faces? 1.c. How well is he dealing with
them?
Answer 1.a. Peter Arnell was promoted from the British subsidiary, Clayton Ltd and was
declared country manager of Clayton SpA, the Italian subsidiary of US-based Clayton
Industries. With the diminishing market D. Briggs and S. Buis expected Arnell to position
Clayton SpA for future growth. Arnell knew how the situation was and he instantly took
the position. He did not even give a second thought to join it. At first, Arnell called a
management meeting to share his early assessment of Brescias grave situation and to ask
for their support. Emphasizing that this was a time for immediate action, he requested all
of them to postpone vacation plans until further notice. He then met individually with his
top team, asking each to help him use his first 60 days to understand the situation and
develop a strategy for the company. He also secured the banks agreement to postpone large
payments due over the coming quarter. Arnell knew that while these few changes would
not return the plant to profitability, they might buy the company some time as he
completed his assessment of the situation. Over the next few weeks, he learned a great deal
about the companys current situation as well as the challenges the company was facing.
Finally, in conversations with his people from Clayton SpA and different country
