Diamond Chemicals Case Study11_Final
Transcript of Diamond Chemicals Case Study11_Final
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&4enda
E;ecutive Summary
9ndustry "vervie<
:he 3erseyside $ro=ect $ro=ect>s 7aluation $rocess
$ro=ect>s &ttractiveness
"? N" " &nalysis
3utually e;clusive@
3erseyside vs !otterdam N$7 and E$S
9!! and $aybacA
Strate4ic Comarison
!ecommendations
N"7& SC"" "F B#S9NESS &ND EC"N"39CS 5 &$$9ED C"!$"!&:E F9N&NCE 5!"#$ %&
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E;ecutivesummary
Diamond Chemicals is one of the lar4est rivately o<comanies in the #S 9n terms of roduction cost
olyroylene' the rm is not doin4 better than averaunderstandable 4iven the a4e of its t
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9ndustry "vervie<
N"7& SC"" "F B#S9NESS &ND EC"N"39CS 5 &$$9ED C"!$"!&:E F9N&NCE 5!"#$ %&
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$ro=ect>s 7aluation $rocess
N"7& SC"" "F B#S9NESS &ND EC"N"39CS 5 &$$9ED C"!$"!&:E F9N&NCE 5!"#$ %&
E$C ro=ect Ge;cludeH• 9mact on N$7 IJ0'003• &ction tell the assistant lant mana4er that both ro=ects are
searate and therefore should be analyed indeendently
Cannibaliation GincludeH• 9mact on N$7 KJ)'203• &ction Because of the ro=ect' sales may decrease in the !otte
factory
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N"7& SC"" "F B#S9NESS &ND EC"N"39CS 5 &$$9ED C"!$"!&:E F9N&NCE 5!"#$ %&
En4ineerin4 costs Ge;cludeH• 9mact on N$7 IJ0')23• &ction :he en4ineerin4 costs GJ%00000H should not be included since
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$ro=ect>s 7aluation $rocess
N"7& SC"" "F B#S9NESS &ND EC"N"39CS 5 &$$9ED C"!$"!&:E F9N&NCE 5!"#$ %&
9nLation GincludeH• 9mact on N$7 IJ2'8/3• &ction &cAno
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$ro=ect>s 7aluation $rocess
N"7& SC"" "F B#S9NESS &ND EC"N"39CS 5 &$$9ED C"!$"!&:E F9N&NCE 5!"#$ %&
Initial NPV£9M
E$C $ro=ect
J03
CannibaliationJ)23
En4ineerin4 Costs
J0)23
9nLation
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&4enda
E;ecutive Summary
9ndustry "vervie<
:he 3erseyside $ro=ect $ro=ect>s 7aluation $rocess
$ro=ect>s &ttractiveness
" or N" " &nalysis
3utually e;clusive@
3erseyside vs !otterdam N$7 and E$S
9!! and $aybacA
Strate4ic Comarison
!ecommendations
N"7& SC"" "F B#S9NESS &ND EC"N"39CS 5 &$$9ED C"!$"!&:E F9N&NCE 5!"#$ %&
$ = t>
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$ro=ect>s&ttractiveness
N$7 P IJ%683 9!! P 2-
$aybacA P -08years
E$S P IJ00611 eshare
FinancialView
N"7& SC"" "F B#S9NESS &ND EC"N"39CS 5 &$$9ED C"!$"!&:E F9N&NCE 5!"#$ %&
$ = t>
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$ro=ect>s&ttractiveness
9ncrease roductivityNo learnin4 curve' short
term solution
Fle;ibility in terms of
chan4e in technolo4y
-% day shutdo
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" or N" " &nalysis
N"7& SC"" "F B#S9NESS &ND EC"N"39CS 5 &$$9ED C"!$"!&:E F9N&NCE 5!"#$ %&
Because of
3eetin4 all nancial reOuirements
9ncreasin4 the comany>s roductivity
Bein4 Le;ible to chan4e to a ne< technolo4y
Morris should continue to proote the pro!e"unding
3 t ll
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3utuallyE;clusive@
N"7& SC"" "F B#S9NESS &ND EC"N"39CS 5 &$$9ED C"!$"!&:E F9N&NCE 5!"#$ %&
#$clusi%it& in 'eand(
&ssumin4 that the marAet stays constant for 1% years
Settin4 the annual outut eOual to 2%0000 tons in both
)he NPV is still positi%e in *oth pro!ects there"ore not utuall& e$clusi%e in deand
o
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N$7 and E$S
N"7& SC"" "F B#S9NESS &ND EC"N"39CS 5 &$$9ED C"!$"!&:E F9N&NCE 5!"#$ %&
3erseyside
N$7 PB$%'68 3
E$S P 0'0611
!otterdamN$7 P B$
1(')1 3
E$S P0'186)
Qhy $ro=ects of diMerent nature' DiMerent initial investments' DiMstrate4ic 4oals' DiMerent investment hases' 'i,erent -ross M
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9!! and $aybacA
N"7& SC"" "F B#S9NESS &ND EC"N"39CS 5 &$$9ED C"!$"!&:E F9N&NCE 5!"#$ %&
3erseyside
9!! P2-'0)
$aybacA P -'08
ears
!otterdam9!! P 1/'0)
$aybacA P 8'1(
years
DiMerent Cash Flo< tiings• 9mlementation taAes -% days at 3erseyside and ) years in !o• !otterdam only reaches full caacity in 200-
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Strate4icComarison
N"7& SC"" "F B#S9NESS &ND EC"N"39CS 5 &$$9ED C"!$"!&:E F9N&NCE 5!"#$ %&
3erseyside
• Fits all the four erformance hurdles• TuicAly imlemented
• No learnin4 curve' short term solution• :he ross 3ar4in starts decreasin4 afteyear %'
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Strate4icComarison
N"7& SC"" "F B#S9NESS &ND EC"N"39CS 5 &$$9ED C"!$"!&:E F9N&NCE 5!"#$ %&
!otterdam
• reater N$7• on4 term horion
• E;lore the learnin4 curve• "nly meets three of the reOuirements• !elies on the analysis of e;ternalconsultants
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!ecommendation
N"7& SC"" "F B#S9NESS &ND EC"N"39CS 5 &$$9ED C"!$"!&:E F9N&NCE 5!"#$ %&
!otterdam
ro=ect
Fle;ibilityof theother
factory
Qe
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Nova School of Business and Economics8th February 2016
Franc *o+o Sa
*
)han &ou "or &our attention.
N"7& SC"" "F B#S9NESS &ND EC"N"39CS 5&$$9ED C"!$"!&:E F9N&NCE 5 !"#$ %&