Alden products, Inc.

BY GROUP 4
 Case facts
Privately-owned corporation headquartered in Peoria, Illinois

Approximately 1,500 different products were sold in almost 50 countries

API's lines of premium-priced personal care products were marketed worldwide

More than half of API's sales were made outside the United States; majority of sales took place in Europe

API hoped to rapidly introduce new products in growing Eastern Europe and the Middle East markets

Intended to finance its growth through internally generated funds

 Case facts
To be the preferred choice for customers seeking higher quality, innovative, and unique personal care products

Made heavy use of advertising

Products typically were priced about 15% above those that fought for mass market

High gross margins were needed to finance the cost of R&D, advertising and channel support while still providing an adequate
profit

Ronald van Zwieten's plant alone produced over 150 different product formulations

API introduced seasonal products to remain competitive in the market

Sales projections made by the company in 1990s revealed that a huge demand was expected in the next 10 years and there was
a requirement for 8 to 10 high speed filling lines

The major problem of API here is take a strategic decision in locating the additional filling lines
 2. Logic that led API in 1962 to consolidate its European (continental)
production into a single facility

In our opinion, the decision to change the structure of the company to a single production center was the
best decision in the interest of the company as it was able to make better execution of its operational
strategy in terms of :
• Quality: With the decision of one factory, the standardization will increase and variation will decrease
leading to using equipment, staff and suppliers of similar capabilities. It is the most differentiable
factor which allows API to charge a premium of 15% higher than mass-market products.
• Speed: The decision will enable the centralized manufacturing to upscale the speed of operation and
avail economics of scale. The location of the factory in Holland gave the company access to raw
material and effective distribution to the rest of European market, resulting in reduced lead time for
customers and suppliers.
• Dependability: API move to single factory helped it meet larger orders, improve customer satisfaction
and trust building towards suppliers
• Flexibility: Flexibility in labeling and packaging allowed the region to customize its product and occupy
the niches in the market

Thus, having a more effective operation through singular factory has enhanced the customer’s
satisfaction and has added value to the in product
 3.Performance of Uniplant in 1980s

• The plant sells its inventory with in a 37 day period which signifies good demand and
a strong and efficient sales efforts
• The is still scope of improving capacity utilisation and formal coordination between
plants
• Ability to deal with market fluctuations by using available temporary resources
• Despite increase in wages the plant is not increasing it labour cost / per unit
• Total manufacturing cost per unit is gradually increasing since 1981 with an increase
in total production which shows a possibility of increasing variable costs with respect
to production.
• Relation ship between plant and other Europe market organisations have been
worsened as the transportation costs are varying drastically from country to country.
• Threat of losing market from Italy which would incidentally increase the costs per
product
 4.Future Strategy for API

• Capacity requirements (1988-2000)

• Growth rate: 5-6% per year
• Rapid Growth during 1990-1995, followed by steady growth till 2000
• Sales expected to double between 1988 and 2000
• Current Capacity: 440 million units/year (UK & Holland Plant – 2 Shifts)
• Additional Requirement: 400/40 = 10 high speed filling lines
• The company required additional 7-10 filling lines by 2000 to meet the forecasted
demand
• Filling line expected cost is around $3 million with a capacity of 40 million units/year.
Decision Alternatives
1. Expanding Uniplant to meet the requirements - Integration
2. New plant in southern Europe - Separation
3. Approach Contract Fillers - Offshoring
 Alternative 1: Expansion of uniplant
Van Zweitan felt that integrating the additional facilities in Uniplant was best and economical choice

Pros
• Minimize the investment required avoiding the cost
on purchasing additional land
• If required Purchasing land adjacent to Uniplant was
cheaper (extra 10 hectares it would cost $ 250,000/
hectare)
• high speed filling line for a capacity of 40 million
units would cost around 30 million Dfl and it requires
an additional investment of 10 million Dfl if it was to
be done in Uniplant
• an expanded plant would support them with blow-
molding facility to produce its own plastic bottles: an
added cost advantage
• locational advantages
• Increased bargaining power with suppliers due to
combined demand
Cons
• Sourcing human resource would be a challenge
in a new plant
• risk congestion and transportation problem
encountered earlier as well
• Difficulties in managing a large work force
• Issue of late deliveries will remain unsolved
• it may led to management problems, such as
quality issue, capacity shortage and
furthermore, poor customer service.
 Alternative 2: New Plant in Southern Europe
Separate the function or set up a new plant in the southern parts of Europe may be in Italy or
southern France

Pros Cons
• Feasible due to the proximity to the European market
• High investment, land in Southern Europe would
which is its major target market
cost 4 times higher as $ 2 million/ hectare.
• The French subsidiary currently contributes for 1/3rd of
• This decision will change the overall
Alden Europe sales, followed by Italy i.e. half of France
companywide operational strategy (centralized
sales
strategy) to decentralizing production
• French and Italian market in recent times showed
• Change in operational strategies & management
negative feedback on two variables
based on local practices
• market-responsiveness
• high levels of investment required in the training
• late delivery
and development of staff at a new plant
• The problem of late deliveries can be rectified by moving
• knowledge transfer across countries might be
closer to the markets
complex due to differences in work ethics and
• Currency deterioration, which was a barrier to price the
cultural barrier of using a different language
products competitively in Italy (majorly due to
• Van Zweiten is highly valued by Alden-Europe and
transportation costs) can be overcome
has disagreements on this approach
• Will enable French subsidiary to Self-monitor their own
markets.
 Alternative 3: Approach Contract Fillers
Offshoring the filling to contract fillers locally
Pros
• By 1989, around 15% of Europe’s sale came from
Offshoring while 30% of United Kingdom’s sale
came from Offshoring
• economical as cost varied from country to country
• Some fillers in France charged 5% to 10% less than
Uniplant while Italian fillers charged 20% to 30%
lesser
Cons
• The quality of products and customer service
might reduce
• Cost of inspecting the quality for fillers across
would certainly increase
• Allowing a fillers to take over 100% production of
any product would make it difficult for API to
rebuild capabilities in future
• High chance of losing competitive advantage by
revealing the hidden secrecy of formulations to
fillers
• Other risk like logistics cost and lead times,
currency risks, political risks.
 Recommendation: High tech centralized Uniplant
Investment
• Land: Uniplant in Holland is located in industrial area where new filling lines can be added without buying new
land. Further expansion of 10 hectares would cost minimum of $ 250 per hectare.

• Equipment Cost: A newly high-speed filling line have a capacity of 40-million-unit per year, and costs about $10
million.
• Resulting investment = 10 x 10 = $100 million

• Labor Cost: New automated production would reduce the labor requirement and can hire part-time labors from
university

• If needed, API can approach Fillers for low-value and low-technology products
• Since it considers avoid telling 100% products formulation and ingredients to others
• If any unexpected case happened, API could still take the high-technology on hand and not losing control of
the product exclusive.
• This will protect the expertise in process technology and maintain state-of-the-art capabilities.
By implementing the integration strategy, It can certainly cater to niche segments with
• creative marketing,
• new products development,
• meet market demand in a timely manner,
• maintain the superiority of its quality,
• provide exceptional customer service,
• build state of art capabilities,
• exercise high degree of flexibility in responding to the market situations
Thank you