Ciba-Geigy founded in 1750s has come to a large number of changes in their very own business strategy from case-by-case decisively being one of aggressive planning for the future with corporate portfolio planning which allowed Ciba to decentralise in to diversified businesses. At their latest reorganization, Ciba acquired five types: Development, Growth, Pillar, Market and Key allocated coming from 14 categories with thirty-three sub-business models.
Each department in every category has separate responsibility to the entire portfolio, for instance , the Color division in Core category had the role of cash provider.
Therefore , it was tough for this department to access to capital, key investment could violate their mandate, and payback period was set at 2 to 3 years. Nevertheless , the Tones division mind recently suggested the plan intended for major expenditure in complete modernization of any manufacturing plant in Newport that has been the only global source pertaining to Sfr 145 million in sales of Quinacridone (HPP) pigments.
Ciba needed to make a decision whether or not to invest in Newport and choose amongst three alternatives: invest completely, invest partly in Newport cigarettes or close it. Advice: Based on Lippuner’s two queries in corporate planning collection strategy upon new business, you will find two factors behind Ciba to treat the expenditure in Newports cigarettes as different to invest. Besides, they should select option one which committed a complete investment of around US $140 , 000, 000.
Firstly, this investment increased Newport flower from high maintenance costs and frequent failure in production to be the plant with all the leading-edge criteria for production, safety, and friendly to environment. This kind of investment also opened opportunity for Ciba to produce DPP, which protected Ciba’s leading marketplace position in HPP pigment when DPP pigment’s patent protection was set to terminate in 2k ” 2002.
Limited purchase in choice two would not bring Ciba’s Pigment department the leading-edge knowledge and maintained the capability for innovative edge, therefore , it was out of Ciba’s strategy for start up business. Secondly, this investment sturdy synergistic efforts between Pigment and other department in current portfolio. Though it was big investment in core category, the pigment division continue to maintained to experience a positive cashflow and payback period was within 3 years.
Besides, Ciba should study from the lesson of the pharmaceutic business which in turn uelled other categories and came under difficulty in the economic depression. The same difficulty would happen in Pigment segment if Ciba did not spend money on Pigment. However , we would not know how much Pigment led in the earnings of the profile, so we could not examine if the whole portfolio could handle the investment period when there was a short of cash from Color. If not, Ciba should certainly choose alternative three: close Newport and move it to Alabama or Louisiana as a significantly less risky program.