Academic journal article Journal of the International Academy for Case Studies

Ksb Argentina

Academic journal article Journal of the International Academy for Case Studies

Ksb Argentina

Article excerpt

CASE OVERVIEW

Andres Kessen, General Manager of the Argentine subsidiary of the German pump manufacturer KSB AG, is requesting permission from KSB AG headquarters in Germany to allow him to begin manufacturing pumps in Argentina for export to markets elsewhere in the world, primarily Less Developed Countries (LDCs) such as Egypt, Uzbekistan, Venezuela, etc. The pumps produced in Argentina would compete with pumps already produced by KSB manufacturing plants elsewhere in the world. Advantages of the KSB Argentina-produced products would include shorter delivery times (60 days vs. 120/150 days). In addition, use of KSB Argentina's obsolete technologies (not available elsewhere in KSB's system) offer lower manufacturing costs and higher margins. Kessen must decide what arguments he will offer to KSB AG's Board of Directors, in support of his proposal that KSB Argentina be allowed to expand its operations in this way. Kessen believes deeply in the merits of this proposal. However, he knows already that KSB AG's Director in charge of operations in the Americas (that is, the Director to whom he reports) is against the idea, because it would challenge and disrupt KSB AG's existing Global Manufacturing Network, which KSB Argentina (a small subsidiary using obsolete technologies) has not been invited to join.

The case is based on discussions conducted by the authors in Argentina. The case is appropriate for senior-level undergraduates as well as students in MBA and Executive Development programs. It is designed to be taught in a class session of 1.5 hours, and is likely to require a couple of hours of preparation by students.

CASE SYNOPSIS

Andres Kessen is General Manager of the Argentine subsidiary of the German pump manufacturing company KSB AG. The business involves designing, manufacturing, marketing, selling, and servicing pumps and related equipment. The markets served include water, sewage, industrial applications, energy, movement of water and/or waste water in buildings, oil and mining. Historically, KSB Argentina has manufactured a very limited range of pumps for the local market, and has imported a wide range of pumps produced elsewhere for applications not covered by its local manufacturing efforts. To date, KSB Argentina has not been involved in manufacturing pumps in Argentina for export. However, given the current economic situation in Argentina (unemployment is high, pressures for increases in wages are low, etc.) plus the fact that, over the last two years, the peso has depreciated 70% against the U.S. dollar, Kessen believes that substantially increasing his production would make it possible for him to produce (at very reasonable prices) enough pumps not only to cover local needs but also to provide a substantial number of pumps for export to developing world markets such as Egypt, Uzbekistan, and Venezuela. However, before producing pumps for export, he needs to receive permission to do so from world headquarters in Germany.

Data in the case include:

1. Description of the challenge faced by the company

2. For Argentina: Historical overview, plus a sample of recent statistics from the World Bank and (for benchmarking purposes) comparable statistics for the United States.

3. On KSB AG: Historical overview and current performance.

4. On KSB in Argentina: Historical overview and current performance.

5. On the opportunity Kessen sees for KSB Argentina: Information on the strategy currently being used (markets targeted, products offered, prices of those products, the route to market used, (that is, characteristics of the channels of distribution), promotional initiatives, and so on. Also, characteristics of the competitive situation in the pump industry in Argentina.

INSTRUCTORS' NOTE

Our hero, Andres Kessen, General Manager of KSB Argentina, faces the following situation:

1. He believes that manufacturing pumps using low-technology manufacturing techniques viewed as obsolete by corporate headquarters not only for consumption in Argentina (already doing this) but also for export to Less Developed Countries (LDCs) such as Egypt, Uzbekistan, and Venezuela (not yet doing this) could be a very profitable opportunity for KSB Argentina. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.