Ciba-Geigy

Ciba-Geigy founded in 1750s has come to many changes in their business strategy from case-by-case decisively to be one of proactive planning for the future with corporate portfolio planning which allowed Ciba to decentralise into diversified businesses. At their latest reorganization, Ciba had five categories Development, Growth, Pillar, Niche and Core allocated from 14 divisions with 33 sub-business units.Each division in each category has separate responsibility to the whole portfolio, for example, the Pigment division in Core category had the role of currency provider. Therefore, it was difficult for this division to access to capital, major coronation would violate their mandate, and payback period was set at two to three years. However, the Pigments division head recently proposed the plan for major investment in comprehensive modernization of a manufacturing plant in Newport which was the only global source for Sfr 130 million in sales of Quinacridone (HPP) pigments.Ciba ne eded to decide whether or not to invest in Newport and choose among three options invest fully, invest partially in Newport or near(a) it. Recommendation Based on Lippuners two questions in corporate planning portfolio strategy on new business, there are two reasons for Ciba to diplomacy the investment in Newport as exception to invest. Besides, they should choose option one which committed a full investment of around US $140 million.Firstly, this investment improved Newport plant from high maintenance costs and frequent failure in production to become the plant with the leading-edge standards for productivity, safety, and friendly to environment. This investment also subject opportunity for Ciba to produce DPP, which protected Cibas leading market position in HPP pigment when DPP pigments patent protection was set to make pass in 2000 2002.Limited investment in option two did not bring Cibas Pigment division the leading-edge knowledge and maintained the capability for groundb reaking edge therefore, it was out of Cibas strategy for new business. Secondly, this investment reinforced synergistic efforts between Pigment and other division in current portfolio. Although it was huge investment in core category, the pigment division still maintained to have a positive cash flow and payback period was at heart 3 years.Besides, Ciba should learn from the lesson of the pharmaceutical business which uelled other categories and came under difficulty in the recession. The same problem would happen in Pigment segment if Ciba did not invest in Pigment. However, we did not know how much Pigment contributed in the cash flow of the portfolio, so we could not evaluate if the whole portfolio could handle the investment period when there was a short of cash from Pigment. If not, Ciba should choose option three close Newport and move it to Alabama or Louisiana as a less risky plan.