Background to the AXO Group
AXO Group is a publicly listed, global business with its headquarters in London. It has operations in the UK and Europe, but extends through North and South America, Africa, the Middle East and Asia. It employs over 40,000 people. The group is currently structured around four product-based divisions and three functional heads - finance, human resources and a company secretariat; the board includes four non-executive directors.
The CEO is Peter Drummond. He is British, extroverted, and most comfortable with ‘big picture’ issues. His upbringing and business experience has given him a belief in trusting people to get on with the job. He delegates readily whilst leaving others to sort out the details.
Chief Financial Officer
One of Peter Drummond's key appointments was Indra Swaraj as CFO. She is British, with parents who left Uganda when she was a child. She has a quiet personality but is fiercely hard working and likes to have control over every detail. She is also the lead for IT.
The HR Director, Chuck Novak, is American with great expertise in compensation and benefits. Quick-witted and with a love of novelty and ingenuity, he is often seen by his colleagues as abrasive and competitive.
The Company Secretary, David Armstrong is British. His background is in commercial and international law. He appears self-effacing but is highly organised and methodical, and revels in complexity.
Non Executive Directors (4)
Nelson Oliviera, a Brazilian with US nationality, based in Miami, heads the Bottling Division. He has a straightforward and open personality and is known for expressing his views without fear or favour. Good at planning and prioritising, he prides himself on “running a tight ship”, relying on the hierarchy to make things happen.
Annemiek van Dijk
Annemiek van Dijk
Annemiek van Dijk who runs the Consumer Products Division was recently recruited from a large Dutch trading company and has relocated from Amsterdam to London. She has an outgoing personality and is seen as warm and open. She has acquired a reputation for taking on too many new projects and having a relaxed approach to time management.
Dr. Karl Wolff
Karl Wolff heads up the Medical Division and is originally from East Berlin but now based in Frankfurt. He is seen as highly committed, energetic but enigmatic: he is hard to read and values his privacy. Karl is focused on the future and has surrounded himself by a high performing team. He sometimes obsesses over the detail and believes in having clear rules and procedures.
Andy Chan runs the Media Division. He is an American based in Los Angeles. He is seen as clever, analytical and challenging. He works in bursts of creative energy but can be disorganised. His team is made up of young and very bright individuals who operate on a collegiate, and often remote, basis.
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The business has grown over the past six decades by a string of mostly friendly acquisitions, large and small. Many of these were opportunistic and arose from business, and even family, relationships rather than a grand strategy. Initially, these companies reported direct into the group HQ. When this became too unwieldy, a regional structure was established with a director responsible for the overall profits of each region. In the late 1990s it moved to a divisional structure with a regional matrix. AXO resisted the calls to break itself up and release potential shareholder value. In short, it is a classic conglomerate*, riding the waves of different business sectors and national economies to produce a relatively stable return on its portfolio of activities. The complexity of the structure has considerable in-built advantages for maximising tax efficiency.
* Investors have always worried about putting all their eggs in one basket. Portfolio theory of investment suggests that exposure to risk is reduced by owning a wide range of shares. From the 1950s onwards, this approach was applied to company strategy. Diversification would spread risk: shareholders could choose to buy either a diversified portfolio of shares – or a share with a diversified portfolio of businesses, related or not, i.e. a conglomerate. The fashion reached its peak in Anglo-American business in the 60s and 70s, reinforced by another seductive idea: synergy or ‘2+2=5’. By the end of the last century, the fashion had shifted round 180 degrees and ‘focus’ and ‘sticking to the knitting’ were the new mantras. Shares in Western conglomerates began to trade at a discount to the break-up value of their constituent businesses. AXO Group came under intense pressure to dismantle itself and return value to its shareholders; they resisted by tidying up their structure and selling off any businesses that did not fit the new divisional format or growth criteria.
Some of the biggest businesses today are conglomerates e.g. Warren Buffet’s Berkshire Hathaway, GE, Siemens, Bouyges, Bombardier, Tata, LG, Samsung, Wanda and Hitachi. The 2nd most valuable company in the World: Alphabet, which includes Google, joined the list in late 2015. It is an organisational form much favoured in Asia, where family involvement is likely to be greater.
One of the greatest challenges for conglomerates is for the centre to understand and exert control over a lot of different businesses. This is often compounded by geographical spread and the need to include and motivate managers from a variety of national cultures. AXO is no exception.
Axo’s senior executives spent some time debating what values should hold the group together. In the end, they agreed on a mixture of business drivers and values:
‘One Team’ – every employee must actively promote other parts of the group and enable ‘cross selling’.
‘Continuous improvement’ – avoid complacency and look for new ways of doing business and delivering good outcomes for customers.
‘Deliver results’ – agree performance objectives and then meet them consistently and without excuses.
Each division has a chief executive with global responsibility for profit, derived from their respective product/market clusters:
The Bottling division has franchises to bottle and distribute branded soft drinks in the Caribbean, South and Central America. It is a well-established and relatively stable business; the priorities have been mainly about operational efficiency.
Consumer Products distributes branded foodstuffs and OTC pharmaceuticals, mostly originating from Europe, into the Middle East, Africa and some parts of Latin America. Managing the distribution network is complex and time consuming; a number of long established local relationships are in need of overhaul.
The Medical Division started life by distributing medical supplies to hospitals, clinics and other health providers across Western Europe; attempts to penetrate Eastern Europe and Russia had been largely unsuccessful. The appointment of Dr Karl Wolff brought in his expertise in medical diagnostic equipment, where the capital value of transactions is much higher and involves support and maintenance contracts. He is rapidly transforming the division’s profile and its geographic spread.
The Media Division originated from a larger acquisition that included satellite TV channels in France, North Africa and European film distribution. Video games and video conferencing were subsequent additions. Lacking coherence and direction as a business, Andy Chan replaced the previous French CEO. He was tasked with setting a new strategy and one of his first moves was to acquire a virtual learning start-up in Cambridge, England. He believes SE Asia and China still offer great potential.