Management of Development Process: Call-Center Relocation

ICI (Imperial Chemical Industries) UK

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Management of Development Process

Table of Contents
Introduction......................................................................................................................................1
ICI Background and History........................................................................................................1
Vision Statement..........................................................................................................................2
Mission Statement.......................................................................................................................2
Principal Subsidiaries..................................................................................................................2
The Competitive Edge of ICI Organization.................................................................................2
Change Analysis..............................................................................................................................3
Elements of Change Process........................................................................................................4
1.The Energy Consumption Trends in UK..............................................................................4
2.Achieving Economies of Scale.............................................................................................6
3.Diversification Strategy of ICI.............................................................................................6
The Call-Center Relocation Strategy...............................................................................................7
Theoretical and Practical Issues...................................................................................................7
1.Nepal (Brutal).......................................................................................................................8
2.China (Shenzhen)..................................................................................................................8
3.Philippines (Manila).............................................................................................................8
Critical Analysis of Decision...........................................................................................................9
Floor Plan of the Strategy............................................................................................................9
Identification of strengths and weaknesses of the proposal.......................................................10
Operational and Behavioural Aspects of the Campaign............................................................10
References......................................................................................................................................11

Table of Figures
Figure 1: Energy consumption in UK..............................................................................................4
Figure 2: Global consumption Analysis..........................................................................................5

Management of Development Process

List of Table
Table 1: Call-Centre Operating Cost.............................................................................................10

Management of Development Process

Introduction
ICI Background and History
Imperial Chemical Industries (ICI) emerged from a merger of four major chemical
companies of Great Britain in 1926. The merged organizations were NIL, UAC, BDCB, and
M&C limited. The ICI has a competitive edge of never getting dismantled by the authorities. ICI
was a dynamite company, born with the merger, was founded by Alfred Nobel (akzonobel.com).
The founder was the inventor of dynamite made with gunpowder, specifically used in
engineering projects for blasting. The revolutionary inventions made few projects possible that
were considered impossible before this invention, for example, Suez Canal. Within 12 years, the
revenues reached at 1 million, yearly (Heaton, 2012).
All the merged companies brought their expertise along. ICI had a competitive edge and
were technologically stronger than the rivals. During World War I, the company supplied
ammunitions. It was a turning point as the company was an ammunition manufacturer now. In
1926, the company found itself in tough competition with the German chemical company, the IG
Farben. Another evolutionary merger of industry giants formed Imperial Chemical Industries.
The reason was to give a concrete image of chemical manufacturers. In the beginning, Imperial
Chemical Industries had nine groups: alkalis, cellulose products, dyestuffs, explosives, fertilizers,
general chemicals, leather cloth, lime and metals; where, fertilizer was the main growth
segment with 10% of the investments. However, in 1930s, ICI faced 4% drop in revenues. The
focus was diverted to produce oil from coal, but it was not competent enough. By the mid of
1930s ICI again started focusing dyestuffs. In World War II, ICI was a major producer that
worked for the British government. ICI became a need for entire Britain industries as it was
producing huge segment of ammunitions. Till 1965, ICI faced tough competition and a downfall
was observed, but somehow it survived. In 1965 new building plans were introduced. The
expansion strengthens the pricing strategy of the company and gave a 33 % boost in the sales. It
further improved labour relations with the company (Heaton, 2012).
By the early 1970s, ICI experienced a 11 % boost in productivity, but profits still
declined by 13%; unlike the industry trends. The next few years were very inconsistent. In
1970s, the company was standing at a point where it was a large but inefficient company with a
wide list of unsuccessful projects. In 1982, Sir John Harvey-Jones took over ICI and in a year,

Management of Development Process

the company made double profits than last year. The product line was extended.This time
production focus was shifted from ammunition to polyester . The 1981, acquisitions and
purchases lead a healthy growth, followed by a downfall. The other companies and business
experts have stated that the reason of down fall was bulk chemicals production by ICI that is no
longer profitable.
In 1987, Harvey-Jones retired, leaving the company in the hands of other experts. Denys
Henderson is the new successor of the company. ICI is still diversifying and widening its product
range with valuable products. ICI is operating its subsidiaries in Argentina, Australia, Canada,
China, France, India, Japan, Malaysia, Netherlands, New Zealand, Pakistan, South Africa, West
Germany, and the United States.
Vision Statement
Tomorrows Answers Today(akzonobel.com).
Mission Statement
To be the partner of first choice for customers and suppliers, ensuring sustained leadership
positions in the markets where we compete, delivering long-term business value through a high
performance culture, innovation, ethics and responsible care (akzonobel.com).
Principal Subsidiaries
1. ICI Petroleum Ltd.
2. ICI Finance Ltd.
3. Nobel's Explosives Co., Ltd.
4. Scottish Agricultural Industries.
The Competitive Edge of ICI Organization

Eco-friendly products
Market competitive low cost
Protection of limited resources
Social image building

Change Analysis

Management of Development Process

The past years unsuccessful projects and failed schemes have tracked ICI to a point
where it is not in a position of opening or re-locating its production plants. But, ICI can move
some of its divisions into other countries where the cost is cheaper for increasing efficiency. ICI
is re-locating its call centers in countries, it where it would be helpful for ICI in globalization. It
would benefit the company revenues and sales. The detailed analysis of change and its allocation
strategy is devised in this report (Penny 2004). Site selection is considered as an important aspect
while opening new call centers. However, the cities saturated with call centers are facing a
problem of limited staff, for example, Phoenix or Dallas. The expensive offices and high wages
increase the cost where small towns can provide a better solution in this regard.
Call centers are progressively considering economies to move to a new location. Over the
last few years, a change in trends is being observed. There are substantial costs of relocation, like
compensation packages, recruiting costs and training costs (Penny, 2004). But on comparison the
savings that are big enough in terms of labour cost, that is the call centres major operational
cost. Relocation costs can be regained in a very short time. The globalization aid companies to
regain its market share and diversity (Plumlee, 2008).
Imperial chemical industries being highly innovative and diversified is at a point where
the organization needs to take some smart and proficient profit oriented decisions. The thorough
historical analysis of the company has clarified that ICI have emerged with an infusion of
expertise by mergers; and since the beginning the founders approach is innovative. In the
journey of successes and failures, ICI has seen many diversifications. The organization needs to
expand as its necessary for its survival and it is the tradition of the company as well (Heaton,
2012).The relocation of call-centre would help ICI to focus on its product-line expansion and
diversification. According to Greeg (2012) globally diversified organizations have prospered
more than domestically diversified portfolios. Diversifying internationally results in higher
revenues and have the same level of risk. The market trends keep changing, since the global
diversification reduces the chances of missing any opportunity of growth and sales. As an
evident from 2009 to 2011 the global portfolio outperformed domestic from $100,000 to
$191,772. The study concluded that there are prominent advantages of diversification
capitalizing globally, especially for long-term investment. The technological change has made it
possible for organizations to diversify without disturbing their production area. The simple
solution of it is to re-locate some of the parts into countries where the cheaper cost.

Management of Development Process

Elements of Change Process

The Imperial chemical industries need to diversify and expand its product line. The
company needs to shift some of its areas in other countries. It would help ICI in focusing on the
product line and diversification strategy. The change is needed due to globalization.
The three key factors identified the need of globalization in organization are:
1.The Energy Consumption Trends in UK.
The first key factor identified the need of globalization at ICI is the trend of energy
consumption of United Kingdom Energy sector. An illustrative graph of the consumption trend is
attached below:

Figure 1: Energy Consumption in UK

Management of Development Process

Figure source: http://leftfootforward.org/images/2015/02/Inland-UK-energy-consumption-bysector-Energy-Trends-11-12.gif

The graph above illustrated the energy consumption trend in the UK from 2011 to 2012.
The consumption trend for natural gas and petroleum is inconsistent where, the natural gas
consumption shows a drop of 10 %,where the consumption rate of petroleum started from 27%,
and was raised to 40%. It followed a drop of 15% and then was raised to 35% again. The trend is
inconsistent. Coal consumption shows a periodic curve. The consumption is increased by 5%,
where nuclear consumption shows consistent periodic fluctuation. Wind and hydro consumption
is consistent, though it is very low; where reliance on imports seems negative in the UK.
The change can be justified by doing a competitive analysis in the global context and
domestic trends of consumption. The graph below is an illustration of global consumption trends
from 1965 till 2012.

Figure 2: Global Consumption Analysis

Figure source:Data retrieved from, https://fractionalflow.files.wordpress.com/2013/06/fig01world-energy-consumption-2012.png

Management of Development Process

The visible increasing trend shows the prominent difference in domestic and international
consumption trends. The consumption is consistently increasing with very little fluctuations. The
international exposure can neutralize the domestic downfall and diversified market exposures
can be a competitive growth in the industry.
2.Achieving Economies of Scale
The per-unit increase in production, reduces the production cost of one unit. It increases
input efficieny as well. Diversified industries such as cement and chemicals show higher
achievement rate of economies of scale production (Plumlee, 2008). The theoretical study
presents two approaches of economies of scale; first approach assume that decision-making unit
(DMUs) are efficient. The approach works on the assumption that DMUs work on production
possibility frontier PPF curve and maximum output is extracted. The second approach does not
rely on DMUs as it works on Technical Frontier (TF) curve that identifies all possible options
and devices a PPF curve accordingly (Shih et al, 2006). The ICI commitment and financial need
of doing more profit oriented projects would need economies of scale. The bulk chemical
production is already burdening ICI where ammonium nitrate fertilizer was 20 cheaper than the
industry due to economies of scale. ICI need to achieve economies of scale in order to reduce its
production cost and increase its overall profit margin, it would save ICI from bankruptcy.
Globalization or global diversification would fit ICI growth needs (Heaton, 2012).
3.Diversification Strategy of ICI
The intense competition of the industry can only be achieved by attaining continuous
successful projects of ICI, where ICI is also diversifying in its product line (Heaton, 2012). The
geographic diversification could give a competitive edge by reducing labour cost, solving
transportation problems and reducing risk of market downfall in a particular industry (Ceballos
et al,2012). Financial diversification enables an organization to hold foreign assets and liabilities
cross-country. Holding means increased foreign assets and liabilities; and it is due to
globalization. The phenomena is due to investment in other countries. The returns benefits the
national economy and it also encourages foreign investment in homeland. Exposure of an
organization in the global financial system would add many aspects to its growth by reducing
risk and gaining market share globally. According to a study by Riddix, (2011), investment in the

Management of Development Process

market depends on investment strategy. For surviving market downturns, diversification is the
best option. The three major advantages of diversification are risk reduction, capital preservation,
and power to expand company portfolio.
The analysis proved that expansion and diversification are the need of ICI. Now, for
reducing cost and expanding the product line, ICI needs to focus the change strategy of call
centres relocation, so that the saved amount can be used in product line expansion.
The Call-Center Relocation Strategy
The main focus of ICI is devising a profit driven strategy. The study already has
identified the needs of change. The historical analysis of organization highlighted that the major
problem ICI has been facing, that is, modification in its product line. Moreover, the change
strategy should focus the factors that can help an organization in achieving cost effectiveness,
productivity and diversification opportunities, for example, cheap labour, real estate cost and
availability of qualified labour. The geographic and demographic selection of diversification
would determine the success of the organization change policy (Plumlee, 2008). Imperial
Chemical International change strategy is wide scaling the three demographic regions for
opening ICI call centre are as under:
1.Nepal (Butwal)
2. China (Shenzhen)
3. Philippines (Manila)
Theoretical and Practical Issues
The current scenario would enable ICI to save $1.7 million and also increases labour
savings just in a year. The relocation would also benefit ICI with an opportunity to renew its
staffing strategy. Generating new profiles will provide a better basis for recruiting staff
associates. It will provide a new set of schedules to match work load and less effective schedules
can be eliminated. A point of concern is loss of expertise as it could affect the training cost as
well. A periodic review of the components of call-center are its operating costs, regardless of its
type and size, and should be done to analyze the economic benefits of relocation (Penny,

Management of Development Process

2004).The main theoretical and practical issues that ICI could encounter with respect to features
of the locations are based on geographical location. Following are main regions to be considered:
1.Nepal (Butwal).
Butwal is a fast growing newly urbanized city of Nepal. It has a population of more than
120,982 people, according to 2011 census, with an area of 1,470 km2 (Geohive, 2015). It is an
educational hub and appeals a large population of students who choose to study here. The
potential work force in this region would be cheaper. A new housing zone has built in the
southern region that has low real estate cost and value and less competition but well-built
transportation facilities and infrastructure. The residents include huge population based on
students who works on low wages. However, the busy vegetable and fruit markets generate
traffic constrain but on the other hand, it has been improved by the development of new
infrastructure. Nepalese Rupee is their currency and conversion rate is $0.0098 which is
relatively very low and can add a lot more value to the cost saving strategy of ICI.
2.China (Shenzhen).
Shenzhen is the major city of Guangdong province of China; its in the north of Hong
Kong. It is a special economic zone of China with a population of more than 15 million and an
area of 17,573 hectares. Transportation facilities are well structured, the population is too large
and labour is easily available. The Chinese Yuan is the currency with a conversion rate of 0.16
US Dollar which is higher than Nepal but still would give good savings for ICI.
3.Philippines (Manila).
Manila is the capital city of the Philippines that has an overall population of around 12
million. It is situated on the eastern shore of Manila Bay. Manila is the second most populated
city in the Philippines. The land area is only 2,498 hectares. Philippine Peso is the currency and
it has a conversion rate of $0.022 which is quite low and can lead to cost saving. Though the real
estate cost in central city is higher, but its quite cheaper than the UK. Another factor is the
transportation facilities that are well built and make it possible to choose a location other than the
central areas.

Management of Development Process

Critical Analysis of Decision

The decision would benefit ICI a lot in following its cost cutting strategy. A floor plan
can explain the analysis done and can help in identifying the strengths and weaknesses of the
strategy and change.
Floor Plan of the Strategy
There is a chart of the financial strategy floor plan. Biggest problems a call center faces
are high turnover of employees and a rise in wages. Organizations have to plan a strategy to stay
competitive in large cities. ICI needs to globalize the strategy to consider offshore options. The
cost of trade-offs in each major cost category is listed below in the Table.
Labor Cost
Number of agents
Wage and benefits rate
Average annual wage rate
Annual labor cost

300
$20.40
$42,432
$12,729,60
0

300
$16.25
$33,800
$10,140,00
0
$2,589,600

25%

20%

$2,500
$187,500

$2,000
$120,000
$67,500

Labor savings
Turnover cost
Estimated turnover rate
Recruitment and training costs per
person
Annual turnover cost
Turnover savings
Facility costs
square footage
Lease cost per square foot
Annual lease cost

25000 sq.ft.
$40
$1,000,000

25,000
sq.ft.
$25
$625,000
$67,500

25000 sq.ft.
$40
$1,000,000

25001 sq.ft.
$25
$625,000

Faclity savings
Economic incentives
Training incentives at $1000 per
person
New equipment/technology grant
Total incentives
Total savings and
Incentives
Relocation Expenses
Relocation package

$375,000
$100,000

Management of Development Process

Severance package
Recruiting and training
Moving costs
New furniture
Infrastructure modifications
Total Relocation costs
Net Relocation savings

10

$400,000
$500,000
$400,000
$200,000
$200,000
$1,800,000
$1,732,100

Table 1: Call-Centre Operating Cost

The above table illustrates the expenses of relocating the call centre. It shows ICI would
need a cost of about $1.8 million for relocating. The same level of skilled employees if found on
relatively lower cost, as shown in the table, that was $16.25 can save $4.15 per hour, and annual
savings would be of over $2.5 million.
Identification of Strengths and Weaknesses of the Proposal
The saving from the labour cost will be an initiative to improvise the strategy. The
regions chosen are less urbanized and have low competition and turnover rate. If it may be
reduced up to 5% for ICI, it will lead to an annual saving of around $67,500. UKs urban areas
are central business hubs. Relocating in the selected area will benefit ICI with lower real estate
cost and will save approximately $375,000 annually. The loss of expertise is the main weakness
of the campaign as it would increase the cost. Relocating call centres in identified region will
help in cost cutting and therefore, a competitive edge will be gained in the market.
Operational and Behavioural Aspects of the Campaign
The operational aspects are based on implementing a plan strategy in which organization
would finalize its budget and accordingly. 3 teams comprising of a business manager, recruiter
and a trainer would be sent to identified destinations for training, for a period of one month, in
order devise team strategies. The teams would select a service providing group; and would train
them. The British company, ICI is much concerned about its cultural norms. The cross-cultural
behavioural constraints would be covered by training operations. The operational aspect can be
improved by introducing new strategies as discussed earlier.

Management of Development Process

11

References
Ceballos, F., Didier, T., &Schmukler, S. L. (2012). Financial globalization in emerging countries:
diversification vs. offshoring. World Bank Policy Research Working Paper, (6105).
Geohive, (2015), Data retrieved from, http://www.geohive.com/cntry/nepal.aspx [Accessed on 2Aug-2015]
Heaton, C. A. (Ed.). (2012). The chemical industry:Springer Science & Business Media.
Penny, R. (2004). The Economics Of Looking For A New Call Center Home: The Call Center
School. Retrieved Online
from<https://www.akzonobel.com/pk/cp/aboutus/our_vision_mission/>[Accessed on 2Aug-2015]
Plumlee, M., &Plumlee, D. (2008). Information lost: A descriptive analysis of IFRS firms' 20-F
reconciliations. Journal of Applied Research in Accounting and Finance (JARAF), 3(1),
15-31.
Riddix, M. (2011). Advantages of Diversification as Part of your Investment Strategy.Online
fromhttp://www.benzinga.com/economics/11/09/1897071/3-advantages-ofdiversification-as-part-of-your-investment-strategy[Accessed on 3-August-2015]
Shih, B. J. S., Harrington, W., Pizer, W. A., & Gillingham, K. (2006). Economies of scale:
Journal AWWA, pp. 1-101