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Transcription of this question: 5.As details about “RDB 2020″ spread, several stakeholder groups began to express their concern.One stakeholder group was the workers, who were upset because Of the planned closure Of theirworkplaces. Another stakeholder group was the governments Of Denmark, Germany and Swedenwho wanted RDB to continue manufacturing in northern Europe. The three governments agreed toOffer two incentives for RDB to remain.2.All three governments promised to pay 25 % Of the budgeted cost Of making the RDB factories”green”, if RDB chose to be a real “green” company. The budget for the renovations wouldhave to be approved by the three governments before the work on the factories could begin.With this money from the government, RDB would not have to sell shares. Details Of thegovernments’ assistance and some Of the implications were explained to Valdemar Holstein ina memo from Sofia de Carvahlo, RDB Chief Financial Officer (Item 1).In addition, the Danish government promised to feature the story Of “Green Bearings, anRDB Company’ (Valdemar’s rebranding suggestion) as the lead article in the Danish GlobalBusiness Directory for 2015. This directory is well respected and is published annually bythe Danish government. The directory is mostly purchased by public libraries and embassies.Gloria Woolrich, a marketing consultant, informed Valdemar that this would not be sufficientfor RDB to successfully rebrand (Item 3).Valdemar produced a simple decision tree framework to visualize the three strategic options:Valdemar produced a simple decision tree framework to visualize the three strategic options:Option A: “RDB 2020″(Anna Holstein’s original proposal).Option B: Valdemar Holstein’s counterproposal withgovernment incentives:Stay in Europe• cell production• “green” factoriesgovernment grantsform strategic alliances with ball bearing companies inBrazil, China and India.Option C: Valdemar Holstein’s counterproposal:Stay in Europecell production• “green” in name onlyform strategic alliances with ball bearing companies inBrazil, China and India.(This question continues on the following page)(Question 5 continued)(a)(b)(c)(d)(e)With reference to the renovations to the RDB megafactories in Europe, describea budget.Using relevant information from Item 2, calculate:(i) the current gearing ratio for RDB.(ii) the forecasted gearing ratio for RDB after the conversion to”green”production.(iii) the current return on capital employed (ROCE) for RDB.Explain one advantage and one disadvantage Of decisiondecision-making tool.With reference to RDB, examine possible marketing practiceseffective rebranding.trees as arequired forUsing information contained in the case study and Items I to 3, recommend tothe RDB Board Of Directors the most suitable strategic option (Option A, B or C).[2 marks][l mark][l mark][l mark][4 marks][9 marks][12 marks]Item 1: Memo from RDB’s Chief Financial Officer to Valdemar HolsteinSofia de Carvahlo, Chief Financial Officer, RDBFrom:Valdemar Holstein, ChiefExecutive Officer, RDBSubject: Implications Of the governments’ 25% grant for “green” conversionsBelow are key financial data related to the upgrade Of the three European factories instead Of”RDB 2020″.Budgeted cost Of converting the factories: €300 000000.Financed by grants from the governments Of Denmark, Germany and Sweden,€75 000000 and in long-term loans, which total €225 000000:which totalDenmarkGermanySwedenTotalGovernment grants€20000000€25000000€30000000€75000000Long-term loans€225 000000€225 000000The €75 000000 from the three governments will be recorded as retained profit on the balance sheet.The impact on RDB will be significant. Financial data is given in Items 2.1 and 2.2. Of particularnote is the impact that the conversion will have on gearing. Even though the governments will provide€75 000000 for the conversion, RDB will still have to borrow significant funds.Item 2.1: RDB’s balance sheet: current and forecasted after conversion to “green” production (allfigures in €000000)Fixed assetsLess depreciationTotal (net fixed assetsCurrent assetsStockDebtorsCashTotal assetsCurrent liabilitiesCreditorsShort-term borrowinTotalNet assetsCurrent2202881201367644490270814120694Forecasted afterconversion toroduction79022057028812013611147644120994Share capitalLoan capitalRetained fitCapital employed22304626942455537994Item 2.2: Selected items from RDB ‘s current profit and loss account (all figures in €000000)cost of goods sold 423Sales revenue195720Item 3: Memo from Gloria Woolrich to Valdemar HolsteinGloria Woolrich, Marketing Consultant, Maia Marketing AssociatesFrom:Valdemar Holstein, Chief Executive Officer, RDBSubject: Proposed article in the 2015 edition and issues related to rebrandingThe proposed article in the 2015 edition Of the Danish Global Business Directory will be about 10000words and will narrate the history and “green” practices of “Green Bearings, an RDB Company”. A focuswill be on why Green Bearings is a company Of which Denmark is proud. As you know, the publicationformat is printed (2000 copies). Generally the authors of these articles do not say much about the natureOf a company’s product or its competitive position, as that would make it appear as though the publicationand the Danish government were promoting particular businesses over Other Danish businesses.Danish Global Business Directory wants to be neutral.I do not think that the article will be adequate for RDB to successfully rebrand as “Green Bearings, anRDB Company*’.

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