BASF

-SWOT AND PESTEL ANALYSIS

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INTRODUCTION-

BASF, the acronym of Badische Anilin- und SodaFabrik, a German word for ''Baden Aniline and Soda Factory'',
is a German multinational chemical company and the largest chemical producer in the world. The BASF
Group comprises subsidiaries and joint ventures in more than 80 countries and operates six integrated
production sites and 390 other production sites in Europe, Asia, Australia, the Americas, and Africa.

SWOT ANALYSIS-

1. STRENGTH

 Superb Performance in New Markets –

BASF has built expertise at entering new markets and making them a success. The expansion has helped the
organization build a new revenue stream and diversify the economic cycle risk in its markets.

 Good Returns on Capital Expenditure –

BASF is relatively successful at executing new projects and generated good returns on capital expenditure by
building new revenue streams.

 Strong Brand Portfolio –

Over the years, BASF has invested in building a strong brand portfolio. The SWOT analysis of BASF
underlines this fact. This brand portfolio can be advantageous if the organization wants to expand into new
product categories.

 It has a successful track record of developing new products.

 Automation –

Automation of activities brought consistency of quality to BASF products and has enabled the company to
scale up and down based on the demand conditions in the market.

 Strong Free Cash Flow –

BASF has strong free cash flows that provide resources in the company's hands to expand into new projects.

 Strong distribution network –

Over the years, BASF has built a reliable distribution network that can reach the majority of its potential
market.

2. WEAKNESS
 Investment in Research and Development is below the fastest growing players in the industry. Even
though BASF is spending above the industry average on Research and Development, it has not been able

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 to compete with the leading players in the industry in terms of innovation. It has come across as a mature
firm looking forward to bring out products based on tested features in the market.

 The high attrition rate in the workforce –

Compared to other organizations in the industry, BASF has a higher attrition rate and has to spend a lot
more than its competitors on the training and development of its employees.

 Organization structure is only compatible with the present business model, thus limiting expansion in
adjacent product segments.

 There are gaps in the product range sold by the company. This lack of choice can give a new competitor a
foothold in the market.

 The marketing of the products left a lot to be desired. Even though the product is a success in terms of
sales, its positioning and unique selling proposition are not clearly defined, leading to the attacks in this
segment from the competitors.

 Financial planning is not done correctly and efficiently. The current asset ratio and liquid asset ratios
suggest that the company can use the cash more efficiently than it is presently.

 It is not very good at product demand forecasting, leading to a higher rate of missed opportunities than its
competitors. One of the reasons why the day's inventory is high compared to its competitors is that BASF
is not very good at demand forecasting, thus keeping higher lists both in-house and in the channel.

3. OPPORTUNITIES

 The new technology provides an opportunity for BASF to practices a differentiated pricing strategy in the
new market. It will enable the firm to maintain its loyal customers with excellent service and lure new
customers through other value-oriented propositions.

 An organization's core competencies can be a success in similar other products fields. A comparative
example could be - GE healthcare research helped it in developing better Oil drilling machines.

 After years of recession and slow growth in the industry, economic uptick and increased customer
spending are an opportunity for BASF to capture new customers and increase its market share.

 New trends in the consumer behavior can open up a new market for BASF. It provides an excellent
opportunity for the organization to build new revenue streams and diversify into new product categories.

 The market development will dilute competitors' advantage and enable BASF to increase its
competitiveness compared to the other competitors.

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 Opening up new markets because of government agreement – the adoption of new technology standards
and government free trade agreement has provided BASF an opportunity to enter a new emerging market.

 Decreasing the cost of transportation because of lower shipping prices can also bring down the cost of
BASF's products, thus allowing the company to either boost its profitability or pass on the benefits to the
customers to gain market share.

 New customers from online channels – Over the past few years, the company has invested a vast sum of
money into the online platform. This investment has opened a new sales channel for BASF. The company
can leverage this opportunity by knowing its customer better and serving their needs using big data
analytics in the next few years.

4. THREATS

 The company can face lawsuits in various markets given - different laws and continuous fluctuations
regarding product standards in those markets.

 Imitation of counterfeit and low-quality products is also a threat to BASF's products, especially in
emerging and low-income markets.

 Shortage of skilled workforce in the particular global market represents a threat to steady growth of profits
for BASF   in those markets.

 Liability laws in different countries are different, and BASF may be exposed to various liability claims
given changes in policies in those markets.

 Growing strengths of local distributors also present a threat in some markets as the competition pays
higher margins to the local distributors.

 No regular supply of innovative products – Over the years, the company has developed numerous
products, but those are often responses to the development by other players. Secondly, the supply of new
products is not regular thus leading to high and low sales numbers over the period.

 Rising raw materials can pose a threat to BASF profitability.

 Rising pay levels, especially movements such as $15 an hour and increasing prices in China, can lead to
severe pressure on the profitability of BASF

PESTEL ANALYSIS-

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1. POLITICAL FACTORS
 Political stability
High political stability provides a stable and friendly business environment with predictable market growth
trends. However, political chaos deters the investors and harms the stakeholders' trust in economic and
consequent organizational performance. Currently, BASF. is present in different countries, each having its
political tensions. Growing tensions and instabilities in the global political environment can affect the Gold
industry's growth and limit the growth opportunities available to BASF.

 Changing policies
Frequent changes in government policies harm business performance by increasing environmental uncertainty.
It is vital for BASF. to study the current trends in the country's political scenario as changes in government
may alter the government's priorities towards the development of different industries.

 Protests/pressure groups and governance system

BASF. should carefully analyze the protests by pressure groups, social/environment activists, and worker
unions as such protests play an essential role in the policy-making process. Close collaboration with such
groups may enhance the BASF.'s ability to collaborate with the community and achieve long-term corporate
goals. Moreover, a well-developed governance system with a democratic political environment makes the
business environment more comfortable for international business organizations like BASF.

 Bureaucracy and corruption

Bureaucracy and corruption negatively influence the business environment. Operating in countries with high
corruption levels and weak law enforcement makes the business environment increasingly unpredictable for
BASF. Due to jeopardized public trust in business organizations and overall political and economic structure.
Corruption can influence various business operations, ranging from licensing, contracting, fraudulent deals to
frequent lawsuits. If BASF. Deciding to enter markets with a corrupt economic and political system will
threaten the organization's sustainable development by destabilizing society, harming the justice system, and
endangering the rule of law.

 Taxation, trade restrictions, and intellectual property protection

Entering countries with high taxation levels will directly influence the profitability of BASF. High taxation
affects international trade and prevents exports. BASF Can enter low taxation markets and benefit from
increased profits invested in research and development activities. The organization may also study the
industry-specific taxation policies to understand the host government's priorities and interest in developing
industries. Similarly, high trade restrictions can make the business environment more complex by affecting
exports and harming relationships with foreign trade partners. Moreover, if the country's government under

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 consideration is not serious about protecting the intellectual property rights of business organizations, it will
deter the entrepreneurs from investing in organizations due to the high risk of ideas being stolen. Hence,
BASF. should study how intellectual property rights are protected in the host country and accordingly make
business strategies.

2. ECONOMIC FACTORS

 Economic/business cycle stage

The economic development of a country directly influences organizational performance. Growing economies
offer wide-ranging growth opportunities to the BASF. Similarly, it is crucial to understand the industry
lifecycle stage. Entering mature industries can be more challenging due to market saturation than industries at
the growth stage. Moreover, the business performance of BASF. is also influenced by the extent to which the
host country government has spent on core infrastructure development. A well-developed infrastructure
facilitates the business environment and increases the growth potential of the gold industry in the respective
country.

 Inflation/employment/interest/exchange rates
The GDP growth rate will determine the BASF.'s ability to pursue its long-term growth strategies. High GDP
also signals the consumers' ability to spend more on offered products. High unemployment signals the
availability of surplus labor at comparatively lower wages. Operating in such a market can lower the
production cost of BASF. The organization should also carefully consider the interest rate and its influence on
borrowing ability and attitude towards investment. The high-interest rate will encourage the attitude towards
investment and increase growth opportunities for BASF. Finally, the exchange rate fluctuation can also
influence profitability and international trade. The high flux on local currency can be a cause of serious
concern for BASF.

 Labor market conditions

The demand and supply of labor determine the wage rates and collection of the skilled workforce. BASF. Must
study and predict the labor market conditions to understand how it can attract talented workers and leverage
their skills to improve business performance. When labor markets are flexible, BASF can take advantage of
higher labor productivity. Whereas operating in rigid labor markets may cause labor wage and other issues
raised by powerful labor unions. BASF. We should also carefully analyze the availability of skilled human
capital as a shortage of skilled labor can affect business efficiency and make talent attraction and retention
challenges.

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  Financial markets efficiency
The financial market efficiency influences the global expansion strategies of the BASF. Operating in highly
efficient financial markets leads towards improved liquidity position and strengthened ability to enter new
markets. The health and efficiency of financial markets will determine BASF.'s ability to raise capital at fair
prices.

 Economic structure
The overall economic structure influences the business practices of the BASF. The economic and regulatory
environment in a monopolistic or oligopolistic system will differ from monopolistic and perfect competition.

3. SOCIAL FACTORS
 Demographic trends
Changes in demographic patterns like aging population, migration trends, and socioeconomic variables are
essential for international business organizations like BASF. Studying the demographic characteristics can help
BASF. In choosing the right market segment/segments with high growth potential. The business and marketing
strategies are also influenced by migration. BASF needs to understand the people's general attitude towards
migration, impacting firms' ability to bring international managers to the host country.

 Equality and power distance

The power distance within any society shows the acceptance of hierarchy and income inequality. BASF Must
adjust its business management practices while entering markets with high or low power distance. The
growing inequality in many countries alters the power structure, which severely affects international business
organizations like BASF.

 Gender Roles
BASF needs to study the traditionally assigned gender roles to align its marketing and communication
practices accordingly. A traditional, patriarchal society with clearly distinguished gender roles, marketing, and
human resource strategies will differ from communities with typical gender stereotypes.

 Societal norms and class distribution

Culture is considered a vital variable by international marketing managers. Each society has distinctive norms
and values that play an essential role in shaping consumer behavior. BASF should develop local teams and
create partnerships to understand societal attitudes and criteria to tailor marketing strategies to unique cultural
contexts. The observation of social class stratification is also vital for BASF. Offering luxury products at
premium prices to a market where the high-end market is considerably small in number will require BASF to

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 adopt niche marketing strategies. Similarly, market segmentation based on social class may be ineffective
where social class stratification is low.

 Online shopping
The advent of social media and e-commerce has encouraged online shopping behavior among customers.
BASF needs to understand the online shopping behavior by considering the generational differences as
younger consumers are more inclined to shop online than older customers. When developing marketing and
communication strategies, the growing use of mobile phones and social networking sites must be considered.

 Spending patterns and behavior

Their purchasing power of money influences the consumers' spending patterns. Studying and forecasting the
consumers' purchasing power based on relevant economic indicators is essential to analyze the customers'
interests and spending patterns. In some societies, consuming the offered product is considered a status
symbol, while others use the same products for functional aspects. BASF. Should invest time in understanding
the consumption motivations and social trends that define the consumption behavior. BASF should also
attempt to understand the degree of consumer ethnocentrism and consider the country of origin effect to
determine local consumers' evaluation of foreign products. Lastly, BASF. should study the consumers' leisure
interests and focus more on enhancing the customer experience if customers prefer experiential products over
traditional product offerings.

4. TECHNOLOGICAL FACTORS
 Social media marketing
The development of information and communication technologies has led to innovative marketing techniques
to enhance collaboration with customers. The use of social media has become common in a modern business
environment. BASF can leverage the opportunities offered by social media marketing to improve business
performance. Technological trends can be used to start creating social media campaigns for developing online
brand communities.

 Technological innovations and development level

BASF. should carefully consider the ongoing technological innovations to stay ahead of the competition. A
close eye should be kept on analyzing the 5G and determining its potential to deliver positive business
outcomes through enhanced user experience, increased speed, and expanded access. Technological innovations
like this can bring significant transformations in the industry and reset the success rules for market players.
Moreover, considering the development and maturity level of technology in the respective market is also
essential. Entering markets where technological advancement has not reached maturity means BASF can
increase its market share by focusing on emerging technological innovations.

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  Research and development on technology and impact on cost structure/value chain
BASF needs to consider the investments made by competitors on a micro and macro level to understand how
new technologies influence the firm's value chain and prevailing cost structure. Research and development
activities are significant in an environment characterized by creative disruption. BASF should invest in
disruptive technologies to maximize the profits and re-invest the profits for future disruptive technologies in
such an environment.

 Shortened product life cycles

The adoption of new technologies has shortened the lifecycle of new product development. Today, new
products are developed quickly, and supply chain partners have also gained more power. It pressurizes the
BASF. To create new products rapidly, increase product range diversity, integrate flexibility into the value
chain and develop healthy business relationships with value chain partners.

5. ENVIRONMENTAL FACTORS
 Recycling and waste management
The growing environmental pollution and technological advancement have compelled business organizations
to adopt innovative recycling and waste management practices. In some countries, recycling has almost
become a business norm. Moreover, adopting efficient waste management practices in organizational units
located in or near urban areas is crucial for BASF. Many countries have placed strict standards to protect their
urban areas through effective waste management.

 Renewable technologies
Some countries offer subsidies for encouraging investment in renewable technologies. BASF can benefit from
it and invest in renewable technologies to ensure long-term sustainability. This investment will also increase
stakeholder satisfaction and expand the customer base due to enhanced brand image.

 Weather and climatic conditions

Changes in weather and climatic conditions can influence business efficiency. For instance, extreme weather
conditions can increase the cost of operations and compel the BASF to make the value chain more flexible.
Such changes can also influence the consumers' spending patterns, causing the organization to revise its
product and marketing strategies.

 Attitude towards eco-friendly products

There is a growing trend towards the use of green/eco-friendly products. BASF can take it as an opportunity
and adopt green business practices to win the trust of stakeholders. Regulatory bodies' emphasis on ensuring

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 compliance with environmental norms is altering the product innovation priorities. It requires BASF to
prioritize and focus on marketing the eco-friendly nature of their products over customary value propositions.

 Environmental regulations to avoid resource depletion

Excessive resource depletion by BASF can draw a negative response from media, environment protection
groups, customers, and the general public. BASF must study the specific environmental regulations of the
country under consideration to understand which resources are considered rare or which species are
endangered whose excessive consumption can cause trouble for the organization.

6. LEGAL FACTORS
 Employee protection laws (discrimination and health and safety)
BASF must follow the employee/labor health and safety laws as some countries have strict regulations to
ensure labor safety. Providing a secure work environment for the workforce is the ethical and moral obligation
of BASF. Similarly, anti-discrimination laws must be carefully studied when developing human resource
practices as discriminatory suits against employers harm the corporate image and affect organizations' ability
to attract and retain talent.

 Consumer protection laws

Data protection has become an important issue due to consumers' privacy and security concerns. BASF needs
to study data protection regulations to protect customer data. Moreover, laws set the maximum price, ensure a
certain quality standard and protect consumers from fraudulent marketing claims. BASF must consider these
factors to ensure compliance with consumer protection laws.

 Intellectual property laws

Intellectual property regulations are designed to protect the companies' patents and valuable ideas. Inability to
protect intellectual property rights can result in losing competitive advantage, which may weaken the
positioning of BASF against other market players.

CONCLUSION-

With the help of the following presentation, we understood that the SWOT and PESTLE analyses are used to
make a systematic and thorough evaluation of a new business or project. SWOT and PESTLE analysis is first
done at the preliminary stages of a business planning process. SWOT analysis is usually carried out to find the
competitive advantage over other companies. What are the strong and weak points of the company concerning
the competitors can find out through SWOT analysis. Analysis of the Opportunities and threats that may occur

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which will affect the company in the long and short term also can be analyzed through SWOT analysis.
Through PESTLE analysis, the external factors which affect the business environment can be analyzed. The
process gives decision-makers a better awareness and understanding of the changes that may occur and the
impact that these changes may have on their business.

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