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Relationship Management and Network Construction in the Chemical Sector

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Table of Contents

Question 1:..............................................................................................................................................3
Question 2:..............................................................................................................................................4
Question 3:..............................................................................................................................................5
References:..................................................................................................................................................6
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Question 1:
Sol:

The specialty chemicals business constituted an appealing business situation in the early nineties.
Due to a steady supply of innovative end-user systems demanding enhanced chemical products,
sales were relatively greater. This allowed specialty chemical suppliers to establish higher rates
by differentiating their products. In this industry, ChemCo identified three separate segments.
The first group consists of the global majors, which constitute the largest volume buyers. These
organizations have grown to operate on a global basis. Nearly 40 consumers in the second sector,
significant national enterprises, have retained strong roles in their own frontiers. Hundreds of
tiny localized chemical firms, many of whom operate in specialty markets, make up the final tier
of consumers. During this time, the market was quite appealing. Additional raw materials were
abundant, entry constraints were high because of the expenditure required in Research &
development activities, and there was no fear of rivals.

The major consumers, the global corporations, did not integrate their purchasing procedures, and
each regional branch acted independently. Regional purchasing executives, who believed they
had stronger working connections with regional officials, were usually pleased with the scenario.
The majority of dialogues took place on a technical basis. The producers simply passed on the
chemical provider's rates to the final client once these specifications were reached. ChemCo does
not appear to be taking any aggressive measures toward its users. This situation seems to create a
sense of complacency inside the specialty chemicals industry. There was even acknowledgment
of ChemCo's greedy behavior towards chemical makers. ChemCo's intimate links with the global
giants' national affiliates appeared to have led in a very different consumer viewpoint in general,
where mutually advantageous arrangements were frequently done at a regional level, and
domestic purchasers were generally pleased.

By the late 1990s, global chemical utilization had reached a standstill, even in formerly
expanding markets. Some financial experts forecast negative volume growth, owing in part to the
fortunes of the Pacific Rim markets. As a result of the downturn, producers have more excess
reserves and are focusing on cost cutting, which has had a knock-on impact on specialty
chemical providers as consumers seek lower prices. Merger is becoming more visible among the
global majors. This has resulted in increased purchase amounts, but it has also revealed prior
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pricing discrepancies and reductions, weakening the ChemCo's position even more. Due to
consolidated purchasing, the sector's major clients have significantly increased their negotiating
position as a result of these changes. Chemical providers' major goal today appears to be gaining
market share, which has resulted in price-based rivalry being the standard. Rising development
costs and shorter product life cycles have compounded the situation, but they haven't stopped the
market from devolving into a commodity-style market.

Question 2:
Sol:

The lack of communication looked to be largely due to the ChemCo's management of consumer
interactions. ChemCo is increasingly focusing on head-office KAM with global companies,
which some participants believe is having a negative impact on relationships with national
industrial chemicals. Domestic affairs, reward schemes, and short-termism were all raised as
problems with ChemCo's existing KAM system. Because the sales team was able to meet targets
considerably more rapidly by concentrating on the "Seven Sisters," the level of authority
evidently resting in the KAM function could well be an accounting element for ChemCo's
concentrate on the requirements of the consolidated global corporations. There are serval flaws
with the ChemCo's managerial system, citing an urgent need for change. Short-termism was
considered to pervade the whole chemicals sector, in addition to account executives' short-term
outlook. Some of the major consumers, in my opinion, use a commercial strategy that is too
short-sighted. Much of the purchaser or supplier behavior seen in the industry's effort to lower
prices appeared to be antagonistic. This could be a result of clients' impressions of previous
market disputes.

Because it does not tackle complicated structure of chemical sector interactions in this globalized
commoditized environment, the idea that marketing strategy can be reduced to fundamental
KAM tactics for servicing big centralized purchasers appears to be an unsuitable framework for
guiding strategy.

Question 3:
Sol:
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The cumulative effects of global financial forces, consumer centralization, and consolidated
purchasing practices have had a considerable impact. The hazards of ChemCo’s contradictory
ambitions, which have resulted in local ties being overtaken by the new corporate plan. In such a
situation, ChemCo's practicality of following a strategy focused solely on market share and,
further, focusing on key global customers at the apparent cost of second-tier clients, is
questionable. The risks are exacerbated by the fact that big chemical producers are taking a
repressive power position based on short-term commercial aims with no shared long-term
advantage to the suppliers. Commoditization might emerge from the resultant sector price-
cutting efforts, which are aggravated by a failure to establish service or product distinctiveness.
This, in turn, appears to rule out ChemCo's ability to provide additional value to chemical
businesses, a challenge aggravated by ChemCo's customers' conceptions of additional value in
the first place. This is likely to be due to fading and restricted local consumer contacts.

Some of the fault for this predicament can be attributed to the focal company's weak customer
handling. ChemCo's current relational strategy appears to be the result of a mix of historic
industry beliefs and a response to the majors' centralized purchasing procedures. This has
resulted in a KAM approach for clients worldwide and an under-resourced response for national
companies, a sector where the potential to distinguish is being missed, owing in part to the
company's price signals to the industry as a whole. The shallowness of inter-firm interactions
enabled by the bow tie phase of client relations so common in the industry, as well as the
readiness of either purchasing or offering organizations to accept the cultural shift, have not
improved relations inside the specialty chemicals distribution network. Short-termism and a lack
of knowledge sharing are depicted. Apart from competency faith, there is a general loss of
credibility and devotion, with both sides displaying opportunistic. (Ellis & Mayer, 2001)

References:

Ellis, N., & Mayer, R. (2001). Inter-Organisational relationships and strategy development in an
Evolving Industrial NETWORK: Mapping structure and process. Journal of Marketing
Management, 17(1-2), 183–223. https://doi.org/10.1362/0267257012571410
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Journal of marketing management. (n.d.).

https://www.tandfonline.com/doi/pdf/10.1362/0267257012571410?needAccess=true.