BY

GROUP B

Amarjeet Kumar 130009

Aniket Rakshit 130010
Anushka Singh 130011
Ashish Kumar Mishra 130014
Bipin Raj 130015
Ekta Choudhary 130017
 ACKNOWLEDGEMENT

We take this opportunity to express our profound sense of gratitude and respect to all those
who have helped us through this endeavour.

We pay deep sense of gratitude to Prof. Sayan Banerjee, CIMP, for providing us the
opportunity to implement the knowledge gained through the course Strategic Management.
We are immensely obliged to him for elevating inspiration and kind supervision wherever
necessary.
 TABLE OF CONTENTS

Chemical Industry Overview ............................................................................................ 4

Michael Porter’s Five Forces Framework ......................................................................... 5
Bargaining Power of Suppliers ......................................................................................... 6
Bargaining Power Buyers .................................................................................................. 7
Threat of New Entrants ..................................................................................................... 8
Threat of Substitutes .......................................................................................................... 9
Rivalry among Existing Players ...................................................................................... 10
Implications of Porter’s Five Forces on the Chemical Industry ..................................... 11
References .............................................................................................................................. 13
 Chemical Industry Overview

The Indian chemical industry is one of the largest worldwide. In 2020, it ranked fifth in the
world in terms of revenue.

With over 80 thousand products, it is also one of the most diversified sectors in the country.

It provides raw materials to many end-use industries and acts as a backbone in the
development process of the nation.

From 2016 to 2020, foreign investment in the Indian chemical sector was over one billion
U.S. dollars per year.

In the first six months of 2020, there were 24 acquisitions of Indian chemical companies by
international players.

The following are the major segments of the Indian chemical industry:

1. Base Chemicals
Petrochemicals, man-made fibers

STATISTICS
2. Specialty chemicals
Dyes and pigments, leather chemicals,

3rd
3. Pharmaceuticals
Active Pharmaceutical Ingredients
Largest producer in Asia
4. Agrochemicals
Insecticides, herbicides, fungicides
6th
5. Biotechnology
Largest Producer in the World
Bio-pharma, bio-Agri, and bio-industrial products

7%

Of India’s GDP
 Michael Porter’s Five Forces Framework

Michael Porter identified five elements that influence a company's profitability in its industry.
The Porter Five Forces Model can be used to determine the strategic position of an industry
or a corporation, as well as provide an overview of rival behaviour. As a result, it may be
useful in making proper decisions.
The Porter Five Forces model is a holistic strategy paradigm that decouples strategic
decision-making from a simple analysis of the current competition.

• Threat of New Entrants

• Supplier Bargaining Power
• Buyer Bargaining Power
• Threat of Substitute Products
• Rivalry between the current players

High Medium

Low Low

High
 Bargaining Power of Suppliers

Suppliers in the chemical business have a lot of bargaining leverage. Almost every firm in the
Chemicals industry, which is quite diversified, buys raw materials from a number of sources.
Suppliers with a dominant position may be forced to decrease margins. Because there are so
few suppliers in the market, they have a lot of bargaining power because all of the larger
corporations want to have a long-term connection with well-known or significant chemical
companies.

Supplier bargaining power is influenced by the following factors:

1) The chemical industry relies on a small number of big suppliers for raw materials, giving
them negotiating strength.

2) The majority of suppliers are not reliant on one another in the supply chain.

3) Inputs or substances offered are difficult to replace.

What companies could do to address "Supplier Bargaining Power":

1) Create a streamlined supply chain with many suppliers.

2) Experiment with different materials for product concepts. As a result, if the price of one
raw material rises, the company may switch to another.

3) Creating a committed supply base. Develop 3rd-party manufacturers whose sole source of
revenue is the company. This has a huge impact on negotiating power.
 Bargaining Power of Buyers

The buyers' bargaining power is moderate, with little room for increase or reduction. Buyers
are frequently a demanding bunch that want to have the finest of everything at the lowest
feasible price. Large producers, such as TLC, are said to have more customers than their
competitors. Furthermore, because chemicals are the primary components or raw material in
most businesses, any rise or loss in buyer negotiating power is unlikely. The expense of
switching providers is really expensive. It's also difficult to find a supplier that can provide a
high-quality product at a reasonable price.

The following are some of the factors that influence negotiating power:

1) Chemicals are critical inputs in a variety of industries, including paint and coatings, food
and beverage, lubricants, and pharmaceuticals.
2) Customers have access to a variety of supply options.
3) Chemical firms are tied by long-term agreements. Because of long-term agreements, the
cost of switching suppliers is higher.
4) There is a lack of differentiation in the chemical products.
5) Adhesives, agrichemicals, plastics, and other specialized chemicals have some price
power.

How to deal with the issue of "Bargaining Power of Buyers"

1) Establishing a sizable consumer base. Buyers' bargaining power will be effectively

reduced. Also, provide the organisation the chance to simplify its sales and manufacturing
processes.

2) Developing new items quickly. Customers frequently look for special offers and discounts
on well-known brands. Buyers' negotiating power will be limited if a company continues to
develop new items.

3) New items will also prevent existing clients from defecting to competitors.
 Threat of New Entrants

In the chemical industry, the threat of new entrants is considered low. It is high due to a number
of negative elements that influence a company's choice to join a new market. A significant
amount of capital is required to run the business and establish a brand identity in the sector. It
is difficult for a new entrant to meet quality requirements with the same efficiency and
effectiveness as established large companies.

New entrants in any market often bring innovation and new ways of doing things, as well as
putting pressure on incumbent organizations through reduced pricing strategies, cost
reductions, and new value propositions to customers. Existing businesses must address all of
these issues and erect strong barriers in order to maintain their competitive advantage.

Some limitations to bargaining power include:

1) A significant capital requirement is a significant impediment. All of its primary

activities and operations necessitate a significant amount of investment.

2) Meeting quality standards is challenging.

3) Patent restrictions are both costly and difficult to adhere to.

4) There are also R&D and personnel requirements to consider.

5) The majority of procedures for a newcomer to this industry are costly.

6) Each country has its own set of rules and regulations. Some countries have

severe policies that are tough to adhere to.

How to deal with "Threats from New Entrants"

1) Creating new products and services that are innovative. It not only attracts new
customers, but it also encourages existing customers to repurchase.

2) Creating economies of scale to reduce fixed unit costs.

3) Investing in R&D and building capacities. Newcomers are less inclined to join a
dynamic industry where existing players are constantly defining the standards. It drastically
decreases the window of opportunity for new businesses to make spectacular profits, deterring
new entrants into the field.
 Threat of Substitutes

In the chemical industry, the threat of substitutes remains low, but this

may change in the future depending on demand.

Industry profitability suffers when a different product meets a similar customer demand.
Google Drive, for example, can be used to replace physical storage drives. If a substitute
product or service offers a value proposition that is significantly different from the industry's
current offerings, it poses a significant threat.

Because there are only a few substitutes available in this industry, substitute threats are
minimal. Furthermore, only a few companies are capable of preparing a chemical's exact
composition. Many businesses form strategic alliances with suppliers, leaving no room for
substitutes to flourish.

Substitutes are affected by the following factors:

1) Buyers or consumers typically have specific chemical needs and require the same
types of chemicals for their applications.
2) For a specific chemical requirement, there are no direct substitutes.
3) Changing the chemical composition incurs a high R&D cost, which small
companies/players do not consider.

4) Finding substitutes for any chemical is difficult and difficult due to the complex
composition.

Dealing with the "Threat of Substitute":

1) By focusing on service rather than just selling products.

2) By focusing on the customer's core need rather than the product they are buying.
3) By raising the cost of switching for customers.
 Rivalry Among Existing Players
The modern adversaries in the substance business are High. The opposition is exceptional in
the business where every player is attempting to expand their information base. Additionally,
it shows propensity to increment. The high rivalry is to acquire portion of the overall industry.
Economies of scale is high in this industry, so more rivalry in estimating system. Fixed
expenses are high, upkeep and existing expense are high. Consolidation and Securing is a
method for diminishing the contenders.

Yet, this is just a possibility for the greater firms' abundant resources. Assuming the contention
among existing players in an industry is serious then it will pull down costs and lessening the
general benefit of the business. The Substance business is differentiated and exceptionally
cutthroat. This opposition takes cost for the in general long-haul benefit of the association.

Factors behind the high adversaries in the business are:

1) Chemical industry is profoundly divided with exceptional contention among organizations.

2) Since, there is a 100 percent FDI permitted, nearby or homegrown organizations face a fierce

opposition from their unfamiliar partners or contender.

3) International firms likewise present synthetics at seriously low cost.

• Not many Driving Existing Substance organizations:

1) TATA Synthetic compounds Restricted is one of the main substance organizations in India.

Tender loving care is a market chief in palatable salt.

2) UNITED PHOSPHORUS Restricted is chiefly occupied with the matter of agrochemicals,

other

modern synthetics.

The most effective method to handle Exceptional Contention among the current rivals in

compound industry:

1) Building an economical separation.

2) Building scale to contend better.

3) Collaborating with contenders to expand the market size rather than simply contending
 Implications of Porter’s Five Forces on the Chemical Industry

By analysing all five competitive factors, strategists can get a complete picture of the factors
affecting an organization's profitability in the chemical industry. You can identify game-
changing trends early and respond quickly to seize opportunities. A detailed understanding of
the “power of the five porters” allows company managers to shape these forces to their
advantage. This is indispensable in a situation where the global chemical industry is undergoing
rapid change. Both demand and consumption of chemicals are shifting eastward as 4,444 new
manufacturing facilities open. So, American scholar and HBS professor

Michael Porter defined a framework for assessing the strengths and weaknesses of the industry.
At present, the chemical industry is already highly competitive.

However, if manufacturers increase their trading volume, the level of competition may soar.
Road ahead Despite the current pandemic, the Indian chemical industry has many opportunities
given China's supply chain disruption and trade tensions between the US, Europe and China.

China's pollution control measures will also create opportunities for the Indian chemical
industry in certain sectors. Additional support in the form of tax incentives, such as tax
incentives, and 4,444 special incentives through PCPIR or SEZ will help to boost production
and advance the industry as a reward for processing units. In order to bring about structural
change in the domestic chemical industry, investment must be concentrated on petrochemical
complexes and refineries built to produce chemical products as well as transportation fuels
such as gasoline and diesel
Chemical Industry
 References

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Retrieved from
https://phdessay.com/chemical-industry-analysis-using-porters-five-force-model/

2. Chemical Industry in India. (2020, Dec 27). Retrieved from

https://www.statista.com/topics/5601/chemical-industry-in-
india/#dossierKeyfigures

https://en.wikipedia.org/wiki/Chemical_industry_in_India#:~:text=India's%20che
mical%20industry%20ranks%20as,produces%2080%2C000%20different%20che
mical%20products

3. Chemical Industry Analysis Using Porter’s Five Force Model. (2017, Aug 17).

Retrieved from
https://graduateway.com/chemical-industry-analysis-using-porters-five-force-
model/

4. Chemical industry in India - statistics & facts. (2020, Nov 16). Retrieved from

https://www.statista.com/topics/5601/chemical-industry-in-
india/#dossierSummary chapter5

5. Chemical Industry Porter’s Analysis. (2015, Aug). Retrieved from

https://www.ibef.org/download/Chemicals-August-2015.pdf
Waiting
6. to be disrupted – the chemical industry and porter’s five forces.
(2017, Feb 27). Retrieved from

https://www.kemgo.com/blog/waiting-to-be-disrupted-the-chemical-industry-
and-porters-five-forces/

7. The Dow Chemical Company.(2017, Feb 27). Retrieved from

http://fernfortuniversity.com/term-papers/porter5/analysis/133-the-dow-
chemical- company.php
8. Porter’s Five Forces (Porter’s Model) of BASF. (2019, Nov 23). Retrieved from

https://www.porteranalysis.com/porters-five-forces-porters-model-of-basf/