CHEMICAL Industry

Industry Analysis, Strategic Management Prof. Mischak

EMBA AUBG Spring 2010
Yoanna, Silvia, Rayna, Alexander B.
Contents
Industry outline
1
1.1 Definition and segmentation

1.2
History

1.3 Market overview

Industry Analysis
2
STEEPLE
2.1

2.2
Porter’s 5

2.3 Key Financial Indicators

Strategic Groups and KSF

2.4

2.5
Leading Companies
3
 Industry outline
1
1.1 Definition and segmentation

Chemical

Industry

is:
converts:
consists
one of the of:
largest and raw materials
the most companies (oil, natural gas,
diversified engaged in the air, metals and
industries in processing and minerals)
the World.. refinement of
industrial into more than
chemicals as 70 000 different
well as gases.. products
 Industry outline
1
1.1 Definition and segmentation

Segmentation by product

Basic
Consumer
• polymers, bulk petrochemicals intermediates
Basicand basic industrials, inorganic
• other derivatives
Chemicals
products; chemicals;
chemicals, and fertilizers
26,70% 42,3%

Life sciences
Basic chemicals
Specialty Life sciences
• electronic chemicals, industrial gases, adhesives
and sealants as well as coatings, industrial
Specialtyand
chemicals
chemicals institutional cleaning chemicals, and catalysts
Consumer products
Consumer
• soaps, detergents, and cosmetics
products
Specialty
chemicals; Life sciences;
9,10% 26,7%
 Industry outline
1
1.2
History

From the past…

Middle
ages
10th cent
6th cent ~1630
AD
7000 BC
BC

Alchemists
Chinese Pilgrims
Middle east Phoenicians
artisans •Black • Chemicals
•Refined powder, a •Gun powder
•Soap
alkali and primitive
limestone to explosive
produce
glass
 Industry outline
1
1.2
History

… to the present

1970…
1930 –
1970
1860 –
1800 1920
~ 1860
Concerns about
toxic wastes
• Nylon
•Man made • Increased
fibers •Production of government
Modern organic •Major boost chemicals for oil regulation
chemical during WW 2 •Market
industry •Discovery of saturation
polymers
• Dye for textiles •Plastics, paints
 Industry outline
1
Market overview
1.3

World chemical sales: Geographic breakdown

World chemical sales: By region

http://www.cefic.be/Facts-and-Figures/Profile-of-the-Chemical-Industry/
 Industry outline
1
Market overview
1.3

Dow Chemical; 4,50%

TOP 10 Companies Rank by sales BASF ;
2009 Sales ($mil) 7,28% ExxonMobil; 4,11%
80 000 72 660
70 000
60 000 Sinopec; 3,14%
50 000 44 875
40 979
40 000 31 371 LyondellBasell Industries;
30 828
27 559 27 481 27 138
30 000 26 109 25 911
3,09%
20 000
10 000
0 Shell; 2,76%
Market share by sales (TOP 100)
SABIC; 2,75%
Dow Chemical; 4,50%
Rest; 64,42% BASF ;
7,28% ExxonMobil; 4,11%
Mitsubishi Chemical; 2,72%
Sinopec; 3,14%

LyondellBasell
Industries; 3,09%

DuPont; 2,62% Shell; 2,76%

SABIC; 2,75%
Rest; 64,42%
Mitsubishi Chemical;
INEOS; 2,60% 2,72%

DuPont; 2,62%

INEOS; 2,60%

www.icis.com
 Industry Analysis
2
2.1 STEEPLE

Sociological
Factors Technological
Factors
•Increased unemployment rate
•Aging population •Huge spending on R&D
•Work force health care issues •& IT Economic
•Activists pressure Factors

•Oil and natural gas prices

• Globalization lead to
increased competition
•World economic crisis

Political/Legal
Factors Environmental
Ethical Factors
Factors •New EU regulatory system: REACH
Integration •Pollution
•US Regulatory system: TSCA •Energy consumption
•Responsible Care programs •Strict regulation on working •Green house gas emissions
•Improving working conditions
conditions
 Industry Analysis
2
2.2
Porter’s 5
Power of suppliers

•Forward integration by suppliers

•Moderate switching cost of firms Complementors
2009
2000 in the industry
•Low differentiation (commodity
products, eroding margins) Environment

Legal
Industry rivalry
•Low product
differentiation
• Low concentrations
• Decreased margins
• High Fixed costs

Power of buyers

•High price sensitivity (commodity

products, consumer chemicals)
•Moderate switching costs, lack of
substitutes
•Forward integration (chemical
companies acquiring distributors)
 2 Industry Analysis
Strategic groups & KSF
2.4

Explore crude oil/gas

Asset
and refine into basic
chemicals
driven

… go further
downstream and also
Integrated produce polymers and
even specialty
chemicals

… buy intermediate
products (basic chemical,
polymers) and process
them to specialty
Specialties
products.:
• focused players
http://www.mce-ama.com/ATKearney_report
• broad based players
 Industry Analysis
2
Strategic groups & KSF
2.4

• Access to Low cost raw

materials
Asset • Low cost
manufacturing
driven • Supply chain
management
• Ability to fund growth
investments

Integrated

• Customer intimacy
• Capacity management
• Innovation capabilities
• Supply chain
Specialties capabilities
 Leading Companies
3

BASF DOW chem. DuPont

Share price $55,57 $35,93 $36,12

Market Capitalisation 52,88B 41,70B 32,97B

Divident yield NA 1,70% NA

Beta NA 2,41 NA

Annual Sales $81.17B $52.37B $31,31B

Profit Margin 6.5% 3,8% 9,90%

P/E 10,1 24.95 10,71

Price/Book 2,1 2,3 3,7

Price/Sales 0,7 0,8 3,1

5-year Growth NA -29.002% NA

http://screener.finance.yahoo.com/
 Revenue: $72 Billion (-17.30%)
Employees: 105.000
Plants: 385 production sites worldwide

Business segments: Chemicals; Plastics; Performance

Products; Functional Solutions;
Agricultural Solutions; Oil & Gas

Market Capitalization: $52 Billion

company info
 Dr. Jergen Hambrecht - Chairman of the Board of Executive Directors

Goal: $110 Billion till 2020

Growth in Asia and South America
increase operating margin to 18% till 2012

Company info
History:
1897: Dow Chemical Company is incorporated
1906: Agricultural division is established
1930’s: Production of plastic resins
1937: Listed on the NYSE
1952: First overseas subsidiary
1973: First foreign industrial company on TSE
1983: First compact disks are introduced
1990: Product range enlargement
2000- Global presence
Mission:
“to combine power of science and technology
and innovate what is essential to human
progress”

Andrew Leveris
President, Chairman, CEO

Warren Buffet: Both 3 million shares for $3B. in 2009

$382.5 million in dividend payouts
Today:
Revenue: $45 Billion
Employees: 52.000
Operations: 160 countries worldwide
Product range:over 5000, 214 plants

Supplying: Basic chemicals; Plastic resins; Coatings;

Electronic Polymers etc.

Market Capitalization: $42 Billion (second largest chemical

company in the world)
History: 1802 Foundation of the company

Progress: constant innovation and adaptation

escaping from commodity markets

R&D: 75 research and development and customer service labs in 12 countries

around the world

Trademarks: Lycra, Teflon, Kevlar etc.

 Ellen J. Kullman Chair of the Board and CEO

Mission:
“The creation of shareholder and societal
value while we reduce our environmental footprint
along the value chains in which we operate “

Vision:
To be the world's most dynamic science company, creating
sustainable solutions essential to a better, safer, healthier life for
people everywhere.
 Revenue: $26 Billion
Employees: 58.000
Operations: 80 countries worldwide

Business segments: Agriculture; Industrial Coatings; Building

Innovations, Performance Polymers;

Market Capitalization: $33 Billion, (third largest chemical company in

the world)

Company info