Natural Resources and the Environment

Resource scarcity is the most important trend the chemical industry faces. Water scarcity, in particular, is an increasing threat. Not only are people suffering in many parts of the world from water shortages, but water needed by industrial processes is also running out. The chemical industry will need to re-design its processes to rely less on water for its own use, and will also be forced by society to take care that people in the areas where it operates are not deprived of water for their use. The need for sustainability will drive innovation.

Planning, Measuring and Managing “Sustainability”

Companies know they need to become more sustainable to be competitive. The business benefits have already been demonstrated. But how do you do it? To learn more about managing for sustainability, please click here. 

Globalization

Globalization is the second-biggest trend transforming the chemical industry. Cash-rich government funds and companies from Asia and the Middle East are investing in Western companies to acquire knowledge, brands, and market footholds. Result: The chemical industry is globalizing on a rapid scale and the dominance of established companies is being evened out by increasingly sophisticated “emerging market” companies. Everyone’s market will be open to foreign competition, on an increasing scale. And chemical companies have to be global to compete.

Major Shifts in Consumption Patterns

Rising prosperity in fast-growth and developing markets will continue to drive strong chemical sector growth. As demand shifts, companies must reposition their asset and product portfolios.

Geographic Shift. About 70% of consumer spending is concentrated in North America, Europe and Japan. In 10 years, 80% of the middle-income consumers will live outside of these economies.

Shift in End-User Choices. There is a clear polarization of consumption in the chemical industry. At one end is demand for basic, cheap chemicals, and at the other end demand for premium chemicals with special properties.

Chemical Players with Consumer Products

Changes in consumer markets will affect parts of the chemical industry—those with consumer products. To read about the latest developments, please click here. 

Regulation

Regulation will continue to influence the development of the chemical industry, on a regional and local basis. Activism increasingly influences regulation. A well-known example is Europe’s REACH (the Registration, Evaluation, Authorisation and Restriction of chemical substances) regulation. Companies are pressured to become more open and demonstrate strong environmental stewardship.

Demographics

Population shifts will have major consequences. In mature markets, chemical industry workers are retiring, leaving companies without experienced managers to take over leadership roles. Fast-growth markets have high numbers of young people, but many of them need further training, education and development to work in the chemical industry. Nevertheless, the resource pool for technical skills will shift toward the fast-growing markets of Asia, and other emerging market countries.

Asset-driven players: Manage the impact on your business

In petrochemicals, many of the largest asset-driven players are in the Middle East. These resource owners are using their financial and natural resources to become global petrochemical producers. They have access to significantly discounted oil and gas reserves. This gives them a competitive advantage. They are geographically closer to Asian customers than their Western competitors are. Middle Eastern producers will increase their capacity to produce petrochemicals and basic chemicals. Their challenges are to improve productivity and operational efficiency, and to develop the management and technical skills of their local workforce on a large scale. These realities will compound the weak asset position of the established major players in the oil and gas industry. According to industry experts, 86% of forecasted petrochemical capacity will be built in the Middle East and Asia in the next few years. As a result, we will see more Western producers seeking mergers, joint ventures, partnerships or alliances with them. Mature market companies may also have to consider “moving up the value chain” into polymers and/or specialty chemicals, and getting out of commodity chemicals.

Mergers, Acquisitions, Joint Ventures, Partnerships and Alliances

• To learn more about the opportunities and challenges of partnerships and alliances, click here. 
• For more information about mergers, acquisitions and joint ventures, click here. 

Critical success factors for Asset-driven players

1. Access to low-cost feedstock  
2. Low-cost manufacture  
3. Globalization of supply chain capability  
4. Global sales and marketing capability  
5. Capital requirements to capture growth  

Integrated Players: Work through separate divisions to find success in multiple market segments

Integrated players have a foot in each part of the chemicals market. That gives them three choices of where to play:

1. Basic chemicals
    
2. Polymers
    
3. Specialties  

Integrated players often choose 1 and 2, 2 and 3, or even 1, 2 and 3. Each part of the chemicals market requires a different strategy or customer value proposition. And that means that each one also needs a different business structure, organizational culture, customer relationship and processes for how they engage and reward their people.

Players in this market segment may have a Value-Priced Offer, a Premium Offer, a Custom-Made Solution—or all three residing in different divisions. They are caught between the asset-driven players and the pure specialty players. To realize their objectives, they will have to manage different customer value propositions in different ways.

Basic chemical plants, for example, focus on getting the greatest output from their assets. They need to be at the highest level of operational excellence. Commoditized products need efficient manufacturing sites that can produce large volumes at low costs. But specialty products are produced in smaller batches at different locations in order to meet customer needs in a flexible way.

Globalization of the supply chain capability will drive business development. Growth will be both organic growth and by expansion through mergers and acquisitions, joint ventures, partnerships and alliances. Both growth scenarios will require a high capability to fund investments quickly.

From a strategic operations point of view, integrated players need to make sure their basics business has access to cheap raw materials. At the same time, they need to get the most out of their polymer and specialty activities.

Some “basic” chemical companies have already become specialty players to make this move. For example, BASF acquired Ciba, Dow Chemical bought Rohm and Haas, and DSM went through a major portfolio transformation.

Critical success factors for Integrated players

The critical success factors here will be an increased importance of and attention to:

1. Innovation life cycle  
2. Customer focus / customer centricity
    
3. B2B value creation and value-based selling  

Specialty Players: Go for Premium Offers and Custom-Made Solutions

Specialty players need to decide whether they have a Premium Offer or are developing Custom-Made Solutions. Their decision affects everything they do, from how they lead and manage, to the structure of the organization and how they reward their people.

For Specialty players, customer-centric innovation is about working with their customers to jointly develop new products or applications for a specific customer need. This requires teamwork across functions on both sides. It also requires a managerial approach that is different from Integrated players.

Success in delivering Custom-Made Solutions involves aligning all functions of the organization, from Finance and HR to Sales, Customer Service and Production, to support the customer relationship. This creates a higher level of business complexity that needs to be managed.

But some Specialty players probably cannot afford to increase their spending on innovation. The current crisis will accelerate the speed of consolidation in this sector. Financially stressed players will look for support. Cash rich players (mainly from the Middle East and Asia) will look for opportunities. Should Specialty producers follow the shift in demand and growth to emerging markets and invest in those regions of the world that are showing growth? Do they need to globalize and adapt their supply chain to their present and new customers?

Critical success factors for Specialty players

The critical success factors here will be an increased importance of and attention to:

1. Customer focus / customer centricity  
2. Multifunctional account management capability
    
3. Co-creation, co-innovation with customer  

Integrated and Specialty Players: Component Marketing

When B2B companies produce and sell functional ingredients or components that end up in complex products several steps later along the value chain, they struggle to have the value-added of their component fully recognized by the end customer. In many cases, you cannot sell to your customer’s customer’s customer, so it is difficult to differentiate your component from that of competitors. It is also difficult to capture the full value-added of your component.

Example: In paints, the resin is the prime determinant of the performance of the paint. Some high-quality resins may make paint dry faster. The end benefit of the resin to a painter is that he can apply a second layer within hours rather than having to come back another day, which is more expensive. This benefit also reduces the “downtime” of the painted space, for the owner of the space e.g. a painted floor in a factory. The resin can clearly offer significant added value along the value chain. How can resin producers make these benefits known to the end customer and capture their fair share of the value? There are a few strategies that can have some effect:

Marketing to or educating the end customer

If a firm has a component with unique characteristics, it has more leverage than when there are comparable products available. A firm can try to increase the perceived value of its component by emphasizing the benefits directly to their customers’ customers. This creates a “pull” effect along the value chain. This can be done by marketing directly to customers, or educating them. Either way there is a price to pay in marketing and advertising costs. Social media is becoming a more and more effective tool for this. Sometimes there are legal or value chain barriers to this practice.

Ingredient Branding

One way to claim the value that the component adds is to actually brand the ingredient. An Ingredient Brand is exactly what the name implies: an ingredient or component of a product that has its own brand identity. Intel, GoreTex, Dolby, TetraPak, Shimano, and Teflon have had success with this strategy.

Dual Branding

Two or more companies may co-brand their products. Senseo, the European coffee maker that was co-branded by Douwe Egberts and Philips Electronics has brought value to both parties.

Co-design

Companies can seek to engage in strategic partnerships with their direct customers and co-design innovative solutions based on their combined strengths in product technology and market access. Not all customers will agree to this. They can go even further and invite end users or end user groups to help them design new products whose performance is of high value to the end customer.

Get involved in the sales process

Perhaps the most effective route, but the most difficult to do, is to participate directly in the selling process to the end customer.

• Find where in the value chain the real buying decision is made – find out who the end customer is
• Find out what that customer really needs/is trying to achieve. What performance characteristics do they need?
• Select or design the component that best does the job
• Craft a strategy to influence the buying decision, including direct participation in the sales process
• Do all of the above without upsetting the other players in the chain

All Players: Develop your people to be able to implement your strategy

As the chemical industry becomes more global and more competitive, there will be changes for people in the company – people who have been used to a certain way of working for most of their careers. Helping people to adapt to these changes, to align themselves to a new strategy, and to implement the strategy and achieve the goals, requires extraordinary leadership at all levels of the company. Leaders will have to focus on the implementation of strategy as never before.

To be able to implement strategy and contribute to it, your managers need to understand what it means and how to think and act more strategically. They need to develop themselves to understand how the different parts of the business work together and how value is created. Many very capable chemists, engineers, technicians, or functional experts are lacking a formal business background. Developing their business knowledge and skills improves their decision-making and performance today, and develops the talent pipeline for the new leaders needed for tomorrow.

Critical success factors for All players

1. Leadership for strategy implementation capability  
2. Talent pool of chemical professionals with excellent business skills 

Open Enrolment Workshops for Individual Managers

Every business professional—and every business—is dealing with constant change and long-term uncertainty. Having robust skills in multiple areas reduces uncertainty and opens up a whole new world of possibilities for success. That’s why thousands of people have turned to MCE for professional development that moves their skills to a higher level—fast. MCE’s development programs focus on personal relevance—how YOU benefit. Guided by expert course leaders, you will learn new skills with a small group of peers from various industries and a diversity of cultures. You will be ready to integrate new knowledge and ideas the very next day.
Click on each workshop title below to see detailed information about the workshop.

Asset-Driven Players 

• Managing Strategic Alliances and Partnerships 
• Leadership for Post-Merger and Acquisition Integration  

Integrated Players 

• Value Selling in the Chemical Industry 
• Profitable Customer Centricity: How do you Get There? 
• Managing Strategic Alliances and Partnerships   
• Managing and Servicing Global/International Key Accounts in B2B Markets 
• Product Management in B2B Markets 
• Selling through Different Channels in B2B Markets   

Specialty Players 

• Profitable Customer Centricity: How Do you Get There?  
• Leading and Working in a Multifunctional Account Team for Customised Solutions 
• Managing B2B Teams for Solution Selling  

All Players  

• 5-Day Mini MBA for the Chemical Industry 

Develop your ability to meet tomorrow’s challenges and adapt successfully to changing conditions.
Click the arrow to request more information about MCE's Open Enrolment Workshops.

In-Company Leadership and Management Development Workshops

Customized to Your Specific Needs. Talented managers and leaders in key roles make all the difference in taking smart decisions and leading strategy implementation to success. Identifying talent potential and developing that talent to take on greater responsibilities is crucial for ensuring leadership succession as the older generation retires. MCE can help you with talent assessment, pipeline planning, and tailoring career path plans to achieve your future senior management needs.

Your future leaders need to understand your business, the broader business environment, how to make strategic business decisions, and how to lead and manage people in complex organizations. They need a cross-functional understanding of how the organization works together to get things done. We can customize a programme to run exclusively in your company for your future senior managers. 

Increase the ability of your managers and leaders to meet tomorrow's challenges and adapt successfully to changing conditions.
Click the arrow to request more information.

Business Coaching and Mentoring

MCE senior associates provide flexible one-on-one mentoring and coaching to key people in your organization at middle or senior levels. MCE associates mentor and guide based on their own business experience. This can be on a particular business issue or project, or for general career development. It could be about filling a knowledge gap in a specific area in preparation for taking on a more senior role.

Move your career to a new level with an MCE Mentor or Business Coach.
Click the arrow to request details. 

Advice on Organizational Development and Talent Management

Your people are your most expensive asset. Success depends on making sure this asset is productive. An important part of this is developing your people in the competencies related your your strategy. MCE can work with you flexibly and in a variety of formats. Management Centre Europe can help you custom-design a development curriculum for the individual managers in your leadership pipeline.

For management learning and management academies, MCE can help you lay the foundation and get started. We can help you decide what your curriculum should be in support of your strategy and learning and development needs. We can also supply content for your curriculum. For corporate universities and management academies that are commercializing their programmes for an external market, MCE can help you with strategy, business model, curriculum planning, content and launch. 

Talk to MCE about developing talent for productivity, engagement and the leadership pipeline.
Click the arrow to request more information.