Degussa is one of the top ten chemical companies in the world (#1 in specialty chemicals) with large production facilities in over 50 countries and sales and marketing offices worldwide. In March 2005 the company committed to increase their EBIT by 2008 through four priorities: solutions to customers, site excellence, human and corporate excellence and make China happen (Source: Degussa 2008 Program). The strategic plan for China was to triple the sales from $300 to $900 million by 2008 and capture a major share of the Chinese market for specialty chemicals. One of the high growth potential areas would be the segment of stabilizers (growing at least 7-9% per year in China and Degussa owned only 10% market share of it). The…show more content…
The integration into existing operations doesn’t seem to pose a big problem since the facility is going to operate relatively independently and Degussa has experience implementing their “Perfect Plant” program to standardize and optimize the production process. One more argument for acquisition or joint venture is the possibility to use the established supply and distribution networks of a local player (local players have closer relationships with suppliers and customer base which is different from international players and can help to win market share).
Industry can be characterized by high growth rate (7-9% annually) and intense competition from both local and international players. Worldwide there’s an over-capacity which drives the prices down, however within China there’s still a gap between supply and demand and China meets 30% of its domestic demands through imports. That means that theoretically there’s a space for another production facility and speaks for greenfield. Production is relatively technology intensive, however most stabilizers are considered commodity products with the exception of proprietary products. To differentiate companies have to focus on providing good lead time, supreme service and technical support. Therefore we can consider the industry highly consumer-oriented, which can serve as an argument for acquisition or joint venture.
China scores very high on