The American Chemical Industry -- A Perspective from an Academic

How Shareholder Value Induces Company Transformations in the European Chemical Industry

A Millennium of Opportunity for the Smaller Custom Manufacturer

Where is the Business of Chemistry Going? -- A Techno-Economic Viewpoint

A Strategic View on Japanese Chemical Industry in the Next Century

The Changing Competitive Landscape of the Chemical Industry

The Division of Business Development and Management of American Chemical Society

The U.S. chemical industry is the world’s largest manufacturer of chemical products by a substantial margin with a balance of trade surplus in excess of $15 billion. Given its leading role in the US economy, it may be surprising to find that many academics share a sense of disquiet about its future. These feelings are brought about by the impression that the U.S. chemical industry is operating in a "harvesting mode" rather than one of sustained investment in research for future growth. This talk will discuss these practices as perceived by someone outside the industry itself and outside the usual academic infrastructure that supplies talent to the U.S. chemical industry.

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The globalization of financial markets has induced the current management era “Shareholder Value”, which started a decade ago in the US and is now also very popular in Europe. Generally, to realize sustainable value creation, companies have to rigorously improve profitability and growth. One important performance measure to evaluate companies is the Total Return to Shareholder (TRS). To keep a high TRS level for the next decade, the European chemical companies have, like their US competitors, two basic options. The “corporate development strategy” enables value creation by ongoing market restructuring, focussing on leading positions and operational excellence; examples are Dow and BASF. Value creation by radically refocusing the portfolio towards high growth pharma, biotech and agrochem markets (life sciences) indicates the “corporate redesign strategy”; examples are Monsanto and Hoechst/Rhone-Poulenc (Aventis).

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Outsourcing of production operations within the fine chemicals industry currently represents a market of unprecedented opportunity for the small custom manufacturer. Principal drivers behind this continuing trend include 1) high-tech, "pseudo-pharma" companies; 2) smaller pharmaceutical and start-up biotech outfits; and 3) large pharma industry vendors in need of sub-contractors. Additionally, non-pharma fine chemical production and toll unit operation services represent increasingly important capabilities available from smaller batch chemical producers.

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Technological, globalization, and consolidation forces are giving rise to substantial and unparalleled changes in the outlook of the business of chemistry, the structure of markets, and the business strategies of companies participating in this $1.5 trillion global industry. This presentation will discuss the importance of the business of chemistry, the long-term outlook of the industry, both in the USA and globally, and examines the most successful areas of growth as well as those that are less promising. It examines how companies are addressing the challenges ahead as the business further evolves from that of a basic materials industry to a high-tech industry based on knowledge and science. Particular emphasis is placed on the role of bioscience in what is a third wave of technological innovation.

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In June 1999, the Japan Chemical Innovation Institute (JCII) compiled a report entitled "Strategy for Chemical Science and Technology: Year 2025," after having studied possible scenarios and innovative chemical technologies for the sustainable development and the reinforcement of global competitiveness. JCII proposed a vision, identifying core technologies, and promising markets for chemical industry. JCII stressed in the report the importance of close collaboration between chemical enterprises, between chemical industry and other industries, and between industry, academia and national institutions. For this purpose, JCII proposed the establishment of a PLATFORM including the formation of overall information network named "CHEMICAL HIGHWAY". While this study is rather focused on the near future, the future opportunities of Japanese chemical technology will be overviewed based on this study.

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The chemical industry faces significant challenges as it enters the new century. The competitive environment is a fierce battleground as companies strive to stake out profitable positions in the global marketplace. Intense merger and acquisition activity, ultra-competitive pricing policies, heightened customer power over business terms and conditions, and increased environmental and social awareness have become facts of life. A number of trends continue to shape the competitive landscape and drive the behavior of individual chemical manufacturers. Yet, as the industry struggles with difficult current business dynamics, chemical manufacturers are posed to take on the stiffest challenges facing the world's societies in the new century -- human health, the environment, population, nutrition, sustainable development and more.

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