A business indication for the chemical industry – 2019

The chemical industry is in its nature a very explorative and innovative industry. The status quo must be challenged in every second to search for product, production or process improvements. This either should result in cost reduction or enhance product functionality. Finally, both ways should create higher margins for the company.

A new way of doing business?

In recent years, companies in the chemical or pharmaceutical industry have made use of another way of business. Mainly, due to the low or zero interest rate policy, mergers and acquisitions were and are still more interesting than ever.

For example, the pharmaceutical company Bayer bought Monsanto. Dow and DuPont merged to become the biggest chemical company, whereas they split up afterward into three separate businesses. Evonik bought Air Products, Merck acquired Sigma-Aldrich, and Linde and Praxair just joined recently. And these mergers were just the most popular ones. Even more mergers and acquisitions have taken place.

Even though these mergers and acquisitions have taken place in recent years, some of the companies are still fighting with their decisions. For example, Bayer is still involved in legal disputes about the glyphosate-containing products from Monsanto. Before an acquisition or merger can take place, the cartel authority in every country where both companies are operating must approve the acquisition or merger.

Does the culture fit?

Does the culture fit between the companies either for a merger or an acquisition is a very important point, which is often firstly asked at the very end of the process. After all legal questions have been answered, the cultural differences are still in place.

Does the company remain independent and simply belong to the group? Just like WhatsApp and Instagram get the addition “by Facebook” to point out that the apparently independent companies are part of another? Will the culture of the parent company be adopted or will a mixed culture emerge? How does the integration process look like? All these questions can be even more difficult because they heavily influence the mood of the employees and they in turn influence the productivity and efficiency of the company. For example, is the organization centrally and hierarchical or decentralized and flat? Have the employees freedom to take own decisions or should everything be escalated to the next line manager? And these are just very basic questions, but they already set the frame for a certain kind of culture.

Business indication for the chemical industry 2019

The above-mentioned examples fitted for the opportunities of the last years, which primarily have been the commoditization of products. But the greatest challenge in today’s globalized world is the economical and geopolitical barriers, which are out of the normal range. Now, barriers exist where previously an easy exchange of goods as possible.

Now, companies have to rethink how they can deliver value for their customers within this more complicated and uncertain environment. Those, who see this environment as a chance will be more successful than those who just complain about the good old days. The best way to get forward is the preparation and exploration of new business opportunities.

Digitalization, the Internet of Things (IoT) and further investments in the own capabilities are the best bet in these uncertain times. Moreover, companies that focus on their continuous development and steadily challenge the status quo to have a higher chance to be successful in future times, especially when it comes to a recession.