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Strategic Analysis of Chemical Industry

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Sagarika Bharadwaj

on 15 September 2015

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Transcript of Strategic Analysis of Chemical Industry

Strategic Analysis of Chemical Industry
Submitted by: Group 4
Companies Under View
TATA Chemicals.
Cipla Pharmaceutical Company
Hindustan Organic Chemicals Ltd.

The chemical industry creates an immense variety of products which impinge on virtually every aspect of our lives.
 While many of the products from the industry, such as detergents, soaps and perfumes, are purchased directly by the consumer, 70% of chemicals manufactured are used to make products by other industries including other branches of the chemical industry itself. The industry uses a wide range of raw materials, from air and minerals to oil.


Availability of skilled human resource
Matured industry with proficiency in understanding specification and requirement of foreign buyers
Flexibility in developing specialized chemicals with low capacity plants (small batch production)
Strong IT base amenable for application in chemical processing.

Porter’s Five Forces of Chemical Industry
Threat of New Entrants
Low and Will Remain Low
Government regulations and patents
Significant capital requirements
Incumbents have superior efficiency and quality in production that may be difficult to imitate
Intense R&D and human capital requirements

Bargaining Power of Suppliers
Moderate and Will Remain Moderate
Chemical industry relies on supplies from a few large corporations (such as those in petrochemicals industry)
Chemical producers have limited substitutes for inputs
Most suppliers are not dependent on their sales to chemical manufacturers

Industry Rivalry
High and Increasing
Large number of competitors all competing for market share
All are global competitors little room for expansion
All benefiting from economies of scale, so competing on price
Little differentiation among current players
High fixed costs, and high exit costs

Relatively weak R & D base
Lack of common logistics supporting infrastructure
Chlor-alkali industry depends upon imported membrane in processes
Lack of global marketing set-up

Development of Special Economic Zones and PCPIR
Gas discovery at the KG basin by state PSU and private players
Raw materials availability with skilled human resource enables tie-up for technological products

Large capacity and government support enjoyed by Chinese companies
Large capacity creation in Gulf countries
Patents and Research and Development advancement in EU and USA
Stringent environmental norms and regulations

Bargaining Power of Buyers
Moderate and Will Remain Moderate
Chemicals are important inputs to many industries
Those in chemical industry have many end-customers; don’t rely on one customer
The products (chemicals) are not greatly differentiated
Usually purchased through long-term contracts, so switching costs are high
Threat of Substitutes
Weak and Will Remain Weak
Buyers tend to need specific chemicals as inputs
There really are no similar substitutes for chemicals
Even if another chemical can be used, it is most likely produced by the same Industry Players.


Environmental Regulations
Political Stability
Consumer Protection

Economic Growth
Exchange Rates
Consumer Confidence

Income Distribution
Lifestyle Changes

Energy Use And Costs
Industry Focus On Technology
Government Research Spending
Full transcript