Chemical companies must look beyond their home markets

The existing chemical companies must look beyond the local market and consider how to take advantage of the dynamic changes that are changing the industry pattern - the rise of chemical production in countries with raw material advantages and the shift of demand growth to emerging markets. Established companies have to ask themselves how they can unite with new players, whether to build business in resource rich countries, or build capacity in China and other high growth markets, or both.

Then they have to think about how to improve and maintain their attractiveness as partners. Many established companies operate a wide business portfolio; they have to consider how best to articulate the value proposition they bring to potential partners. Innovation - the creation of new technology and new products - has always been the way of profit growth in the chemical industry, and also the advantage field of existing chemical companies. Companies with the technology needed for new petrochemical plants in oil producing countries will be in the best position to compete in any joint venture. Companies with much-needed expertise in fast-growing emerging markets will attract more interest from governments in these countries; therefore, they can better access these markets.

Existing chemical companies must also consider how valuable the market access they provide in their own markets is to new producers. They should consider the best way to provide this service. One possibility is a joint venture partner with a new producer to enable it to gradually reduce its production.

Finally, chemical companies must recognize the strategic choice they are facing. What bargaining chips does the company have? What kind of chips does it want to develop? Is it strong enough to remain independent? Should it consider cooperation or alliance? Is it more meaningful to focus on the Middle East than China? If a company decides to focus on China, should it try to form an alliance with Chinese enterprises or establish a larger direct presence in China? The company must carefully consider, for example How to use their bargaining chips to create maximum value - these chips cannot be used many times.

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