Commodity companies

Experienced market researchers planning a strategy that involves acquisition of a specialty chemical company by a commodity chemical producer have to be aware of these differences. Many such acquisitions have failed over the years because the commodity company management failed to recognize or refused to beheve these differences. 

Although commodity companies8 performed less well than their spedalty and diversified counterparts from 1992 to 2003, plenty of evidence suggests that they can find the right strategy to create shareholder value - or at least to avoid destroying it. Many of our findings confirm accepted beliefs about what makes commodity companies successful, but few companies seem to heed them. 

Commodity companies have to take a conscious view of feedstock price developments, and consider a wide range of options from financial hedging and optimizing flexibility to taking stakes in Middle Eastern companies to benefit from their stranded gas assets (see Chapters 7 and 16)... 

Commodity culture companies tend to have flat, lean organizations. Interpersonal relationships and company loyalty are important to the successful operation of such businesses where so much depends on so few people. Unfortxmately, some commodity companies may lack such loyalty if fhey have gone through a number of staff reductions in the course of their existence. Personnel stability over a sustained period of time can help rebuild that loyalty. 

A weakness notable in many commodity company cultures is an inability to capitalize on the value of product differences where they exist. Instead, they view product differences as a sales tool, whereby they can obtain or hold business at the same price as the competitor, instead of using the situation to charge a premium. Often, this results in an inability to pay for R D above product maintenance levels. This weakness obviously works against the development of specialfy producfs. If fhe managemenf of a commodity culture company wishes to diversify info specialfies, it would be well advised to set up such a business as a relatively independent entity or risk almost certain failure. In some companies, fhis approach is known as "infrapreneuring."... 

Applications Research. Specialty chemical producers devote a larger share of their time and costs to appHcations research than do producers of most commodity chemicals. As noted earHer, the most successful specialty chemical producers have been those companies that ate able to respond quickly to customer needs and problems under the conditions found in the customer s plant. This entails having, at the specialty chemical plant, equipment and procedural knowledge which closely approximate those found among customers. Tests can then be mn and a solution to the problem or need may result. If successful, even in part, it can be brought to the customers and tried there. In practice, of course, each customer s plant has some variables which make a single answer or product quite unlikely. Fortunately, slight modifications by the suppHer will often solve the next customer s problem. 

High density polyethylene (HDPE) is defined by ASTM D1248-84 as a product of ethylene polymerisation with a density of 0.940 g/cm or higher. This range includes both homopolymers of ethylene and its copolymers with small amounts of a-olefins. The first commercial processes for HDPE manufacture were developed in the early 1950s and utilised a variety of transition-metal polymerisation catalysts based on molybdenum (1), chromium (2,3), and titanium (4). Commercial production of HDPE was started in 1956 in the United States by Phillips Petroleum Company and in Europe by Hoechst (5). HDPE is one of the largest volume commodity plastics produced in the world, with a worldwide capacity in 1994 of over 14 x 10 t/yr and a 32% share of the total polyethylene production. 

Commercial production of PE resias with densities of 0.925 and 0.935 g/cm was started ia 1968 ia the United States by Phillips Petroleum Co. Over time, these resias, particularly LLDPE, became large volume commodity products. Their combiaed worldwide productioa ia 1994 reached 13 X 10 metric t/yr, accouatiag for some 30% market share of all PE resias ia the year 2000, LLDPE productioa is expected to iacrease by 50%. A aew type of LLDPE, compositioaaHy uniform ethylene—a-olefin copolymers produced with metallocene catalysts, was first introduced by Exxon Chemical Company in 1990. The initial production volume was 13,500 t/yr but its growth has been rapid indeed, in 1995 its combiaed production by several companies exceeded 800,000 tons. 

Countries produciug commodity LLDPE and their capacities, as well as production volumes of some U.S. companies, are Hsted iu Table 5. Iu most cases, an accurate estimate of the total LLDPE production capacity is compHcated by the fact that a large number of plants are used, iu turn, for the manufacture of either HDPE or LLDPE iu the same reactors. VLDPE and LLDPE resius with a uniform branching distribution were initially produced in the United States by Exxon Chemical Company and Dow Chemical Company. However, since several other companies around the world have also aimounced their entry into this market, the worldwide capacity of uniformly branched LLDPE resins in 1995 is expected to reach a million tons. Special grades of LLDPE resins with broad MWD are produced by Phillips Petroleum Co. under the trade name Low Density Linear Polyethylenes or LDLPE. 

In this text, partnerships include alliances. Some companies prefer the alternate name. Partnerships are structured in many different ways. They may be project specific, commodity specific, or even company specific. Each company has its own qualification criteria. It is beyond the scope ol this book to go into detail on these because that is material for a text of its own. The intent here is to introduce the reader to the concept if it is not known and meld in the negotiarion modifiers for both neophyte and veteran... 

Individuals and companies make shipping decisions based on price, speed, and reliability. If reliability and speed arc equivalent, the decision usually comes down to price. Because energy costs of shipping by air, railway, waterway, and truck vary tremendously, so does the price. Whereas commodities and basic materials arc moved by rail, jtist-in-... 

The various formulatory raw materials necessary to produce these programs are available as either commodity, semispecialty, or specialty chemicals worldwide. Although today all water treatment companies, no matter their size or location, have virtually the same opportunities for materials sourcing, some depth of experience is required to provide blended (and branded) products that have genuinely beneficial properties and the potential for competitive differentiation. 

Dicyclohexylamine (DCHA), C6HuNHC6Hn, MW = 181.3. Sp. gr = 0.914. Flash point = 219 °F (ASTM D56/closed cup). Available as strongly basic, secondary amine, 99+% commodity product, from manufacturers such as Monsanto Chemical Company and Abbott Laboratories, Inc. 

Looking further at the second group, although many of the larger, non-utility operators around the world retain a resident water services chemist or trained technician, there is a marked tendency for all owners or operators, whether large or small, to work in conjunction with a water treatment service company. There is also a common purpose to use branded BW treatment chemical products rather than commodities. 

Whether life sciences informatics software ultimately becomes a commodity, with the commercial rewards for software companies being in packaging, integration, support, and deployment (in a similar way to the Linux community), and what impact the open source movement will have. In bioinformatics and chemoinformatics, open source, free software, and shareware are increasing in quantity, and it is becoming common for smaller software companies at least to release reduced-functionality versions of their software into the public domain at no cost. 

The bulk chemical commodity producing companies (e.g., refineries, petrochemicals) have been practicing this philosophy for some time, using dynamic models to contain operational variability through feedback controllers, and employing static models to determine the optimal levels of operating conditions (Lasdon and Baker, 1986 Garcia and Prett, 1986). 

Another advantage of biocatalysis is that chemo-, regio-, and stereoselectivities are attainable that are difficult or impossible to achieve by chemical means. A pertinent example is the production of the artificial sweetener, aspartame, which has become somewhat of an industrial commodity. The enzymatic process (Fig. 2.31), operated by the Holland Sweetener Company (a joint venture of DSM and Tosoh), is completely regio- and enantiospecific (Oyama, 1992). 

---