Dow Chemical Company Paper
Dow Chemical
Dow Chemical Company
manufactures and sells chemicals, plastic materials, agricultural, and other
products and services that are specialized. Dow Chemical is very diverse and
offers products and services that stretch from fresh water and food to paints and
packaging throughout 160 countries (Data Monitor, 2010). The company also
interlocks its chemistry and innovation with sustainability to help address the
world’s problems for clean water, renewable energy, conservation, and increasing
the productivity of agriculture. The revenues of Dow Chemical amount to $44,875
million in 2009 (Data Monitor, 2010). This company is
interesting because it does just about everything in terms of chemicals. Dow is
also known for making innovative breakthrough’s from saran wrap to providing
heat shields for the Apollo programs. “It’s diverse like me”
Key Success Factors in Dow Chemical History
1897 Dow Chemical Company
is incorporated
1898 Dow Chemical Company
produces and sells bleach on a commercial scale.
1913 Dow exits the bleach
business to focus on value of raw material of chlorine- stock rises
1916 Dow starts marketing
calcium, chloride, and magnesium metal and acetyl salicylic acid
1922 Dow introduces new
products such as ethylene dibromide that is used for ethyl gasoline.
1925 Dows new calcium
chloride flake is granted a patent.
1935 Dow introduces
Ethocel ethylcellulose resins and officially enters the plastics business
1936 Dow institutes a
formal pollution program
1948 20 percent of total
sales come from plastics
1952 Asahi-Dow is the
first subsidiary overseas
1953 Dow introduces saran
wrap for households
1958 Total sales account
for 52% for chemicals and 35% for plastics
1960 Introduces 23 new
products and Handi wrap plastic wrap is introduced.
1964 Annual sales exceed
1 billion
1968 Heat shield for
Apollo 8 is epoxy resins produced by Dow and ziplock bags are test marketed.
1975 Dow supplies the
Alaskan pipeline with Styrofoam brand insulation
1995 Dow reaches a record
profit in sales of $20.2 billion
1999 Dow and Union
Carbide agree to a merger, Union Carbide agrees to become a subsidiary through
a transaction that is tax free, stock for stock at a value of $11.6 billion.
Six sigma and code of conduct is introduced.
2003 Dow Plans to use GM
Fuel Cells in Worlds Largest Fuel Cell Transaction.
(Our Company: Dow Chemical, 2010)
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(Fortune
500: Industries, 2010)
Dows Strengths
Global Operations
Dow is a large producer
in the US of chemicals and plastics in the US and in 37 countries, Dow has 214
manufacturing sites. Dow markets their products internationally in more than
160 countries. The company’s manufacturing operations is vertically integrated.
Dow owns in salt deposits that are in the US (Louisiana, Michigan, and Texas),
Canada, Brazil and Germany. Dow invests in brine deposits and limestone
deposits. In its Liana subsidiaries, Dow involves themselves in property & causality
insurance and reinsurance business. Revenues of Dow are dispersed
geographically. In 2009 revenues came from the US ( 31.5%), Europe (33.6%), and
other countries (34.9%). In addition Dow Chemical’s sales from joint ventures
were (mainly outside of the US) 75% and some came from emerging parts of the
world where growth rates exceeded 10%. Dow’s presence in Southeast Asia,
Brazil, China, India, and Eastern Europe has recorded volume growth increase of
2 to 3 times GDP. Dow expects its increased revenues from these countries in
2012 by 35%. Global Operations help Dow protect it by investing in many regions
to avoid financial downturn in specific regions (Data Monitor, 2010).
Diversified product portfolio
There are over 5,000
products that Dow Chemical Company offers. These products include innovative
chemical, plastic, and agricultural products that are provided in many consumer
markets. The consumer markets include, food, transportation, health & medicine,
personal & home care, and building & construction (Data Monitor, 2010). Dow Chemical operates many segments to
include: Electronic and Specialty Materials, Coatings and Infrastructure,
Health and Agricultural Sciences, Performance Products, Basic Plastics, Basic
Chemicals, Hydrocarbons & Energy, and corporate (Data Monitor,
2010).
In over 160 countries Dow specializes in electronics, water, energy, coatings,
and agriculture, all of which are high growth sectors (Data Monitor, 2010).
DIVERSE REVENUE STREAMS
2009 Revenue percentages
·
22.1%
Basic Plastic Businesses Segment
·
20%
Performance products
·
12.8%
Performance systems
·
10.1%
Health and agricultural sciences
·
9.5%
Hydrocarbons and energy
·
9.3%
Coatings and Infrastructure
·
9.2%
Specialty Materials
·
5.5%
Basic Chemicals
(Data Monitor, 2010)
Strong R&D capability
Dow conducts research
(basic and applied) that is based on developing new products as well as to
improve on established products and processes. Research and development for Dow
Chemical Company has about 6,700 people and spent $1,492 on R&D activities
in 2009. So far the R&D for Dow has 3,661 patents in the US market and
13,793 patents in foreign markets. Revenues amount to $269 million in 2009 from
technology royalties and patents. Dow continues to increase their research and
development for innovative products (Data Monitor, 2010).
Dows Opportunities
Acquisition of Rohm and Hass
Rohm and Haas is a global
specialty materials company that was acquired by Dow in April 2009. The
portfolio of Rohm and Hass will allow Dow to improve its performance business
portfolio growth and it gives the company a strong place among the global specialty
chemicals and advanced material sectors. This acquisition gives Dow an access
to new and innovative technologies and will allow Dow to extend its reach to
emerging geographies (Data Monitor, 2010).
Rohm and Hass will provide
Dow with a better position in industry segments that are forecasted to have
significant growth such as electronic materials and coating segments. Dow will
also benefit from the strong presence of Rohm and Haas, in the areas of, water
solutions, adhesives, personal care, biocides, and building & packaging
materials. This acquisition allows Dow to grow and expand its portfolio with
adding there range of new (innovative) products and technologies to the
acquired high growth downstream sectors. This also allows Dow to sell more
products through existing market channels (Data Monitor, 2010).
Joint venture agreement with Mitsui & Co.
Dow signed a joint
venture agreement with Mitsui &Co. and formed a 50:50 manufacturing
agreement to construct, own, and operate a new membrane chlor-alkali facility
in 2010 (Data Monitor, 2010). The facility will be in opened in 2013
and will have approximately 800 kilotons per annum of capacity. The chlor-alkali
facility will be under the operation and maintenance of Dow. This joint venture
will fuel Dow’s performance business with a cost efficient chlorine supply.
(Dow’s chlor-alkali production serves 70% of growing performance and market
driven businesses) (Data Monitor, 2010).
Strategic divestitures
Dow maintains and
optimizes its portfolio of assets to increase their reserve base. Dow sold its
Raffinaderij Nederland interests for approximately $800 million. A subsidiary
of Dow, Union Carbide sold its ownership of Optimal Group of Companies to
Petroliam Nassional for $660 million in September 2009. Divestures continued
for Dow with the completion of selling its interests in Morton International to
K +S for $1,675 million in October 2009. Dow started off the year in 2010
(January) divesting their acrylic acid and esters business to Arkema for $50
million. Then in May 2010 Dow sold its Styron division to a Bain Capital
affiliate for a total of $1,630 million. Dow is strategically selling its
non-core businesses to focus more on core businesses (Data Monitor, 2010).
Dow Weaknesses
Lawsuits
Dow is involved in many
lawsuits. Union carbide Corporation, a subsidiary of Dow is involved in
lawsuits related to asbestos, these lawsuits were filed in the US (state
courts) in the past 30 years. It involves injuries and claims of exposure
resulting in asbestos containing products. Union carbide’s pending liability
and future claims is $839 million in asbestos related cases and insurance
recoveries that are asbestos related is at $84 million. This can damage Dow’s
reputation (Data Monitor, 2010).
Dependence on suppliers
Dow needs raw materials
and it is dependent upon its suppliers. They purchase hydrocarbon (natural gas,
liquefied petroleum gases, etc.), electric power (benzene, ethylene, etc), and
other raw materials they need. If Dow’s suppliers don’t come through the impact
on its operations is negative. Major hurricanes on US Gulf Coast from
2005-2008, impacted Dow because of temporary supply disruptions. Without the
supply of raw materials, Dow cannot run efficient operations and serve its
customers (Data Monitor, 2010).
Dow Threats
Environmental compliance costs
Dow has to comply with
pollution and protection that federal, state local and foreign government
enacts (laws, regulations, rules, and ordinances; includes generation storage,
handling, etc). In 2009 Dow spent $619 million for environmental remediation
and restoration costs as well as an extra $80 million for superfund site
remediation (Data Monitor, 2010).
Local, state, and fed
government regulations
Dow faces strict
regulations mainly dealing with critical infrastructure such as chemical
industry and security threats. There are also new regulations of the security
of chemical plant locations in terms of transporting hazardous chemicals that
can impact negatively for the company (Data Monitor, 2010).
Intense competition
Dow faces competition
from Chemical companies as well as chemical divisions of international oil
companies. Dow competes on the platform of quality, price and customer service
on a worldwide scale. Dow could be forced to lower prices or feel the impact of
low sales volume if the level of competition increases (Data Monitor, 2010).
Porter 5 Forces Dow Chemical (Commodity Chemicals)
Threat of Entry of New Competitors
There is low product
differentiation for global chemicals but there is a strong and established
demand for commodity chemical products. Commodity chemicals market is mass
produced chemicals that involves chemical transformations that produce simple
molecules at the lowest cost. The entry of a new company entering into this
market will need huge amounts of capital to set up plants with high volume
production. If the new entrant decides to go into the industry as a small scale
company it will most likely be unsuccessful (Data
Monitor, Commodity Chemicals 2010).
Threat of Substitutes
The threat of substitutes
is scares since buyers need a certain chemical composition product. In other words these companies are the only
source to get certain chemical compositions for a competitive price (Data Monitor, Commodity Chemicals 2010).
Rivalry
Competing Chemical
companies have intense rivalries because the products they are selling are
undifferentiated and branding in this industry is not important (Data Monitor, Commody Chemicals 2010).
Buyers
Commodity chemical
manufacturers produce many various chemicals with a lot of functions. Ethanol
(a commodity chemical) can be incorporated in alcoholic drinks, paint/varnish,
manufactured ethanal and ethanoic acid can be used for thermometer fluid and in
preserving biological specimens. Buyers bargaining power is a two way street, since
the market for commodity chemicals is a low cost with intense rival competitors
the bargaining power of customers is strong. The absence of substitutes of
certain commodity chemicals weakens the buyers bargaining power resulting in
long term contracts with periodic renewals (Data
Monitor, Commidity Chemicals 2010).
Suppliers
Major chemical
manufacturers are experiencing increasing raw material prices and hesitant
customers which increase the suppliers bargaining power. In the case of Dow
they have to make stronger partnerships with their supplier to remain
profitable in the commodity chemicals market. However the suppliers bargaining
power is weakened because they deal with undifferentiated raw materials, oil
and gas, typically supplying companies offer the same raw materials (Data Monitor,Commodity Chemicals 2010).
Corporate Governance
Board of Directors-
Conduct an extensive review and ask hard questions. Majority of Dow’s Board members are
independent directors
Corporate Officers-
Accountable to Board and addition management roles their assigned
Executive Leadership
Committee- Manages the whole corporation and has a responsibility of defining
and implementing a strategy to maximize the long term value of the shareholder.
They also set strategic direction, define priorities, establish corporate wide
policy and manages governance and enterprise level decisions (Dow Chemical: Leadership, 2010).
Dow’s Business Code of Conduct
Diversity, Equal
Opportunity and Respect in the Workplace-Discrimination not basis for
employment promotion, and compensation decisions
Environment, Health and
Safety- Observation of unsafe or (potentially) hazardous condition needs to be
reported immediately to a supervisor, or HR, EH&S leader. Employees should
take the responsibility not be impaired (by alcohol and other substances) and
should watch unprofessional behavior such as verbal abuse.
Financial Integrity- Each
employee is expected to report all payments to management that are questionable
to legal or the Dow EthicsLine
Accurate Company Records-
Report every transaction.
Conflicts of Interest-
Outside interests should not impact job performance, loyalty, or negatively
impact Dow’s Reputation. Gifts and entertainment should not influence business
decisions.
Obligation to Customers,
Competitors and Regulators- Act lawfully and ethically towards, customers,
shareholders, suppliers, competitors, and regulators.
Computer Systems and
Telecommunication Security Policy- Computers intended for business use,
information stored on the device is subject to review.
Safeguarding Important
Information- Don’t talk about confidential company information (Don’t use it
for personal gain).
Interactions with public-
Personal opinion on public issues represent the individual not the company (in
other words don’t speak for the company on your own opinion)
(DOW: Code of Business Conduct, 2010)
Human Element 2006
Dow launches the Human
element a multi-million branding and corporate reputation campaign. This
campaign is initiated on a commitment of applying science to improve the human
condition. Dow instituted a storytelling program to educate Dow employees about
Human Element, and the 2015 Sustainability Goal which is based on the Human
Element (Dow-Bringing the Human Element to Life, 2006).
Sustainability Goals 2015
Reduce Energy Consumption-
25% reduction (efficiency)
Climate Change- 2.5
percent reduction
Continued Improvement in
employee health and safety
Collaboration with
communities (with Major Dow presence) addresses concerns and support community
goals.
Sustainable chemistry (new
and enhanced products and services with extra sustainability benefits)
Transparency of products
with risk assessments
External evaluation
safety and stewardship processes of Dow products
(Liveris Announces 2015 Sustainability Goals for Dow, 2006)
Education of the Environment
Dow is using both World
Water Day and its own Earth/Run for Water partnership to educate the next
generation to become effective stewards of fresh water. Dow is teaming up with
Edina Public Schools in Minnesota to teach local students about the global
water crisis and support World Water Day as well as Dows own Live Earth Run for
Water event (that is held in about 100 cities and communities around the world).
Dow Water and Process Solution along with Edina Schools hosted clean and safe
drinking water presentations in local classrooms (Minnesota). In the
Indianapolis area they are continuing their humanity’s water crisis campaign.
In fact students from Central Indiana participated in IMAGINE Global Leadership
Conference for middle school students. The middle school students developed
action plans that dealt with water needs, locally, regionally or globally. In
Europe France’s Dow employees are teaching their children (ages 4-12) about
clean water conservation and both nature and humanity need it. They will also
be organizing water experiments for 80 children at youth associations for 2
weeks (Dow Takes Youthful Approach To Global Water Solutions, 2010).
Pollution History
Agent Orange
During the Vietnam War
Dow Chemical Company manufactured Agent Orange alongside with Monsanto for the
US Forces. Agent Orange contains lethal chemical dioxin (cancer causing) and
was used during the war to deter the enemy out of the forest and it destroyed
enemy food crops. The country of Vietnam has claimed that the herbicide (Agent
Orange) has caused millions of illnesses and birth defects. (US Won't Compensate Vietnam's Agent Orange Victims: Official, 2006). ” A 1979 study
published in the JAMA by Bogen et al looked at 78 Vietnam veterans who reported
Agent Orange exposures. Eighty percent reported extreme fatigue. Over 60% had
peripheral neuropathies, 73% had depression, and 8% had attempted suicide.
Forty-five per cent reported violent rages. Sudden lapses of memory were seen
in 21%.” (Monsanto's Agent Orange: The Persistent Ghost from the Vietnam War,
2002)The
negative effects of Agent Orange reflect a bad reputation on the company’s
image (Monsanto's Agent Orange: The Persistent Ghost from the Vietnam War,
2002).
In the Now and Dioxins Again
Even in 2009 Dow Chemical
seems to have more pollution problems. This time it has to do with dumping
dioxins into the Tittabawassee River in the Midwest. Dow is responsible for
poising this river valley that leads up to Saginaw Bay and Lake Huron. Dow is
getting pressure from the Obama administration to clean up there pollution. The
Federal Superfund Law provisions will require Dow Chemical to evaluate and
clean up dioxins along the Tittabawassee River as well as the Saginaw River.
Dow also promises to remove or cap dioxin sediment (Dow agrees to address pollution at Midwest site, 2009).
Dow is resistant to state
and federal cleanup efforts and proclaims that pollution doesn’t hurt people or
wildlife (Dow agrees to address pollution at Midwest site, 2009).
Dow Chemical Company has
manages its strategy with effectiveness and efficiency. The company strategizes
its investments and divestment's to where they still come out the winner. Dow
has a bad reputation as well for being a dioxin polluter however; it has tried
to curb its bad habits with environmental programs.
Works Cited
Data Monitor. (2010, March). Global Commodity
Chemicals. Retrieved November 18, 2010, from Data Monitor:
http://datamonitor.com
Data Monitor. (2010,
July 17). The Dow Chemical Company. Retrieved November 18, 2010, from
Data Monitor: http://www.datamonitor.com
Dow agrees to
address pollution at Midwest site.
(2009, November 6). Retrieved November 18, 2010, from Los Angeles Times:
http://articles.latimes.com/2009/nov/06/nation/na-dow-dioxin6
Dow Chemical:
Leadership. (2010). Retrieved
November 18, 2010, from Dow Chemical:
http://www.dow.com/financial/corpgov/leader/index.htm
Dow Takes Youthful
Approach To Global Water Solutions.
(2010, March 22). Retrieved November 18, 2010, from CSRWire:
http://www.csrwire.com/press_releases/29143-Dow-Takes-Youthful-Approach-To-Global-Water-Solutions
DOW: Code of
Business Conduct. (2010). Retrieved
November 18, 2010, from Dow Chemical:
http://www.dow.com/PublishedLiterature/dh_004f/0901b8038004f2bd.pdf?filepath=about/pdfs/noreg/473-00001.pdf&fromPage=GetDoc
Dow-Bringing the Human
Element to Life. (2006). Retrieved
November 18, 2010, from Golin Harris:
http://www.golinharris.com/Default.aspx/CaseStudies/Dow-BringingtheHumanElementtoLife?rel=60106
Fortune 500:
Industries. (2010). Retrieved
November 18, 2010, from CNN Money:Fortune:
http://www.fortunesmallbusiness.com/magazines/fortune/fortune500/2010/industries/7/index.html
Liveris Announces
2015 Sustainability Goals for Dow.
(2006, May 23). Retrieved November 18, 2010, from CSRWire:
25915-Liveris-Announces-2015-Sustainability-Goals-for-Dow
Monsanto's Agent
Orange: The Persistent Ghost from the Vietnam War. (2002). Retrieved November 18, 2010, from Organic
Consumers Association:
http://www.organicconsumers.org/monsanto/agentorange032102.cfm#agent
Our Company: Dow
Chemical. (2010). Retrieved November
18, 2010, from Dow Chemical:
http://www.dow.com/about/aboutdow/history/1890s.htm
US Won't Compensate
Vietnam's Agent Orange Victims: Official. (2006, June 5). Retrieved November 18, 2010, from Common Dreams:
http://www.commondreams.org/headlines06/0605-03.htm
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