The chemical industry is the world's greatest and most diversified industry, composed of companies that utilize raw materials to generate chemicals utilized by consumers and other industries.
FREMONT, CA: Know the three important business models utilized by the Chemicals Industry to produce value for its customers; asset-driven business model, integral business model, and particularities business model.
Different Business Models in Chemical Industry:
The chemical industry is also the world's greatest and most diversified industry, made up of companies that utilize raw materials to generate chemicals utilized by consumers and other industries. It is made up of numerous small industries that involve hundreds of segments. Famous players in the chemicals industry have various strategies for offering value. Some only find and sell oil and natural gas, while others form fundamental chemicals and polymers. Others concentrate on producing specialty chemicals.
The industry uses three main business models to create value for its customers:
1. Asset-Driven Business Model:
The players use this business model to examine or buy oil/gas and convert it into petrochemicals and other fundamental chemicals. Access to raw materials is a crucial success factor. The asset-driven business model normally applies to the commodity chemicals sector. This business model creates value by purifying raw materials into other products, like oil and gas, petrochemicals, and other basic chemicals.
Many of the largest asset-driven players in petrochemicals are in the Middle East. These resource owners use their financial and natural resources to turn into global petrochemical producers. They have access to considerably discounted oil and gas reserves, which provides them with a competitive benefit. Basic chemical plants concentrate on getting the finest output from their assets and are apt to be at the greatest operational superiority to derive value. Similarly, commoditized products need efficient manufacturing sites to produce volumes at low costs.
For the contestants in the chemical industry that utilize asset-driven business models, their success greatly relies on access to low-cost feedstock. Edge lies in the incapacity to manufacture at the lowest possible cost and allow the globalization of supply chain capability. Some players are exploring opportunities to "rise the value chain" into polymers and/or specialties.
2. Integrated Business Model:
Players operating for an integrated business model go one step advance "downstream" in the value chain into the manufacture of polymers besides refining oil and offering fundamental chemicals. Some of them might also have "specialty" units. This integrated business model utilizes by companies that provide petrochemicals, basic chemicals, and polymers. Under this business model, value is formed by refining oil and gas into petrochemicals and fundamental chemicals and utilizing these basic chemicals to form specialty chemicals with specific functions.
Integrated players have a stake in each section of the chemicals market, comprising basic chemicals, polymers, and specialties. They are prone to derive value from business models comprising various combinations of fundamental chemicals, polymers, and specialties. Some important success factors under this business model are innovation, customer closeness, globalization of the supply chain capability, and complication management.
3. Specialties Business Model:
These players purchase intermediate products (i.e., basic chemicals or polymers) and address them into specialty products allied with specific functionalities. Some of them are concentrated on a niche market. Others are more broad-based. The specialties business model includes using petrochemicals, basic chemicals, and polymers to develop and generate products with specific functions.
This business model permits companies to create value by changing emerging petrochemicals and fundamental chemicals into specialty chemicals. Specialty products are generated in smaller batches at diverse locations to meet customer needs flexibly. Specialty players are presently operating in a very fragmented market and an upper level of business complexity that must be managed.
