The boundaries of multinational chemical companies: return to specialty chemical

Specialty chemicals company hits growth limit and begins to re-establish strategic boundaries

After the polymer/petrochemical product revolution came, although professional chemical companies such as DuPont, Dow, and Monsanto did not have the same advantages on raw material side as petroleum companies, they also expanded into petrochemical products with their own good R&D capabilities. They are also involved in the production of polymer products and petrochemical products, but only operate on a smaller scale. On the other hand, some other companies such as Union Carbide have tried to diversify non-related products to narrow the gap with DuPont and Dow Chemical, but they found that their R&D capabilities can hardly provide any competitive advantage in new market areas.

After the 1970s, most of the top chemical companies began to realize the problem: human’s understanding of the chemical industry has reached a limit, and the fields of chemistry and engineering have failed to generate enough new knowledge and products, and research has been unable to bring greater help to their growth marginally. Therefore, DuPont, as a representative, began to gradually focus on the development rather than the research of new products in its business strategy, but the development of these new products is based on technologies that have been developed since the 1920s. After the second oil crisis caused by the Iranian Revolution, the European and American countries generally ushered in the economic recession in the early 1980s. These professional chemical companies found that their basic chemicals and general plastics business were facing fluctuations in crude oil price which was so fragile, so they are beginning to look for new strategic boundaries and strengthen the foundations of R&D and self-learning that they are good at. So we can see that after the 1980s, the American chemical industry began to focus on the development and production of professional and specialty chemicals, and this is the field that specialized chemical companies began to engage in in the 1920s.

At the same time, some specialty chemical companies in the US have begun to explore a new path, exploring life sciences as an area for acquiring new intellectual property rights and barriers to entry, but no company has proven successful in this area. Both Dow Chemical and DuPont have tried to expand into the pharmaceutical industry, but the difficulty of expanding the strategic borders that they are not good at eventually made them choose to withdraw.

Overall, after the polymer/petrochemical revolution of the last century, the restructuring of the strategic boundaries of professional chemical companies and petroleum companies in the chemical industry can be summarized as follows:

1) The chemical business of petroleum companies is subject to technical barriers and their own R&D capabilities, and focuses on the basic chemicals and general plastics fields based on cost advantages.

2) Professional chemical companies face the limits of growth after making shallower attempts to upstream polymers and petrochemicals, and begin to strengthen the strategic boundaries of their areas of expertise, but it should be noted that in the process of achieving relevant diversification, they broke through their own growth limits with development instead of research. Under the background of fierce competition in the bulk basic chemical market, they are committed to extending their strategic boundaries to niche markets such as specialty chemicals with higher profit margins.

3) After some professional chemical companies faced the limit of growth, they began to try to expand new cognitive and strategic boundaries into the life sciences and pharmaceuticals fields, but most of them encountered failures under the capacity constraints.