Analysis Of Basf Chemical Company Commerce Essay

Here is background of BASF Company. BASF is leading chemical company on the world market. It has four production market departments: Europe, North America, South America and Asia. Moreover, the production of the company is separate in sex different segments: Chemicals, Plastics, Performance Products, Functional Solution, Agricultural Solution and Oil & Gas. The department located in Germany is oriented in production of personal care products, so called Performance Products. BASF does not sell product to the final customer. Its products are intermediates like catalysts, molecules and raw materials, which are used from other manufacture companies. The main mission of the company is to produce products for sustainable future.

The report objective is to analyzing the external and internal environment of BASF Company. This is useful for understanding the company`s current situation. Based on these analysis, this report gives recommendations to the company, how to keep its position on the market and to use on the best way its opportunities.

Research information was collected in the fallowing way. Firstly, was done the secondary research. For it the main source was internet. Secondly, the primary research was done by conducting an interview with Mrs. Sengel, who is member of Executive Board of the company. Finally, based on collected information the company`s strengths, weaknesses, opportunities and threats was analyzed with used of SWOT analysis.

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Based on the analyzed information, research results are as fallow. BASF is leading company on chemicals market. One of the company`s strength are so called Verbund sides – perfect conglomerates between different departments of the company. Every product produced in the company is used in the most efficient way. BASF has opportunity to rising commodity chemicals market in regions like Africa, Asia Pacific and Middle East. The company is negative influenced by some economical factors like increasing energy prices and current credit crisis. Moreover, the negative political factors which influence the company are different laws and regulars in European Union about Genno – modified products and some kind of molecules. The threat for the company is raising competition.

In conclusion, BASF is leading company with a lot of strengths and opportunities. There are some external threats, which influence the company. Nevertheless, if the company use its own potentialities and hold on external negative factors, it can develop its market positions and to expect its great future.

Recommendations are as fallow. Firstly, the most important thing for the company is to make innovations. This gives opportunity to BASF to be better than competitors. The company can develop the business if it is oriented to the market place in new development countries like Asia and Middle East. Secondly, internal environment of BASF will be better if there are more common and strictly rules for the employees of every department. Moreover, the company has to hold the good communication within the different departments. Finally, if company makes more researches it will know better the customer’s needs and demands. To close, BASF has to do everything possible to create products for sustainable future.

III. Preface

Here is the framework within which this report has been written. This report functions as a final output of PLA1-Project Organisation of Business. During this project, we worked in a group of students. Our purpose was to analyze a chemistry company – BASF located in Dusseldorf, Germany. This is how we made our purpose, reality. During lectures, we studied theories of primary and secondary research, useful for analysis of a company. After that, we did secondary research into BASF`s internal organization. Furthermore, we did interview with Mrs. Sengel, who is member of Executive Board of the company. All of this data, our group prepared a group file. Finally, the collected information was analyzed. Based on this analysis, the individual report was written, that now lies before you.

In this report, I address the fallowing audience. My primary audience is my lecture M.Sc. M.Hajjoubi, who will graduate my report. My secondary audience is every person who works in BASF Company and who is interested in read it.

I would like to express my gratitude to the fallowing people. First, I would like to thank to my group members – Simon Braun, Muzzeyen Gundoghu, Anna Wolter, Ivet Mladenova, Mo Vania and Radu. It was pleasure and really useful experience to work together with you as a team. Secondly, I would like to express my sincere appreciation for our PLA1`s lecture M.Sc. M. Hajjoubi, whose consultations, guidance, understanding and patience support us from our fist week till the end of this project. Thirdly, special thanks are due to Miss. C. Jacobs, for her efforts and guidance to improve our language skills. Last but not least, I proffer my heartfelt thanks to Mrs. Sengel with who we made our interview. Without contribution of these people, this analysis would not have been possible.

Place: Venlo, the Netherlands

11th November, 2012

Eleonora Georgieva

Table of contents – PLA1 report

Title page І

Summary ІІ

Preface ІІІ

Table of contents ІV

Glossary V

1. Introduction 1

2. Company description 2

2.1 General company description 2

2.2 Product description 2

3. Project description 3

3.1 Project description 3

3.2 Project aim 3

3.3 Research approach 3

4. Theoretical framework 4

4.1 External analysis 4

4.2 Internal analysis 5

4.3 SWOT overview 6

5. External analysis 7

5.1 Political factors 7

5.2 Economic factors 7

5.3 Social factors 7

5.4 Technological factors 7

6. Internal analysis 8

6.1 McKinsey 7S framework 8

6.2 Interconnection of the 7s 9

7. SWOT overview 11

8. Conclusion 12

9. Recommendation 13

10. Critical appraisal 14

Reference list

Appendix 1 15

V. Glossary

PEST Analysis – Political, Economical, Social and Technological factors which are analyzed

SWOT Analysis – Strengths, Weaknesses, Opportunities and Threats analysis

R & D – Research and Development department

1. Introduction

To start, here is the macro perspective on BASF Chemical Company. BASF is one of the leading chemical companies in the world, like this BASF is influenced by many political and economical factors. Different laws and regulations determine the production of the company. Moreover, the technological factor has hardly influence in this area of chemical production, where the innovations are leading force. In addition, the main mission of the company is to create chemistry for the sustainable future. Consequently, BASF Company has a lot of strategic methods to achieve its goals.

This report has some objectives. To start, one of the main objectives of the report is to analyze BASF Company. To show the strengths and opportunities of the company`s future development. On the other hand, this report presents the weaknesses and threats of the company, for which it gives advice to make BASF more successful. In other words, this report aims to gives advice to BASF Company how to improve its internal and external situation.

The following information was collected for this report. For collecting of information were used two main research methodologies. First, secondary research was done on micro and macro environment of BASF Company, for which the main source was used internet. Second, the primary research was done by conducting an interview with Mrs. Sengel, who is member of Executive Board of the company.

The report has the fallowing structure. In chapter two, BASF Company and its product line are shown. In chapter three, the project`s description and aim are explained. Chapter four of the report is the Theoretical Framework of the report, in which the McKinsey`s seven S model, PEST analysis and SWOT analysis are theoretically described. In chapter five and six, PEST analysis and McKinsey`s seven S model are attached to collected information. PEST analysis is used to analyze BASF`s eternal environment, while the McKinsey`s model is used to analyze BASF`s internal organization. In chapter seven, is shown SWOT analysis based on the collected information. In chapter eight the conclusions based on the analyses are drawn. In chapter nine, recommendations for company improvement are given. In chapter ten, this report is critically appraised.

2. Company description

2.1 General Company Information

Here is general information about BASF Company. BASF is the leading chemical company, which chemicals are used in almost all industries. The production of the company is separate in six different segments: Chemicals, Plastics, Performance Products, Functional Solution, Agricultural Solution and Oil & Gas. BASF like an International company has 70 global and regional business units around the world. The department in Germany is thoroughly oriented in produce of Performance Products. BASF combine economic success, social responsibility and environment protection. The main mission of the company is to create chemistry for a sustainable future. BASF’s 111, 141 employees, located all over the world, help the company to achieve its goals. BASF is market oriented in four main areas: Europe, North America, South America and Asia. In 2011, the most sales are made in Europe and company`s annual turnover amounted to 73, 5 billion Euros.

2.2 Product Description

Germany`s department of BSAF has a broad range of products. The main segment is called Performance Products, which includes the fallowing product lines: Dispersions and Pigments, Care Chemicals, Nutrition and Health, Paper Chemicals and Performance Chemicals. The product portfolio of the company in this segment includes vitamins and foods additives, ingredients for pharmaceuticals and for hygiene, home and personal care items. Examples are products for hair care, sun and decorative care, body care, facial and oral care. The company does not offer products to the final client. BASF develop and sale molecules, catalysts and ingredients to the other companies which use this things for manufactures of products for final client. These things are not end- product; they are intermediate products which go to other steps of the production process.

3. Project description

This chapter will give project description. The chapter will be separate in tree sub chapters, which will describe project description, project aim and research approach.

3.1 Project description

This sub chapter will show the project description. To start, BASF is one of the leading chemical companies on the world market. In this market there is a big competition. Firstly, the future opportunity for the company is to create new products. Secondly, to find new market`s possibilities. Thirdly, one of the most important things in this branch is innovation. On the whole, to achieve its goals, BASF have to understand its own strengths and weaknesses.

3.2. Project aim

The purpose of this sub chapter is to explain the project aim. For this project was collected information about external and internal environment of BASF Company. The aim of this project is to understand the company`s situation based on McKinsey 7S analysis, PEST and SWOT analysis and based on it to give recommendations about BASF`s future development. Furthermore, to show BASF`s strengths, weaknesses, opportunities and threats. In other words, these are most important factors which describe present situation and future possibilities for one organization.

3.3 Research approach

To start, for analysis of BASF Company`s present situation are used two research methods. First, the primary research was done by conducting an interview with Mrs. Sengel, who is member of Executive Board of the company. This information is used for internal analysis of the company. Second, the external environment is analyzed by secondary research method. This includes McKinsey 7S analysis and PEST analysis. Thirdly, the strengths, weaknesses, opportunities and threats are described with use of SWOT analysis. In conclusion, all of collected information is used to give recommendations of the company, about its future development.

*The world can be seen in the Glossary

4. Theoretical framework

The purpose of chapter four is to show the theoretical framework of internal and external analysis. Hence, the real company’s situation will be shown. First, in sub-chapter 4.1 will be shown the internal analysis- McKinsey 7S model. The model include seven elements, which are separated in so called hard S`s – Strategy, Structure and Systems and four so called soft S`s – Shared Values, Skills, Staff and Style. Second, in 4.2 will be discusse the external PEST analysis. In other words, Political, Economic, Socio-cultural and Technological factors that influence the company will be include. Finally, in 4.3 SWOT- overview of the company will be given.

4.1 Internal analysis

Figure 1: McKinsey 7S model

7S.gif

Source: 7S strategy software

In this paragraph will be shown the so called hard S`s of McKinsey 7S model. Firstly, Strategy describes actions and plans of an organization to achieve specific goals. The external environment influences the company and its strategy. Thus the enterprise prepares to adapt on changes and to determine the right place among customer and competitors. Secondly, Structure describes the hierarchy of the company. It shows the relationships between the people which work in the organization. It can be seen on the organization chart. It always depends from the business strategy, form the business internationalization, size and diversity. The third “S” from so called hard S’s is Systems. Systems are all procedures which company uses to operate every day. This includes internal and external procedures. Systems are directly related to the Structure and Strategy of the company, because they describe the main practices of the organization to achieve its goals (Cuypers 2010, 3-9).

The soft “S” from McKinsey 7S model, which will be given in this paragraph includes – Shared Values, Skills, Staff and Style. Peters and Waterman’s (1984) argued that shared Values in 7S analysis determine the core guiding principles of the company. Moreover, it refers to what an organization stands for and believes in. Understanding the Shared Values of the company is the easiest way to find the main ideas and goals of the enterprise. To achieve these goals helps Skills. Skills are the unique abilities of the company. Skills describe the capacity and quality of the company in contrast with the competitors. It refers to the learned capability of staff within the company. Very important here is quality of the products and services within the organization. These things are related with the Staff and Style of the company. Staff refers to the number and type of people employed by the company. However, staff describes the processes used to manage the careers of employees. It is related to the Style, because it is directly dependent on the human resource’s system that manage the way staff is encourage, reward and motivate. Style is the work culture. It is describe the main way in which senior managers run the organization. It is related to the system that influences the procedures in the company. The most important things that style describes are how managers allocated their time, beliefs and their leadership skills. The main factors are the size and the structure of the organization which determines how different departments inside of the company are managed (Spencer, 2011).

4.2 External analysis

In the first place, every organization depends on the political factors. Political factors include government regulations and legal issues. The political factors define the structure of the company and the rules under which the company must operated. It depends on the structure, because in the different countries the trade restrictions, tariffs, tax policy and employment laws are not the same (Oxford University Press, 2004).

The second factor which directly influences every kind of company or organisation is the economic factor. The economic environment consist different factors, for example income and income distribution, current and project economic growth, inflation and interest rate. This environment can offer to the company both opportunities and threats. Understanding of economic environment determined the company development (Oxford University Press, 2004).

Thirdly, the company is influenced by social factors. This lifestyle trends and demographic changes determined the consumer behavior. The main purpose of every company is to understand which exactly are the consumer’s wants and needs. If social-cultural changes are clear, it is easier for the company to developing strategies and practices to achieve its goals (Oxford University Press, 2004).

Finally, in these days, one of most important factors which influence the company is technological environment. This is the most dramatic and the fastest development factor. These are forces that create new technologies, products and market opportunities. In the world of technology, the company has to be open and prepare for new opportunities (Oxford University Press, 2004).

4.3 SWOT

According to Berry, the SWOT analysis is an extremely useful tool for understanding and decision-making for all sorts of situations in business and organizations. SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats (Berry, 2012).

Strengths are internal capabilities that may help the company to reach its objectives; in contrast weaknesses may interfere for that. This includes understanding of the internal environment or the situation inside of the company or organisation. The factors which determined the straightness and weaknesses of the company are tend to be in the present. Factors are relating to products, pricing, quality, staff and processes within the company. With understanding of these factors the company may understand the unique selling proposition and how to improve it (Berry, 2012).

Opportunities and threats are related with the external environment which shows the situation outside of the company or organisation. Here, the factors tend have to be in future. Factors here are relating with markets opportunities – fashions, trends, seasonability, politics, society, competitors and every other external factor which influence the company. With understanding of opportunities company is able to exploit the external factors to its advantage. Threats are negative factors that may challenge the company`s performance (Berry, 2012).

5. External analysis

This chapter explains the external environment analysis – PEST. The chapter is divided into four sub charters. Firstly, sub chapter 5.1 will give the Political factors, which influence the BASF Company. Secondly, 5.2 illustrate Economic factors. Thirdly, 5.3 show Social factors. Finally, sub chapter 5.4 analyzes Technological factors which influence the company.

5.1 Political factors

There are some political factors, which influence BASF Chemical Company. One of these factors is a common initiative for a sustainable chemicals industry has launched by European Union in 2005 year. This factor has a positive effect on BASF, because the mission of the company is to create chemicals for sustainable future. This political factor gives opportunity to the company to make more innovations with collaboration on European Union. The negative political factor for the company is unfavorable political environment. In European Union there are different laws and regulations about Genno- modified products and some molecule products. For these reason USA is more favorable market for these kinds of products (Thomas, 2005).

5.2 Economical factors

One of the results from present credit crisis is reduced consumption of customers. This is strong factor, which influence BASF Company. It makes the future more unstable and precariously. Only the best companies with the best products could keep their market`s place. The second economic factor which influences BASF is increasing energy prices. It is negative because it could damage chemicals industry competitiveness further. On the other hand, there is increasing competition from new economic powers, such as China. To avoid these negative factors, BASF Company could orientate to different markets, such as Africa and Middle East (Thomas, 2005).

5.3 Social factors

In chemical`s industry is very complicated to find new well educated faces. The reason is the fact that young people choose other careers in different branch. Young talents in chemical`s branch, which are well educated require very high remuneration and good working conditions. BASF Company is working to improve matters. Flexible working time is one of decisions of the problem. On this way could be attached qualified labour (Thomas, 2005).

5.4 Technological factors

For BASF Company the technological innovations are very important. The main reason is that technological innovations gives opportunity to the company to make products better, and to add new products in company`s portfolio. The company is focus of solutions for sustainable future, and definitely innovations are the key point for it. At all, the global technology platforms act as partners in product development (Thomas, 2005).

6. Internal analysis

6.1 McKinsey seven S framework

To start, for BASF like as world`s leading chemistry company is very important to strengthen its position on the market. To achieve this goal, company has to focus their business on customer`s needs and demands. In chemistry market, and for company, which do not produce product for the final consumer is required to focus on innovation, to create new products and functionalized materials, and to find new solutions for more sustainable future. These things are very important too, for the other aim of the company, which is to increase year`s profit with average four percent per year, and to grow two percentage points faster than global chemical production (Interview, Appendix 1) (BASF, 2012).

The structure of BASF Company is a Matrix structure. The Matrix organizational structure divides authority both by functional area and project area. In BASF there is Board of Executive Directors which consist eight members. They are responsible for the management of the company. The Board of Executive Directors regularly reports to The Supervisory Board. Supervisory Board consist 12 members, six shareholders representative elected by the Annual meeting and six members appointed by the representative body of the employees. Every country and every different department in BASF Company has a chief, who are supervise from the Chairman of the management board – Kurt Bock (Interview, Appendix 1) (BASF, 2012).

The company systems are very important for the business and for good done work. BASF has an own marketing department in every country where the company is located. In addition, they have supporting marketing agency outside the company, which helps them to develop the motives and the way BASF wants to present itself to the customers. Like a chemicals company, BASF use only trait media for advertising – home personal care magazines or euro- cosmetic magazine, which are special magazines for cosmetic market. To exist and to be successful a big company like BASF is necessary to have fixed rules and good communication between different departments. Primary method within the company to discuss the problems and development in the market are manager`s meetings. The complicated structure of the company determined the need from daily meetings of the leader figures in the organization, much that the other companies (Interview, Appendix 1) (BASF, 2012).

One of BASF`s goals is to make rules and system more common in the different countries. The leader style in the company allows to employees to share their ideas about innovations. Every idea on issue placed by some of employees is consider, but the main decision is always taken by The Supervisory Board. In the same time, the management style is people oriented, one of the most important things for the company is to understand consumer needs, and to create values for them (Interview, Appendix 1) (BASF, 2012).

BASF is company with almost 200 000 employees. Every day in Germany for BASF works 54 000 employees. They work in different departments but the responsibility for their work is taken by managers of every department. There are a lot of frameworks and guides which are coming from the central department, and which are common for every employee. The employees have to respect the rules and framework given by the main department. Rewards and warnings in the company depend from Human Resource Department. There is not something special within the company, they fallow the legal system. Every employee has a set of target which is called “employee dialogue”. This makes management style in the company open for ideas from employees. “Employee dialogue” gives opportunity to employees to talk about the goals which they are achieving in the year and to share new ideas. The incentive system in the company is connected with reward as money bonuses for well done job (Interview, Appendix 1) (BASF, 2012).

BASF Company, as company which do not produce product for the final customers, it is very important to makes products better, healthier and safer than competitors. The reason is that the end consumer never seen and could not understand that BASF Company is better than competitors, and cannot contrast them. The most important thing for the company are innovations, this is the only way that company can be unique and distinctive from competitors. The Company spending a lot of money every year to make research, which helps to find new opportunities for development. In the same time, the company makes everything possible to have products which are already developed and to make them successful on the market. The main question for BASF is to understand better than competitors what are exactly consumer`s needs and to be ready to satisfy these needs on time (Interview, Appendix 1) (BASF, 2012).

The core value of BASF is to create chemistry for sustainable future. To achieve its goals BASF tries to be a company with innovative products, intelligent solution of problems and good service departments. The company strives to be the world most widespread supplier in the chemical industry and to generate high return of its assets. It wants to reach these intentions without harming the environment and nature (Interview, Appendix 1) (BASF, 2012).

6.2 Interconnection of the seven S

To start, for BASF like as world`s leading chemistry company is very important to strengthen its position on the market. For achieve its goal for the Company is necessary to make its products better than competition and to has high quality of its services. For this helps The Matrix organisational structure and the management style of BASF, which is people oriented – oriented to understand customer’s needs. The company is focus on innovations and every decision for a new idea is taken by The Supervisory Board. For the company`s success is important to have good communication between the different departments and to have fixed rules. In BASF this is achieve with regular meetings of The Board of Executive Directors.

The company strives to be the world most widespread supplier in the chemical industry and to generate high return of its assets. For these goals, company has to employ highly qualified staff. Moreover, the leader system of the company is focuses to encourage the employees to share their new ideas. For this, the company use so called “Employee dialogue”. On the other hand, the company has to invest in researches. The R&D department is responsible to find new market opportunities for BASF.

The main mission of BASF is to create chemicals for sustainable future. For this goal helps the good organisation structure, cooperation between departments. On the other hand, very important are employees and the way they are managed. Very important are innovations and the style of the company. All of these things determined the current situation of the company and its future position and development of the market.

7. SWOT overview

First, BASF Company is one of the leading chemicals company in the world. This factor gives chance to the company, to manage the big part of the market and to have hard influence on smaller chemicals companies. Moreover, as so international and big company BASF has a lot of production sides around the world. One of the company`s strengths are production sides, so called Verbund sides. These sides have really good conglomerates of the production. This conglomeration allows, every kind of product produced within the company, to be used in the most efficient way. Different materials produced in one department of the company, can be used in another one, which means that the BASF Company produce raw materials which use in its own production. Besides, this allows to the company, to produce a lot of different materials and products, to make innovations in this sector and to create more value for the customers than competitors (YouSigma 2011).

Second, BASF Company has a huge profit in the last year. Nevertheless, in the last few years is observed declining earnings in several business segments, which is one of the company`s weakness. There are several reasons about this fact. The firs reason, is one of the company threats, is the Economic slowdown in the European Union Region, which is due of the present credit crisis. The credit crisis in these days covers and influence, both small and in the same way huge companies like BASF. The other reason is that people in European Union have possibility to choose between hundred different products. Here the competition is really strong and the market in Europe is developed till maximum. One of company opportunities is to rising commodity chemicals market in regions like Africa, Asia Pacific and Middle East. These are the growth regions of the future, for almost every kind of industry, because the growth rate of profit in future in European countries would not be so high. The other opportunity for the company is always to develop new products and new ideas (YouSigma 2011).

Figure 2: SWOT analysis table

Location of factor

Favorable

Unfavorable

Internal

Strengths

Leading chemical company

Concept of Verbund

Variety of products

Weaknesses

Decrease earning in some countries

Less expenditure for R&D

External

Opportunities

Product innovations

Expand the business in Africa, Asia and Middle East

Threats

Laws and regulations

Economic slowdown in European Union

8. Conclusion

BASF is international company, which is leader in chemical market. The company production is separated in six different departments and its market is oriented in f