New chemical manufacturer must develop world-class capabilities

For new chemical manufacturer, whether in countries with abundant raw materials or in emerging markets with high growth and low labor costs, their entry into the market is based on production, making use of their advantages of low cost basis to gain a foothold in the export market on the basis of price. This is a logical approach and a natural entry point. However, it often leads to the commercialization of the market and the strict attention to the lowest price. Therefore, it may destroy many values existing in the market, whether for new entrants or existing participants.

There are countless examples of new low-cost chemical manufacturer lowering their prices below the level sufficient to ensure their foothold in developed markets, with a wide range of products, such as polyethylene terephthalate and fluorochemicals. Similarly, Chinese specialty chemicals are often sold to developed markets in North America and Europe through third parties according to specifications, which means that Chinese manufacturers are isolated from customers and have limited insight into market dynamics.

As new players emerge in the industry, they have to develop capabilities to sustain growth and look more ambitiously at the image they want to create. As a first step, they must build their own R & D and innovation capabilities, which will enable them to provide differentiated products and reduce their dependence on existing technologies.

Second, new producers must start to build up marketing capabilities so that they can go beyond simple low price sales and get all the economic benefits from their products. They have to develop expertise in areas such as differentiated marketing, transaction pricing and value pricing, and salesperson management. This is the common demand of all new chemical manufacturer, whether they are producing for export or to meet the soaring demand in the domestic market.

Developing these capabilities will help new chemical manufacturer get better returns from their existing product lines and avoid wasting money by selling products at unnecessarily low prices. As new producers expand their portfolios to more complex, higher value-added products, they want to extract the maximum value from them, which will become more urgent.

To become a global supplier, it is necessary for new manufacturers to establish mature marketing and sales capabilities in developed markets to support such products. Many of these products will require a completely different type of sales approach - one that can handle product approval registrations, closely link with customer product development plans, and obtain the products specified in those plans.

Third, all of the above initiatives related to the establishment of global market presence require newcomers to take measures to establish international businesses and, most importantly, to establish management skills to successfully run these businesses. Whether these businesses are established through acquisition or from scratch, setting up and operating subsidiaries overseas is a new challenge for the senior management team of these companies.