COVID-19 Impact Analysis on The Livestock Insecticide Market in NAFTA Countries (1)
Even though China’s specialty chemical market has nearly doubled in size over the last decade, not many international specialty chemical companies have been successful in fulfilling their growth and profitability aspirations from this market. Foreign companies in the sector are facing major setbacks in terms of growth and market share in China. Our market research experts suggest that margins in specialty chemicals in China market for international companies are structurally lower than in other regions and also show wide variance between leaders and laggards. The highly fragmented specialty chemicals market in the region is dominated by overcapacity and intense competition. Although some argue that the lower margins are a part of their global strategy to capture growth in China and establish a long-term presence in the country, there are evident signs that international companies are failing to keep up with the market’s growth.
Considering the fact that China’s specialty chemical market is witnessing steady growth, international specialty chemical companies operating in China must rethink their existing approach and strategies to avoid getting left behind.
Identifying the problem areas for specialty chemical companies in China
The performance shortfalls of international specialty chemical companies in China are fueled by a number of factors. This includes:
- Insufficient tailoring of products to suit the Chinese market and counter offerings of Chinese competitors
- Western companies have limited access to important potential customers (SOEs and fast-growing private organizations in second and third-tier cities)
- Lack of in-depth market insight, insufficient relationship-building capabilities, and a lesser number of entrepreneurial Chinese top talent in key company positions
- Increasing number of local Chinese competitors that are able to offer products and compete for high-end segments
- Highly effective and entrepreneurial incentive structures by aggressive private entrepreneurs demonstrating capabilities to make investments at lower rates of capital expenditure
- Rapid adoption of western technical-know-how and technologies by Chinese competitors, making it easier for them to offer highly competitive products
Infiniti’s market entry strategy has helped several global companies enter and establish themselves successfully in foreign markets. Planning to venture into new territory? Request a free proposal to know how our solutions can help your business.
How international specialty chemical companies can rethink their market strategy
International specialty chemical companies operating in China can learn from their past mistakes and strategize to reengineer their operations to thrive long-term in the country. Correctly positioning themselves in the market will prove crucial for specialty chemical companies over the next decade. Experts at Infiniti Research has listed below some steps that companies must consider making a part of their approach.
Build market and segment level insights
Specialty chemical companies must take into consideration China’s growth trajectory while evaluating specific segments for its growth potential in the country. Experts at Infiniti Research suggest that specialty chemical companies must consider adopting a granular approach that considers regional differences when assessing various specialty-chemical segments. Careful assessment of second and third-tier cities may also show signs of higher growth potential in the years to come.
Develop products tailored to the Chinese market
Designing products to meet the demands of Chinese customers at competitive price points is crucial to success for international specialty chemical companies in the long run. Providing more sophisticated products to Chinese customers would be crucial as local competitors are increasingly adopting western technologies to develop new and improved products. Specialty chemical companies must provide their local teams in China with maximum resource support and operational authority to launch products that are tailored to Chinese consumers.
Learn from past investment mistakes
Making the Chinese market a central part of your company’s long-term growth strategy and investment plans is pivotal in bringing success to your business operations in China. Prioritize on long-term goals and analyze the track record of international specialty chemical companies in China to learn from their previous errors.
Want more insights into our portfolio of market intelligence services?
The global chemical industry currently represents one of the largest worldwide interacting sectors delivering essential materials to several major industries including pharmaceuticals, agriculture, manufacturing and construction, and automotive. This is an indicator of the fact that any major changes in the chemical industry could also significantly affect these related sectors. Procurement is an unceasing challenge for companies across various sectors, and procurement in the chemical industry is no exception. In fact, procurement challenges are particularly pronounced for chemical sector companies. Implementing sustainable solutions is the way forward for CPOs in chemical companies to effectively meet critical procurement challenges.
Based on insights gathered from our industry experts, we have listed below some of the top procurement challenges faced by CPOs in the chemical industry.
Competition is extremely fierce in the global chemical industry. Although the chemical sector offers immense potential, it also poses significant procurement-related operational challenges for players in this sector. Suppliers may find it difficult to distinguish themselves amidst the cost pressures and increasingly complex organizational relationships. Furthermore, shortened value chains arising due to vertical integration and portfolio consolidation also builds new risks for purchasers in the chemical industry.
Maintaining compliant, efficient, and effective processes that drive growth is paramount for success in the chemical industry. Ensuring supplier excellence is the key to achieving this. It can be done through robust sourcing and vendor evaluation processes. Another key challenge that most CPOs face in the chemical industry is the lack of skilled workforce, capabilities, and localization that would act as a high-performing business partner. The success of procurement in chemical companies are also weighed down by the absence of a concise digital strategy or systems to support procurement business targets.
How Infiniti’s procurement market intelligence can help CPOs combat these challenges
Creating a competitive advantage by overcoming critical procurement challenges in the chemical industry requires clear insights into the market changes and effective strategies on how the company can adapt. Here’s what Infiniti Research provides for procurement officers:
Category market intelligence
With advanced market intelligence techniques, experts at Infiniti Research help CPOs and other key decision makers in chemical organizations to analyze and understand best practices for category-specific strategies and sourcing of chemical ingredients as well as raw materials. Our techniques can also support companies in the chemical industry with in-depth market knowledge and price benchmarks to create a competitive edge over other market players.
Demand planning and management
Infiniti’s demand planning and management solutions help procurement in chemical companies by providing critical insights on cross-functional optimization strategies and also pin-pointing capabilities to identify key cost-saving opportunities for companies in the chemical industry.
Supplier risk management strategies
Our team of experienced risk-management experts offer specific supplier management and evaluation insights that help organizations in the chemical industry explore various supplier-related risks and improve their decision-making process during supplier selection. We also help chemical companies for undertaking specific supplier assessments.
Industry best practices and competitive benchmarking
Leveraging new business processes, organizational approaches, and technologies are now becoming imperative for chemical companies to stay ahead of their peers in the market. As attempting to improve all aspects of the business processes at once could prove to be unfruitful, chemical companies can leverage solutions such as industry best practices assessment to benchmark and implement the best practices for sourcing and product development. Our solutions can help companies to improve time to market, reduce costs, and respond appropriately to new product or service launches.
Although China’s chemical industry growth has receded, the region continues to remain the most profitable for most global chemical companies. The colossal size of the chemical industry in China should not be blindly associated with the sector’s stability. The industry is in the midst of a profound rapid transformation due to stringent investment pools, stricter environmental laws by the government, and changing consumer-demand trends. Furthermore, increasing economic turbulence in the region since mid-2018, related to China’s economic slowdown and the turbulent US–China trade relations, adds new uncertainties in the chemical market dynamics.
China’s economy is currently moving to a new era of development. After the headlong market expansion in the early 2000s, the chemical market is now focused on consolidated and selective growth. As overcapacity in one of the existing challenges faced, companies looking to make fresh investments in the chemical industry are faced with a more selective appraisal from the Chinese authorities. Moreover, intensifying competition from the local Chinese chemical market companies who are at advantage due to their lower production costs compared with imports and their greater ease in establishing relationships with key customers poses greater challenges for international chemical companies in China. As critical changes are underway in the chemical market in China, players will have to adopt a new set of strategies to survive and ensure continued growth.
Attaining profitable growth in China’s chemical market
Prioritize products matching domestic requirements
China’s growth prospects in the future of chemical industry cannot be denied, but the changing chemical market dynamics make market opportunities more nuanced for international companies. This means that international chemical companies need to learn to adapt. One approach to achieve this is to focus on products that match the domestic needs and that the Chinese state is promoting. Chemicals are crucial enablers for strategic growth in industries that China prioritized to gain a major market at a global scale. This includes sectors such as electric vehicles, new energy technologies, and civil aviation among others. International chemical companies must aim to become China’s trusted partners in their innovation plans to bridge technological gaps and set environmental standards in sectors that have a major government backing.
Proactive stakeholder management
International companies that seek to establish their business in China’s chemical industry will need extensive approvals and support from several stakeholders both across the regulatory as well as the business landscape. Ergo, effective stakeholder management becomes vitals especially in the case of building new plants and new product introductions, especially in the regulated products category. As China currently does not have a process to legitimize the proposed chemical industry investments in a community, the concerns of environmentalists and local communities can only be addressed through hands-on stakeholder management. International companies operating in China’s chemical industry have already set up dedicated teams to identify and manage all the key stakeholders affecting their business.
Re-engineering the existing go-to-market strategies
China’s business landscape is highly relationship driven. So, having a local presence in the country becomes important to capture value from new market opportunities. Companies must seek to establish a tailored distribution approach. Appropriate distribution partner network enables international players in the chemical industry to get closer to customers and also differentiate their products in the increasingly competitive chemical market in China.
Building strategic M&A partnerships
M&A partnerships are the strategic approach to grow more quickly and extensively in the chemical industry in China. This will enable chemical companies to gain organic growth through increased market access and also fill product or technology gaps. Several dynamic mid-sized chemical companies have emerged in China over the recent years. This could present attractive acquisition opportunities for international chemical companies. A dedicated business development team in China can help international players in the chemical industry better meet these motives.
Chemical Market Outlook
As the chemical industry contributes to every manufactured product in one way or the other, the industry is poised to witness positive growth. Despite the positive outlook, the companies in the chemical industry still encounter several severe challenges. Some of them include the volatility of raw material cost, the increasing number of recalls and quality audits, and the competition from new market entrants. In order to succeed, chemical companies will need to address these challenges and harness untapped market potential. This is where companies realize the importance of leveraging chemical market intelligence solution.
The client is a chemical company based out of San Francisco. The client wanted to understand the prevailing market dynamics in the European chemical sector to devise an informed expansion strategy. Also, the client wanted to gain detailed market insights, identify the best route-to-market, and analyze the competitive landscape. To do so, the client approached the experts at Infiniti Research to leverage their expertise in offering chemical market intelligence solution.
With Infiniti’s chemical market intelligence solution, the client also wanted to:
Adapt to unexpected market changes
The increasing volatility in raw material cost, exchange rates, and tariffs created a dynamic environment in the European chemical market. With the aid of Infiniti’s chemical market intelligence engagement, the client wanted to understand the demand and sales potential for their chemical products in the Europe. Also, they wanted to stay abreast with all market changes and adapt to all the unexpected transformations.
Incorporate new technological innovations
The client noted that various technologies such as IoT and Industry 4.0 are highly transforming the operations and processes of chemical companies in Europe. With Infiniti’s chemical market intelligence, they needed to identify technological innovations and trends in the European chemical market. In addition, with Infiniti’s chemical market intelligence, they also wanted to streamline their operations to reduce overhead expenses.
As a part of the chemical market intelligence engagement, the experts at Infiniti Research conducted a market opportunity assessment. This phase of the chemical market intelligence engagement helped the client to evaluate the prevailing market dynamics of the European chemical industry, European chemical market size, and chemical market growth rate. Also, the client was able to evaluate the potential demand for chemical products in the Europe.
The chemical market segmentation approach conducted as a part of the chemical market intelligence engagement helped the client to segment their target customer groups and devise personalized strategies to attract them.
Also, the trend analysis engagement conducted as a part of the chemical market intelligence engagement helped the client to identify chemical market trends and latest innovations. In addition, with Infiniti’s chemical market intelligence engagement, the client was able to understand exchange rates and tariffs and efficiently forecast the average sales potential.
Infiniti’s chemical market intelligence engagement supported the client in devising an informed expansion plan. Infiniti’s chemical market intelligence solution helped the company to withstand unexpected fluctuation in the market, enhance inventory planning, and increase reliability across operations. Also, by streamlining their business processes, the client was able to enhance their ROI by 31%.
Market Intelligence Engagement for the Chemical Industry
Intensifying globalization is opening up new opportunities for companies in the chemical industry. However, ambiguity across global chemical markets, pricing pressures, and fluctuating regulatory landscape are increasing challenges for chemical manufacturing companies to stay relevant in the market. As a result, it is becoming imperative for companies in the chemical industry to adapt quickly to evolving market changes and embrace new market opportunities.
The client is a chemical manufacturer based out of Germany. With the landscape of the chemical industry continually changing, the client was facing challenges in quickly adapting to transformations and maintaining a competitive edge. Also, the client’s inability to realign their business operations with evolving chemical market demands impacted their overall profit margins. The company was also losing their market share to their competitors. The client, therefore, realized the need to conduct a market intelligence engagement to track emerging market trends, regional market developments, forecast supply-demand shifts, and keep tabs on target market segments.
Other challenges faced by the chemical manufacturer were:
Chemical industry challenge #1
Unanticipated variations in commodity prices – Unexpected fluctuations in prices of crude oil and natural gas were affecting the company’s production process. This subsequently resulted in huge capital losses for the company. The client, therefore, wanted to stay abreast of rising costs and market trends to sustain a healthy bottom line.
Chemical industry challenge #2
Increasing number of recalls and quality audits – As companies in the chemical industry are exposed to a variety of government and other regulatory compliance, it was becoming important for the client to maintain strict quality management to equip themselves for quality audits. Therefore, with Infiniti’s market intelligence solution, they wanted to keep track of evolving regulatory changes in related service sectors.
Chemical industry challenge #3
Forecast supply-demand shifts – With Infiniti’s market intelligence solution, the client wanted to analyze the regional market developments and market demands to accurately forecast supply-demand shifts. By doing so, the company in the chemical industry wanted to better manage inventory activities.
As part of market intelligence engagement, the experts at Infiniti Research conducted a detailed analysis of the chemical industry in Germany. The factors such as industry growth rate, latest trends and innovations, opportunities, and challenges were taken into consideration during the analysis. Also, the experts analyzed the client’s market size, supply chain requirements, and competitive landscape.
With Infiniti’s market intelligence engagement, the client was able to gain a comprehensive view of the market and their customers. The experts also helped the company in the chemical industry to explore new opportunities in the market. By understanding the needs and requirements of the market, the client was able to take confident capital investment decisions. Also, the chemical manufacturer was able to optimize their product offerings and operate safely and sustainably.
Furthermore, with Infiniti’s market intelligence solution, the company in the chemical industry was able to understand the potential market demand and accurately forecast supply-demand shifts. Also, by keeping track of the changing economic and governmental policies, the company in the chemical industry was able to smoothly undergo quality audits. Also, Infiniti’s market intelligence solution helped the company to withstand unexpected fluctuation in the market, enhance inventory planning, and increase reliability across operations. Within the course of one year, the client was able to reduce operational cost by 20% and achieve savings of $4.8 million.
The Future of the Chemical Industry
With the increasing pressure caused by new entrants in the market, lack of innovation, and diminishing opportunities to differentiate against competitors, the chemical companies are on the verge of disruption. Thus, chemical companies are realizing that, in order to address the next wave of opportunity and enter new markets, they will have to shift from a historic “operations-driven” focus to more agile service-driven businesses. But the question major players in the chemical industry come accross is, how to gain a competitive advantage? Well, this is where a marketing strategy comes into play. A robust marketing strategy is a marketing plan that help businesses keep tabs on target market segments, analyze their target customer, forecast demand-supply shifts, track emerging market trends, regional market developments, and provide insights on the potential impact of changing factors on business segments for gaining a competitive advantage in the market. So, let’s find out how Infiniti’s marketing strategy solution helped a chemical company gain a competitive advantage in the market.
Over the last few years, the global specialty chemicals market has experienced inferior profitability rates within a more competitive environment. With the rising standards of living in many developing countries and swift growth of new technologically advanced financial prudence, the center of gravity of the global chemical industry is shifting. Moreover, as traditional companies are facing increasing pressure from local players and rival producers trying to seize a larger share of the global specialty chemicals market, new market entrants across the globe must find new ways to compete and grow. Additionally, specialty companies are dealing with an ever-increasing array of decisions and in many occasions are attempting to apply methods, processes, and tools that were developed in the era of lesser complexity. Furthermore, the inability to cope with the current complexity is resulting in higher costs, more unforeseen consequences, and lost opportunities for specialty chemicals companies.
- The client: A specialty chemicals market player
The client – is an American chemical, biotechnology, and life science company. The company is headquartered in St. Louis, United States and has operations in over 40 countries. The specialty chemicals producer wanted to understand the market opportunity for marine outboard motor fuel additives in five countries. A market size forecast was needed as part of that strategic assessment. Lack of available data on the specialty chemicals product being investigated was the primary challenge. Additionally, incompatibility between the statistics available and a segmentation that would be meaningful to the specialty chemicals producer also created challenges in terms of how to adapt and utilize the available public domain data.
How Can Market Size Forecasting Help Specialty Chemicals Companies?
Market size forecasting is a key component of any strategic marketing planning. Knowledge of the size of the target market allows businesses to fully assess opportunities and accurately plan their approach and investments – wisely. Market size forecasting also helps specialty chemicals companies find new market niches, operate more efficiently, add values to their data, and minimize risks across geographies.
Summary of our market size analysis solution
The market size forecast experts at Infiniti Research compiled information across a wide array of exclusive sources to help the specialty chemicals producer understand the market opportunity for marine outboard motor fuel additives. The experts also followed a comprehensive research method, which delivered valuable insights on technological advancements, geographical target regions, market requirements, and future enhancement possibilities
The Solution Benefits and the Business Impact
With the help of Infiniti’s market size forecasting engagement, the specialty chemicals company gained insights into the statistics available from relevant boating, marina and shipping associations. This allowed the them to cross-check and verify the total number of registered boats and establish base numbers for outboard motors. Additionally, vital assumptions and ratios relating to how additives are used in different types and sizes of the outboard motor, as well as the typical usage of different types and sizes of the boat during a year were derived to help the client understand the market opportunity for marine outboard motor fuel additives in five countries.
Specialty Chemicals Market Future
Specialty chemical companies across the globe are facing perilous intersections of their own making. Business sectors will have to subsist with managing the unavoidable commoditization process. Companies that first succeed in identifying and analyzing the key components of their product lines and the nature of the businesses they possess will have a major role in shaping up the global specialty chemicals market.
A must-read case study for strategy experts and decision makers looking to develop a deeper understanding of the global specialty chemicals market
- Automobile Industry Intelligence: How a Leading Auto Accessories Manufacturer Gained Business Stability with the Help of Infiniti’s Market Intelligence Engagement
- Customer Intelligence Assessment: Reigniting Business Growth with the Help of Brand Health Assessment for a Leading Media Services Provider