PRIORITY INDUSTRY SECTOR ON Chemical Industry
Africa’s chemical industry is undergoing dynamic change, with a range of external factors presenting industry executives with vastly divergent challenges. As such, running a pan Africa chemical company has never presented so many opportunities and challenges. The following are five (5) strategic platforms for development:Africa’s chemical industry is undergoing dynamic change, with a range of external factors presenting industry executives with vastly divergent challenges. As such, running a pan Africa chemical company has never presented so many opportunities and challenges. The following are five (5) strategic platforms for development:
1. Capture growth from emerging markets – increase the pace of developing emerging market footprints to capture long-term growth and the emerging customer base. There is a need to be creative and look beyond China. A portfolio approach to capture the benefits and offset the risks inherent in different markets comes from balancing geographic expansion.
2. Optimize the portfolio – take a more disciplined approach to identify business units and segments which will not be competitive in the long-term; or which do not fit with the wider business strategy. In particular, remove the history and sentiment attached to legacy businesses, which often results in chemical companies holding onto areas which are no longer optimal in terms of maximizing shareholder value or no longer fit the strategy.
3. Build financial strength – many of the good things the industry was doing in 2008 onwards have stopped. Supply chains have become bloated, buffers have been built in inventory and discipline around receivables collection has weakened.
4. Reduce business model complexity – build leaner, more efficient business models which are more readily able to adapt to change. The chemical industry has become proficient at building structure and process and heavily integrating these structures resulting in reduced flexibility – adding layers of costs and functions which confuse the picture of underlying business performance, making it difficult for management to make optimal decisions and subsequently, make it difficult to deliver change.
5. Focus innovation to drive price and margin – among the wider manufacturing industry, the chemical industry is a clear leader when it comes to customer centric innovation and new product development. For established market companies, we won’t pretend to offer anything new here – just a reminder to continue to focus on this as a core competency for long-term success. For emerging market companies, the pace of development of specialty chemical business units have been slow, such that many are now closer to the heralded movement of downstream than they were five years ago, while opportunities continue to pass them by. Basic chemistry is much maligned but as part of a fundamental GDP building block than it offers a platform to foster development.
Each of these is based around existing chemical industry core competency, but there is a clear need for renewed focus and increased pace of change. It is not enough to do one or two of these well. A successful strategy in today’s world requires all aspects to be performed equally well, at the same time, often at different paces in different regions of the world. The time for change is now. In our view, those who wait and react will fall behind those who embrace the changing dynamics.