Accelerating globalization, high raw material and oil and gas prices, growing competition from Asian players, and increasing merger and acquisition activity are driving change in the chemical industry. Drawn by a strong market potential for chemicals, traditional players are moving into Asia, especially to China, while new Asian entrants are experiencing strong growth rates. The Middle East and Russia,with their cost-efficient natural reserves and abundance of feedstock, are becoming more attractive to petrochemicals, basic chemicals, and polymers. The challenges chemical companies face in these high-growth regions not only are different from the challenges in traditional markets, but also vary at different points along the chemical industry value chain.
In traditional Western markets, margins are eroding, in particular because of continuous price pressure, dwindling demand growth, and the lack of "real" innovation. As a result, chemical companies must develop new strategies to increase profitability and take advantage of opportunities in high-growth markets and regions, including differentiating their product and service offerings, revamping their marketing and pricing strategies, and reducing even further their direct and indirect costs. In addition, mergers and acquisitions are regaining importance as a way for chemical companies to optimize their business portfolio and increase market share. Private equity investors are playing an important role in consolidating the market and reshaping the chemical industry by pursuing buy-and-build strategies, thereby establishing focused players in discrete segments of the value chain.
In Asia, the Middle East, and Russia,established and new, often nontraditional, chemical players are seeking growth strategies to leverage market opportunities. Increasingly, they are focusing on efficiency enhancements to optimize the benefit from demand growth and to proactively mitigate margin pressure from rising costs.
Across all regions, chemical companies have to cope with increasing raw material and energy costs triggered by rising oil and natural gas prices. Thus they seek new and innovative solutions in sourcing as well as in marketing and sales.
Drawing on deep understanding of industry dynamics, extensive experience along the entire chemical value chain, and broad functional capabilities, PwC's Strategy& delivers comprehensive support to the chemical industry. Our global capabilities are equally effective in delivering lasting results in North America, Europe, Asia, the Middle East, and Russia. Working side by side with our clients, we assist with strategy development and execution, transaction support, operational excellence and efficiency enhancement, and innovation management.