Future of chemicals VII: How China can leapfrog the industry development cycle

August 16, 2012

Executive summary

The global chemical industry is in the midst of an upheaval, driven by the convergence of political, demographic, and environmental forces. As established companies struggle to adapt within the existing industry structure, an opportunity has arisen for new competitors. Key among them are the fast-growing chemical companies in Asia and the Middle East; China, in particular, has emerged as a leader among developing economies. Chinese chemical companies have traditionally focused on the rapidly growing and diversifying demand at home, gradually moving down the value chain into higher-margin products. But today, some leading Chinese players are looking beyond their domestic market.

As they do, Chinese companies will confront hurdles that could impede further expansion. Western companies have also faced obstacles to growth over the years and, in response, have made a series of improvements in areas such as supply chain management, manufacturing, research and development, and customer engagement. For example, they introduced the “natural supply chain” to leverage and scale common supply chain elements across the enterprise when market requirements permit, they implemented lean processes to optimize manufacturing costs, they realigned their R&D efforts to enable them to respond more swiftly to market changes and short-term opportunities, and they segmented their customer base to improve interactions and better meet customers’ needs.

These and other productivity improvements can serve as a launchpad for Chinese companies seeking to increase their competitive edge. By leveraging some of the best practices established in the West, Chinese chemical companies have an opportunity not only to surmount obstacles in the current turbulent market landscape, but potentially to leapfrog more established competitors.

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Future of chemicals VII: How China can leapfrog the industry development cycle