I am the business manager of the Performance Chemicals division ($500million) of a Speciality Chemicals Company ($14billion). Our CEO wants us to become the fastest growing (moving from 4-5% growth to 10-15% growth) speciality chemicals company and has therefore asked all the divisions to present growth strategies to him. I would like you to advice us as we do not believe that there is significant untapped potential in the markets served by our division.
The case is designed to be presented to the candidate by an interviewer, who plays the role of the business manager of the Performance Chemicals division of a Speciality Chemicals Company.
Paragraphs highlighted in blue can be verbally communicated to the interviewee.
Paragraphs highlighted in orange indicate hints for you how to guide the interviewee through the case.
The interviewee should perform a back-of-envelope analysis which answers the key question - 'Whether or not the Performance Chemicals division can grow at a 10%+ per annum rate'; and recommend potential growth strategies for the business unit.
Wait for the interviewee to ask questions regarding the background of the case. A few sample questions are shown below. You could use them to help the interviewee with information, if he's stuck.
1. Understanding the market: At what rate do we expect the business unit to grow?
Interviewer’s answer: We have been growing at 4-5% for the last 4 years. The average growth rate of the market served is also the same.
2. What kind of products are sold by the division?
Flourine compounds, sodium chemicals and conditioning solutions
3. Understanding the competition: How is the competitive environment?
All products are being threatened by competition as the intellectual property protection is limited. We will have to look for new product strategies as commoditization and pricing pressures are constraining our growth. Moreover we are exposed to trends such outsourcing, solutions vs products, product-service bundles, etc.
4. Understanding feasibility: Are there any cultural hindrances to growth?
We have always focused on selling products and never seeked for new growth ideas. The business thinking can be described from our quote, "We make it by the ton and sell it by the carload”.
Key question: What kind of growth strategies could help the division grow at a faster rate?
It is clear that the company has to look beyond traditional product strategy to generate the demanded growth.
The company should look at
- Product enhancements or product-service bundling
- Outsource services which are non-core to the firm
- Look for new markets for the existing technological capabilities
- New distribution channels
Alternatively, the following strategies could also be considered:
- Sell a solution not a product (Example product-service bundling)
- Become indispensable to strategic customers
- Consider developing new products in order to become a one-stop shop for specialty chemicals
- Provide extra services to the customers such as a vendor managed inventory system
III. Concluding Observations
The company should look at strategies such as product enhancements or product-service bundling, outsourcing non-core activities and new markets for the existing technological capabilities.
- What could be a pragmatic roadmap to develop such a growth strategy?
- How would you quantify each strategy measure?