Chemicals Industry Professionals are Extremely Bullish about Emerging Markets

September 18, 2012. Chemical company executives say they expect 38% of their global revenues to come from Emerging Markets by 2017 on average, up from 19% today. BASF expects emerging economies to account for 60% of global chemical production by 2020. The 20 respondents representing the chemical industry in M-Brain (formerly GIA)’s Business Perspectives for Emerging Markets 2012-2017 Report said they are investing in Emerging Markets in order to gain a foot hold in future large markets.

The global chemicals industry may be worth around US$ 2.5 trillion per year, but with relatively flat revenue growth in the EU and the US, companies are looking to rapidly increase their production output in Emerging Markets, particularly in BRIC. Secondary Emerging Markets to target up to 2017, according to chemicals professionals surveyed will be Indonesia, South Africa, Saudi Arabia and Vietnam.

In M-Brain (formerly GIA)’s research, respondents cited distribution and access to customers (50%), localized competitive positioning (35%) and product quality (35%) as key success factors. To gain greater access to Chinese markets, Dow Chemical has tied up with Shenhua Group, China’s biggest coal producer, to leverage on local relationships and secure wider distribution and a stronger clientele base. Another global player, BASF, has diversified its production and local distribution networks by setting up facilities in all of the BRIC countries.

The survey respondents said political risk is the primary threat to multinational players in Emerging Markets over 2012 to 2017. Other threats are competition from local companies, political risk, poor infrastructure and cost of international supply chain.

Emerging Markets present a lot of uncertainties, but by understanding the facilitators of growth and the unique characteristics of each market, companies in the chemicals industry will be better poised to take advantage of the forecasted growth to 2017 and beyond.

Success Factors in Emerging Markets for Chemicals Industry (2012-2017)

Rank Success Factors
% Respondents
1 Distribution / access to customers 50%
2 Localized competitive positioning 35%
3 Product/service quality 35%
4 Pricing 30%
5 Adapting to local culture 25%
6 Building a strong brand 20%
7 Local business relationships / lobbying 20%
8 Localization of products/services 20%
9 After-sales service/spares/maintenance 15%
10 Finding the right talent 15%
11 Local partner(s) 15%
12 Supply chain 15%
13 Cost control 10%
14 First mover advantage 10%
15 Flexibility to change as the market develops 10%
16 Government relations 5%
17 IP protection 5%
18 Access to local sources of financing 0%
19 Appetite for risk 0%
20 Availability of finance 0%
21 Reliable access to energy sources 0%

Source: M-Brain (formerly GIA)’s Business Perspectives on Emerging Markets 2012-2017 Report N=20

Threats in Emerging Markets for Chemicals Industry (2012-2017)

Rank Threats
% Respondents
1 Political risk 35%
2 Competition from local companies 30%
3 International supply chain cost 30%
4 Poor infrastructure 30%
5 Difficulty breaking into local networks 25%
6 Lack of local market understanding at headquarters 25%
7 Regulations and taxes 25%
8 Bureaucracy and red tape 20%
9 Competition from other foreign companies 20%
10 Economic volatility 20%
11 Lack of reliable market intelligence 15%
12 Corruption / weak rule of law 10%
13 Foreign exchange rate changes 10%
14 Grey markets / parallel imports 5%
15 Rapid change in the market 5%
16 Lack of demand 0%
17 Repeated losses 0%
18 Unreliable local partners 0%

Source: M-Brain (formerly GIA)’s Business Perspectives on Emerging Markets 2012-2017 Report N=20

 

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