Corporate strategy formulation in the chemical industry: with special reference to bromine

Abstract

This study is an inter-disciplinary investigation into the nature of corporate strategy and the forces shaping industrial development with particular reference to a science based industry such as the chemical industry. The central objective of the study 1S to analyse the critical role of technological change as a major force ln strategic planning - a largely neglected area in the literature on corporate strategy. Traditional writings on corporate strategy tend to be self limiting 1n that they focus on a "single profit objective" and associated with this is the heavy emphasis placed on acquisition strategies in order to realize managerial profit objectives. The present study suggests that much more attention should be given to other than profit objectives, the conflict between them and their reconciliation. For this purpose a synthesis of the behavioural model of the firm and the managerial discretion model is proposed. The method uses four types of standards - historical, external, intentional and innovative - 1n setting multiple objectives at a target and at a constraint level. In this target constraint approach the difference between the two levels determines a margin within which conflicting claims of multiple objectives can be reconciled and a consensus level can thereby be reached. The study shows that the existence of a gap between the innovative and the other standards signifies that growth will mainly come through technological change. Theoretical aspects of technological change, in particular the economic and sociological approaches to diffusion of innovation are also discussed with special reference to the chemical industry. Against this background i i a generalized growth pattern for basic chemicals is developed and this pattern identifies the competitive and innovative modes of growth. In the competitive mode the individual chemical producer seeks to increase the level of usage of his material in its established end use categories. In the innovative mode, on the other hand, growth is sought by innovating new end use categories. Given a specialized producer willing to grow in his area, the competitive mode is characterized by the fact that marketing, financial and organizational measures can compensate for scientific and technological weaknesses, whereas intensive research and development activities are all important in the innovative mode . . The discussion finally leads to the formulation of a method of pinpointing technologically based opportunities. This method~ the technological growth tree, is developed as a managerial tool for mapping out strategic opportunities for the chemical industrialist. The tree consists of two principal branches, technological expansion and technological diversification, which subdivide into relevant strategies and tactics. Technological expansion strategies can be utilized in the competitive mode while the technological diversification strategies are appropriate in the innovative mode. The usefulness of the technological growth tree, in particular its diversification strategies, is illustrated by reference to the bromine industry where application of the former has resulted in a number of potential opportunities. These require further research and development efforts for their realization. ·Resulting from this, the principles outlined in the present study can also be applied in other science based industries for strategic planning.