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E.I. du Pont de Nemours and Company Report
by
Van Anh Nguyen
Strategic Management Forum
Professor Donald Goeltz
March 3rd, 2011
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E. I. duPont de Nemours & Company
HISTORY:
Founded in 1802 by Eleuthere Irenee du Pont, E.I. du Pont de Nemours and Company
(DuPont) is an explosives American-based company headquartered in Wilmington, Delaware.
Throughout its history of development, growth, merger and acquisition, the company offers
variegated products and services in chemicals, agricultural, nutrition, communications,
electronics, safety and protection, home and construction, transportation and apparel. DuPont has
expanded operations in approximately 90 countries with 60,000 employees worldwide. Total
revenues reached $31.5 billion in 2010. The company is known for its strong research and
development with more than 75 labs in 12 countries worldwide.
VISION
“Our vision is to be the world’s most dynamic science company, creating sustainable
solutions essential to a better, safer and healthier life for people everywhere.”
(www.DuPont.com)
MISSION, GOALS & OBJECTIVES:
DuPont has a mission of sustainable growth, which we define as the creation of
shareholder and societal value while we reduce our environmental footprint along the value
chains in which we operate. (www.DuPont.com)
DIVERSITY: “In DuPont we will have an organization in which people of all backgrounds can
contribute and achieve their full potential in pursuit of personal and organizational excellence.”
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As a global corporation, DuPont has promoted diversity and had racially and ethnically diverse
body of employees across various functions and business units. Ellen J. Kullman has been the
CEO of DuPont since January 1st, 2009 and the first woman to lead the company in DuPont’s
209 year history.
HUMAN RIGHTS: “DuPont is committed to the protection and advancement of human rights
wherever we operate. The DuPont Human Rights Policy is based on our core values of Safety
and Health, Environmental Stewardship, Ethical Behavior, and Respect for People. This policy
operates in conjunction with and is supportive of our Business Conduct Guide, our Safety,
Health and Environmental Commitment, our product stewardship programs, our regulatory
compliance program, and our endorsement of the 10 Principles in the UN Global Compact.”
DuPont has taken serious steps concerning safety for its workers since the establishment of the
company in 1802. Explosives and chemicals by nature are dangerous; therefore, the company
pays a great deal of attention to safety for its workers. This step and other aspects show the
company’s respect and honesty for its employees.
PHILANTHROPY: “DuPont is committed to improving the quality of life and enhancing the
vitality of the communities in which it operates throughout the world. Through financial
contributions and the volunteer efforts of its employees, DuPont supports programs and
organizations that address social progress, economic success and environmental excellence – all
vital components of community sustainability."
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SUSTAINABILITY: “The need for truly sustainable options for 21st century life remains one of
the most critical challenges facing the global community. As a science company, DuPont has the
experience and expertise to put our science to work in ways that can design in – at the early
stages of product development – attributes that can deliver solutions that help protect or enhance
human health, safety and the environment. We believe this is a direct route to a successful,
profitable business that adds value to our customers, their customers, consumers, and the planet.”
DuPont has put sustainability into daily actions, short-term plans, and long-term goals. Its
employees are asked to change printing practices, which will save the company $700,000
annually. DuPont also has improved logistics and distribution in a way that helps reduce NOx
emissions by 4,000 kilogram and CO2 by 3,500 tons in 2007. Highest standards for safety,
health, and environment have been applied at many plants. The company also makes goal to
double investment in research and development of new renewable and sustainable products to
$640 million by 2015 and has reached $660 million in 2010.
CURRENT SITUATION:
Headquarters
E. I. DuPont de Nemours & Company’ headquarters is a fourteen-story high-rise building
located in Wilmington, Delaware.
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Brand Concepts
DuPont is a top and heritage-rich name domestically and globally. Because of a diversity
of products and services, DuPont has a multitude of brands and trademarks. Many brands are
familiar to customers in their homes, commercial environments, and communities. Some brands
and trademarks are Corian, Kevlar, SentryGlas, Teflon, and so on. The brand name for the whole
organization is DuPont – The miracles of science. According to the former DuPont CEO Chad
Holliday, the slogan implies the company’s ability to provide science-based solutions for a better
world. The company’s direction has been on the right track, which focuses on research and
development of renewable, recyclable, and sustainable products. The logo is the red “DuPont” in
a horizontal oval with the black phrase “The miracles of science” underneath it.
Operations & Marketing
DuPont has global operations in about 90 countries, more than 75 R&D labs in 12
countries, and a total of 60,000 employees worldwide. In the increasingly globalized age,
DuPont focuses on a larger scale of global operations and markets. The company determines
excellence in operations is not optional but crucial to success in the intensely competitive global
marketplace. The DuPont Operational Excellence (OE) model has been implemented with the
following aspects:
Asset productivity
Capital effectiveness
Operational risk management
This model is designed to lower costs, to minimize potential incurring injuries and
damages, to increase efficiency, to maximize sustainable returns on operating assets, and
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enhance competitive position in the market. The following chart illustrates the stages of the
model. The model helps DuPont and its clients cooperate and work together efficiently.
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The OE model has helped DuPont minimize costs and improve efficiency. The diversity
of products and services requires DuPont to various versions of the models to adapt to the
business types. Operating across industries and nations, DuPont also have different marketing
strategies, plans, and programs for the business units, industries, domestic and global markets.
CURRENT ISSUES
Declining sales and revenues
Affected by the economic recession, DuPont’s sales and revenues decreased in
chemicals, materials, coatings, safety and protection, electronic and communications segments
and in global markets including the United States, Europe, Middle East, Africa, Asia Pacific, and
Latin America in FY2009 compared to sales and revenues in FY2008. On the other hand, the
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agriculture and nutrition and the other segments recorded an increase in sales and revenues. The
overall decrease is 14.5% in FY2009 compared to FY2008.
Environmental legal charges
DuPont has faced many legal charges regarding environmental adulteration. According to
a report by the Political Economy Research Institute (PERI) at University of Massachusetts,
DuPont is ranked number one with 17.15 millions of pounds of toxic air releases.1 The company
has settled many class action lawsuits regarding environmental pollution. A class action lawsuit
by 60,000 residents of Ohio and West Virginia in 2004 over the chemical C8, also known as
ammonium perfluourooctanoate, or PFOA cost DuPont more than $340 million in settlement.
Another class action lawsuit in New Jersey cost the company $8.3 million in settlement with
5,000 homes.
Competition
Being a large global organization, DuPont faces intense competition industry-wide and
worldwide. Major competitors include large chemical companies in the United States, Europe,
and Asia. Some of them are Dow Chemical Company, Monsanto Company, BASF AG, PPG
Industries, Inc., Akzo Nobel N.V., PolyOne Corporation, Eastman Chemical Company, and
others. In addition to these firms, DuPont also has to compete with smaller and more specialized
firms around the globe.
GOVERNANCE ISSUES
DuPont has a strong record of governance organization that is “committed to having
sound corporate governance principles and practices.”
1 http://www.peri.umass.edu/Toxic-100-Table.265.0.html
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EXTERNAL ANALYSIS
THE GENERAL ENVIRONMENT
Demographic Segment
It is estimated that the global population will reach 9 billion in 2050, of which 8 billion
people reside in developing countries. Since DuPont operates in many developing countries,
innovation and business practices need to be adapted to the demographic change. Developed
markets have experienced declining birth rates and aging population, which will soon affect
negatively labor resource as well as market demand. Those expected declines in labor and
market demand can be offset by growing population, rising middle class, and increasing demand
in emerging markets.
Sociocultural Segment
“An organization’s values are those principles, ideas and ideals that its members adhere
to, often without consciously recognizing that they are doing so. Values are the glue that holds an
organization together in good times and especially in bad ones.” Throughout more than 200
years of history, DuPont has grown from a family business into a global corporation. The
company embraces good ideas, innovation, emphasis on employee safety, diversity and success,
commitment to research, consumer products revolution, green revolution, and environmental
impact.
Political/Legal Segment
DuPont was charged for failure to report toxic chemical studies by the U.S.
Environmental Protection Agency (EPA) in 2010. The required settlement that was worth $3.3
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million is to resolve 57 Toxic Substances Control Act (TSCA) violations. Another case is the
violation of Comprehensive Environmental Response, Compensation and Liability Act
(CERLA), which requires DuPont to pay for the cleanup costs
Technological Segment
DuPont has strong R&D. They also invented many new technologies for the industries
they participate in. As a science-based company, DuPont has a long and impressive list of
patents and trademarks of many products, inventions, and technologies. The company has
continuously improve the workplace so that it is safer, more efficient, and more comfortable.
Billions of dollars are spent on R&D worldwide annually. Realizing the green trend in the
economy, the company has invested in sustainable technology and renewable energy such as bio-
fuel energy. The 2015 goals include reducing greenhouse gas emissions, water consumption by
at least 30% at global sites, air carcinogens and completing an independent third-party
verification of the effectiveness of their environmental management goals and systems at 100%
of DuPont’s global manufacturing sites. Current clean technologies products and services are
BELCO Clean Air Technologies, STRATCO Alkylation, Global Engineered Solutions,
IsoTherming Hydroprocessing Technology, and training solutions.
Economic Segment
During the financial crisis, the company experienced a revenue decrease of 14.8 percent
in FY2009. DuPont has an advantage of a diversified stream of revenues because they operate in
seven industries. Therefore, decrease of sales and revenues in some business segments and
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markets have been offset by increase in other ones. The following pie charts show DuPont 2010
sales by markets and segments. Total sales were $32.7 billion.
US35%
Europe, Mid-dle East, Africa
25%
Asia/Pacific22%
Latin America11%
Canada3%
Other4%
DuPont 2010 Sales by Markets - Total $32.7 bil-lion
Agriculture & Nu-tritrion
28%
Performance Chemicals
19%
Performance Mate-rials19%
Performance Coat-ings12%
Safety & Protection10%
Electronics & Communications
9%
Other3%
DuPont 2010 Sales by Segments - Total $32.7 bil-lion
From the charts, one can see the U.S., Europe, Middle East, and Africa accounted for
more than 80 percent of the market sales. Chemicals manufacturing including performance
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chemicals, performance materials, and performance coatings accounts for more than 50 percent
of the sales by segments. Agriculture and nutrition segment amounts to nearly one third of the
sales by segments. Diverse streams of revenues and global markets give DuPont advantage and
flexibility to reduce risks of one or more markets or segments.
PORTER’S FIVE FORCES MODEL OF INDUSTRY COMPETITION
Threat of New Entrants
HIGH MEDIUM LOW
Economies of Scale XProduct Differentiation XCapital Requirements XSwitching Costs XAccess to Distribution Channels X
Science-based businesses required capital invested in R&D, equipment, and plants, all of
which are costly. Therefore, it is hard for new entrants. The threats can be low since two of
DuPont’s strongest strengths are R&D globally and capital. Nevertheless, product differentiation
threat is high because many different kinds and sizes of firms in the chemical manufacturing
industry offer comparable products at competitive prices. Threat of economies of scale and
access to distribution channels are medium because of the increasing number of competitors and
the growing global market.
Bargaining Power of Buyers
HIGH MEDIUM LOW
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Switching Costs XIndustry’s Product Quality is Unimportant
X
Large Volume Buyers XStandard/Undifferentiated Products
X
The switching costs for buyers are low because competitors are able to offer comparable
products at competitive prices. Product quality is important because chemicals easily and highly
affect health and environment. Large volume buyers are medium because there is a balance
between DuPont’s reputation of product quality and the number of other companies that can
offer comparable products. Standard/undifferentiated products are high because those products
can be easily manufactured by any chemical-manufacturing firms.
Bargaining Power of Suppliers
HIGH MEDIUM LOWSuppliers Group Dominated by Few
X
Importance of Customer to the Supplier
X
Supplier’s Product Important Input to Buyer’s Business
X
Switching Costs X
DuPont has faced threats from volatile prices of raw material and energy. In addition,
increasing demand of raw materials for manufacturing gives supplier more power. Therefore, the
first two are considered medium. Supplier’s products are highly important input to buyer’s
business since DuPont is in manufacturing industry. Switching costs can be low because
commodity would have similar prices.
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Threat of Substitute Products
HIGH MEDIUM LOWDifferentiation of Substitute Product XPrice-Performance relationship of Substitute Product
X
The threat of differentiation of substitute product is medium since science and technology
products require R&D. DuPont is very strong at R&D and has thousands of patents and
trademarks. Certain products cannot be substituted even with differentiation. The price-
performance relationship of substitute product is medium because
Rivalry among Competitors in Industry
HIGH MEDIUM LOWNumber of Competitors XIndustry Growth Rate XFixed Costs XProduct Differentiation XSwitching Costs X
DuPont has a multitude of competitors of all sizes because it operates in several business
segments. Within the chemical manufacturing, DuPont face competition domestically and
internationally. Competitors include firms that are as large as DuPont such as Dow Chemical
Company, medium to specialized firms. Industry growth rate is medium because chemical
manufacturing is quite mature compared to other industries. Fixed costs are high because of
plants, equipment, R&D, and labor. Product differentiation is also very high because as
mentioned, chemical manufacturing industry is developed. The switch costs is high because of
heavy capital required to initially invest in working capital.
INDUSTRY KEY SUCCESS FACTORS
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Access to low-cost material will help DuPont improve operation margins since the company has
low operation margins.
Innovation Capability is DuPont strength in the industry. The company has thousands of
patents and innovation s that have been applied in its plants and used for consulting services.
Supply Chain Excellence is the key to the company success because supply chain management
creates cost savings and time-to-market reduction.
Ability to fund growth investments is very crucial since DuPont is a science-based technology.
Available fund is very important to new R&D projects or new plants in new regions or countries.
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INTERNAL ANALYSIS
E. I. duPont de Nemours & Company VALUE CHAIN ANALYSIS
Value chain analysis is the strategic model of a set of interrelated value-creating activities
common to a wide range of firm. The diagram demonstrates support and primary activity that a
firm operates. In addition to the value chain analysis, DuPont has a more complicated model that
is discussed in Operations & Marketing part. The complexity is inevitable because the nature of
DuPont company. It has operated more than 200 years and in seven industries offering a wide
range of products and services. It is the Operating Excellence Model (OEM) that helps DuPont
focuses on and manages efficiently the primary aspects of operations.
Inbound logistics
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Inbound logistics handles all the initial incoming and processing activities before
operations. DuPont has applied the six sigma logistics to manage efficiently inbound logistics
regionally and globally.
Operations
Operations are the stage in which inputs are transformed into the final products. As
discussed, DuPont uses Operation Excellence Model (OEM) to maximize values and manage
resources efficiently during this process.
Outbound logistics
Outbound logistics include activities necessary to deliver finished products to customers
including warehousing and order fulfillment. DuPont employs a private internet transportation
portal that allows employees around the global to instantly exchange freight data with carriers
and suppliers.
Marketing and Sales
These activities are to communicate with customers about products and their values. The
goal is to get customers to purchase the products via different distribution channels and
marketing strategies such as advertising, pricing, promotion, and place. DuPont has marketing
facilities throughout the world to do these activites.
Customer Services
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Customer services are to maintain and enhance products’ values including support,
replacement, repair services, and so on. DuPont has a strong customer services team to carry out
these activities.
RESOURCE-BASED VIEW
VRIN Analysis of E. I. duPont de Nemours & Company’s Resources and Capabilities
Valuable RareHard to Imitate
Hard to Substitute
Tangible Resources
Plants X
R&D Labs X X X XTrademarks X
Intangible Resources
Brand Name and Patents
X X X X
Organizational Capabilities
Innovative of Products
X
Tangible Resources
Tangible resources include firstly the fourteen-story headquarters located in Wilmington,
DE. DuPont also has many plans across the United States and other countries. The plans include
specialty science equipment. Financial numbers usually outweigh industry averages. In addition
to plants, the company also operates 75 R&D labs in 12 countries.
Intangible Resources
The name DuPont itself is already a huge intangible asset. It is not just a brand name but
also a heritage of over 200 year history. In addition, DuPont’s R&D is granted hundreds and
thousands of patents and trademarks worldwide. Each business segment has a score of brand
names and trademarks.
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Organizational Capabilities
DuPont has strong organizational capabilities. The company has achieved thousands of
patents through its investment in R&D. Its labs and technologies are unique as well as effective
marketing of these products and services to customers through its long-time reputation and
heritage brand name.
Continuing and continuously improving the current path, DuPont will be able to maintain
its leading position in the market and competitive advantages in the global market.
SW/OT Matrix Format
Opportunities
Emerging market growth
Strategic global M&A
Growing demand for environment-friendly products
Alternative energy market
Threats
Global economic crisis
International market risks
Tightening environmental regulations
Volatile energy and raw materials prices
Strengths Strong R&D Diverse range of
products and services
Leading position in the market
International operations
Strong financial figures
M&A
R&D for environmental-friendly products and alternative energy
M&A foreign firms Generate more
revenues from Include new
products and services
Diversify services and products portfolios
Diversify geographic operations
Purchase commodity options
Backward Integration
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Weaknesses Lawsuits Legal and
environmental charges
Declining market share
Low operation margin and liquidity
Settle lawsuits Reduce minimum
pollutant wastes M&A to increase
market share Offshore
manufacturing to reduce costs
Pay attention to environmental issues in global operations
Pay attention to legal issues both international and local
Improve operation margin and liquidity
RECOMMENDATIONS
International expansion
DuPont is very strong at M&A and joint ventures. Continuing doing so will help the
company expand its market share in the world and to compete with other major competitors.
Environmental legal charges
Environmental concerns have been growing. In addition, DuPont has faced many legal
charges regarding environmental pollution and millions of dollars of settlements. Paying more
attention to environmental issues is necessary for the company to avoid class action lawsuits
regarding environment and huge settlement fees accordingly. In addition, doing so will help
improve the company’s “green” image. With strong R&D, strict health and safety policies, and
excellent management, DuPont should be able to find out new cleaner and safer technologies
than the current ones.
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Improve operation margins
While having strong financial figures compared to the industry averages, DuPont has low
operation margins. The company should consider different strategic management to improve
operation margins such as lowering costs of production.
Strategies for E.I. du Pont de Nemours and Company
CURRENT STRATEGY RECOMMEND STRATEGY
BUSINESS STRATEGY
Differentiation
Focus
Differentiation
Differentiation in products,
services, and brand images
Develop new brand names
and intangible assets
Introduce improved products
to extend industry life cycle
Enhance pricing strategy
CORPORATE
STRATEGY
Growth
Diversification Vertical integration
Related diversification
Unrelated diversification
INTERNATIONAL
STRATEGY
Multi-domestic
Merger and acquisitions
Join ventures
Wholly-owned subsidiaries
Continue current strategies of
M&A and joint ventures
ENTREPRENEURIAL
STRATEGY
Differentiation
Competitive:
Strategic and
Tactical
Logistics Innovative products, services,
and logistics
IMPLEMENTATION
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DuPont formulates different strategies for various business segments and units within the
organization. The company uses contemporary approach together with its own models that suit
the businesses. The above diagram the relationships of formulating, implementing, and
controlling strategies. Behavioral control is interactive between strategic control and
implementing strategies. Information control is between formulating strategies and strategic
control.
OVERALL OUTLOOK
E.I. du Pont de Nemours and Company is not just a business as many others. The name
itself is reputation and heritage. In addition to that, the company has grown from a family
business into a global corporation. It has a firm and leading position in the market as well as
strong expansion and growth outlook. While many businesses suffered from a great deal of
losses during the economic recession, DuPont has been able to maintain its relative revenues and
sales thanks to its diverse streams of incomes from seven business segments and global markets.
Strong R&D certainly gives DuPont an advantage particularly for the renewable, sustainable, and
clean technologies. The market-drive science research reflects the growing concerns about the
DuPont 24
global environment and meets the increasing global demand for clean energy and products for a
better world. Furthermore, global operations allow flexibility and adaptability to social,
economic, and demographic changes. With M&A, join ventures, and foreign subsidiary
activities, DuPont has been focusing on expanding its global operations and R&D. The business
model is very advanced and unique across industries and in the world. Overall, DuPont has a
very firm background, successful present business operations, and promising future outlook in
the rapidly changing world. Hence, E.I. du Pont de Nemours and Company’s outlook is very
positive and visible.
Work Reference:
DuPont website:
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http://www2.dupont.com
http://www2.dupont.com/Consulting_Services/pt_BR/assets/downloads/OP%20E_White
%20Paper_FINAL_12%2014%2005.pdf
http://yosemite.epa.gov/oa/EAB_Web_Docket.nsf/Filings%20By%20Appeal%20Number/
972AA52D3BEADFE0852577FF0059A226/$File/Consent%20Agreement...1.pdf
DuPont Investor Relations:
http://phx.corporate-ir.net/phoenix.zhtml?c=73320&p=irol-irhome
Datamonitor 360 Database
Hoover’s Company Records
Lexis Nexis Database
Plunkett Research Online Database
Articles:
http://www.quickmba.com/strategy/value-chain/
http://www.msnbc.msn.com/id/5953878/ns/us_news-environment/t/dupont-settle-teflon-
pollution-lawsuit/
http://www.environmentalleader.com/2007/07/24/clean-air-act-violations-cost-dupont-70-
million/
http://www.legafi.com/lawsuits/news/705-dupont-settles-another-toxic-c8-class-action-lawsuit