Business Environment of Yule Catto Company - Case Study Example

Running head: YULE CATTO Analytical report on business environment of Yule Catto [Supervisor’s Analytical report on business environment of Yule Catto The Company Yule Catto & Co plc is a leading chemical producing company in the United Kingdom. The company is competing on a large scale and it has a 14 production facilities in Europe and 22 manufacturing plants across Europe. It has also expanded its business in pharmaceutical chemicals and other performance chemicals. It employs over 22,000 employees worldwide; in 2010 the company reported sales of £645.8 millions and it is forecasted to increase in the future (Yule Catto 2012). Mission The mission of Yule Catto & Co plc is to provide the customers with the best quality and service by flexible solutions and innovative ideas. Yule Catto & Co plc is fully committed to earn the loyalty of the customers by delighting them and to form alliance with the special clients. The mission is to increase the shareholder’s wealth and at the same time considering corporate social responsibility (Yule Catto 2012). Objectives The objective is to make consistent progress in all the divisions of the organization, including the strategic plans and the operational performance. Their aim is to be recognized and valued by their customers around the world; to achieve these objectives; they have to be flexible and respond to the environment efficiently and become committed to success (Yule Catto 2012). Evaluation of the Mission Statement and objectives To achieve the required mission of the Company, more focus is given to the satisfaction of the customers and understanding their needs and by delivering the performance through quality products. In order to be more flexible, the company has maneuvered its growth strategy by focusing towards the changing needs of the markets in which they serve by processing with a new technology. The company has also centered its attention towards the safety of the employees and the communities to increase the value of the stakeholders. The company has provided ‘Responsible Care’ principles which intend to improve and heighten the chemical industry safety and environment each year. This effort tends to increase the interest in the social corporate responsibility (Waters 2006). History The Company has a long history for acquisition and merger. Yule Catto & Co plc initiated the business in 1881 as a rubber plantation company known as Malaya General Company and it remained the same company by next 80 years, but due to the latest trend of diversification at that time, the company managed to diversify itself to a chemical producing company and acquired a shipping agent company Yule Catto Ltd in 1971; then it changed its name to Yule Catto & Co (ICIS 2012). The company acquired Revertex, a chemical producing company, to gain expertise in the chemical industry and converted itself to public limited company and was listed in the London stock exchange. Then the period of acquisitions began and the company started to acquire those companies that had the competitive advantage in their respected product sphere and were the specialist in chemicals (Funding universe 2012). In 1990, the company was completely transferred and had been labeled a chemical company and expanded its operation worldwide. Then the company stepped in the market of fragrance and flavor by acquiring Oxford chemicals in 1996 (ICIS 2012). In 1998, the company divided its chemical structures into three divisions: performance chemicals, fine and pharma chemicals and polymer. The company started to focus on these three divisions and sold its smaller operations, including the sheet plastic business and roof light business, to different companies. The company also sold its sulphur dioxide business to restructure the performance of chemical divisions. In 2009 after gaining the expertise, the company sold its subsidiary Oxford chemicals and the entire share capital of Aroma chemicals to different companies (ICIS 2012). International and Market strategy: The major strategy of Yule Catto & Co plc is to expand geographically and to reach different parts of the world and increase its presence in the emerging economies where the business hubs exist, mainly in Asia. The aim is also to focus its growth in those developing nations in which their technology and their new product development would provide them with the competitive advantage. This strategy has resulted in the pharmaceutical chemicals in contributing over 85% of the total revenues of the company (Lowe and Doole 2008). Ansoff’s Matrix of Yule Catto & Co plc: Existing Products New Products Existing Market Market penetration Increase market share in chemical industry. Increase sales by producing in bulk. Product development Expanding into Nitrile latex dipping market. To produce higher quality emulsion polymer. New Market Market Development Expanding in Asian market. Presence through acquisitions. Issuance of stake of chemical companies. Diversification Moving into paint and emulsion industry. Fragrance products. Photographic color developers. Market Penetration: While remaining in the same market, Yule Catto & Co plc intends to increase the sales and to capture the market share by focusing on the existing products. Chemical market is very much saturated so it would be difficult to achieve high growth for the company. The company is successfully achieving the sales target by improving the quality of the product and is convincing the existing customers and non-customers to utilize more of the company’s products through effective use of advertising media. The company also focuses on restructuring to raise the performance of the business and offering better margins to the current market segment (Waters 2006). Market Development: The company has planned to become the global leader and is expanding in the various regions, particularly in the Asian market. The company has also bought major stakes in the overseas chemical companies and has acquired the local companies in order to operate effectively. Recently, the company has increased its holdings in Harlow chemical company to 100 percent and it has purchased 50 percent of stake of the joint venture partner Clariant. The company is consistently expanding in new geographical areas and enticing new customers (Stone 2001). 1 Yule Catto & Co plc has majority of its operations in Asia which ensures the successful implementation of the strategy of operating overseas. Eastern and Western Europe combines a total operation of 45% (ICIS 2012). Product Development The company continues to support the growth sterile latex dipping market for the medical gloves and is planning to specialize in the butadiene latex market. At the same time, the company is looking for opportunities in gaining a competitive edge in new emulsion polymer to develop business growth. This strategy prevents the new entrants in entering the competitive arena and it also links with the company’s mission as the product innovator and exploiting new technologies in gaining the market share. The company intends to offer the products to those customers that were not previously catered (McDonald and Meldrum 2007). Diversification: Yule Catto & Co plc is applying this strategy by acquiring different companies that has the expertise in the particular product and is diverting in a paint and emulsion industry. The company has also taken interest in producing the fragrance products and has issued share capitals of various firms in the fragrance business. The company is following the approach of related diversification which usually occurs when the company enters into the business that are related to its existing products. The company has also bought the stakes from an Indian joint venture company to move into the color photographic business (Stone 2001). Competitive Environment: The major competitors of Yule Catto & Co plc include Avecia Holdings plc, Teknor Apex Co and E. I. DuPont de Nemours & Company. To analyze the competitive environment, Porter’s five forces model has been used to critically examine the environment (ICIS 2012). Porter’s five forces Barriers to entry: Chemical market is considered to have a high barrier to entry because of the high capital expenditure associated with research and development and production and excessive amount of distribution. The cost of entering into the market depends on the height of the barriers to entry. To produce according to the economies of scale is always difficult for the new entrant. Normally, a high barrier to entry increases the competitive position of a company because there are fewer competitors in the industry (Simon 2009). Bargaining powers of customers: Due to the price transparency, the industry is focused on the customer loyalty and improving the experience of a customer. Customer segmentation is the key factor for the increase in sales and makes your customers satisfied. Optimized offering should be made possible for individual customers. Bargaining Power of Supplies: As chemical industry has limited manufacturers, the effect of bargaining power is minimized. The customers have the tendency to switch the supplier easily but not in the case of chemical industry. Supplier should emphasizing more on customer loyalty to prevent the customers from switching suppliers (Simon 2009). Threat Substitute: Substitute can easily replace chemical industry’s products. Customers have increased knowledge of new products and this enhances the opportunity for the chemical substitutes to gain advantage. This increases the threat of substitute because customers have better measurement capability. Changes in consumer taste often lead to the threat of a substitute (Society for Human Resource Management 2006). Rivalry amongst competing firms: As chemical industry has few competitors, they can coordinate with each other to decrease the intensity of the competition. Institutional mechanism can, in fact, increase the coordination among the competitors. There should be a pre-announcing of the price changes and share of information in trade. But if there is a lack of differentiation in company’s products and a slow growth in an industry, it increases the chance of competition rivalry (Burgers 2008). Market forces that affect environment: The nature of the market examines the degree of competitiveness of a company. Oligopoly and monopoly often maintain the dominance in the market because they prevent other competitors to enter in to the market. Chemical industry has significant economies of scale, therefore, new entrants are deterred and the field is exploited by some few players. Chemical industry spends on high research and development cost and it signals that they have a large financial resources; in order to match this level, the competitors have to match or exceed this level of spending which prevents the rivals to enter the market. This is widely found in oligopolistic markets such as the chemical industry and pharmaceuticals (Sushko and Puu 2002). Conclusion: Yule Catto & Co plc has been a major player in the chemical industry of UK. Its main focus remains to fulfill the needs of its customers by delivering them quality products and to expand them worldwide and increase their presence in the emerging economies. The chemical industry has significantly large economies of scale so it prevents other competitors to enter in to the market but as there are few competitors, they could coordinate in order to decrease the intensity of the competition. Recommendation: As the company tends to be more focused in expanding their business in the emerging economies, the company can buy major stakes in the overseas chemical companies or they could acquire local companies in order to operate more effectively. The company could offer these markets with the products in which they have a competitive advantage. The company should also diversify its product line to generate revenue mix and should focus on related diversification which is related to its existing products (Lowe and Doole 2008). List of References Burgers, W., 2008. Marketing revealed [Electronic book]: challenging the myths. New York: Palgrave Macmillan. Funding universe, 2012. Yule Catto & Company plc. [Online] Available at http://www.fundinguniverse.com/company-histories/Yule-Catto-amp;-Company-plc-Company-History.html" http://www.fundinguniverse.com/company-histories/Yule-Catto-amp;-Company-plc-Company-History.html >[Accessed 22 March 2012]. ICIS, 2012. Yule Catto | Company Structure Information from ICIS. [Online] Available at: http://www.icis.com/v2/companies/9146927/yule-catto/structure.html" http://www.icis.com/v2/companies/9146927/yule-catto/structure.html >[Accessed 24 March 2012]. Lowe, R. & Doole, I., 2008. International marketing strategy: analysis, development and implementation. London: Cengage Learning EMEA. McDonald, M. & Meldrum, M., 2007. Marketing in a nutshell: key concepts for non-specialists. Oxford, England: Butterworth-Heinemann. Simon, H., 2009. Hidden champions of the twenty-first century: success strategies of unknown World market leaders. New York: Springer. Society for Human Resource Management (U.S.), 2006. Essentials of strategy. Boston: Harvard Business Press. Stone, P., 2001. Make marketing work for you: boost your profits with proven marketing techniques. London: How To Books Ltd. Sushko, I. & Puu, T., 2002. Oligopoly dynamics: models and tools. New York: Springer. Waters, D., 2006. Operations strategy. London: Cengage Learning EMEA. Yule Catto, 2012. Polymer Chemicals. [Online] Available at http://www.yulecatto.com/yulecatto/site.nsf/page!openform&page=polymerhome" http://www.yulecatto.com/yulecatto/site.nsf/page!openform&page=polymerhome >[Accessed 22 March 2012]. Yule Catto, 2012. Welcome to Yule Catto, being part of all our lives. [Online] Available at http://www.yulecatto.com/yulecatto/site.nsf/page!openform&page=home" http://www.yulecatto.com/yulecatto/site.nsf/page!openform&page=home >[Accessed 22 March 2012]. Read More