Methanex Corporation SWOT Analysis - Case Study Example

SWOT Analysis Company Profile Methanex Corporation (TSX:MX; NASDAQ:MEOH), situated in Vancouver, British Columbia, is the worlds biggest methanol supplier. The organization produces, showcases, and circulates methanol all through North America, Latin America, Europe, the Middle East and Asia Pacific. Methanex makes esteem for its worldwide clients through a guarantee of dependable methanol supply and its Responsible Care creation status. In 2014, Methanex kept up its industry initiative with 15% piece of the pie. The organization’s work plants in Trinidad, Chile, Egypt, Canada, New Zealand and the United States (focused on begin 2H 2014). Plants in Egypt and Trinidad (Atlas and Titan) are worked as joint endeavors with Methanex holding basic interest of 60% and 63.1%, individually. The paper seeks to carry out a comprehensive analysis of the company’s SWOT analysis before the year 2013. In addition, the paper will discuss the key recommendations on how to solve the issues both qualitatively and quantitatively (Methanex, n.d.). Key issues Some of the major issues affecting the company include holding a large amount of Assets (PPE) sitting unused due to political instability in Chile and Egypt leading to wastages. Notably, these wastes constitute to close to $1.87 B in initial investment costs that could be put to constructive use. In addition, the company lacks diversification and is completely dependent on the sale of Methanol making it not competitively effective. Besides, the company has not fully taken advantage of economies of scope since almost all of its competitors produce other materials (Methanex, n.d.). Methanol in its pure form cannot be directly used since companies buy from Methanex to produce other materials. The replacement cost of assets are more than the market value of the company (2/3 cost). This implies that if the company goes under, they could not sell assets to cover all the cost. Another major challenge that the company faces is high operational cost (Zacks.com, 2014). In fact, 80% of cash costs go to purchase of natural gas and energy use costs hence increasing the operational cost (Arslan & Er, 2008). Key weaknesses Its greatest contender (MHTL), could conceivably make them bankrupt in Trinidad (where the vast majority of Methanexs yield is produced) The biggest utilization for methanol, formaldehyde, has had terrible attention in the U.S. in view of conceivable negative wellbeing impacts identified with presentation (Leukemia, numerous myeloma, Hodgkins). High purchaser power- methanol expenses represent a little divide of what organizations pay to deliver their last items. This is not a key asset requirement for creation, so methanex cannot utilize its supplier control too forcefully (Lee et al., 2009) Operations in various outside purviews posture dangers for the organization identified with changes of ecological or exchange regulations and the capacity to secure regular gas contracts in amounts important to achieve generation targets; coal is the most broadly utilized include as a part of China because of is accessibility, over characteristic gas, in the locale. Although it remains the biggest methanol utilization market, European GDP development evaluations of 1.3% do not suggest approaching monetary recuperation. This will adversely affect the development of methanol utilization in the locale. There is a danger in existing delivery limit. Amid the late confinements in Argentinean common gas feedstock, Methanexs Chilean plants experienced noteworthy unmoving times and diminished yield. Subsequently, Waterfront (Methanex) has abundance-shipping limit, which it must balance on the tanker spot market. With proceeded with doldrums in the marine transportation industry, cost efficiencies are yield (Olesen Et al., 2008). Alternative Strategies Its focused strategy and cost leadership strategy has allowed it to have majority of market share. Besides, the company has had its own distribution and logistics system consisting of Fleet of tankers, barges, trains, and trucks that help in transport. Moreover, it owns storage facilities (unlike competitors) in key distribution areas to reduce instances of price volatility to ensure consistent availability to buyers. In fact, it holds Long-term contracts with low-cost suppliers of natural gas to mitigate supply and price fluctuations. It depends on extremely low labor costs (compared to competitors) due to continual investments in technology, and high level of computerization and mechanization (Hongqing, 2005). Low threat of substitutes: few cost-effective substitutes for production of formaldehyde and acetic acid. Additionally, geographic production facility diversification is used to offset natural gas contract uncertainty. Moreover, methane process on methanol are the industry standard for contract price rate. Differentiation - With production facilities in Chile, Canada, the U.S. (2014), Trinidad, Egypt and New Zealand, Methanex has shorter supply chains to reach main markets in North America, Europe and China. Geographic diversity allows scheduled or unscheduled production disruptions in one plant to be offset with methanol supplied from its other facilities. This diverse production style is unique in the industry (Cruz-Vera, Et al, 2009). Recommendations In 2014, yearly worldwide interest for methanol was over 40 Million tons (International Methanol Producers and Consumers Association, 2015). However, Methanex sold only around 542,000 tons in the fourth quarter of 2014 (Zacks Equity Branch, 2015). In fact, Methanol business has a future Compound yearly development rate (CAGR) of up to 7.3% in light of rising oil expenses expanding worldwide interest for option fuel sources. The Chinese Market: requests 37% of worldwide interest for methanol to the large market for DME transformation into olefins to make polypropylene plastic. On the other hand, Chinese produce at a high cost, and have diminishing impetus to fare in light of the fact that the rising request in china (could offer to them at a lower expense than they are creating. Methanol in China represents 33% of worldwide interest, which is required to develop with fuel added substance and MTO applications. Chinese generation of methanol uses coal as feedstock, which costs altogether more than the common gas inputs. In addition, being even more ecologically inviting, lower expense regular gas inputs permit Methanex to gain by the Chinese utilization market. The company needs to build research and requirement for optional fuel sources that can be used in its production. Methanol-mixed powers are utilized by China (M85 85% and M100 100% methanol mixes) Expected to present M15 in advancing years. Several different nations (Australia, Pakistan, Iran, Malaysia, &Trinidad) have been inquiring about methanol fuel mixing as a distinct option for unadulterated fossil. Limitations of the recommendations Some of the most common limitations include government intervention in the business activities that makes Methanix pay high taxes. In addition, political instability in a number of countries has affected Methanix’s global market; hence, making it hard for the company to earn profits from its outsides sources. Despite having effective competition, the company has not diversified in any other commodity apart from methanol making it vulnerable to any changes in the market analysis of methanol across the world. References Arslan, O., & Er, I. D. (2008). SWOT analysis for safer carriage of bulk liquid chemicals in tankers. Journal of Hazardous Materials, 154(1), 901-913. Cruz-Vera, M., Lucena, R., Cárdenas, S., & Valcárcel, M. (2009). One-step in-syringe ionic liquid-based dispersive liquid–liquid microextraction. Journal of Chromatography A, 1216(37), 6459-6465. Hongqing, T. (2005). The Evaluation of Shell Coal Gasification Process and Its Ways of Improvement [J]. Coal Chemical Industry, 6, 003. International Methanol Producers and Consumers Association. (2015). About Methanol. Retrieved from impca: http://www.impca.eu/en/about_methanol/ Lee, S. K., Mogi, G., & Kim, J. W. (2009). Energy technology roadmap for the next 10 years: The case of Korea. Energy Policy, 37(2), 588-596. Olesen, M. H., Wied, M., & Andersen, P. D. (2006). A study on complementarities and gaps between national H 2 &FC RD&D programmes and analysis of new opportunities (SWOT analysis). Sixth Framework Programme priority E RA-NET. Co-ordination action to establish a hydrogen and fuel cell ERA-Net, hydrogenco-ordination. [sn]. Methanex. (n.d.). About Us. Retrieved from methanex: https://www.methanex.com/about-us Zacks Equity Branch. (2015, February 2). Methanexs (MEOH) Q4 Earnings Beat Estimates, Sales Miss - Analyst Blog. Retrieved from Yahoo : http://finance.yahoo.com/news/methanexs-meoh-q4-earnings-beat-145002618.html Zacks.com. (2014, February 03). Methanex Swings to Profit in Q4, SHares Up-Analsyst Blog. Retrieved from nasdaq: http://www.nasdaq.com/article/methanex-swings-to-profit-in-q4-shares-up-analyst-blog-cm323001 Read More