Term Paper: Dupont Business Strategy: Competitive Advantage

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[. . .] There is little price difference among suppliers and quality is a bigger factor than price in this market.

The Buyer does not have a lot of bargaining leverage as far as price and switching brands is concerned. This market is made up of hundreds of specialized niche markets and there is little cross over among suppliers. Buyers tend to stay with one brand if the quality is satisfactory. Product differentiation is difficult to determine in this industry due to the diversity of products. The product differentiation differs among different segments. There may be many suppliers of lawn chemicals, but only one supplier of Analytical Grade Potassium Permanganate.

This market is like no other as far a product differentiation and the ability to substitute is concerned. The buyers in this industry are driven by need alone. Each player in the industry is diverse and offers a variety of product lines. Different companies make some and some are exclusive to one company. It is difficult to use these aspects of Porter's Forces in the analysis of this area due to the nature of the market.

Typically a competitor gains advantage over a rival by lowering prices to gain a temporary advantage, improving product differentiation, and using vertical integration to provide alternate distribution channels, and exploiting relationships with suppliers. Players in the specialty chemical industry have used all of these techniques at some time. There are not a lot of companies involved in this industry, but the companies that do participate produce a large number of products and generally operate each of their product lines as a separate division. In this way one would have to compare each individual product on these merits and that is beyond the scope of this report.

Pest Analysis

Business strategies and outcomes are influenced in by political circumstances, economic trends, sociocultural and technological factors (PEST). DuPont operates in a variety of countries and must consider the position and perform PEST analysis in each of the countries in which it operates. It must also consider the overall global picture as well. Because DuPont has the philosophy of operating its many segments as a separate entity in order to allow the managers to take advantage of local conditions, this creates some interesting issues concerning PEST analysis that are unique to DuPont and other similarly operating international companies.

The most important global political condition that threatens DuPont on a global level and has the greatest impact on the largest number of DuPont's facilities is the war between the United States and Iraq. This war has the potential to cut supplies and raise the price of raw materials. In addition, could pose a direct threat to plants located in the Middle East that could become casualties of war. This also effects relations between companies operating in countries that may now be rivals. The war on Iraq is the greatest political challenge that DuPont currently faces and it could have a direct effect on DuPont's profitability.

Economic conditions in the U.S. have been poor and are expected to have a slow recovery. DuPont is an established and mature company that is mature in the product life cycle. Companies such as this typically move in accordance to the general economy. They may vary more than the general economy, but in general move in accordance to the economic conditions in an area. DuPont is effected by the local economy of each of its operating sites and the global economy as well.

Matching company capabilities and the external environment

In the past the greatest opportunity for growth and expansion was in new product development. DuPont concentrated its efforts on providing the raw materials for other technological industries and as a result developed a diverse portfolio of products for a specific purpose. Currently the trend has undergone a trend toward greater consolidation and less diversification28. Economic conditions and the need to cut costs has been the key driving forces behind this trend. Technology has also played a part and companies are cutting costs through a higher degree of vertical integration. The Internet has represented a major technological advancement and has effected almost every industry in some way. DuPont has seen an increase in efficiency through integration of supply lines and communications among all of its global satellites.

As political, economic, sociocultural, and technological conditions change, DuPont must determine the changes that need to be made in each individual plant or location, They also have to consider the company as a whole and look at the whole picture. DuPont must employ micro management at each of its locations, while still maintaining a focus on the parent company. Positions must be constantly analyzed and re-evaluated.

DuPont's Competitive Position

DuPont has created and improved its competitive position through diversification. Any good stock portfolio knows the value of diversification. A diversified portfolio allows one to decrease risk of harm from one position turning sour. While at the same time allows one to take advantage of opportunities. In addition, once a position is purchased, it must be constantly monitors to make certain that it is meeting performance expectations. If it does not meet expectations, then a savvy portfolio manager will discard the position for one that promises more profit. This is exactly the way in which DuPont has created its competitive position throughout its long history and the way in which it currently manages it to keep the position that is has.

In addition to a diversified product line, DuPont also has a diverse customer base as well. They have markets in home products and industrial chemicals. Sales are not dependent on a single small groups of customers and as market conditions change DuPont will cut back production on products that are in less demand and increase production on products that are becoming more in demand. The ability to adjust to meet changing market conditions is the key to DuPont's success. Without a high degree of diversification, this would not be possible.

DuPont uses a variety of tool and measurement interments to keep tabs the supply and demand of the their products. DuPont has strict criteria in evaluating new investments. DuPont must receive a considerable return on their investment within a certain time frame or the position will be reexamined and potentially sold. DuPont does this to ensure that each division is pulling its weight. DuPont cannot afford to hold onto positions that are losing and sets concrete performance criteria for its investments to meet. This strict policy keeps the overall corporate strategy in focus and on track for long-term profitability.

Diversification has allowed DuPont to establish a sustainable competitive advantage on a global basis. DuPont has recently sold its pharmaceutical division to a major pharmaceutical producer because competition in the pharmaceutical industry was becoming too concentrated and even though the company was profitable currently, DuPont did not feel that this profitability was sustainable for the long haul. However, DuPont is examining long-term positions in emerging markets such as South America and Southeast Asia. Sustainability is a buzzword either appeals in conjunction with DuPont policy in many recent news articles. DuPont has always maintained a vision on the long-term future, and has sometime made decisions that may have not been profitable in the beginning, but that were expected to experience long-term growth.

SWOT Analysis and Mann's Country Profile

Strengths, Weaknesses, Opportunities and Threats (SWOT)) as well as Mann's Country Profile must be undertaken for each country and division in which DuPont operates. DuPont uses these analyses in evaluating each of it positions in order to determine whether buy or sell a position. In the case of operations expansions of operation into an area these issues are also considered. It is difficult to apply SWOT and Mann's profile to the entire entity of DuPont in general as DuPont operates as a conglomerate of positions consisting of over 144 facilities and the conditions are each and every one of these facilities will be different.

In general, DuPont's key strength is its degree of diversification and the ability to anticipate technological trends and spot opportunities to expand their product line. Their key threat is from competition. However, due to the high degree of specialization in the industry this competition usually only threatens one portion of the business and there are other areas to spread the impact. The same can be said of opportunities and threats. The key opportunities for expansion lie in expanding markets, particularly by participating in emerging markets and in developing countries. The key threat, currently is the rising cost of production and raw materials. Considering Mann's principles in the decision to enter into an emerging market can serve to greatly reduce the risks associated with the move.

Discussion, Conclusion and Recommendations

DuPont has chosen the road seldom traveled in strategic management. While other companies were busy in the beginning of the century concentrating their efforts on one golden product opportunity, DuPont was busy expanding its market through diversification. When possible management… [END OF PREVIEW]

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