comparative business analysis basf group, bayer ag, and dow

8/8/2019 Comparative Business Analysis BASF Group, Bayer AG, And Dow ...

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Comparative Business Analysis: BASF Group, Bayer AG, andDow AgroSciences

Amy Hylkema

AEB 3133 Agribusiness ManagementMs. Jane Bachelor

Apopka Campus Spring 2007


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Amy HylkemaAEB 3133

Spring 2007

Reviewed by Jane L. Bachelor

University of FloridaIndian River Research and Education CenterFort Pierce, Florida

Table of Contents

BASF .................................................................................................... 3-11

Bayer ................................................................................................... 12-19

Dow AgroSciences ............................................................................ 20-28

Final Comparison .............................................................................. 29-30


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Mission Statement:We offer intelligent solutions based on innovative products and tailor made services.We create opportunities for success through trusted and reliable partnerships.

Stated Values:Innovation for the success of our customersSafety, health, and environmental responsibilityPersonal and professional competence

Mutual respect and open dialogueIntegrityOur innovative products, intelligent solutions and services make us the most competentworldwide supplier in the chemical industry. We strive for high return on assets andsustainable development. We welcome change as an opportunity. We, the employees ofBASF, together ensure our success. Together, the mission statement and values form

the framework of all decisions and activities.

Executive Summary

BASF is the worlds largest chemical company, ahead of Dow, DuPont, and Bayer. The

limited liability corporation is composed of five business segments: agricultural products,plastics, performance products, basic chemicals, and oil and gas exploration andproduction. The company has a world wide client base. Its two major competitors areBayer and Dow Chemical, according to Dunn and Bradstreet. They develop products,procedures, and services on a scientific and highly technical level to help their clients bemore successful. Their commercial slogan in the 1990s says it best: At BASF, we dontmake a lot of the products you use; we make a lot of theproducts you use better.

The target market includes industries such as textile manufacturers, agriculture andhorticulture producers, pharmaceuticals, the health care industry, and the automotiveindustry. BASF attributes it years of success and industry domination to broad

experience in research and development, manufacturing, marketing and sales expertise,and customer focus which makes us the preferred partner. Their focus is to createsmart, tailor made solutions to meet the requirements of customers all over the world.

History

BASF began as the result of the birth of the chemical industry in the 19 th century. Boththe textile industry and the chemical industry were ripe with new innovations due to


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modern advances in mechanization and an increasing population. Large amounts ofinorganic chemicals like sulfuric acid, soda ash, and chlorinated lime were needed for theprocessing and bleaching of cottonthe most popular and most available textile. Soon,chlorine bleach, soap, glass, and fabric became widely available as a bi-product of thechemical era. The stock corporation Badische Anlilin & Soda Fabrik (BASF) was

created in 1865 by Friedrich Engelhorn in Manheim, Germany. He envisioned the vastopportunities in synthesizing dyes and drugs from coal and tar. The manufacturingfacilities were built on the Rhine River in Ludwigshafen, Bavaria. Ludwigshafen becameone of the fastest growing cities in Germany during the second half of the 19 th centurydue to the presence of BASF.

In 1868, BASF appoints its first head of research, a chemist named Heinrich Caro. Underhis leadership, many new colors of dyes were developed, opening the world textilemarket to BASFs new products. In 1876, the synthesis of methylene blue earned them

their first patent. The coal tar dye was used in the textile industry as well as in medicalresearchcreating one of the first multiple purpose products. By the 1900 Worlds Fair

in Paris, BASF was already being called without question, the largest chemical producerin the world. Between 1865 and 1900, the number of employees surged from 30 to

6,207. In 1912, after years of research, the Haber-Bosch process was perfected, allowingfor the synthesis of ammonia from nitrogen and hydrogen. Ammonium nitrate fertilizerswere created and tested thoroughly at the newly developed agricultural research station in1914. The station studied the use of fertilizers and plant physiology and paved the wayfor BASF to enter the field of agricultural chemistry.

After the First World War, the German economy was in disarray. Business slowly beganto recover in the mid 1920s due in part to large scale investments with foreign capital.BASF merged with five other companies to form IG Farben. The foreign investorsquickly pulled their funding after the Wall Street crash of 1929. The Nazis party soontook over the political landscape and the economy rebounded with fast growth in theconstruction, automotive, engineering, and chemical industries.

The Second World War led IG Farben to shift production to the war effort. Severaltechnological advances were made including production of magnetic tape, styrene andplastics, polymers, methanol, and urea-formaldehyde condensates. Because the BASFplant produced nitrogen, gasoline, and rubber, it was bombed heavily by the Allies. Postwar recovery efforts were hindered by political unrest, reparation agreements, lack ofcoal and other fuels, transportation problems, and the French occupation of the RhineRiver. In 1952, BASF was re-established as its own entity.

Eventually, there is a post war economic boom that lasted until the late 1960s. Advancesand growth in plastics, pesticides, fertilizers, and petrochemical use were contributors.On January 30, 1952, an initial public offering of BASF stock was made available.BASF and Dow agreed on a twenty year joint venture in Freeport, Texas in 1958. Theplant produced basic chemicals and fiber intermediaries and became the springboard forBASFs current day U.S. operations. There was a series of world wide acquisitions


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between 1950 and 1980, giving the company a foothold in many industries spread acrossthe globe.Organization and Corporate GovernanceCorporate governance is overseen by two jointly responsible bodies, the Board ofExecutive Directors and the Supervisory Board. Together, they devise the corporate

strategy. Each board is headed by a chairman. The Board of Executive Directors is anine person group that is responsible for managing company operations. Its activities anddecisions are dedicated to the goal of increasing the companys long term value and

promoting company interests. The board reports to the Supervisory Board on a regularbasis. The Supervisory Board monitors, advises, and appoints members to the Board ofExecutive Directors. The twenty member board consists of ten shareholderrepresentatives and ten employee representatives.

Dr. Jurgen Hambrecht is the current Chairman for the Board of Executive Directors. Hejoined BASF in 1976. His duties include responsibilities with the following departments:legal, taxes, and insurance, strategic planning and controlling, executive management anddevelopment, investor relations, and communication between the BASF businesssegments.

The global headquarters for the Agricultural Products and Nutrition business segment arein Limburgerhof, Germany. The president is Michael Heinz. The segment is subdividedinto four regional business units with their own headquarters:

1. Europe, Middle East, Africa - Germany2. North AmericaNorth Carolina3. South America - Brazil4. Asia/Pacific - Singapore

BASF Group Business Segments

Agricultural Products & NutritionProducts manufactured range from herbicides,pesticides, and fungicides to high quality vitamins and active ingredients in countlesspharmaceutical products. For animal nutrition, they provide one of the broadest ranges offood additives (micronutrients, digestibility enhancers, preservatives, and colorants) thatallow the livestock feed and pet food industries to offer feed of the highest quality andnutrition.Basic ChemicalsThe chemical segments products range from petrochemical andinorganic origins and extends to intermediaries and specialties for the world market.PlasticsBASF is one of the global leaders in providing engineering plastics, styrenes,and polyurethanes.Oil & Gasexplore, drill, and produces crude oil and natural gas products.Performance ProductsThis business segment works directly with clients to design,


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manufacture, and provide tailor made products and processes for a vast portfolio ofbusinesses.Sales by Business Segment2006

TOTAL SALES (In Million Euros) %

1 Chemicals 11,572 22.00

2 Plastics 12,775 24.28

3 Performance Products 10,133 19.26

4 Agricultural Products & Nutrition 4,934 9.38

5 Oil & Gas 10,687 20.31

6 Other 2,509 4.77

Total 52,610 100.0

In 2005, BASF achieved total sales of 42.7 billion Euros with 81,000 employees. In2006, BASF achieved total sales of 52.6 billion Euros with 95,000 employees. That is anincrease in sales of 23%.

Agriculture Products Market

BASF is a major supplier of fine chemicals and agricultural products for the farming,urban pest control, forestry services, turf and ornamental plants, food processing, animaland human nutrition, pharmaceuticals, and personal hygiene industries. Their statedvision is To be the worlds leading innovator optimizing agricultural production,improving nutrition, and enhancing quality of life. Their extensive research inbiotechnology focuses on creating solutions for more productive agriculture, healthierplants, and improved nutrition. They are also focused on producing products moreefficiently and economically, while keeping the local ecosystem healthy.

This business segment produces a vast array of fertilizers, herbicides, fungicides, plantgrowth regulators, and insecticides utilized by the green industry. These products, alongwith improved seed technologies developed by the research and development team haveassisted the worlds farming community in decreasing crop inputs, increasing yields, and

reducing post-harvest diseases. Products that are manufactured for final sale aregenerally formulated in facilities close to the market where there will be utilized. BASFis dedicated to continuous research and development of new, environmentally soundagricultural chemicals that will help the worlds farmers attain the greatest crop yields tofeed the ever growing population.


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The worlds population over the next four decades is expected to reach nine billion. Inthe last fifty years, the massive increase in food production is attributed to only an 8%increase in farm land. The other 92% has been attributed to increased productivity peracre of farm land. It will no longer be possible to expand crop growing areas by anygreat amount in the future. In order to meet the demands of food production, even moreefficient applications of biotechnology, plant production, land management, anddistribution will be vital. BASF is continually searching for ways to continually increaseproduction without depleting natural resources.

BASF Plant Science is the internal biotechnology research and development arm of thecompany. It has R&D platforms at seven sites in Europe and North America and consistsof 600 employees. They are responsible for coordinating with research partners atuniversities, research institutes, and biotechnology firms. Their focus is on creating moreefficient agriculture, healthier human and animal nutrition, and utilizing plants in theproduction of renewable raw materials. Between 2006 and 2008, BASF will invest 270million Euros in the expansion of its plant biotechnology operations.

International Presence

International collaboration will be vital to the success of providing enough food to aquickly growing world population. In an effort to help fulfill current and future needs,and take advantage of the opportunities for profitable growth, BASF has openedmanufacturing plants around the world. With production operations at more than onehundred large sites, BASF is close to its clients in 170 countries and can supply themwith products quickly and reliably. There are thirty five sites in Europe, thirteen in Northand Central America, twelve in South America, six in Africa, and twenty four in the Asia

Pacific region. There is planned future growth in the Asia, Africa, South American, andPacific regions. By the end of 2005, there were 80, 945 and 2,330 trainees worldwide.Below is a chart with employment data by region for 2004 and 2005.

2005 2005 2004

% %

Europe 56,614 69.9 70.2


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Thereof Germany 45,620 56.4 56.9

Thereof BASF Aktiengesellschaft 34,143 42.2 43.1

North America (NAFTA) 9,826 12.1 12.9

Asia Pacific 9,669 12.0 10.9

South America, Africa, Middle East 4,836 6.0 6.0

80,945 100.0 100.0

The decline of 1,000 workers between 2004 and 2005 has been attributed to a Group

wide measures to maintain and increase the competitiveness. An additional 17, 400positions have been created for employees from companies that provide support servicesfor BASF. Due to acquisitions and growth in 2006, the number of employees rose to95,000, with two-thirds of the global workforce employed in the European region.

Recent International Company News

Being a worldwide company means having a worldwide presence. In December of 2006,BASF was awarded a contract to supply greenhouse gas reduction technology to thelargest Chinese petroleum company. This technology reduces nitrous oxide emissions byconverting the harmful gas into inert nitrogen and oxygen, two components of our naturalatmosphere. It is estimated that this technology will reduce ten million tons of carbondioxide equivalents per year, thus improving air quality and reducing environmentalimpacts for everyone.

In May of 2006, BASF announced the acquisition of CropDesign, a Belgianbiotechnology enterprise. The existing employees became a part of the BASF researchteam, and have been working on gene discovery activities to pinpoint desired genetictraits of various plant crops. They are specifically looking for finding the gene anddiscovering the traits for drought tolerance, improved nutrient efficiency, and yield

improvements. Wheat, rice, grains, and cereals are all important crops in feeding ahungry and ever growing world. Continued research on these crops will hopefully lead toimproved and higher quality yields.

As of January, 2007, BASF venture capital has invested in the United States fuel cellcompany in California. These micro fuel cells can be used in portable devices thatrequire long run times without the availability of a power supply. Laptop computers, cellphones, radios, and other communication devices will benefit from improving thistechnology.

Human Resources

BASF seeks People with ideas and passions that are interested in going beyond thelimits of conventional chemical industry markets and are willing to do things differently.They offer career opportunities in a variety of expert fieldslogistics, finance, sales andmarketing, research, engineering, communications, legal, economics, etc. They offercollege internships and graduate theses appointments in the hopes of building their futurepipeline of top employees. The company website has a human resource link that displaysvacant positions and allows potential candidates to post their resumes.


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In addition to receiving competitive salaries, employee wages are supplemented withvarious social benefits. Health insurance, pension plans, employee stock purchasingprograms, and 401Ks are all a part of the total benefits package.

Financial Data

In 2006, BASF reached some important internal goals. For the first time in its history,sales passed 50 billion Euros and earnings before interest and taxes (EBIT) reached arecord 7.2 billion Euros. As stated by Dr. Hambrecht, BASF Chairman, Our ambitiousteam has achieved this using its own strength. Our value enhancing acquisitions in theareas of catalysts, construction, chemicals and resins, and research have helped us growin highly innovative areas and have brought us closer to our customers.

Key Financial DataMillion

2006 2005Change in

%

Sales 52,610 42,745 23.1

Income from operations before depreciation and amortization (EBITDA) 9,723 8,233 18.1

Net income 3,215 3,007 6.9

Earnings per share () 6.37 5.73 11.2

Dividend per share () 3.00 2.00 50.0

Return on assets (%) 17.5 17.7 -

Return on equity after tax (%) 19.2 18.6 -

Research and development expenses 1,277 1,064 20.0

Both dividends and earnings per share increased year over year. Due in part to asuccessful sales year, net income and EBITDA were markedly higher in 2006 than in

2005. There is an optimistic outlook for 2007, as well. They are basing the businessplanning on the following assumptions: global economic growth of 3.2%, average oilprice of $55 per barrel, an exchange rate of $1.30 per Euro, and moderately high interestrates in Europe. They expect significantly higher sales, once again, due to previousbusiness acquisitions and organic growth from the existing business and clients.

Company stock has performed well in 2006, increasing their value by 17.5%. Long terminvestors with 1,000 Euros worth of shares in 1996 that reinvested all dividends wouldhave 3,291 Euros in 2006, an overall increase of 229%. The five year growth rate ofBASF stock is 15.7% annually. Not a bad investment, in my opinion.

Future Success Planning

Below is a diagram of the recently developed strategies and principles for sustaining andpromoting future growth and success.


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Profitable growth will be important in the international competition for capital. Byfocusing even closer to discovering and satisfying client needs, both BASF and theirclient base will grow and thrive. Their continued commitment to hiring the best qualifiedemployees and management teams will help to ensure continued success. By combiningeconomic success with social responsibility and environmental protection, the goal ofsustainable development can continue to be attained.

Growth through acquisitions is a key strategy to future success. In 2006 alone, BASFGroup purchased Engelhard Corp., Johnson Polymer, CropDesign, and PEMEAS. Thesecompanies contributed to higher than expected sales and operating incomes. Their targetcompanies for acquisitions are for innovative businesses that grow faster than the marketas a whole and that make the portfolio more resilient to cyclicality. They are alsofocusing efforts for future growth through market focused innovations, and technologiesof the future. Plant biotechnology, nanotechnology, industrial biotechnology, and energymanagement systems are believed to be the technology driven opportunities of the future.

Research and development will continue to be the key to future financial success in all ofthe business segments. It is important to keep the pipeline of potential products filled inorder to remain a technologically competitive and financially sustainable worldwidebusiness. Below is a chart of current and future products in development by BASFAgriculture Products with their sales potential.

Additional Evaluation of Management

BASF seems to have a strong foothold in key, high value world markets. Their efforts tocontinuously improve customer service should keep client retention rates, and therefore


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repeat business and revenues, high. The well developed pipeline of future products andcommitment to diligent research and development of new products will allow BASF toremain a top innovator of life improving products and services. There are well outlinedgoals and commitments that seem to be followed in their business practices. Once again,this company has a large international presence and is not dependant on one country or

regions economy. As with retirement funds, having a diversified business portfoliospreads the possible risks over a large area, thus reducing the possibility of companywide failure. As I have researched this company, there has been nothing that has stoodout as being a potential for economic disaster.

* Information in this paper can be found at BASF.com and Hoovers.com


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Bayer, Far More Than Aspirin

Stated Values: A will to succeed A passion for our stakeholders Integrity, opennessand honesty Respect for people and nature Sustainability of our actions

Mission Statement: We have set our course for the future.The corporate mission statement includes the slogan Bayer: Science for a Better Life.

This statement summarizes and reflects the Bayer Groups strategies, goals, and values.It underscores the potential and willingness for Bayer to help develop and shape futureinnovations to benefit mankind in the fields of health, crop, and materials science.Werner Wenning, Chairman of the Board of Management for Bayer AG wrote thisstatement in a 2006 company publication:

We have set our course for the future. This new mission statementdefines our future perspectives, our goals and our values, and guides our

strategy at a time of sweeping change. It outlines to our stockholders,our customers, the public and especially our employees how we think andbehave as a company. In seeking to arouse everyones enthusiasm tocontribute to Bayers success, we aim to impart one thing above all else: thefascination that is Bayer.

Executive Summary

According to the company profile, Bayer is a research based, growth oriented globalenterprise with core competencies in the fields of healthcare, nutrition, and high techmaterials. Our products and services are designed to benefit people and improve theirquality of life. According to Hoovers, a Dunn and Bradstreet company, Bayers top

competitors are BASF, Dow Chemical, and Johnson& Johnson, with 27 other companieslisted as minor competitors. They are a corporation with ties to the entire world market.Their target market includes pharmaceutical, textile, agricultural, horticultural,production, and medical companies that sell to end users. Research universities,healthcare management firms, and individual governments are also a part of Bayers

marketing mix. Bayers goals and objectives are simply stated on their website. Wewant to create value through innovation, growth, and improved earning power. At

Bayer CropScience, there vision is to be a leading partner in providing innovative

products and combined solutions for the production of quality food, feed, and fiber tomeet the global challenges of tomorrow. They seek out mutually beneficial partnershipsthat are long term, consistent, and predictable with a goal to generate value through

human innovation.

HistoryOn August 1, 1863, Friedrich Bayer and Johann Weskott created a joint business ventureand opened a dyestuffs factory in Wuppertal, Germany. Two years later, invested in acoal, tar, and dye factory in the United States and began exporting products. In 1876, thebusiness venture expanded to include a dye factory in Moscow. The joint stock companyBayer & Co. was established on July 1st, 1881, by the descendants of Bayer and Weskott.


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During the next twenty years, the pharmaceutical division was established with the helpof chemist Carl Duisberg. Bayer researcher Dr. Felix Hoffmann synthesized achemically stable form of the active ingredient in aspirin in 1897. Bayer aspirin wastrademarked in 1899, and became the worlds first painkiller.

In 1925, Bayer & Co. merged with several smaller companies to form I.G.Farbenfabriken AG. As Germanys largest and most recognized chemical company I.G.Farbenfabriken was drawn into working with the government during the Third Reich. In1939, Gerhard Domagk, a researcher, was awarded the Nobel Prize for Medicine for hisantibacterial effect of sulfonamides, a common ingredient in modern day antibiotics. Inan attempt to improve the image of the company in the post war era, the companychanged its name to Farbenfabriken Bayer AG in 1951. By 1972, they were simplyknown as Bayer AG.

The push for international expansion of the chemical and healthcare group began in theearly 1970s. In 1979, an agriculture center was developed in Monheim which is now the

corporate headquarters for Bayer CropScience, which was established in 2002 as the firstlegally independent subgroup of Bayer. Bayer made several acquisitions of Americanpharmaceutical companies and became one of the worlds largest manufacturers ofdiagnostics systems and reagents for clinical chemistry in the 1980s and 1990s. In 2001,the CropScience group acquired Aventis CropScience for 7.25 billion EUR, making it aworld leader in crop protection. The next year, Bayer shares were listed on the NewYork Stock Exchange. In 2003, Bayer Chemical AG, Bayer HealthCare AG, and BayerTechnology Services gained legal independence as part of the Bayer Groups

restructuring. In 2004, Bayer was selected as the first private sector partner to the UnitedNations Environment Program in the youth and environment area. They provide materialand financial support in excess of one million EUR annually to facilitate world wideyouth environmental programs. Bayer recently purchased Icon Genetics AG whichspecializes in researching innovated methods of producing and utilizing geneticallymodified crops.

Organization

The Board of Management consists of four members with Werner Wenning as chairman.The board serves to commit to serving the interests of the entire enterprise and achievesustained increases in corporate value. They are responsible for defining corporatestrategy, setting the annual budgets, and allocating corporate resources, which are nosmall tasks. The Board of Management is also responsible for making sure that theSupervisory board receives comprehensive, timely information on any and all mattersregarding planning, business development, and risk management. Members serve forfive years and are eligible for reappointment after there term has ended. The SupervisoryBoard consists of twenty members with Dr. Manfred Schneider as chairman. This boardis responsible for overseeing the work of the Board of Management and approving thefinancial statements and the annual budgets. Half of the board is elected by employees,the other half elected by stockholders. The board is kept aware of all business policiesand corporate planning and strategies Below is the organization chart for the subgroups


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and service companies. Each piece of the portfolio operates independently under theleadership of the management holding company of Bayer AG.

Bayer Healthcare- researches, develops, markets, and manufactures products for diseaseprevention, diagnosis, and treatment.Bayer CropScience- a global leader in crop protection and horticultural pest control

Bayer Material Science- a renowned supplier of various high performance materials andinnovative system solutions used in countless products for everyday living.

Central Service Functions Combined Into Three Service Companies:Bayer Business Services- Bayer Groups international competence center forinformation technology based services.Bayer Technology Services - the technological backbone of the Bayer Group. Theyengage in process developments for plant engineering, construction, and internaloptimization.Bayer Industry Services - the operator of Germanys largest chemical park network,consisting of three sites.

International Market Presence

The Bayer Group employs 110,200 people world wide. Below is a breakdown of theglobal workforce by region.

Workforce110,200 employees worldwide (as of June 30, 2006), including:

61,300 in Europe (of which Germany: 44,100)

18,000 in North America

16,900 in Asia/Pacific

14,000 in Latin America/Africa/Middle East

Bayer is represented by 350 company locations globally with headquarters inLeverkusen, Germany. In 2005, they posted sales of nearly 12 billion EUR in theEuropean market alone. This accounts for more than 43% of total sales worldwide.


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More than 52,000 Europeans are employed at the European sites, where 65% of allresearch spending was used in 2005. Belgium, France, the United Kingdom, Ireland,Italy, and Spain all have major production facilities and almost every country in EasternEurope has at least one branch.

While Europe may be home base, Bayer is present on five other continents. All divisionsof Bayer are represented in Africa with crop protection being the major focus. They arecontinually searching for improved efficiencies and scientific advances in foodproduction to feed a hungry continent. South Africa accounts for 56% of total sales forthe continent, and continues to hold a key position with Bayers Africa success strategy.

The South African operation serves much of the continent and is equally important toIndian Ocean country markets like Madagascar and Mauritius.

The combined countries of the Middle East serve to bridge the gap between Europe andthe Far East. Its entire portfolio of groups and services is represented, as well. Since1990, the Asia-Pacific region has become the focused target for future growth and

revenues. In 2005, this region accounted for 4.6 billion EUR, or 16% of total Groupsales. Japan has the worlds second largest economy so it is obviously important forBayer to maintain a stronghold there. China and Taiwan comprise the second largestAsia market. China will continue to develop a larger presence in the worlds corporate

environment. Currently, manufacturing and construction industries are expanding rapidlyand Bayer is planning on spending billions in capital expenditures to corner the market inpolymer production and manufacturing.

Bayer has actively supported and helped develop growth in South Koreas economy withthe building of facilities for all three groups. Thailand, Vietnam, Myanmar, Laos, andCambodia will all play a future role in the expansion of the companys regionalmanufacturing base in the Asia-Pacific region. Singapore, Indonesia, Malaysia, thePhilippines, Brunei, and East Timor are known as the South ASEAN country group. Inthis region, business is driven by life science operations. The Indian country groupconsists of India, Sri Lanka, and Bangladesh. There are 12 sites in these locations thatfocus mainly on agriculture and polymers.

There is a strong company presence in Australia and New Zealand and has helpedcontribute to the regions growth. The six production facilities focus on agriculturaladvances, health care, and polymer development and production.

The North American market plays a large role in the success of the Bayer Group. Theyare represented by two separate operating subsidiaries: Bayer Corporation isheadquartered in Pittsburg, and Bayer Inc. in Toronto, Ontario. Total North Americansales reached 7.3 billion EUR in 2005. The United States organization is the largestwithin the Bayer Group with 55 locations spread across the country. They offer 10,000products and market the entire spectrum of its portfolio. There are 3,500 scientistsemployed that work specifically on research and development. A budgeted 565 millionEUR were spent in 2005 on research and development in the states. Bayer Inc. operatesboth the HealthCare and MaterialScience Groups in Canada. The Crop Science Group


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also has a large presence and all three Groups focus on improving the quality of life forCanadians. Producing products that fight disease, crop and animal protection, anddeveloping improved high performance materials are all services that are performed inthis region.

Bayer has been present in Latin America for 110 years. Almost every country hasaffiliates and there is a high level of awareness among consumers for brand recognition.In 2005, Bayer achieved sales in this region of 2.4 billion EUR. They have been able tobenefit from the growth and modernization of the region and have helped to develop andshape the business environment since they have been a presence for such a long time.Brazil is the largest single market in Latin America. In 2005, 36% of sales generatedwere in this country. Mexico accounted for 27% of sales that same year, and is home tothree production facilities. Central America, the Caribbean, Columbia, Ecuador, Chileand a dozen other Latin American countries all contain production facilities for Bayer.Below are the newly released sales figures for Bayer CropScience in 2006

Sales by Region

Bayer CropScience 2006

Sales by Business Bayer CropScience 2006

Recent International News

On March 7, 2007, Money Magazine reported that Bayer announced plans to cut 6,100employees world wide by 2009. This cut has been planned since Bayer acquired its rival,

Schering, in 2006. These job cuts aim to reduce expenses by $925 million per year. Ofthe planned cuts 3,150 will occur in Europe, 1,000 in the United States, 1,200 in LatinAmerica and Canada, and 750 in the Asia-Pacific market.

On March 28, 2007, Bayer CropScience announced two new joint ventures in China.Sales are expected to grow from 65 million Euros to 100 million Euros in this region inthe next few years. Bayer also plans to invest 25 million Euros in the Chinese region tofurther develop crop advancements. China is an attractive market for core crops like


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cotton, vegetables, canola, and rice. It has a similar climate and soil profile to manyregions of the United States, so many of the same plant material can be produced. Thefuture market for seeds is one of the future drivers of growth that Bayer CropScience ispaying particular attention to.

Human Resources

It is Bayers stated belief that a world wide presence requires world class employees in

all fields. They seekout highly qualified young employees in marketing, informationtechnology applications, and research and development. It is there goal to hire and trainemployees while they are just out of college to build for the future success of thecompany.

The company website has an extensive online link for worldwide job opportunitiesamong hundreds of facilities. The user friendly site allows the user to input educationlevel, desired location, and desired division. The site lists all of the published job

openings. In addition, Bayer offers internships, student grants, and vacation work forcollege students, as well as a combined degree/vocational training program to employeeswho want to move up within the company. Each employee is offered a performancerelated bonus program in addition to their annual salary, as well as a pension plan. Longterm stock ownership programs have been developed to not only reinvest in the company,but also benefit individual employees retirement plans.

Financial Data

Bayer Group (in million Euros) 2005 2006 Change%

Net sales 24,701 28,956 +17.2

EBITDA 4,122 4,675 +13.4

Net income 1,597 1,683 +5.4

Earnings per share ()3

2.19 2.22 +1.4

Dividend per Bayer AG share () 0.95 1.00 +5.3

Net cash flow5

3,227 3,928 +21.7

Capital expenditures 1,210 1,739 +43.7

Research and development expenses 1,729 2,297 +32.9

Bayer has managed to improve its financial position in all of the categories listed above.Sales, earnings, and income are all up, as are dividends and net cash flows. There wereincreases in capital expenditures and research and development expenses year over year,but these increases can be viewed as the cost of securing future business advancements.The stock price continues to climb from $58.28 on February 12, to $62.45 on March 28,2007. It seems that Bayer is in a good financial position for 2007.


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Future Success Planning

To continue to develop the companys innovative spirit, a Group wide initiative has beenlaunched under the slogan inspiration, ideas, innovation. This long term initiative has

been designed in the hopes that it will encourage all employees to develop and offer

creative ideas and suggestions. This creates an atmosphere of sharing and inclusion andlets employees know that there voice will be heard.

Between 2000 and 2011, twenty six new active ingredients have been scheduled forreleased by the Bayer CropScience Group. It is estimated that these new products willpeak sales potential by an additional 2 billion EUR by 2011. These products werecreated by the scientists in the research and development departments of facilitiesworldwide. Continued innovation in products and technology as well as developing agreater presence in international markets will help ensure the future success of the BayerGroup.


Bayer restructured the organization by creating independent groups instead of one mega-company. This reduces overhead, increases efficiencies and profitability, increasesoutput with fewer inputs, creates more streamline manufacturing and distribution, allowsfor a more highly trained and specialized staff, and streamlines training operations. Eachof these benefits can only help the Bayer Group continued success in their markets.While it can be harder to keep a corporate identity with some many divisions of thecompany, they seem to be doing a good job keeping the employees informed of actionsand ideas throughout the divisions. While there are independently operating Groups,there is still a management board that oversees all operations and is constantly updated onthe status of the divisions. There actions have kept Bayer working as one cohesive unit.

Creating and successfully managing such a diversified portfolio spread over multiplecountries and areas of the world is a positive. This keeps a single incident in one countryfrom adversely affecting the entire company (natural disasters, terrorism, economicdownturn, etc.) Bayer should be applauded for being present in so many countries thatare not at peace with other companies in the portfoliothe UK and Ireland, NorthAmerica and the Middle East, etc. I did find any documentation to support this, but Iwould assume that Bayer has a well established diversity training program thatcontributes to the atmosphere of tolerance.

Focusing on developing in new markets that have barely been tapped, like the China andAsia-Pacific markets is a great decision. Controlled growth is the way to increase thesuccess and profitability of a company. The key is to be able to handle the growth whilemaintaining efficiency, product integrity, and customer service.

Bayer continues to view research and development as its security for the future. Creatinginnovative products and technologies will continue to keep them on the forefront of


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modern scientific advances. Below is a graph depicting the way funds have beenallocated for research and development over the last three years.

Research and Development Expenses 2005 Research and Development Expenses 2006

by subgroup in % by subgroup in million

The only additional comments I have regarding the Bayer Group are in reference to the

corporate decision to not renew the licensing on the product Azulux. This product wasthe only herbicide on the market in the United States that was labeled to treat crabgrass inSt. Augustine turf. On the surface this decision seemed to not make good business sensesince Bayer had the market cornered. They were able to charge a premium for thisproduct since there was no real competition. Upon further review of the global picture, Irealized that this was actually a sound business decision. There are only two states thathave a significant amount of St. Augustine turf, Texas and Florida. In fact, the mostcommon variety of St. Augustine was named for the two universities that collaborated tocreate a sun tolerant variety. The University of Florida and Texas A&M created thefloratam variety, blending both universities names into one. Even though sellingAzulux created a revenue stream for Bayer Corporation in the US, it probably did notamount to much of anything when viewed from the Bayer Groups corporateheadquarters in Germany. Bayer seems to create and supply products that affect andserve the global market, rather than provide specialty items that can only be utilized by asmall section of the world. So, while this decision has negatively impacted thousandslandscapers and millions of homeowners, it has been another successful business decisionby Bayer.

There is an obvious commitment to constantly improve human health, crop and animalhealth, and technological advances in production and security. There is a commitment toact in a way that balances economic, ecological, and social needs of current and future

generations by reconciling short term results with long term requirements. These allcontribute to the betterment of mankind and the continued evolution of Bayers unique

identity and success.

*Information from this paper can be found on Bayer.com and Hoovers.com


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Mission Statement: To constantly improve what is essential to human progress bymastering science and technology.

The component constantly improve is the concept bedrock to Dows corporate culture.

H.H. Dow, the companys founder once said, If you cant do it better, why do it? Thisstatement fuels the drive to be a constantly adapting, innovative company. Beingessential to human progress means that they develop products that provide improvedlifestyles for all the people of the world. This idea connects Dow with all of the externalmarkets they serve, looking at the world from outside-in. This allows Dow to seek outgrowth opportunities and to develop new products that are necessary for humandevelopment. By mastering science and technology, they work to continually createsolutions for their clients and society.

Core Values: Integrity and respect for peopleDow Chemical Company has a belief in the inherent value of all people. They state thatour promise is there most vital product- our word is our bond. The relationships that arecritical to our success depend entirely on maintaining the highest ethical and moralstandards around the worldwe will ensure the health and safety of our communities,

and protect the environment in all we do. They believe that their communities are theirneighbors and that the customers are their partners in creating value. Their customersloyalty is the greatest reward.

Executive Summary

Dow AgroSciences is a wholly owned subsidiary of the Dow Chemical Company, thesecond largest chemical company in the world. Dow Chemical, headquartered inMidland, Michigan, and its subsidiaries manufacture plastics, hydrocarbons, agriculturechemicals, petrochemicals, Styrofoam, fibers, Saran film, and performance chemicals.Together, the combined divisions of Dow Chemical manufacture more than 3,500products. These 3,500 products are sold in more than 175 countries. According to Dunnand Bradstreet, its top competitors are BASF, DuPont, and Exxon Mobile Chemical.They are ranked 36th on the list of Fortune 500 companies.

Dow AgroSciences is a limited liability corporation based in Indianapolis, Indiana. TheAgroScience division is ranked as a top tier agricultural company dedicated to

providing innovative crop protection, seeds, and biotechnology solutions to serve theworlds growing population. As a global leader in providing pest management andbiotechnology product solutions, they have been responsible for helping to increase theworlds food supply and promote health and improved quality of life for the ever growing

world population. They employ 5,500 people in more than fifty countries and haveworldwide sales of $3.4 billion.


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HistoryThe Dow Chemical Company was incorporated in 1897. After the development of asales department and the introduction in 1906 of its first product for fruits and flowers,the agricultural chemicals division was established in 1908. On June 26, 1937, thecompanys stock was listed on the New York Stock Exchange for the first time. Dow

AgroScience began as the agricultural unit of the Dow Chemical Company and as a partof the Eli Lilly and Companys agricultural business in 1950.

The joint venture, DowElanco, was formed in 1989, and continued to develop newproducts and acquire strategic businesses. In 1997, the Dow Chemical Companyacquired 100 percent of DowElanco and renamed it Dow AgroSciences. Majoracquisitions in the 1980s and 1990s include Mycogen Seeds, Cargill Hybrid Seeds,Sentrichem, and the agricultural chemicals business of Rohm and Haas. In 2002,President Bush bestowed the National Medal of Technology to Dow for the vision tocreate great science and innovative technology in the chemical industry and the positiveimpact that commercialization of this technology has had on society.

Dow AgroSciences plans for the future focus on implementing its strategies revolvingaround productivity, portfolio management, and innovation. This allows them tomaximize growth by concentrating on current products as well as continually developingnew, revolutionary products and solutions.

Organization and Corporate GovernanceThe ultimate authority for corporate governance rests on the shoulders of the Board ofDirectors. The current Chairman of the Board of Directors is Andrew Liveris. He is alsothe president and CEO of Dow Chemical Company. In March of 2007, the boardannounced major organizational changes. Soon there will be eight groups rather thantwo, with a president for each group. Below is the new organizational chart with theadditional six groups. Each group president is held responsible for implementing theappropriate growth strategies for the businesses in his division, as well as contributing tothe short term and long term financial goals set fourth by the Board of Directors.

There are five standing committees which operate directly under the Board of Directors.These committees include the Governance Committee, Audit Committee, CompensationCommittee, the Environment, Health, and Safety Committee, and the Executive

Hydrocarbons& Energy

DowAgroSciences

SpecialtyPlastics

Specialty ChemicalsEpoxy &

Designed Polymers& Latex

Polyurethanes

BasicChemicals

BasicPlastics

Board of Directors& Standing


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Committee. All members of the standing committees are elected by the Board ofDirectors. Each of these committees plays an integral role in the organization.

The purpose of the Governance Committee is to consider and report to the Board of

Directors all matters relating to the selection, qualification, compensation, and duties of

the members of the Board. They also act as the nominating committee for directors andassist the Board with corporate governance issues. The four member Audit Committee isappointed by the Board to assist in monitoring the integrity of financial statements,performs the internal audit functions, and assures compliance with legal and regulatoryrequirements.

The Compensation Committee is responsible for discharging the board from mattersrelating to total compensation, benefits, and perquisites of the CEO and other seniorexecutives. This removes any potential improprieties or unethical compensationpackages to be developed. The duties of the Environment, Health, and Safety Committeeoversees and assesses the effectiveness of all programs relating to the environment,

health, and safety policies and programs. They advise the board on matters that impactcorporate social responsibilities and the companys public reputation. Lastly, the fourmember Executive Committee exercises all of the powers of the Board of Directorsbetween their scheduled meetings. The Executive Board manages and directs thebusiness affairs of the company in the absence of the Board of Directors.

Jerome Peribere assumed his role as president and CEO of Dow AgroSciences inFebruary of 2004. In 2006, he was appointed to Dow Chemical Companys Office of theChief Executive. Peribere began working for Dow in France as a sales representative inSpecialty Chemicals in 1977, after receiving a masters degree in business economics andfinance. He was named Regional Marketing Manager of Eastern Europe in 1982. By1988, he was the European agricultural business director. Peribere moved to Indiana in1993 to assume the position of global commercial director. After several otherpromotions, he became the vice president of Agricultural Chemicals in 2002.

Dow Chemicals Operating Segments and Businesses

Agricultural SciencesDow AgroSciences has a broad spectrum of agricultural cropprotection chemicals including herbicides, insecticides, fungicides, and fumigants. Thelarge herbicide portfolio provides weed management solutions around the world. Itsinsecticides and fumigants are used in over a hundred agricultural markets globally.Multiple fungicides provide protection from pathogens in fruits, vegetables, grain, andspecialty crops. The combination of products created and sold by the AgroSciencesdivision provide several crop management strategies that lead to higher crop yields andprofits.

The Plant Genetics and Biotechnology division is committed to providing solutions thatwill improve crop production and output for food and feed uses. This division is dividedinto the Seeds and Traits, Healthy Oils, and Animal Health segments. The AgronomicSeeds and Traits segment has proprietarily developed top performing seeds for corn,


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cotton, soybeans, alfalfa, canola, and sunflowersall vital crops to help fulfill theworlds needs for food, clothing, and fuel. The Healthy Oils segment is constantly tryingto improve plant traits that will lower saturated fats. The goal is to create the mosthealthy oils and products to best benefit farmers, food producers, and consumers. TheAnimal Health segment is currently exploring plant cell produced vaccines and

antibodies for use in animal disease prevention. They have already developed severaldisease prevention antibiotics for livestock, which helps keep the food supply safer.

Performance PlasticsDow Automotive, Dow Building Solutions, Dow Epoxy,Specialty Plastics, Polyurethane Systems, Technology Licensing and Catalyst

Performance ChemicalsDow Latex and Acrylic Monomers, Designed Polymers,Specialty Chemicals

Basic ChemicalsCore Chemicals, Ethylene Oxide/Ethylene GlycolBasic PlasticsPolyethylene, Polystyrene

Hydrocarbons and EnergyUnallocated and OtherDow Ventures

2005 Sales by Operating Segment 2005 Sales by Geographic Region(Dollars in millions) (Dollars in millions)

Performance Plastics $ 11,388 North America $ 19,850Performance Chemicals $ 7,713 Europe $ 16,624Agricultural Sciences $ 3,364 Asia Pacific $ 5,174Plastics $ 11,815 Latin America $ 4,659Chemicals $ 5,660Hydrocarbons and Energy $ 6,061Unallocated and Other $ 306

MarketIn addition to the agriculture industry, there are several specialty markets that utilize theproducts developed by Dow: golf courses, lawn and ornamental horticulture growers,landscape management companies, the livestock industry, and interior/exterior pestcontrol industries. The regions of the world where Dow products are available includeNorth America, Latin America, Asia-Pacific, Europe, the Middle East, and Africa.Below are graphs depicting Dow AgroSciences global sales by region and division.Currently, almost half of all sales revenue is generated from North American sales. Ibelieve that in the future, a greater portion of sales revenue will be generated in otherregions due to the increased presence in manufacturing, research and development aroundthe world.

Dow AgroSciences Global Sales by Geography 2005North America 45% Europe 26%Latin America 15% Asia 14%

International Presence

Dow AgroScience is dedicated to serving the worlds growing population viarevolutionary solutions. They estimate that the world population will grow forty percent


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to 9.1 billion people in the next fifty years! Innovation can come from every corner ofthe globe; therefore, international collaboration is vital in finding solutions to worldissues. Dow currently employs 42,400 people worldwide. That is a drop of 10,000employees since 2001; however, the ratio of men to women has remained the same at76% male and 24% female employees. I could not find any publications to explain the

cutting back of the workforce, but I assume that it was a budget cutting measure to helpkeep profitability high.

2005 EMPLOYEES BY GEOGRAPHIC AREA DOW CHEMICAL COMPANYNorth America 22,646Europe 13,276Asia Pacific 2,782Latin America 3,709

In an effort to help fulfill future demands, Dow has opened more than twenty majormanufacturing locations worldwide. Each location has its own dedicated website that isavailable in English and the language native to the area, thus keeping the localcommunities involved and aware of Dows progress. In addition to providingemployment opportunities and strengthening the local economies with tax revenues, theyseek to address the specific needs of the communities, such as education, health, andrecreation. These major manufacturing locations include sites in Brazil, Benelux,Germany, Canada, France, Texas, California, Michigan, Louisiana, and West Virginia.Each location has been selected in part for the ease of product distribution and theavailable supply of the labor force. There are future plans to add more manufacturingand research sites throughout the European Union, Australia, China, Russia, and LatinAmerica.

Research and development are the keys to developing future markets and profits. DowAgroSciences has a considerable manufacturing and research presence throughout

Europe. Twenty percent of Dow Europes employees are devoted to research anddevelopment. Diseases of prosperityaging, obesity, diabetes, and heart disease, arebeing researched in Europe. Canada also has a large portion of their Dow employeesdevoted to research and development of solutions for weed, insect, and diseasemanagement as well as plant genetics.

Recent International News

A conference was organized by Dow AgroScience in June of 2006 in Brussels. Thisconference was aimed primarily at forging collaboration between Europeancompanies, institutes, and universities in key areas of life science and biotechnology and

in improving awareness among decision makers. The European bio-economy has amarket size of nearly 1.5 trillion EUR and employs more than 22 million people. Thegoal for Dow was to forge some very strong collaboration with European partners,according to Jerome Peribere, the president and CEO of Dow AgroSciences. Bydeveloping a foothold in this vastly potential market, Dow is securing its goals for futuresuccess. Both plant derived vaccines and the developing of healthier oils were the keytopics of the conference.


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On December 22, 2005 Dow AgroSciences announced a research collaboration with theUniversity of Melbourne in Australia to pursue plant derived vaccines for the Avian flu.This joint venture project is funded partially by grants from the Australian government aswell as Dow itself. This Linkage-Projects program supports collaborative researchprojects between industries and higher education facilities. The project aims to provide a

proof of concept for the rapid production of poultry and livestock vaccines. Plant derivedvaccines avoid the usual caveats of vaccines developed with components of animalorigin. The hope is to further develop these types of vaccines for human use.

China seems to be on the forefront of many new business ventures in the last five years.To further develop this countrys budding corporate explosion, it is important to educatethe young citizens of China. Dow is directly involved with developing TsinghuaUniversitys department of chemical engineering. According to Dr. Zheng Liu, thechairman of the department, As an educational institution renowned for the world classcaliber of its graduates, we are delighted to have Dow so closely involved in helpingdevelop todays young Chinese talent into tomorrows top industry professionals.

Human Resources

The unique corporate culture has evolved from the everyday practices of the core values.The unique talent and leadership abilities of the employees are valued as their greatestresource. They seek to hire well qualified individuals with the ability to developsolutions and the compassion to make a difference. Employee survey feedback showsthat there are several strengths in the diverse culture including the ability to focus andcomplete the task at hand. The employees also feel that the commitment to people isoutstanding and that each person has ownership in their future. The employees alsoreported a feeling of belonging to a diverse, inclusive, learning culture. It sounds likeemployee morale is alive and well at Dow. This helps reduce turnover rates andexpenses.

The company website has a link for career opportunities. One can search the intranet forjob postings worldwide. They have a college recruitment program in place that providessales internships in crop, turf, ornamentals, or urban pest management. There are alsointernships available in lab based research for undergraduate and graduate students. Byteaming with colleges and universities, Dow hopes to attract a well educated work forceto become the innovators of tomorrows products. There are multiple tiered career pathsin research and development, sales and marketing, and functional support which includelegal, financial, and technical support disciplines.

Financial Statements for Dow Chemical CompanyPERFORMANCE HIGHLIGHTS 2005 2004Net Sales $46.3 billion $40.2 billionNet Income $4.5 billion $2.8 billionEarnings per Share Diluted $4.62 /share $2.93 /shareInjury and Illness Rate (recordable incidents per 200,000 hours) 0.40 0.51Taxes paid $1.6 billion $1.2 billionTotal purchases $43.2 billion $39.3 billionDividends declared per share $1.34 $1.34


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Debt to Capital Ratio 39% 48%Charitable Contributions $23.2 million $17.1 million

From the numbers published above, one can see that net sales, net income, earnings pershare, and charitable contributions have increased year over year. While total purchasesincreased in 2005, the debt to capital ratio decreased by nine percent. It seems that

finances have been better managed.

Dow stock is traded on the New York Stock Exchange under the symbol (DOW). OnFebruary 22, 2007, the stock closed at $43.13 per share, which was up .13 cents for theday. As of March 14, 2007, stock prices were $43.19 per share. Below is a chart of thestock prices from April 2006 through March 2007. The fifty two week high was $43.73and the low was $33.00.

DOW Stock Chart April 2006 March 2007

Every quarter since 1912, Dow has paid its shareholders a cash dividendthat is 382

consecutive quarters! The quarterly dividends payable in April, 2007 will be 37.5 centsper share.

An assessment of each units investment potential was made in order to maximizeinvestment capital and value for the shareholders. Those that were deemed able to growat above industry levels received the largest amount of investment capital. Somedivisions are run strictly to generate cash flows to develop other divisions, while somedivisions must show growth and increased profitability or face divestment. There is aclear financial success plan in place.

Future Success Goals and Planning

In 2006 Andrew Liveris, the CEO of Dow Chemical Company, announced 2015Sustainability Goals for all Dow business units. He outlined the ambitious multiple stepprogram that addresses some of the most pressing economic, social, and

environmental concerns facing the global community in the next ten years. Hecommitted the company to creating at least three breakthrough solutions in achievingaffordable and adequate food supplies, decent housing, sustainable clean water supplies,and improved personal health and safety.


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He also announced Dows commitment to improving energy efficiency, developing

alternative energy sources, and addressing the global climate change believed to bepartially caused by the consumption of fossil fuels. Between 1996 and 2005, Dowreduced its fossil fuel consumption per pound of product by twenty percent. Over the

next ten years, the goal is to further reduce consumption per product pond by twenty fivepercent. With a continued focus on world issues, Dow will undoubtedly be a fixture inthe worldwide corporate community for years to come.

Dow has already taken steps to increase its international presence by working withuniversities and research groups in developing countries like China, India, Russia, andBrazil. This strategic investment strategy will help ensure future success. China hasbecome the center of attention when it comes to estimating immediate growth potential -in 2005 alone they posted sales of $2.3 billion. They accelerated the entry strategy inRussia by building a Styrofoam and polystyrene plant and have recently signed anagreement with a Russian energy firm to supply polyethylene products. They are

exploring new partnerships in the Middle East to secure advantaged oil feed stocks toensure long term competitiveness in the global market.

Dow AgroSciences is the leader in focusing on the cutting edge technology of plantderived vaccines. They are actively pursuing solutions for the avian flu, West Nile virus,and canine diabetes. It is believed that plant made technologies can find additionalsolutions for animal nutrition, food safety, food borne pathogens, and several classes ofdiseases.

There has been a recent push for attaining growth with strategic customers by developingstronger, more dynamic customer relationships that yield mutually beneficialopportunities for success, by providing the products, technologies, and services that

enable advances in new directions.

The development of the H.H. Dow Academy in 2005 provides advanced education andtraining opportunities for the companys future leaders. Education and innovation will

always be a focus for this and many other successful, sustainable corporations.


There commitment to building a people-centric performance culture by focusing oninternational recruiting and employee retention reinforces the idea that the workforce isthe single most important source of competitive advantage. Dow wants to ensure thattheir future workforce is as great and successful as the current workforce, or perhaps evenbetter. The fact that they illustrate a compassion for the areas they inhabit creates afeeling of ownership and inclusion in each local market. The focus in research anddevelopment is great for future growth and revenue potentials, not to mention great formankind.


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By further dividing the Dow Chemical Company into eight, rather than two divisions,more sustained and consistent revenues will be generated. This new structure creates anenvironment of greater individual accountability and increased autonomy. Each businessunit will be able to make decisions that increase efficiencies in training, managing,developing, and growth. Each unit has its own long term success drivers and factors so

by hiring people with the specialized skill sets for individual business units, a greaterlevel of success will be achieved.

In a rapidly consolidating and globalizing industry, Dow has an array of strengthsincluding geographic reach, business and product diversity, future potentials, range ofcustomers and markets, and a global manufacturing and distribution capability. As theycontinue to spread into the world market, developing the right staff and managementteams will be vital to creating and maintaining a cohesive business unit.

*All information contained in this document can be found on Dow.com, Dowagro.com, and hoovers.com


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Final Comparison

I wanted to research three companies with similar portfolios in order to truly compare andcontrast them. BASF Group, Bayer AG, and Dow AgroSciences are all multi-billiondollar corporations with diverse portfolios of agricultural, human and animal health,

specialty chemical, and energy products that serve to better mankind. Dunn andBradstreet lists these three companies as top competitors with one another. It is estimatedthat by 2050, the world population will reach nine billion people. Todays food

production levels will have to double with out the addition of much farm land. Since thisis becoming a pressing issue in our industry, I wanted to research companies that weresuccessfully addressing this issue.

Historically, these companies are linked to each other either by being a part of the sameparent company or by working on joint ventures. BASF and Bayer are both companiesthat began in Germany in the 1860s. Out of necessity when the German economydissolved after World War I, these two companies merged together with four others toform IG Farbenfabriken. Post World War II, these companies went their separate ways.

Both BASF and Bayers world headquarters are still in Germany. Dow is the onlyAmerican based company in this comparative analysis and was incorporated thirty yearsafter its German competitors. In the 1950s, Dow and BASF worked on a joint venture in

Texas to produce basic chemicals. This joint business venture supplied the base forBASFs North American business. Even though these companies are top competitors,they still have many of the same roots.

When researching these companies, I discovered that there were far more similaritiesthan differences. All three have a world-wide presence and strive for employee and localbuy-in. Each has a highly qualified executive board and similar recruiting and trainingprograms. Each offers a wide variety of products in several markets. Corporate

longevity has been well established since each company has been in business for over100 years. Projected growth, an increased global presence, and a financially-backedbusiness plan will continue to keep these companies in business for years to come.Science and technology, along with research and development, are the drivers of theircompetitiveness, which keeps each company striving to be the first to find the nextsolution to a world issue.


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In the agriculture science divisions, the goal of each company is to find ways to increasethe world food supply to keep up with an ever increasing demand. The agricultureproducts divisions of each company have been recognized as future growth vehicles forthis reason. In addition to increasing the world food supply, these companies areresearching bio fuels, plant derived vaccines, and other bio-products. Utilizing crops for

research and development of more eco-friendly products boosts the agricultural economy.According to MSNBC, the price of a bushel of corn has doubled over the last three yearsdue to the increased production of ethanol gasoline. The price of eggs has also risen 40%in the same time period since chickens eat corn feed. The increase in price of agricultureproducts increases the profitability of farms, particularly American farms since we growthe bulk of the worlds corn. Research and development will continue to be the focus toachieve crop yield goals as well as future sales growth.

I am by far not the most qualified person to tell someone how to run a billion dollarcorporation. If, however, I owned or was a part of the management team for any businessI would focus company efforts on four main areas: employee retention, customer service,

sales growth, and research and development. Each of these areas helps support theinternal structure and integrity of the company. Research and development gives acompany a competitive edge and allows for growth in product lines. A larger assortmentof cutting edge products offered leads to a larger amount of product sold and greaterrevenues. A well planned and run customer service division keeps current customershappy and leads to even more sales growth. It is easier to retain the book of business youhave than to constantly replace existing customers with new clients. Repeat business isoften the largest percentage of sales. Lastly, having high employee retention ratesincreases efficiency, reduces costs, boosts morale, and avoids the pitfalls of revolvingdoor hiring practices. When employees believe in management team directives, companyproducts, company values and mission statements, and their co-workers, everything elsetends to fall into place.

Bayer, Dow, and BASF all contribute to the health and wellness of society. Productdevelopments in agriculture science, human and animal health, specialty chemicals, andenergy by these companies have improved the quality of life for billions of people. Eachof these companies has a diversified portfolio of products, world-wide presence, and hugepotential for growth and development in the coming years. Their successes are ultimatelylinked to man-kinds successes.

comparative business analysis basf group, bayer ag, and dow

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