Make full use of existing assets. In the chemical industry, assets are extremely capital intensive. It would be reckless business to not make full use of these assets.
This is a good time to succeed in the chemical industry. "By 2035, the global market volume of chemical products will more than double. Roland Berger, a global strategy consultancy, said. People's daily life is increasingly dependent on chemical products; from those who preserve our food, dye the plates we eat, wash the plates we eat, and then deal with the waste of food we don't eat. There is hardly any industry more dependent on modern life. So why is it so difficult to succeed in something that everyone really needs?
The answers are manifold, but they include low profit margins, large price fluctuations, increasingly stringent regulation, complex logistics chains and global competition.
As SAP se, a German business consultant, clearly pointed out in a recent report, "companies in the chemical industry are facing fierce competition in their efforts to promote sustainable innovation, growth and profitability - especially after a decade of financial distress and consolidation." While the future looks bright and the industry is expected to grow at its highest rate in more than 20 years, there are still huge challenges. "
Here are five tips to make your chemical products business a success.
Make full use of existing assets. In the chemical industry, assets are extremely capital intensive. It would be reckless business to not make full use of these assets. More and more bigger and more successful companies are rethinking their factory machines and making long-term plans for their replacement, development and improvement. Larger companies are also starting to value their databases more as their own assets. These information can help to find new and more accurate suppliers in different markets.
Sustainability. In an industry with such low profit margin, it is very important to use sustainability to maximize profits. As the use of chemicals increases, finding raw materials from sustainable sources will help reduce costs. It will also help sales, as end users are increasingly conscious of buying "green" products. Recycling of chemical wastes and by-products can also generate secondary sources of revenue and / or reduce production costs.
Prepare for growth. The best chemical companies understand the importance of opening up new areas and markets. They are constantly looking for ways to expand, either by expanding their product base (possibly by combining core business products with other chemicals to make new products), or by moving up and down the supply ladder. It's also useful to think about other uses of the product, as it can bring customers from previously unexpected areas.
Flexibility of the supply chain. As the chemical market is very volatile and prices change frequently and sometimes seem to be volatile, it is important to be able to respond quickly when circumstances change. It's very important that suppliers are global, especially in the industry. Natural and political events can change the situation overnight, whether it's natural disasters, legislative changes or trade embargoes. The ability to quickly source from new suppliers, switch to alternative materials and use different delivery systems will keep you ahead of the competition.
Maintain talent and knowledge. Perhaps more important than most industries, the people who make up your company's employees are your key assets. The chemical industry is naturally technological and often specialized. The knowledge gained by your team is worth developing, and it's worth paying extra for retaining it, because knowing your product, market, and contact information of potential customers and suppliers can prove whether you can make the next deal.
Obviously, these five points are simplified guidelines for complex business. Usually, it's a good idea to observe how successful companies operate and then build a business model based on their practices.
However, because these large companies usually have economies of scale in sales and manufacturing, smaller enterprises must make use of the advantages of scale to adapt to market changes and economic conditions faster. It may also allow for greater specialization, as small businesses can focus on the many market segments the industry has.
Although all these problems and countless unforeseen events will shake the industry, there is a lot of certainty in building a business in an industry that is definitely needed.
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