Case Study Description of The K-Dow Petrochemicals Joint Venture
In 2007, the Dow Chemical Company and the Kuwait Petroleum Corporation announced plans to launch a multibillion-dollar joint venture. Later known as K-Dow Petrochemicals, it would be one of the largest manufacturers of chemicals and plastics in the world. Analysts widely hailed the planned joint venture as a game-changing deal for both companies. Shortly after the announcement, cable network CNBC requested an interview with Andrew Liveris, Dow's CEO, about this massive transaction. Liveris needed to decide how to respond. This case provides a brief background on the industry, both companies, and plans for the joint venture as of January 2008.
Authors :: Guhan Subramanian, James K. Sebenius, Phillip Andrews, Rhea Ghosh
Swot Analysis of "The K-Dow Petrochemicals Joint Venture" written by Guhan Subramanian, James K. Sebenius, Phillip Andrews, Rhea Ghosh includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Dow Liveris facing as an external strategic factors. Some of the topics covered in The K-Dow Petrochemicals Joint Venture case study are - Strategic Management Strategies, Joint ventures, Negotiations, Product development and Strategy & Execution.
Some of the macro environment factors that can be used to understand the The K-Dow Petrochemicals Joint Venture casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, central banks are concerned over increasing inflation,
there is backlash against globalization, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of The K-Dow Petrochemicals Joint Venture
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in The K-Dow Petrochemicals Joint Venture case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Dow Liveris, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Dow Liveris operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of The K-Dow Petrochemicals Joint Venture can be done for the following purposes –
1. Strategic planning using facts provided in The K-Dow Petrochemicals Joint Venture case study
2. Improving business portfolio management of Dow Liveris
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Dow Liveris
Strengths The K-Dow Petrochemicals Joint Venture | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Dow Liveris in The K-Dow Petrochemicals Joint Venture Harvard Business Review case study are -
Effective Research and Development (R&D)
– Dow Liveris has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study The K-Dow Petrochemicals Joint Venture - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Dow Liveris is one of the most innovative firm in sector. Manager in The K-Dow Petrochemicals Joint Venture Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Dow Liveris are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Training and development
– Dow Liveris has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in The K-Dow Petrochemicals Joint Venture Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Analytics focus
– Dow Liveris is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Guhan Subramanian, James K. Sebenius, Phillip Andrews, Rhea Ghosh can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Successful track record of launching new products
– Dow Liveris has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Dow Liveris has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Diverse revenue streams
– Dow Liveris is present in almost all the verticals within the industry. This has provided firm in The K-Dow Petrochemicals Joint Venture case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Learning organization
- Dow Liveris is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Dow Liveris is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in The K-Dow Petrochemicals Joint Venture Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Dow Liveris in the sector have low bargaining power. The K-Dow Petrochemicals Joint Venture has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Dow Liveris to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Dow Liveris digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Dow Liveris has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Ability to recruit top talent
– Dow Liveris is one of the leading recruiters in the industry. Managers in the The K-Dow Petrochemicals Joint Venture are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Strong track record of project management
– Dow Liveris is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses The K-Dow Petrochemicals Joint Venture | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The K-Dow Petrochemicals Joint Venture are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study The K-Dow Petrochemicals Joint Venture, is just above the industry average. Dow Liveris needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High bargaining power of channel partners
– Because of the regulatory requirements, Guhan Subramanian, James K. Sebenius, Phillip Andrews, Rhea Ghosh suggests that, Dow Liveris is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Low market penetration in new markets
– Outside its home market of Dow Liveris, firm in the HBR case study The K-Dow Petrochemicals Joint Venture needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though Dow Liveris has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - The K-Dow Petrochemicals Joint Venture should strive to include more intangible value offerings along with its core products and services.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study The K-Dow Petrochemicals Joint Venture, it seems that the employees of Dow Liveris don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Skills based hiring
– The stress on hiring functional specialists at Dow Liveris has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Need for greater diversity
– Dow Liveris has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Dow Liveris supply chain. Even after few cautionary changes mentioned in the HBR case study - The K-Dow Petrochemicals Joint Venture, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Dow Liveris vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Dow Liveris is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Dow Liveris needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Dow Liveris to focus more on services rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Dow Liveris is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study The K-Dow Petrochemicals Joint Venture can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Aligning sales with marketing
– It come across in the case study The K-Dow Petrochemicals Joint Venture that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case The K-Dow Petrochemicals Joint Venture can leverage the sales team experience to cultivate customer relationships as Dow Liveris is planning to shift buying processes online.
Opportunities The K-Dow Petrochemicals Joint Venture | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study The K-Dow Petrochemicals Joint Venture are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Dow Liveris can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Dow Liveris in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Dow Liveris has opened avenues for new revenue streams for the organization in the industry. This can help Dow Liveris to build a more holistic ecosystem as suggested in the The K-Dow Petrochemicals Joint Venture case study. Dow Liveris can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Buying journey improvements
– Dow Liveris can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. The K-Dow Petrochemicals Joint Venture suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Dow Liveris in the consumer business. Now Dow Liveris can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Dow Liveris to increase its market reach. Dow Liveris will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Dow Liveris can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Dow Liveris can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Learning at scale
– Online learning technologies has now opened space for Dow Liveris to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Building a culture of innovation
– managers at Dow Liveris can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Dow Liveris can use these opportunities to build new business models that can help the communities that Dow Liveris operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Developing new processes and practices
– Dow Liveris can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Dow Liveris to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Dow Liveris is facing challenges because of the dominance of functional experts in the organization. The K-Dow Petrochemicals Joint Venture case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats The K-Dow Petrochemicals Joint Venture External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study The K-Dow Petrochemicals Joint Venture are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Dow Liveris with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– Dow Liveris needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Dow Liveris can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Dow Liveris business can come under increasing regulations regarding data privacy, data security, etc.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Dow Liveris needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Increasing wage structure of Dow Liveris
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Dow Liveris.
Regulatory challenges
– Dow Liveris needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Dow Liveris in the Strategy & Execution sector and impact the bottomline of the organization.
Consumer confidence and its impact on Dow Liveris demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Dow Liveris in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
High dependence on third party suppliers
– Dow Liveris high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Dow Liveris will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Technology acceleration in Forth Industrial Revolution
– Dow Liveris has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Dow Liveris needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Dow Liveris.
Weighted SWOT Analysis of The K-Dow Petrochemicals Joint Venture Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study The K-Dow Petrochemicals Joint Venture needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study The K-Dow Petrochemicals Joint Venture is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study The K-Dow Petrochemicals Joint Venture is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of The K-Dow Petrochemicals Joint Venture is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Dow Liveris needs to make to build a sustainable competitive advantage.