16 March 1998 00:00 [Source: ICB Americas]German chemical and pharmaceutical giant Bayer AG is gearing toward capitalizing on the globalization trend into the 21st century with a focus on competitiveness and innovation.
Speaking at a Societe de Chimie Industrielle meeting in New York City last week, chairman Manfred Schneider says he is optimistic Bayer will emerge as a winner in the global marketplace by investing heavily in the US and increasing its presence in emerging markets. With a focus on innovation, Bayer has budgeted DM4.1 billion, or 7 percent of sales, for R&D in 1998, with 70 percent targeted toward life sciences.
Bayer is truly a global company, with only 16 percent of total sales from Germany and 45 percent from Europe. The US comprises the largest market for Bayer with about 25 percent of sales, while Asia accounts for about 6 percent.
Though Europe accounts for 45 percent of sales, it generates 65 percent of total cash flow, and Bayer seeks to use its solid position in Europe as a base for launching into high-growth markets. "Europe is our home market and generates most of the cash flow needed to invest in emerging markets," says Dr. Schneider.
Bayer sees the US as a key growth market, and is implementing a $9 billion capacity and R&D investment plan in the US from 1995 to 2000. Thus far, the company has spent roughly one-third of the total $9 billion. Bayer spent about $750 million on capital assets in the US last year and plans to spend around $1 billion this year.
Mr. Schneider says Bayer's long-term strategy for growth in Asia will remain in place despite the recent turmoil. This year, 6 percent of Bayer's capital budget is targeted for Asia versus 88 percent for the US and Europe. The expansion will focus on China, Thailand and Taiwan, as well as strengthening life sciences in Japan. Other growth markets include Latin America, Eastern Europe and the former Soviet Union.
On being a diversified chemicals and life sciences company in an age of spinoffs and carve-outs, Dr. Schneider stresses that integration is critical to the company's competitiveness. "Through integration, our clear competitive advantage from synergies between different fields and a broad product portfolio allows us to take advantage of global opportunities."
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