Think Tank: BASF must tap new Asia markets

14 June 2013 09:49  [Source: ICB]

BASF has lowered its major market growth assumptions but stuck with its top-line and profit targets for Asia-Pacific.

Acknowledging that a period of particularly strong GDP and industrial production growth may have come to an end for parts of the region, the chemicals giant wants to be generating much more in the way of sales and profits from its own local production operations and research effort and from new markets.

BASF will look at Myanmar as an untapped market

Copyright: Rex Features

"In the next decade, Asia-Pacific will face huge challenges while remaining the fastest growing market for the chemical industry," BASF's executive board director for Asia-Pacific, Martin Brudermuller said on 4 June. "With our Asia-Pacific strategy, we are positioning BASF as the leading provider of sustainable solutions for the Asia-Pacific region."

The company still intends to grow at two percentage points above chemicals market growth but sees the target as particularly challenging in the volatile market environment. It had been clear that BASF wanted to grow fastest in Asia-Pacific and to push its research and development (R&D) effort in the region.

Now it will have to compete even harder for the sort of research and executive talent that will help it grow across a diverse group of countries including the powerhouse of chemicals demand, China. It will also need to address some challenging and hitherto relatively untapped markets. The slowed China economy, particularly, must weigh on the numbers. BASF is basing its estimates now on China GDP growth of 9.9% a year.

The company talks about growing smartly across the region, pushing much more R&D effort into developing customer solutions and of using task forces to explore untapped markets.

Teams will focus on the top 10 most important industries, BASF says: automotive; construction; packaging; paints and coatings; pharma; mining; food & agriculture; electrical & electronics; wind energy; and textiles.

Starting in south Asia, it wants to tackle what it calls "the base of the pyramid" in terms of spending power, the relatively poor and the emerging middle class.

It suggests that new business models are needed to penetrate new markets and might involve working with customers, non-governmental organisations (NGOs) and government agencies. Its initial focus will be on South Asia, starting in India, but the approach could be extended to ASEAN nations including Indonesia. Task forces will investigate untapped markets in countries such as Myanmar, Cambodia, Laos and Mongolia.

By: Nigel Davis
+44 20 8652 3214

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