Maintaining Capacity to Compete

Maintaining Capacity to Compete J . L. C R A I G

Downloaded by TEXAS STATE UNIV SAN MARCOS on December 26, 2017 | http://pubs.acs.org Publication Date: June 17, 1959 | doi: 10.1021/ba-1959-0024.ch013

Spencer Chemical C o . , Kansas City,

Mo.

Broadening of the chemical industry's markets by product diversification and integration toward the consumer will continue into the 1960's. To be ready for further extension toward the consumer, the chemical industry should improve its knowledge of the needs and desires of final consumers. Marketing abroad is expected to increase, calling for more knowledge of international market situations. Another area of extension is interindustry competition: Markets now served by other industries may be captured by the chemical industry. To meet these situations of the near future, companies in the chemical industry could profitably expand their use of formal market investigations as guides to their technical activity. The real value of use of market research depends to a very large extent upon the insight and sensitivity with which management interprets and uses the information.

W h e n we set before ourselves the g o a l of m a i n t a i n i n g the c a p a c i t y t o compete, we h a v e , i n a sense, c o m m i t t e d ourselves to do some v e r y serious p l a n n i n g of the l o n g - t e r m p o s i t i o n of o u r c o m p a n y i n the m a r k e t p l a c e a n d of the m a n y factors w h i c h m u s t c o n t r i b u t e t o our r e a c h i n g t h a t p o s i t i o n . M a r k e t research c a n be a v e r y u s e f u l t o o l for the p l a n n i n g a n d a c h i e v e m e n t of these l o n g - t e r m goals. W e h a v e a t t e m p t e d to p i c k out several areas i n w h i c h a n e x p a n d e d use of m a r k e t research s h o u l d show a n u n u s u a l l y h i g h p r o f i t c o n t r i b u t i o n u n d e r t h e projected c o m p e t i t i v e c o n d i t i o n s of the 1960's. T h e first of these m i g h t be described as c o n c e r n i n g the h o r i z o n t a l a n d v e r t i c a l g r o w t h of our i n d u s t r y ' s markets. Our Widening Markets I t seems a p p a r e n t t h a t the v a r i o u s forces w h i c h t o d a y are a c t i n g t o w i d e n the chemical industry's markets b y product diversification and integration t o w a r d the consumer w i l l continue u n a b a t e d i n t o the 1960's. T h e r a p i d a d d i t i o n of new p r o d u c t s to the o u t p u t of the c h e m i c a l i n d u s t r y has m a d e i t a l m o s t a cliche for companies t o state p u b l i c l y how l a r g e a percentage of sales is accounted for b y p r o d u c t s w h i c h d i d not exist 5 o r 10 y e a r s ago. A d d e d t o the g r o w i n g c o m p l e x i t y of the p r o d u c t m i x of the i n d u s t r y is t h e i n d u s t r y ' s 95

CHEMICAL MARKETING IN THE COMPETITIVE SIXTIES Advances in Chemistry; American Chemical Society: Washington, DC, 1959.


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q u i c k e n i n g pace of i n t e g r a t i o n t o w a r d the consumer, to g a i n better c o n t r o l over end p r o d u c t s a n d t h u s protect p r o f i t m a r g i n s . I t w o u l d be f a r too t i m e - c o n s u m i n g t o cite even the better k n o w n instances o i v e r t i c a l i n t e g r a t i o n m o v e s w h i c h h a v e o c c u r r e d i n t h i s i n d u s t r y i n recent y e a r s . C o n s i d e r , t h o u g h , the n u m b e r of c h e m i c a l processing companies w h i c h j u s t a few y e a r s ago were p e r h a p s three or four steps a w a y f r o m t h e consumer a n d t o d a y h a v e either reached a l l the w a y to the consumer o r are j u s t a step or t w o a w a y . T h o s e companies w h i c h were nearer t o t h e consumer some y e a r s ago h a v e g e n e r a l l y broadened t h e i r a c t i v i t i e s at the consumer l e v e l a n d are b r i n g i n g other b a s i c p r o d u c t s d o w n the stairsteps of i n t e g r a t i o n t o w a r d t h e i r end-use m a r k e t s . M a r k e t research is a v a l u a b l e a n d necessary service i n the h o r i z o n t a l e x p a n s i o n of p r o d u c t lines a n d i n t h e v e r t i c a l m o v e m e n t of p r o d u c t s f r o m t h e basic a n d i n t e r m e d i a t e categories t o w a r d consumer m a r k e t s . F u r t h e r b r o a d e n i n g of the c h e m i c a l i n d u s t r y ' s m a r k e t s i n the 1960's s h o u l d find m a r k e t research b e i n g used a t a n i n c r e a s i n g r a t e as a m a n a g e m e n t t o o l . T o the average executive w h o has r i s e n t h r o u g h the r a n k s of a basic c h e m i c a l p r o d u c e r , m a r k e t research c a n be of s u b s t a n t i a l assistance i n p u t t i n g together a concise, u n d e r s t a n d a b l e p i c t u r e of some p a r t i c u l a r consumer m a r k e t w h i c h m a y otherwise present itself as a d i s o r d e r l y a r r a y of o p i n i o n s a n d m i s i n f o r m a t i o n . W h e n i n t e g r a t i o n m o v e s are b e i n g considered, m a r k e t research studies c a n be a b i g help t o the sales executive w h o m a y be used t o t h i n k i n g i n terms of sales v o l u m e s m e a s u r e d i n n u m b e r s of t a n k cars or t h o u s a n d s of tons, b u t w h o m a y be faced w i t h the need for u n d e r s t a n d i n g t h e p r o b l e m s of d i s t r i b u t o r s of consumer p r o d u c t s i n R o c h e s t e r , D e s M o i n e s , S a l t L a k e C i t y , o r a h u n d r e d other p o i n t s . M a r k e t studies c a n also help t h e executive w h o is experienced i n d e a l i n g w i t h t h e r e l a t i v e l y h i g h p a i d a n d s k i l l e d w o r k force of the c h e m i c a l i n d u s t r y t o u n d e r s t a n d some of the p o t e n t i a l p r o b l e m s i n c o m p e t i n g w i t h the m a n u f a c t u r e r or f a b r i c a t o r of end p r o d u c t s w h o u t i l i z e s a r e l a t i v e l y l a r g e , b u t l o w - p a i d l a b o r group. A s a n i n d u s t r y , w e are m o r e d i r e c t l y dependent on the c o n s u m e r m a r k e t t h a n m a n y of us m a y r e a l i z e . T h e b u l k of U . S. c h e m i c a l p r o d u c t i o n is u t i l i z e d u l t i m a t e l y i n consumer p r o d u c t s . I n f a c t , the m a j o r p o r t i o n of our p r o d u c t i o n e v e n t u a l l y finds i t s w a y i n t o consumer n o n d u r a b l e p r o d u c t s . A l t h o u g h c o n sumer n o n d u r a b l e s is one of the slower g r p w i n g sectors of o u r e c o n o m y , the c h e m i c a l i n d u s t r y has prospered a n d s h o w n a g r o w t h r a t e s e l d o m a c h i e v e d b y other i n d u s t r i e s . T h e questions m i g h t w e l l be a s k e d b y m a n y of us i n the i n d u s t r y , as t o w h e t h e r we r e a l l y k n o w m u c h a b o u t t h e u l t i m a t e m a r k e t s for m a n y of our p r o d u c t s a n d w h a t m i g h t h a p p e n to some of these m a r k e t s i n t h e d i s t a n t haze of t h e sixties. I n m a n y instances our answers to these questions s h o u l d p o i n t t o the need for g i v i n g m o r e a t t e n t i o n t o t h e e v e n t u a l d e s t i n a t i o n a n d use of o u r p r o d u c t s , i f we are to continue t o r e a l i z e a m a j o r p a r t of our g r o w t h f r o m the u l t i m a t e sale of o u r p r o d u c t s t o the i n d i v i d u a l consumer. T o p l a n successfully for t h i s g r o w t h , we need t o k n o w more a b o u t the specific f u n c t i o n s w h i c h p r o d ucts p e r f o r m i n t h e i r end use areas, a n d w e s h o u l d i m p r o v e a n d extend our k n o w l e d g e of t h e m a k e - u p of the needs a n d desires of our final consumers. M a r k e t research groups of t h e c h e m i c a l i n d u s t r y s h o u l d find m a j o r r e s p o n s i b i l i t i e s i n t h i s area i n the 1 9 6 0 ' s — i n effect to assist m a n a g e m e n t b y s u p p l y i n g the concise, o r g a n i z e d i n f o r m a t i o n so necessary to t a k i n g a c t i o n i n o u r r a p i d l y w i d e n i n g a n d complex m a r k e t s . CHEMICAL MARKETING IN THE COMPETITIVE SIXTIES Advances in Chemistry; American Chemical Society: Washington, DC, 1959.

CRAIG—MARKET RESEARCH:

MAINTAINING CAPACITY TO COMPETE

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International Market Research I n the 1960's, the m a r k e t research a r m of our i n d u s t r y s h o u l d r e a c h a b r o a d w i t h i n c r e a s i n g f r e q u e n c y , i f present v i s i b l e signs are a n y i n d i c a t i o n . F o r m a l studies of a n y p a r t of the foreign m a r k e t b y o h e m i c a l producers or b y i n d u s t r i a l m a r k e t research firms h a v e been v e r y few i n n u m b e r as c o m p a r e d t o the scope of efforts i n t h i s c o u n t r y . U n t i l f a i r l y r e c e n t l y , i n t e r n a t i o n a l m a r k e t research w a s regarded as a n a r e a to be entered i n t o o n l y b y m p j o r c o r p o r a t i o n s w i t h f a r flung overseas operations a n d its use w a s u s u a l l y confined t o m a n u f a c t u r e r s of consumer p r o d u c t s . T o d a y , w i t h the r a p i d g r o w t h of exports a l o n g w i t h the t r e n d t o w a r d the c o n s t r u c t i o n of p l a n t s i n t h e center of foreign m a r k e t s , the need for some f o r m of i n t e r n a t i o n a l m a r k e t research is b e c o m i n g a p p a r e n t t o m o r e a n d m o r e companies. T h e need is b e i n g f e l t most a c u t e l y b y companies w h i c h h a v e large sales i n the export m a r k e t t o d a y a n d are s e e k i n g b o t h t o protect t h e i r present interests as w e l l as to serve t h e i r a m b i t i o n s for e x p a n d e d foreign operations. T h e c h e m i c a l i n d u s t r y is one w h i c h has a p a r t i c u l a r l y large s t a k e i n t h e foreign m a r k e t . R o u g h l y a fifth of the t o t a l U . S. c h e m i c a l p r o d u c t i o n is u l t i m a t e l y d e l i v e r e d t o foreign customers, either i n t h e f o r m of c h e m i c a l p r o d ucts or as finished goods w h i c h u t i l i z e large q u a n t i t i e s of c h e m i c a l s i n t h e i r m a n u f a c t u r e . O n e segment of the i n d u s t r y i n w h i c h our o w n c o m p a n y has a v i t a l interest a n d w h i c h has s h o w n a v e r y h e a v y dependence o n the export m a r k e t is t h a t of the p o l y e t h y l e n e producers. I n the m o r e t h a n three y e a r s i n w h i c h the G o v e r n m e n t has m a i n t a i n e d specific export figures on p o l y e t h y l e n e , the p o r t i o n of t h i s p r o d u c t w h i c h has gone i n t o t h e e x p o r t m a r k e t has r a n g e d f r o m 25 to 3 0 % of t o t a l sales b y U . S. producers ( i n c l u d i n g e x p o r t s ) . S e v e r a l factors h a v e emerged i n recent t i m e s w h i c h h a v e m a d e m a n y of us i n the c h e m i c a l i n d u s t r y m o r e k e e n l y a w a r e of o u r dependence on the foreign m a r k e t . F o r one t h i n g , the E u r o p e a n C o m m o n M a r k e t is s u r p r i s i n g l y no longer j u s t a p a p e r p l a n . I t has begun operations, a n d the r e c o g n i t i o n t h a t the whole i d e a m a y succeed after a l l has sent a r e c o r d n u m b e r of c h e m i c a l i n d u s t r y representatives to E u r o p e t o a p p r a i s e m a r k e t s i t u a t i o n s a n d to do some p r e l i m i n a r y s h o p p i n g for p l a n t sites a n d r a w m a t e r i a l sources. W h i l e m a n y of t h e foreign e x p a n s i o n p r o g r a m s b e i n g so considered are defensive i n n a t u r e , a b y p r o d u c t of the s i t u a t i o n has been to m a k e A m e r i c a n m a n a g e m e n t more a w a r e of o p p o r t u n i t i e s w h i c h exist a b r o a d for new a n d p r o f i t a b l e operations. A n o t h e r reason for l o o k i n g a b r o a d w i t h new concern is the m o u n t i n g p r e s sure t o m e e t the challenge of S o v i e t i n v a s i o n of w o r l d m a r k e t s . T h e c o u n t e r measures to be used t o meet t h i s t h r e a t s h o u l d offer some p o s i t i v e o p p o r t u n i t i e s f o r p a r t i c i p a t i o n b y our i n d u s t r y , because our G o v e r n m e n t w i l l s u r e l y use e v e r y means at its d i s p o s a l to i m p e l U . S. business i n v e s t m e n t s a b r o a d . I t is b e c o m i n g i n c r e a s i n g l y a p p a r e n t t h a t t o cope w i t h the r i s i n g p r o b l e m s of c o m p e t i n g i n the w o r l d ' s m a r k e t s w e m u s t g a i n m o r e t h r o u g h , first-hand k n o w l e d g e of these m a r k e t s . T h i s need, we believe, w i l l r e s u l t i n the m a n a g e m e n t of the c h e m i c a l i n d u s t r y d i r e c t i n g a greater p o r t i o n of t h e efforts of t h e m a r k e t research f u n c t i o n i n t o e x p l o r i n g the foreign m a r k e t s i n the y e a r s a h e a d . M u c h c a n be done w i t h foreign m a r k e t d a t a a l r e a d y a v a i l a b l e i n the U n i t e d S t a t e s — f r o m the v a r i o u s d e p a r t m e n t s of o u r G o v e r n m e n t , the U n i t e d N a t i o n s , embassies of foreign countries, p u b l i c a t i o n s , a n d v a r i o u s w o r l d t r a d e associations. F o r help i n v o l v i n g field w o r k i n foreign countries, a c h e m i c a l c o m p a n y m i g h t t u r n to some of the i n d u s t r i a l m a r k e t i n g research firms of t h e CHEMICAL MARKETING IN THE COMPETITIVE SIXTIES Advances in Chemistry; American Chemical Society: Washington, DC, 1959.

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U n i t e d States w h i c h a r e e x p a n d i n g t h e i r operations i n t o f o r e i g n m a r k e t s . A l s o , a l l of t h e m a j o r i n d u s t r i a l countries of the w o r l d o u t s i d e of the S o v i e t b l o c h a v e w e l l - s t a f f e d m a r k e t i n g research o r g a n i z a t i o n s . A l t h o u g h m o s t of these o r g a n i z a t i o n s m a i n t a i n a m a j o r p o r t i o n of t h e i r business i n consumer m a r k e t research, t h e y w i l l u s u a l l y u n d e r t a k e i n d u s t r i a l m a r k e t research projects a n d t h i s segm e n t of t h e i r business w i l l p r o b a b l y increase r a p i d l y w i t h i n t h e n e x t few y e a r s .


Interindustry Competition A s a n i n d u s t r y , w e c a n n o t hope t o continue g r o w i n g a t a n a b o v e - a v e r a g e r a t e i f w e are t o become o u r o w n strongest c o m p e t i t o r . T h e v i t a l i t y a n d g r o w t h of t h e c h e m i c a l i n d u s t r y m u s t depend t o a v e r y large extent u p o n t h e d i s p l a c e m e n t of p r o d u c t s of c o m p e t i t i v e i n d u s t r i e s . O u r r a p i d d e v e l o p m e n t of n e w p r o d u c t s h a s e n a b l e d us t o m a k e deep i n r o a d s i n t o some older i n d u s t r i e s w h i c h h a v e h a d t o be satisfied w i t h a m u c h s m a l l e r share of the g r o w t h of o u r n a t i o n a l e c o n o m y . E v i d e n c e of t h i s t r e n d m a y be seen i n c o m p a r i n g t h e g r o w t h rates of some m a j o r p r o d u c t groups d u r i n g t h e p a s t decade. I n t h e 1 0 - y e a r p e r i o d e n d i n g w i t h 1958, t h e average rate of g r o w t h of a l l i n d u s t r i a l p r o d u c t i o n c o m b i n e d w a s 3 % p e r y e a r . C h e m i c a l s , as a group, showed a n average increase of 6 % p e r y e a r . A few r e p r e s e n t a t i v e segments of the c h e m i c a l processing i n d u s t r i e s showed t h e f o l l o w i n g average increases p e r y e a r : p l a s t i c s , 1 2 % ; s y n t h e t i c detergents, 1 9 % ; s y n t h e t i c fibers, 2 3 % ; a n h y d r o u s a m m o n i a , 1 1 % ; a n d s y n t h e t i c r u b b e r , 8 % . Some of t h e o l d e r p r o d u c t groups showed declines such as these over t h e 1 0 - y e a r p e r i o d : w o o l , d o w n a n average of 7 % p e r y e a r ; c o t t o n , 1 % ; soap, 9 % ; a n d l e a d a n d z i n c , b o t h 1 % per y e a r . Steel p r o d u c t i o n s t a y e d v i r t u a l l y l e v e l ; p r o d u c t i o n of p a p e r i n creased a n average of a b o u t 3 % p e r y e a r . L o o k i n g b a c k even f u r t h e r , o u r gross n a t i o n a l o u t p u t of goods a n d services has s h o w n a n average r a t e of g r o w t h of a b o u t 3 % p e r y e a r over t h e l a s t 2 5 y e a r s w h e n t h e o u t p u t is m e a s u r e d i n constant d o l l a r s . G o i n g b a c k 50 y e a r s t o 1909, v i r t u a l l y the same a n n u a l average increase o f 3 % i n o u r gross n a t i o n a l p r o d u c t holds t r u e f o r t h e entire p e r i o d . I t becomes a p p a r e n t , w e believe, t h a t t o m a i n t a i n a good g r o w t h r a t e t h e c h e m i c a l i n d u s t r y m u s t search for new m a r k e t s now b e i n g served b y c o m p e t i t i v e i n d u s t r i e s . A d d i n g t o o u r t a s k is t h e f a c t t h a t each a d d i t i o n a l area of e n c r o a c h m e n t u p o n other i n d u s t r i e s becomes more difficult t o c a p t u r e , as w e h a v e s t i m u l a t e d other i n d u s t r y groups t o increase t h e i r p r o d u c t i m p r o v e m e n t efforts a n d t o d i v e r s i f y t h e i r p r o d u c t lines t o m i t i g a t e t h e effects o f p r o d u c t obsolescence. I n f a c t , w e h a v e s t i m u l a t e d m a n y of t h e m t o enter i n t o some r a t h e r s i z a b l e c h e m i c a l operations o n t h e i r o w n . T h i s l a t t e r f a c t o r is b e c o m i n g a p r o b l e m of serious p r o p o r t i o n s t o t h e m e m b e r firms of t h e c h e m i c a l i n d u s t r y as w e m i g h t define i t t o d a y . T h e p r o b l e m , t h e n , of c o m p e t i n g w i t h other i n d u s t r i a l groups, b o t h offens i v e l y a n d d e f e n s i v e l y so t o speak, s h o u l d be of m a j o r concern t o a n y i n d i v i d u a l w h o has r e s p o n s i b i l i t i e s i n t h e f o r w a r d p l a n n i n g a c t i v i t i e s of a c h e m i c a l c o m p a n y . T h e m a r k e t research f u n c t i o n i n p a r t i c u l a r , t h o u g h , is w e l l - e q u i p p e d to seek o u t t h e o p p o r t u n i t i e s i n t h e m a r k e t p l a c e f o r t h e c o m p e t i t i v e d i s p l a c e m e n t of older p r o d u c t groups b y t h e c h e m i c a l i n d u s t r y ' s e x i s t i n g p r o d u c t s , as w e l l as t o d e t e r m i n e needs w h i c h m i g h t be e x p l o i t e d b y t h e d e v e l o p m e n t of n e w c h e m i c a l p r o d u c t s . I n c r e a s i n g t h e emphasis p l a c e d o n t h i s t y p e of m a r k e t




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research a c t i v i t y c o u l d p r o v e t o be of s i g n i f i c a n t help i n h o l d i n g our g r o w t h r a t e t o a h i g h l e v e l i n t h e 1960's. Guidance of Technical Activities T h e research budget i n the average c h e m i c a l c o m p a n y of t o d a y c o n s t i tutes the m o s t s i g n i f i c a n t o p t i o n a l c a p i t a l expenditure i t e m on the c o m p a n y ' s financial statement. V e r y often, t h e o p e r a t i n g d e p a r t m e n t s of t h e c o m p a n y are n o t t a k i n g t h e a c t i v e p a r t w h i c h t h e y s h o u l d i n g u i d i n g research goals, p e r h a p s because of t h e i r p r e o c c u p a t i o n w i t h t h e press of d a y - t o - d a y business affairs or to t h e l a c k of a close r e l a t i o n s h i p w i t h t h e research f u n c t i o n . A s a r e s u l t , t h e a m o u n t of p l a n n i n g a n d a t t e n t i o n w h i c h o p e r a t i n g d e p a r t m e n t s give t o t h e g e n e r a t i o n of a d o l l a r of p r o f i t m a y be exceedingly d i s p r o p o r t i o n a t e t o t h e a m o u n t of c o n s t r u c t i v e thought w h i c h t h e y give t o t h e expenditure of t h a t d o l l a r i n a research p r o g r a m . Somewhere b e y o n d t h i s i m b a l a n c e w h i c h exists i n m a n y companies t o d a y , is the p o i n t of o p t i m u m p a r t i c i p a t i o n of t h e o p e r a t i n g d e p a r t m e n t s i n h e l p i n g t o p l a n t h e research p r o g r a m a n d e v a l u a t e i t s p r o g ress i n order t o r e a l i z e t h e m a x i m u m l o n g - r a n g e p r o f i t g r o w t h of t h e c o m p a n y . M a r k e t research h a s f o u n d i n c r e a s i n g use i n recent y e a r s as one of t h e aids t o c h e m i c a l i n d u s t r y m a n a g e m e n t i n g i v i n g some d i r e c t i o n t o t h e research a n d t e c h n i c a l d e v e l o p m e n t a c t i v i t i e s of t h e i r companies. W e believe t h a t of necess i t y t h e c o m p e t i t i v e sixties w i l l d e m a n d even closer r e l a t i o n s h i p s between t h e m a r k e t research groups a n d t h e t e c h n i c a l a c t i v i t i e s of o u r i n d u s t r y members. T h i s i s n o t t o suggest t h a t the m a r k e t i n g f u n c t i o n or a n y other o p e r a t i n g group s h o u l d or ever w i l l h o l d s t r o n g reins o n t h e research f u n c t i o n . H o w e v e r , t h e m a r k e t i n g f u n c t i o n a n d , more s p e c i f i c a l l y , m a r k e t research c a n be of s u b s t a n t i a l help t o t h e t e c h n i c a l f u n c t i o n of t h e c o m p a n y i n d e t e r m i n i n g the p o t e n t i a l m a r k e t s f o r p r o d u c t s a t a v e r y e a r l y stage i n t h e i r d e v e l o p m e n t a n d i n p o i n t i n g out t h e m o s t p r o m i s i n g of these m a r k e t s w h i c h s h o u l d receive a n e x t r a a m o u n t of effort i n t h e research a n d d e v e l o p m e n t p r o g r a m . B y a n e a r l y a p p r a i s a l of t h e p o t e n t i a l i t i e s f o r a new p r o d u c t i n t h e m a r k e t place some v e r y basic questions m a y u s u a l l y be answered, such as these: W h a t are t h e hopes t h a t t h e p r o d u c t w i l l be c o m p e t i t i v e i n p r i c e ? D o e s t h e a p p a r e n t m a r k e t i n g p a t t e r n fit i n w i t h t h e l o n g - r a n g e goals of t h e c o m p a n y ? Would the p r o d u c t s a t i s f y a w i d e s p r e a d need or w o u l d i t serve j u s t a v e r y s p e c i a l i z e d a r e a of t h e t o t a l m a r k e t i n v o l v e d ? I n t h e l a t t e r case, as w e h a v e seen too often, a n e w p r o d u c t m a y be the perfect a n s w e r for one s m a l l segment of t h e m a r k e t w h i c h has p r o b l e m s p e c u l i a r t o itself ; however, t h e i n c l i n a t i o n of t h e developer of t h e p r o d u c t is t o inflate t h e p o t e n t i a l sales t o a v o l u m e sufficient t o cover t h e entire i n d u s t r y concerned. W i t h p r o b a b l y o n l y few exceptions, c o m p a n i e s i n o u r i n d u s t r y c o u l d e x p a n d v e r y p r o f i t a b l y t h e i r use of f o r m a l m a r k e t i n v e s t i g a t i o n s as a guide t o t h e i r t e c h n i c a l a c t i v i t i e s . R e s e a r c h a n d d e v e l o p m e n t costs l i k e a l m o s t e v e r y t h i n g else are headed s k y w a r d . I f , f o r e x a m p l e , a r e l a t i v e l y s m a l l a m o u n t spent o n m a r k e t research c a n h e a d off a n e x p e n d i t u r e of m a n y t h o u s a n d s of d o l l a r s of research funds t o r u n d o w n a n u n m a r k e t a b l e i d e a , t h e assistance offered s h o u l d be accepted as a means of u l t i m a t e l y g u i d i n g t h e research effort i n t o a better a n d more p r o f i t a b l e s h o w i n g . O n t h e more p o s i t i v e side, i f m a r k e t studies m a y be used t o p o i n t o u t t h e most p r o f i t a b l e m a r k e t s a n d shorten t h e development t i m e a n d expense r e q u i r e d t o r e a c h t h e m c o m m e r c i a l l y , i t s h o u l d be r e a l i z e d t h a t t h e research f u n c t i o n , over t h e longer t e r m , h a s been g i v e n a n o p p o r t u n i t y for s u b s t a n t i a l l y e x p a n d i n g i t s o v e r - a l l c o n t r i b u t i o n t o t h e c o m p a n y ' s efforts. CHEMICAL MARKETING IN THE COMPETITIVE SIXTIES Advances in Chemistry; American Chemical Society: Washington, DC, 1959.


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T h e e x p l o i t a t i o n of t e c h n o l o g y stored u p d u r i n g t h e y e a r s of W o r l d W a r I I has been g i v e n as one reason for the r a p i d pace of new p r o d u c t d e v e l o p m e n t d u r i n g the 1950's. A s s u m i n g t h i s is t r u e , a n d c o u p l i n g i t w i t h t h e f a c t t h a t p r o b a b l y more c o m p a n i e s — n o n c h e m i c a l as w e l l as c h e m i c a l — h a v e m o r e people l o o k i n g for o p p o r t u n i t i e s t o d a y t h a n ever before, i t w o u l d a p p e a r t h a t t h e p r i c e t a g o n a p r o f i t a b l e new d e v e l o p m e n t i n t h e 1960's is g o i n g t o r e a d c o n s i d e r a b l y h i g h e r t h a n the average f o r the 1950's. T h e increased use of m a r k e t research i n the is one w a y , w e believe, for t h e i n d u s t r y t o m a k e its d e v e l o p m e n t d o l l a r s go f a r t h e r a n d r e a l i z e more p r o f i t f r o m t h e m . Appraisal of Competition O n first c o n s i d e r a t i o n , i t m a y seem r e d u n d a n t to s a y t h a t t h e c o m p e t i t i v e sixties s u r e l y w i l l focus greater a t t e n t i o n on the e l a b o r a t i o n a n d r e f i n e m e n t of methods for s c r u t i n i z i n g more c l o s e l y t h e a c t i v i t i e s of o u r c o m p e t i t i o n . T h i s is a n area i n w h i c h m a r k e t research is c u r r e n t l y p l a y i n g a p a r t i n m a n y c o m p a n i e s , a n d w e believe i t is to be expected t h a t the role of m a r k e t research i n a p p r a i s i n g w h a t c o m p e t i t i o n is d o i n g w i l l increase s i g n i f i c a n t l y i n t h e next decade. I n some instances the results of m a r k e t studies h a v e suffered because of i n a d e q u a t e a t t e n t i o n to w h a t c o m p e t i t o r s are d o i n g o r m a y be p l a n n i n g . I g n o r i n g or not f u l l y i n v e s t i g a t i n g the p o s s i b i l i t i e s for changes i n the c o m p e t i t i v e c o n d i t i o n s i n a m a r k e t has resulted i n more t h a n a few companies b e i n g c a u g h t b y surprise a t the loss of business t o t h e i r c o m p e t i t o r s . S o m e producers h a v e f o u n d t h a t s u d d e n l y t h e y m u s t reassess t h e i r p o s i t i o n i n the m a r k e t , p e r h a p s because of the i n t r o d u c t i o n of a new c o m p e t i t i v e p r o d u c t , the a c q u i s i t i o n of customers b y t h e i n t e g r a t i o n moves of t h e i r c o m p e t i t o r s , the a d o p t i o n of a n aggressive p r i c i n g p o l i c y b y a c o m p e t i t o r , or for a n u m b e r of other reasons. N a t u r a l l y , y o u r c o m p e t i t o r i s n ' t g o i n g to send y o u a n a n n o u n c e m e n t of his p l a n s ; however, i f y o u h a v e a good m a r k e t i n t e l l i g e n c e s y s t e m d e v e l o p e d , i t is u n l i k e l y t h a t v e r y m a n y of his actions i n t h e m a r k e t place w i l l come as a c o m plete surprise to y o u . I n the area of p r o d u c t i m p r o v e m e n t a n d the d e v e l o p m e n t of n e w grades of p r o d u c t s , i n v a l u a b l e help m a y be g i v e n b y the a p p l i c a t i o n of m a r k e t intelligence i n f o r m a t i o n t o guide p r o d u c t d e v e l o p m e n t w o r k p r o f i t a b l y . A n s w e r s t o quest i o n s such as these m i g h t be used to good a d v a n t a g e : W h a t is your share of the market? Is it declining, holding its own, or rising? H o w is the market broken down among your competitors? W h o are the real comers, and who are those who are just managing to hold their own because of their accumulated momentum? What is the relative profitability of your share of the market and of your leading product grades? How many grades of a product are required to satisfy a specific end-use market? D o you hold an unusually large share of any market which may be particularly vulnerable to the sales or development efforts of your competitors? M u c h of t h e i n f o r m a t i o n for a p p r a i s i n g y o u r p o s i t i o n i n r e l a t i o n to y o u r c o m p e t i t o r s m a y be f o u n d i n y o u r o w n o r g a n i z a t i o n , a large p a r t of i t b e i n g o b t a i n a b l e f r o m a m o n g those people engaged i n a n y k i n d of field w o r k , such as salesmen, m a r k e t d e v e l o p m e n t representatives, a n d t e c h n i c a l service p e r sonnel. T h e m a r k e t research d e p a r t m e n t c a n be of m a t e r i a l assistance i n t h i s area b v a c t i n g as the focal p o i n t for the c o m p i l a t i o n a n d c o r r e l a t i o n of i n f o r m a t i o n o b t a i n a b l e f r o m w i t h i n the c o m p a n y as w e l l as f r o m outside sources.





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C e r t a i n l y the p r a c t i c e of t r y i n g t o find o u t w h a t y o u r c o m p e t i t o r is d o i n g is n o t h i n g new. I t is as o l d as the i n d u s t r y itself. W e believe, t h o u g h , t h a t the next decade w i l l see some great strides i n t h e c h e m i c a l i n d u s t r y i n t h e techniques e m p l o y e d t o assess the c o m p e t i t i v e p o s i t i o n a n d course of o u r respective companies. I n v i s i t i n g w i t h i n d u s t r y members o v e r t h e p a s t t w o to three y e a r s w e h a v e seen a definite t r e n d d e v e l o p i n g t o w a r d the e s t a b l i s h m e n t of w h a t we s h a l l define as comprehensive, c e n t r a l i z e d m a r k e t i n g i n t e l l i gence systems. T h e s e are systems w h i c h a t t e m p t , i n effect, t o seek o u t a n d record v i r t u a l l y e v e r y w o r t h w h i l e f a c t a b o u t a c o m p a n y ' s customers, the c u s tomer's customers, a n d the share of the customer's business h e l d b y competitors i n the field. Some producers w i t h w h i c h we are f a m i l i a r h a v e h a d m a r k e t i n g i n t e l l i gence systems of t h i s general t y p e i n o p e r a t i o n for s e v e r a l y e a r s . O t h e r s h a v e s t a r t e d i n the p a s t y e a r or t w o . G e n e r a l l y , t h i s c e n t r a l i z e d a u t o m a t i c or s e m i a u t o m a t i c c o l l e c t i o n a n d c o r r e l a t i o n of d e t a i l e d m a r k e t i n f o r m a t i o n are r e l a t i v e l y new p r a c t i c e s i n the c h e m i c a l i n d u s t r y . T h e i r use i n the decade a h e a d s h o u l d become m u c h more w i d e s p r e a d as the i n c r e a s i n g size a n d c o m p l e x i t y of the i n d u s t r y d e m a n d a more u s e f u l a n d r e l i a b l e source of m a r k e t i n g i n formation. I n o u r o w n c o m p a n y we h a v e f o u n d a c e n t r a l i z e d m a r k e t i n g intelligence s y s t e m t o be of p a r t i c u l a r help to us i n o p e r a t i n g as a p a r t of the f a s t - m o v i n g plastics industry. A f t e r a three-year trial-and-error period, we have now developed a s y s t e m of a s e m i a n n u a l c o m p i l a t i o n of a r a t h e r complete a s s o r t m e n t of m a r k e t i n f o r m a t i o n d e r i v e d f r o m reports p r e p a r e d on a p p r o x i m a t e l y 1500 p l a s t i c s processors a n d end users. A s the f a m i l i a r i t y w i t h the s y s t e m has i n c r e a s e d , so has the n u m b e r of uses w h i c h we h a v e f o u n d for the i n f o r m a t i o n i t has y i e l d e d . T h e s e uses n o w i n c l u d e : sales a n a l y s i s , a n d the d e t e r m i n a t i o n of sales t e r r i t o r i e s ; w a r e h o u s i n g a n d d i s t r i b u t i o n s t u d i e s ; a d v e r t i s i n g a n d p r o m o t i o n a l p r o g r a m s ; end-use m a r k e t s t u d i e s ; the s u r v e y i n g of c o m p e t i t i v e p r o d u c t s . I n f o r m a t i o n o b t a i n e d o n e n d uses a n d c o m p e t i t i v e p r o d u c t s is, i n t u r n , a p p l i e d i n our p r o d u c t d e v e l o p m e n t p r o g r a m s w h i c h constitute a h i g h l y i m p o r t a n t a n d c o s t l y p a r t of c o m peting i n the plastics industry. T o i l l u s t r a t e , i n s l i g h t l y more t h a n f o u r y e a r s i n the p o l y e t h y l e n e business, we h a v e p r o d u c e d m o r e t h a n 1000 different grades of p o l y e t h y l e n e resins i n o u r c o m m e r c i a l p l a n t . A t o t a l of 90 of these resins has entered i n t o our l i n e as s t a n d a r d p r o d u c t s . H o w e v e r , t o d a y we c a r r y o n l y 27 different grades of p o l y e t h y l e n e o n o u r p r i c e schedule as s t a n d a r d p r o d u c t s , w h i c h p o i n t s out the v e r y h i g h rate of p r o d u c t i m p r o v e m e n t a n d p r o d u c t obsolescence i n t h i s i n d u s t r y . Y o u m a y see f r o m t h i s e x a m p l e t h a t complete a n d w e l l o r g a n i z e d i n f o r m a t i o n on end-use m a r k e t s , c o m p e t i t i v e p r o d u c t s , a n d d e v e l o p i n g trends is v e r y m e a n i n g f u l t o us i n t e r m s of s p e n d i n g o u r p r o d u c t d e v e l p p m e n t d o l l a r s most w i s e l y a n d e x p a n d i n g our f u t u r e business. T h e r e a l v a l u e to be d e r i v e d f r o m the use of m a r k e t research depends t o a v e r y large extent u p o n t h e i n s i g h t a n d s e n s i t i v i t y w i t h w h i c h m a n a g e m e n t i n t e r p r e t s a n d u t i l i z e s o u r m a r k e t research i n f o r m a t i o n . T h e mere c r e a t i o n of a m a r k e t research f u n c t i o n w i t h i n a c o m p a n y gives no assurance of i t s effective u t i l i z a t i o n . I n the final sense, p r o b a b l y o u r most i m p o r t a n t j o b is t o d e m o n strate a n d sell our p r i n c i p a l p r o d u c t , m a r k e t i n f o r m a t i o n , i n t o a l l areas of our c o m p a n y where i t c a n be s h o w n to be a n effective a n d p r o f i t - m a k i n g t o o l . CHEMICAL MARKETING IN THE COMPETITIVE SIXTIES Advances in Chemistry; American Chemical Society: Washington, DC, 1959.

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