Document 06ky72EYoBzbMnkdbaOk86L9m

WORLDWIDE STRATEGY CAPACITOR-DIELECTRIC AROCLOR I I Operating Division General Management Research Manufacturing International Marketing Approvals. J. Cresce W. R. Richard H. C. Carder D. Wood G. R. Buchanan Date 3/P8/67 3/28/67 f/3/67 Vl 3/67 A/13/67 toy 1, 1967 G. R. Buchanan P. G. Benlgnus R. A. Steenrod D. Wood 0540013 LEXOLDMONOQ6669 DISTRIBUTION 1. C. E, Anagnostopoulos 2. P. 0. Benignus 3. H. S. Bergen i). 0. R. Buchanan 3. J. Cresce 6. S. A. Heininger '7. D. B. Hosmer/H. C. Carder 8. N. T. Johnson 9. V >10. n. V. K. Johnson A. L. Klemm M. McEvien 12. H. h. Minckler 13. W. R. Richard Ik. E. S. Robson 15. R. A. Steenrod 16. D. S. Cameron - M.E 17. C. J. Smith - M.C.L 18. D. Wood - M.E. 19. W. B. Hicks - M.E. 20. Extra 21. Extra 22. Extra ?3. Extra 2k. Extra O&'iOOl't LEXOLDMON006670 TABLE OP CONTENTS Pase I, The Market Situation A. Global Market for Capacitor Aroclor................ .. 1 B. Forces Acting on the Market ............................... 2 C. Competition ................................................................................ .. ** II. Long Range Objectives .................................................................... 6 III. General Strategy ............................................................. ...................... 7 IV. Goals (1967) .................................................................................... ........ ? V. Plans (1967-1968) ............................................................ ................... 11 i: ; ; ; ! 4 0540015 LEXOLDMON006671 WORLDWIDE STRATEGY CAPACITOR-DIELECTRIC AROCLOR The Market Situation A. Global Market for Capacitor Aroclor The worldwide market for dielectric Aroclor used in capa citors was estimated to be In excess of 19,000 tons per year (for the year 1966) or approximately 40,000,000 pounds per year. This market is projected to increase to about 26,000 tons or nearly 55,000,000 pounds per year by 1971. . Fixed paper capacitors with Aroclor are widely used in Industrial applications. These units fill a special mar ket need and are almost always specified for the various applications (where they are used)5 for example, power capacitors, motor running capacitors, etc. In other words the user does not consider Aroclor units versus -some other type - when he needs a specific type of industrial capaci tor, he buys on Aroclor fixed paper capacitor. The same is true of other types of capacitors filling other special ized needs. For technical reasons, Aroclor will not com pete in other capacitor markets - where other types of capacitors are specified. In some areas of the world where currency is not avail able to import Aroclor, or where technology has not progressed to the use of Aroclor, petroleum oil is still used in capacitors. As money becomes available and as technology improves, these markets should use'Aroclor as a replacement for oil. The reason - Aroclor permits the production of lower cost and more efficient units. The market for fixed paper capacitors is dependent upon continued industrial expansion around the world. Power plants must be built for the generation and transmission of electric power to feed this industrial expansion. Such operations will require Aroclor filled capacitors and mar ket projects to assume this continued growth of industrial applications. In general, this market miay be divided into two areas domestic and non-domestic. A domestic market is one in which there is a major producer of chlorinated biphenyl in that particular market. For example, Bayer in Germany, Monsanto in the U.S.A. and 11.K., Kanegafuchi in Japan, etc All other markets are considered to be non-domestic, even though there are small chlorinated biphenyl producers in ( Italy and Spain. 0540016 -2- Domestic and non-domestic markets are shown on Table I. Thus, 33,000,000 pounds or approximately 75$ of the World market for capacitor Aroclor is served by a domestic .supplier, Monsanto supplied 26.000,000 (U.S. and U7K7) and therefore sold 78$ of this "so-called" domestic busi ness. The U.S. and U.K. market should grow to 32,000,000 pounds by 1971, and Monsanto will continue to supply all of this market. Domestic markets in Prance, Germany and Japan will like wise grow from 7,300,000 pounds in 1966 to 12,000,000 pounds by 1971. We do not expect to participate in this business since we cannot profitably compete with these domestic producers. An exception is our study of the posBiblllties of building Aroclor production facilities in f- Japan. Initial evaluations look good and a final deci sion on action will be made by mid-1967. Non-domestic markets will go from 9,000,000 pounds in 1966 to 15,000,000 pounds by 1971. Monsanto's share of this market should increase from 4,000,000 pounds (45$) to 8,500,000 pounds (54$). These non-domestic markets will be described in detail in a series of area strategies - an area strategy is to be.written for each important area of the world (see 1967 plans section of this strategy). The present and future markets in each Important country involved in these areas are shown in Table II. B. Forces Acting on the Market ' For Monsanto 1. Production from three plants - one in the U.K. and two in the U.S.A. Very large production facilities with manufacturing costs in the U.S.A. at least as good or better than any of the other producers. 2. F.xcluslve supply position in the U.S.A. - the largest market - accounting for over 50$ of the world's total requirements. 3. Exclusive supply position in the U.K. - a preferred position in .the commonwealth area through U.K. affili ated company. 4. Worldwide asssoclations with General Electric and Wcstinghouse - providing favorable influence on associ ated companies in foreign countries.. 0540017 LEXOLDMONOQ6673 5. Good technical and marketing know-how - ability to give good technical service to the customer. 6. Strong position and long-term supply relations with Canada, Mexico, South America and Eastern Europe. 7. Through production in U.K. - have preferred position in EFTA. . Against Monsanto 1. Product quality not as good as that available from two major competitors (Bayer and Prodelec). 2. Strong position of competition in the EEC - no Monsanto production to serve the EEC market. `Long-term relations of competition with major European customers. 3. The largest of the international markets (outside of the U.S.A. and U.K.) being supplied by domestic pro ducers and therefore not available to Monsanto - Germany, Prance and Japan. *1. The use of other cheaper dielectrics such as chlorinated naphthalenes and petroleum oil. Where these are locally available, it is often very difficult to import the more expensive chlorinated biphenyls (for example, India). 5. Higher production costs at M.C.L. - resulting in greater vulnerability of this market to the European producers. The difficulty of getting greater tariff protections in the U.K. 6. Prodelec technology and possible patent position in the manufacture of biphenyl, '' 7. The fact that Monsanto has over 6?^ of the world's busi ness - makes it difficult and dangerous to take risks to increase our share of the global market. 8. The development of capacitors utilizing plastic film instead of paper - could result in a decrease in Aroclor used in each unit. ' Competition The major producers of Aroclor together with their estimated production capacities are shown ln^Table XII. The most important of these are Bayer and Prodeiec"anS secondarily Kanegafuchi, Caffaro, Flix and producers in East Germany and Russia. The latter group sell very little material outside of their own domestic markets. 05^0018 Since Aroclor is used in many other applications and mar kets, only a portion of the total production (approximately H0$) goes into capacitors. A separate strategy will be required for other markets. The breakdown of competitive activity in capacitor Aroclor w in the various world markets is shown in Out side of the U.S.A. market our major compelTtlon"`is Bayer and Prodelec. These two companies are described in more detail below. Table _v shows a general comparison of strengths and weak- A "nesses of Monsanto compared to the three largest producers in Europe, jBa^rer (Germany) Bayer has been producing chlorinated biphenyl for about 35 years - as long as Monsanto U.S.A. Their quality is. excellent and their commercial and technical service is considered to be good. Their Clophen products as well as the Bayer name are highly respected throughout the world. Through a basic position, their chlorine costs are low, Jn spite of this, Bayer does not appear to be very aggres sive in. expanding their share of the chlorinated biphenyl market. They appear to be reasonably satisfied to maintain a position of "status quo." Bayer has supplied many of the larger accounts - especially in the European area, and don't appear to be interested in taking any technical or commercial action to "upset the boat." They are relying . for their growth on an expansion of business with their present large customers. They have not developed any new products and do not take the lead in seeking innovations to better serve their customers. On the other hand, they do not hesitate to take the necessary pricing action to protect their long standing business - for example, lowering prices to maintain their position in Italy. Clophen does not appear to be an important product to Bayer, and since it is an old product., they would just like to see things remain as they are. Thus, we do not expect any aggressive marketing activity from Bayer, but would expect that they would rapidly lower prices to pro tect their present business. They do have a large domestic market in Germany end probably consider the rest of the EEC (outside of France) ar. an area 'where they have maximum advantage. prodelec (France) Prodelec has been productr? chlorinated biphenyls for about 25 years, it is a very important line of products to them and accounts for a major part of their income. For 0&<t0019 -5- this reason, they are much more aggressive than Bayer. Prodelec make an excellent line of products and are respected throughout the European area for technical and commercial innovations. For example, -they introduced the three ton returnable bulk container which is now a standard with many major customers in Europe. In addition, they have made a number of quality improvements - notably power factor, and aggressively market the benefits of this improved quality to all major customers. For years Prodelec has carried out a major research pro gram in biphenyl. They have received a number of patents in this area, some of which are of concern to Monsanto. In addition, they recently introduced Pyralene 1500 - an attempted replacement for Aroclor, and even though they have not been successful in replacing Aroclor, they have made a real impression on the industry as far as demonstrating their technical capability. ,. Prodelec is considered to be a very aggressive marketer of Aroclor products. They not only take the necessary pricing action to protect, their present business, but are the most likely company to initiate lower prices to take business from others. They lost a substantial amount of business to Monsanto in EFTA in 1966 and could well take pricing action in an effort to regain this business In 1967. j j | ' j : | i j i ! j I ; I 0540020 X LEXOLDMONOQ6676 .TABLE III ESTIMATED WORLD PRODUCTION CAPACITY* USA Prance UK Germany Italy Spain Japan TOTAL AROCLORS .Monsanto Prodelec Million pound3 80 10 MCL Bayer Caffaro Plix Kanegafuchi 10 10 2 1 JL 120 Tons 36,200 4,600 4,600 4,600 1,000 500 55,000 41 Also produced in East Germany end Russia I i os'iooai LEXOLDMON006677 TABLE XV KNOWN WORLD MARKET BY PRODUCER - 1966 (Metrie Tons) MAJOR DOMESTIC MARKETS E.F.T.A. E.E.C. E. EUROPE ASIA-PACIFIC REST OF AMERICAS REST OF WORLD TOTAL M.C.L. 930 220 200 90 210 0 90 1,740 BAYER 1,100 155 805 115 50 50 0 2,275 PRODELEC 515 365 300 lOO 50 0 30 1,360 CAFFARO O 0 65 O 0 Q 0 65 KANEGA- FLIX FUCKI 0 0 0 0 0 0 250 250 1,700 0 0 0 0 0 0 1,700 M.C. TOTAL 11,000 0 0 O 20 985 0 12,005 15,245 740 1,370 305 330 1,035 770 19,395 i LEXOLDMONOQ6678 o.3 ,i' TABLE V ` ELECTRICAL AROCLOR TABLE OF COMPETITIVE STRENGTHS r' MCL/KC BAYER PR0DBL3C CAFFARO R. M. POSITION Benzene Chlorine Buy/Make Make PRODUCT QUALITY 1254 1242 * Good/Fair Fair/Falr ANALYTICAL Adequate DATE PROD. STARTED Years PRODUCT RANGE 1951/1930 14 35 Very large Buy Make Good Good Adequate 1930 35 Very large Buy (Progil) Make (Progil) . Buy Make Good Good Adequate 1938-1939 27 Limited (Progil) Good Fair Adequate Post 1945 Limited SALES ORGANIZATION Strength Method Visit Frequency Customer Relations TECHNICAL SERVICE Good Direct/Agents Much respect Good Good DIrec t/Agents Europe more than KCL Much respect Good Good Direc t/Agents Europe more than KCL Much respect Good/Excellent Italy only J)j ''pOC t Italy OIC Bit amateur Not as good Big Three .< OTHER ASSETS EFTA (Large Company) EEC (Large Company) EEC (Progil) Local .i SUPPLY SITUATION Drums OK Drums OK Drums OK Drums OK ;! Bulk ? Bulk Good Bulk C-ood j-i LEXOLDMONOQ6679 i 5 T i. 1 23 4t RESEARCH EFFORT } NEW PRODUCTS ' AROCLOR I1 IMPORTANCE (1) :4?iI PRICE LEADERS/ CUTTERS ? PHILOSOPHY i- TA3L5 V (Continued) Needs MC/KCL liaison Yes Small but valuable Not obviously energetic No Small but valuable Very active Very active (1500) Large Non-existent . No Medium Stability Common schedule Stability Common schedule Leaders Common schedule Cutters To capacity jj i4 i j 1 j i* LEXOLDMONOO668O