Document g2NEe1pgZe9zmGqDGVkE5BR4J

WORLD WIDE STRATEGY TRANSFORMER ASKAREL' AROCLOR 1 May 18, 1967 G. R. Buchanan R. A. Steenrod D, Wood OiMtAI A LEXOLDMONOO668I TABLE Q? CONTENTS PAGE I. The Market Situation A. Global Market for Capacitor Aroclor . . 1 3. Forces Acting on the Market........................... 4 . C. Competition .............................................................. 5 II. Long Range Objectives ................................................. 8 III. General Strategy .......................................................... 8 IV. Goals (1967-1968)......................................................... .. V. Plans (1967-1968)......................................................... .. null... .................... < 0564648 will..................Mmimwmipi... .... p'wiji...pm i m '"1 LEXOLDMON006682 WORLDWIDE STRATEGY Askarel Transformer ffluid I, The Market Situation A. Global Market For transformer Askarel The worldwide market for transformer Askarel (oland of Aroclor fluid and chlorinated benzene) is estimated to be in excess of 36 million pounds per year in i960. This market is projected to increase to about 50 million pounds per year by 1971. These numbers are for the blend of the Aroclor fluid and the chlorinated benzene. The Aroclor fluid con tent of these bis nds averages about 6oj. Thus, the market for Aroclor fluid in the transformer blends was about 22 million pounds in i960 and will grow to about 30 million pounds in 1971. The transformer Askarels are sold under a variety of trademarks. The word "Askarel" itself is a generic trade name referring to a dielectric fluid that is fire resistant; and whose arc produced gases are also fire resistant. Some of the common trademarks for Askarel are: Pyroclor - a trademark of Monsanto used by MCL but not Monsanto USA. Pyranol - a trademark of General Electric extensively used in the Western Hemisphere (products . sold by Monsanto USA). Inerteen - a trademark of Westinghouse extensively used in the Western Hemisphere (products sold by Monsanto USA). Clophen - Bayer (Germany). Pyralene - Prodelec (Prance). Kaneclor - Kanegafuchl (Japan. Oib*1 bV> mtmm wmimmmrnrnimmmmmm LEXOLDMON006683 Transformer Askarels sold by Monsanto-USA for both domestic and export are not sold under the Monsanto trademark. Rather, the trademarks of the major customers such as Pyranol and Inerteen are used. Tnls permits us to benefit by association with General Electric and Westinghouse without payment of Royalty (there are no current patents covering transformer Askarels). The main feature of the Askarel fluids is their fire resistance. They are used in transformers for those applications where the threat of fire is of particular concern to the user. These fire resistant transformers are specialty type transformers and their use is con fined to a very minor segment of the market. Tne vast bulk of the transformer market (about 80/6 of the market) is served by the less expensive petroleum oil filled transformers. Askarel transformers are used only where there is a particular concern over the threat of fire. This is . usually in commercial and industrial applications where people are involved; such as in factories, hospitals, office buildings, apartment buildings, etc.; or where expensive or critical equipment is involved such as in a military installation. In such applications, the Askarel transformer competes with the dry type, which is also fire resistant and in the same price range. Petroleum oil transformers could be used for applica tions of this type but usually additional precautions are required such as enclosing the transformer in a special vault that would contain a fire, should one occur. The cost of these special features often in creases the total installed cost of the petroleum oil transformer over that for the Askarel transformer, thus making the Askarel transformer more attractive, econ omically, for these applications. The size of the total transformer market is directly related to electric generating capacity. Each kilowatt of generating capacity requires approximately 2 kilo volt amperes distribution and 3 kilovolt amperes of .power transformer capacity. 0564650 -3- In general, about 5# of the total market is served by the Askarel transformer, about 10# by dry type and the remaining 85# by petroleum oil. This ratio will vary from country to country. Some countries such as France and Canada have laws requiring the use of fire resistant transformers in certain types of applications which allows the Askarel transformer to capture a greater share of the market. In other countries such as India, the fiscal policy of the country may artificially restrict the use of Askarel fluids. For example, in India where the economy is under a severe financial strain, the government insists that import of material be kept to the absolute minimum. Since Aroclor fluid must be imported into India, the government insists that the locally produced petroleum oil be used wherever possible regardless of the desir ability of using an Askarel fluid. In general, the market may 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, 3ayer in Germany, Monsanto in the USA and UK, 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. Domestic and non-domestic markets are shown in Table I. Thus, about 29 million pounds or approximately 80# of the world market for transformer Askarel is served by a domestic supplier. Monsanto (US & UK) supplied about 18 million pounds and.thus have about 61% of this domestic market. The US and UK market should grow to 28 million pounds by.1971 and Monsanto should continue to supply all of this segment of the world market. Domestic markets in France, Germany and Japan will likewise grow from 11,300,000 pounds in 1966 to 13,500,000 pounds by 1971. We do not expect to participate in this business since we cannot profitably compete with the domestic producers. An exception is our study of the possibility of installing Aroolor production facilities in Japan. Initial evaluations look promising and a final decision on this program will be made by mid-1967. 0564651 TABLE I THE WORLD MARKET FOR TRANSFORMER ASKARKL TOTAL POTENTIAL AND MONSANTO SHARE 1966 AND 1971 (ESTIMATED) 1000 POUNDS - (FINISHED BLENDS) DOMESTIC MARKETS 1966 TOTAL MONSANTO SHARE USA UK France Germany Japan ' 17000 650 6100 3600 1600 17000 650 0 0 0 TOTAL 28950 17650 1971 TOTAL MONSANTO Si 25000 3000 7000 4000 2500 25000 3000 0 0 0 41500 28000 NON-DOMESTIC MARKETS EFTA EEC Eastern Europe Asia-Pacific Rest of Americas Rest of World 320 1550 175 305 3380 615 TOTAL 6345 30 0 25 270 3380 300 4005 480 2000 250 450 4860 890 8930 200 0 100 500 4860 700 6360 GRAND TOTAL 35295 21655 50430 34360 0564652 LEXOLDMONOO6686 -4Non-domestlo markets will go from about 7,500,000 pounds m 1966 to 9,000,000 pounds by 1971Monsanto's share of this market should lncfeare"fo,.* . 4,000,000 pounds (54$) to 5,400,000 pounds (59$) in 1971. The non-domestic market will be described in detail in a series of area strategies which will be written for each important area of the world. The major non domestic markets are indicated in Table II. B. Forces Acting on the Market For Monsanto 1. Production from three plants - one in.the UK and two in the US. Very large production facilities with manufacturing cost in the US at least as good or better than any of the other producers. 2. Exclusive supply position in the US - the largest market - accounting for over 46$ of the world's total requirements. 3. Exclusive supply position in the UK - Also, a preferred position in the commonwealth area through UK affiliated companies. 4. Worldwide association with General Electric and Westinghouse - providing favorable influence on associated companies in foreign countries. 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. Because of production m the UK, have preferred position in most EFTA markets. LEXOLDMONOQ6687 TABLE II NON-DOMESTIC MARKETS FOR TRANSFORMER ASKAREL BY AREA - 3Y COUNTRY 1000 POUNDS (FINISHED BLENDS) Austria Denmark Finland Sweden Switzerland Norway Portugal TOTAL EPTA 1966 100 None None None 100 20 100 320 ' 1971 150 None None None 150 . 30 1^0 480 Italy Belgium Holland . EEC 166 * , 750 750 50 TOTAL 1550 1971 1000 ' 900 100' 2000 05b**** ifj^t^waj^rwsr.. & REST OF THE AMERICAS 1966 1971 Argentina 70 120 Brazil 200 400 Mexico 170 300 Canada 2900 4000 Chili 20 20 Puerto Rico 10 10 Panama 1 TOTAL . ___10 3380 10 4860 REST 0? THE WORLD 1966 Israel 70 South Africa 15 Spain 500 Pakistan 30 TOTAL 615 1971 100 50 700 40 890 1 ) 0964659 my;wwy>'a>"nip > *'wwpwwwitM -in '> ,'m 1 m. wiin"P LEXOLDMONOQ6689 EASTERN EUROPE 1966 . Czechoslovakia . None East Germany None Hungary None Poland Romania 25 None Yugoslavia 1^0 TOTAL 175 1971 None None None 50 None 200 250 ASIA-PACIFIC . Australia I966 280 2211 350 India 25 . 100 Hong Kong None None . TOTAL . 305 450 i 056*656 LEXOLDMON006690 Against Monsanto 1. Strong position of competition m the EEC plus no local Monsanto production in any EEC country. Long term relations of competition with major European customers. 2. The largest of the international markets (those outside the US and UK) being supplied by domestic producers (Germany, France, Japan)_ and therefore, not available to Monsanto. 3. The use of less expensive dielectric fluids such as petroleum oil. Where these are locally available, it is often very difficult to import the more expensive transformer Askarels (for example, India). 4. Higher production cost at MCL - resulting in greater vulner ability of this market to the European producers. Also, the difficulty of getting greater tariff protection for the UK. 5. Prodelec Technology and possible patent position in the manufacture of biphenyl. 6. The fact that Monsanto has over 50% of the world's business makes it difficult and dangerous to take risks to increase our share of the global market. 7. No large domestic market in the UK such as exist in Germany and France. _ 8. Non-availability of chlorinated benzene in the UK - must be purchased from our competitor in France, Prodelec. 9. Confusion generated by having many trademarks for the same product such as Pyroclor, Pyranol and Inerteen. Competition The major producers of chlorinated biphenyl together with their estimated production capacities are shown In Table III. The most important of these are Bayer and Prodelec and secondarily, Kanegafuchi; followed by Caffaro, Flix and producers in East Germany and Russia. The latter group sell very little material outside of their own domestic markets. ' mmm wmmm mm 0564657 wmmmmmmm -6- Since chlorinated biphenyl is used in many other applications and markets, only a portion of the total production (approxi mately Ip;*) goes into transformer askarel. Separate strategies will be required for tne other markets served by the chlorinated biphenyl fluids. The analysis of competitive activity in transformer askarel in the various world markets is shown in Table IV. Bayer and Prodelec are the major International competitors. These two companies are described in greater detail below. Table V shows a general comparison of strength and weaknesses of Monsanto compared to the three largest producers in Europe. Bayer (Germany) Bayer has been producing chlorinated biphenyl for about 35 years as long as Monsanto US. 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. Due to a basic position, their chlorine costs are low. Fortunately for Bayer, they do have a very large domestic market. The acceptance of transformer askarel was enhanced during the war years due to the non-availability of petroleum oil for these applications. This created the proper atmosphere for the enlarged use of askarel-fllled transformers in the years following the war. Bayer, for many years, was content to serve their existing customers and not compete actively for new business outside their historical area of interest in Europe. However, this attitude is changing and Bayer is becoming more aggressive in the world markets, particularly EFTA and Latin America. This will require greater competency of .Monsanto to hold its market position and to grow with these expanding markets. WS'I'.P 'HPRMPn91ll)'.WiPP91PP- w 056*<>S8 LEXOLDMONOQ6692 TABLE III ESTIMATED WORLD PRODUCTION CAPACITY* USA Prance UK Germany Italy Spain Japan TOTAL AROCLORS Million Pounds Monsanto 80 Prodelec 10 MCL Bayer . : 10 . 10 Caffaro 2 Flix 1 Kanegafuchl _J1 120 Tons 36,200 4,6oO 4,600 4,600 1,000 500 3,500 . 55,000 *Also produced in East Germany and Russia 0564659 LEXOLDMONOQ6693 TABLE IV KNOWN WORLD MARKET BY PRODUCER - 1966 1000 FOUNDS (FINISHED BLENDS) MARKET MONSANTO UK BAYER PRODELAC CAFFARO FLIX Major Domestic Markets 650 3600 6100 00 MONSANTO KANEGAFUCHI USA 1600 17000 TOTAL 28950 EFTA ' 30 270 20 00 0 0 320 EEC Eastern Europe 0 150 650 750 0 25 O 150 O0 0 O 0 1550 0 175 Asia-Paciflc 260 200 150 00 0 10 620 Rest of Americas . 0 O0 00 0 3380 3380 Rest of the World 265 O 50 0 300 0 0 615 TOTAL ` 1230 4220 7120 750 300 1600 20390 35610 LEXOLDMONOQ6694 Prodelec (France) Prodelec has been producing chlorinated biphenyl3 for about 25 years. It is a very important line of products for them and accounts for a major part of their Income. For this reason, they are much more aggressive than Bayer. In addition, they also produce the chlorinated benzenes necessary for the transformer askarels. These are also sold to others, such as Monsanto in the UK. Prodelec make an excellent line of products and are respected throughout the European area for technical and commercial inno vations. For example, they introduced the three ton returnaole bulk container which is now a standard with many major customers in Europe. In addition, they have made a number of quality im provements - 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 program in biphenyl. They have received a number of patents in this area, some of which are of concern to Monsanto. Prodelec is considered to be a very aggressive marketer of chlorinated biphenyl 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 their capacitor chlorinated biphenyl business to Monsanto in EFTA in 1966 and could well take pricing action in an.effort to regain this business in 1967. . Prodelec has a large domestic market - second only to the United States. This domestic market has been established through the assistance of favorable legislation requiring the use of fire resistant transformers in certain applications. This large domestic market has, of necessity, fixed Prodelec's attention on transformer askarel. This Interest, plus their production of the chlorinated benzene, makes them a formidable competitor in the transformer askarel market. ' "UMgi-W 11' H-Hf jui b>v 1 ilu,a.ID nil iyi!f|ji|pwt|)ijiw.>i!:..WP.y ^ TABLE V TRANSFORMER ASKAREL TABLE OF COMPETITIVE STRENGTHS MCL/MC BAYER R.M. POSITION Benzene Chlorine Chlorinated Benzene^ Buy/Make Make Buy/Buy Buy Make Make PROD. QUALITY Aakare1 Blend Good/Good Good ANALYTICAL . Adequate Adequate DATE PROD. STARTED Years PRODUCT RANGE 1951/1930 14 35 large 1930 35 Limited SALES ORGANIZATION Strength Me thod . Visit Frequency Customer Relations Good Direct/Agents Much respect Good Direct/Agents Europe more than MCL Much respect TECHNICAL SERVICE Good Good PRODELEC Buy (Progll) Make (Progil) Make Good Adequate 1938-1939 27 Limited Good Direet/Agents Europe more than MCL Much respect Good CJ'UEK ASSETS . SUPPLY SITUATION EFTA EEC (La rge (Large Con.p.) Comp.) Drums OK Bulk COOS Drums OK Bulk Good EEC (Progil) Divi.io OK Biillc Good CAFFARO Buy Make Make Good Adequate Post 1945 Limited Italy only - weak Direct Italy OK Bit amateur Not as good as Big Three Local Drui.r. CX Z99VJS0 LEXOLDMON006696 Table V (Page 2) RESEARCH EFFORT NEW PRODUCTS AROCLOR IMPORTANCE (*) . PRICE LEADERS/ CUTTERS PHILOSOPHY MCL/MC Needs MC/MCL liaison Yes Small but valuable Stability BAYER Not obviously energetic No Small but valuable Stability PRODELEC Active Active Large Leaders ' Common Schedule Common Schedule Common Schedule CAFFARO Non-existent No Medium Cutters To Capacity i LEXOLDMONOQ6697 -8- IX. Long-Range Objectives A. Maintain 100^ of the business in the U.S. and the U.K. - at maximum profit. Increase sales in these domestic markets from 17,650,000 pounds in 1966 to . 28,000,000 pounds in 1971. B. Except for the EEC, Switzerland and countries where there are local producers - establish a dominant position in supplying transformer askarel to the rest of the world ' - at maximum profit. C. Increase non-domestic sales from 4,400,000 pounds in 1966 to 5,900,000 pounds in 1971. D. Establish a "pull through" advertising and promotion . program in the U.S. and U.K. designed to establish preference for askarel designed transformers over tne open dry type units. III. General Strategy : Monsanto now supplies approximately 60^ of the world's requirements for transformer askarel. Our major markets are the U.S., the U.K. and Canada where we have 100^ of the available business. We have a share of the markets in many other world areas in the face of stiff competition - primarily from Bayer and Prodelec. Fundamental to our attempt to get additional business around the world is the complete understanding that we do nothing to jeopar dize the profitability of our domestic markets in the U.S. and the U.K. Every aggressive move we make to take business away from the competition must ueigh the'risk of losing any portion of our domestic markets. There is no indication that this will happen in the U.S. (as far as importation of fluid is concerned) but the U.K. market could be open to competitive moves by Bayer or Prodelec. We will make every attempt to strengthen our position in the U.K. through a reduction in manufacturing cost. . Our basic marketing strategy for transformer askarel around the world will include the following: 1 nwii-wiimii3i, mwpw.ma 05<>bbb* w m wjm LEXOLDMONOQ6698 -9' A. We will concentrate our efforts where we have maximum strength rather than dissipate our resources by trying to attack every world area simultaneously-(for example: we will concentrate on the U.K. market -in the European area). In the selected areas/ we will use all available Monsanto resources, including frequent and in-depth account coverage, technical assistance, customer service, supply and quality position and price Innovation where desirable. B. We will encourage the maximum sales activity on a local basis - involving all Monsanto marketing strengths that are available. This will include local Monsanto sales men, agents, etc. This involvement will be spelled out in the area strategies. C. We will develop area strategies for all important marketing area. These strategies will describe what we plan to do and how we will accomplish our objectives in the selected areas, D. We will Investigate selected areas where we do not now have market Information and establish a plan accordingly. E. We will develop accurate cost and profit information from the various producing locations within Monsanto (U.S. and U.K.) and ship material from that source which yields maximum profit - always considering customer needs and market requirements. P. We will Investigate our competition in depth in an attempt to get more detailed information regarding processes and estimated production cost. Tnis informa tion will guide our marketing program, especially our pricing strategy. G. We will use all available Monsanto personnel in the most effective and efficient manner on a worldwide basis regardless of their present location. Additional people . will be added as required to meet agreed upon objectives. H. Constantly review the technical Innovations which could adversely affect the use of transformer askarel - for example, improved and lower cost dry type insulation, non-flammable gasses and vapors, etc. 056* 665 ifpipnwi w111 wwwp.il i i LEXOLDMONOQ6699 9 9 -10- Recognizing the fluidity of relationship between the EEC and EFTA, we will be constantly alert to the need to revise our strategy for these two areas. In summary, we will use all Monsanto resources in an attempt to gain additional business in selected areas of the world where we have strengths over competition - carefully considering at all times the risk of any action to maintaining 100# of our domestic markets. , IV. Goals (1967) ' A. Maintain current business and expand marketure of transformer askarel as follows: 1. Maintain 100# of the business in the U.S. 2. Maintain 100# of the business in the U.K. 3. Maintain 100# of the business in Canada. 4. Maintain 100# of the business in Mexico & South America. 5. Obtain 100# of the business in Australia & South Africa. 6. Obtain 75# of the business in India. . 7. Obtain 100# of the business in Portugal - cover other . EFTA customers during capacitor sales trips as convenient. 8. Obtain 50# of the business in Spain - avoid problems with Fllx. . 9. Maintain 100# of.the business in Israel. . B. Initiate "pull through" advertising and promotion programs m U.S. and U.K. designed to create preference for askarel transformers over other types. ' C. Complete area strategies on all Important markets of the world. D. Coordinate and standardize as much as possible the M.C. and .M.C.L. testing procedures - resolve and understand any . differences. i I.JWHUP'WW'HBa.n.'Um ' OS<>i,<,bb 1pifi1.min.pBWi _*liiUPPI LEXOLDMON006700 -11- 9 E. Maximize profit on export transformer askarel blends by . shipping from lowest cost production plant. F. Attempt to establish blends with a high Aroclor content reduce M.C.L. dependence on Prodelec for TCB. V. PLANS (1967-1968) A. Establish specific area strategies, complete with goals and plans to obtain marketure objectives in selected areas: STRATEGY RESPONSIBILITY DUE DATS U.S. area GRB/PGB 2nd Quarter-1967 (R) Canada* T. Oneson June-1967 (a) Mexico* 8 Argentina* J. Morales P. D. Manfrin June-1967 (R) August-1967 (R) Brazil* W. Pruks November-1967 (R) U.K. P.J.A. Marsh/DW 2nd Quarter-1967 Eastern Europe* D. Wood 2nd Quarter-1967 Spain* D. Wood _ 3rd Quarter-1967 South Africa* Australia* : .* RAS A. D. Phillips December-1967 2nd Quarter-1968 (a) India* RAS August-1967 (r) Japan* RAS ' : .December-1967 (R) Keans Revision Due Indicates strategy will be combined with the capacitor Aroclor 0 strategy to produce a dielectric Aroclor strategy for the particular area. ' . - mm LEXOLDMON006701 B. Initiate "pull through" advertising in U.S. and U.K. RESPONSIBILITY Organic D. Wood Organic MS ACTION TARGET DATE Develop advertising & promotion program - maintaining coordlnation with ME. 2nd Quarter-1967 Prepare advertising & promotional program for the U.K. - maintaining coordination with Monsanto-U.S.A. 2nd Quarter-1967 Apply best features of the U.S. and U.K. program to other market areas such as Australia & Canada 4th Quarter-1967 C. Establish blends with higher Aroclor fluid content. RESPONSIBILITY Organic D. Wood ACTION Work with Westinghouse to establish a transformer askarel using 100$ Aroclor fluid. (See product strategy for details) Evaluate possibility of selling high Aroclor fluid content transformer askarel in ME market and take appropriate action. . TARGET DATS 4th Quarter-1967 3rd Quarter-1967 0564668 LEXOLDMON006702