Document yvN4y4a1Lb82r2oRdbnaypvV

WORLD WIDE STRATEGY CAPACITOR-DIELECTRIC aRqclor~ r May 1, 1966 G. R. Buchanan E. P. Cunningham J. M. Campbell D. Wood DSW 201216 STLCOPCB4052581 DISTRIBUTION 1. C. E. Anagnostopoulos P. 0. Benignu8 3. H. S. Bergen 4. W. L. Bettison 5. G. R. Buchanan 6. E. P. Cunningham 7. A. G. Eades 8. S. A. Heininger 9. D. B. Hosmer/J. A. Mullendore 10. W. K, Johnson 11. M. McEwen 12. H. Iif Minckler 13. D. J. Murphy 14. W. R. Richard 15, E. S. Robson ' ^6* R. S. Vfobus 17. D. S. Cameron 18. J. M. Campbell - MCL 19. C. J. Smith r MCL 20. M. W. Waugh - ME 21. David Wood - MCL 22. Extra 23. Extra 24. Extra 25. Extra 26. Extra ____ osnN^217 STLCOPCB4052582 TABLE OP CONTENTS T " "" 'T ' "T " -- X. The Market Situation Page A. Global Market for Capacitor Aroclor .................... 1 B. Forces Acting on the Market........................ .... . 2 C. Competition . . . ........................ .................................4- XI. Long Range Objectives . . . . ........................ . . . 6 III. General Strategy. ........................ .......... 7 IV. Goals (1966-1967) .......................................................................... 9 V. Plans (1966-1967) ..................................................... .... 11 DSW 201218 STLCOPCB4052583 World Wide Strategy Capacitor-Dielectric Aroclor Th"e Marke ti" S" itu1 "a1 ti"*o" n- . A. Global Market for Capacitor Aroclor The world-wide market for dielectric Aroclor used in capacitors was estimated to bo in excess of 16,000 tons per year (for the year 1964) or approximately 35,000,000 lbs. per year. This market is projected to increase to over 22,000 tons or nearly 50,000,000 lbs, per year by 970. Fixed paper capacitors with Aroclor are widely used in industrial applications. These units fill a special market need and are almost always specified for the various applications (where they are used) for example, power capacitors, motor running capacitors, etc. In other words, the user does not consider Aroclor units versus some other type f when he needs a specific type of industrial capacitor, he buys an Aroclor fixed paper capacitor. The same is true of other types of capaci tors filling other specialized needs. For technical reasons, Aroclor will not compete 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 pf 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 market projects assume this continued growth of industrial applications. In general, this 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, Bayer in Germany, Monsanto in the USA and U.K., Kanegufuchi in Japan, etc. All other markets are considered to be non domestic, even though there are small chlorinated biphenyl producers in Italy and Spain. .^ STLCOPCB4052584 I -2 Domestic and non-domestic markets are shown on Table I, Thus, 27,000,000 pounds or approximately 75# of the world market for capacitor Aroclor is served by a domestic supplier, Monsanto supplied 21,000,000 pounds (US and UK) and therefore sold 78# of this "so called" domestic business. The US and UK market should grow to 27,000,000 pounds by 1970, and Monsanto will continue to supply all of this market. Domestic markets in France, Germany and Japan will like wise grow from 6,000,000 pounds in 1964 to 7*500,000 pounds by 1970. We do not expect to participate in this business since we cannot profitably compete with these domestic producers. Non-domestic markets will go from 8,500,000 pounds in 1964 to 15,000,000 pounds by 1970. Monsanto's share of this market should increase from 3,000,000 pounds (35#) to 8,500,000 pounds (57#). 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 1966 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. Exclusive supply position in the U.S.A. - the larg est 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. affiliated company. 4. World-wide associations 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. dsw 201220 STLCOPCB4052585 TABLE I THE WORLD MARKET FOR CAPACITOR AROCLOR TOTAL POTENTIAL AND MONSANTO SHARE 1964 AND 1970 (ESTIMATED) METRIC TONS DOMESTIC MARKETS 1<J64* 1?70 Total Monsanto SJiare Total Monsanto Objective USA UK France Germany Japan 8,500 930 810 1,010 1,000 8,500 930 0 0 0 11,000 1,200 1,000 1,300 1,200 11,000 1,200 0 0 0 Total 12,250 9,^30 15,700 12,200 ( NON-DOMESTIC MARKETS EFTA EEC E. Europe Commonwealth Rest of Americas Rest of World Total 690 1,270 310 760 500 230 3,760 80 60 45 688 4oo 35 1,308 1,025 1,850 700 1,465 1,190 400 6,630 555 0 300 1,365 1,190 300 3,710 Grand Total 16,010 10,738 22,330 15,910 *1965 Figures were not available at the time this report was written. Figures for 1965 should be 5-10# above 1964. DSW 201221 STLCOPCB4052586 TABLE II NON-DOMESTIC MARKETS FOR CAPACITOR AROCLOR BY AREA - BY COUNTRY METRIC TONS Austria Denmark Finland Norway Sweden Switzerland Total EFTA 1964-65 60 25 75 15 290 225 690 1970 80 45 100 50 400 350 1,025 Italy Belgium Holland Total EEC 1964-65 740 330 200 1,270 1970 1,050 500 300 1,850 Czechoslovakia East Germany Hungary Poland Romania Yugoslavia EASTERN EUROPE 1964-65 5 100 15 100 15 Total 310 1970 20 200 50 200 100 130 700 DSW 201222 V__ ___ STLCOPCB4052587 Table II (Page 2) Australia India Hong Kong Canada Argentina Brazil Mexico Israel South Africa Spain COMMONWEALTH 1964-65 150 150 10 450 Total 760 REST OF AMERICAS 1964-65 170 210 120 Total 500 REST OF THE WORLD 1964-65 30 0 200 Total 230 1970 300 300 15 750 1,365 1970 380 450 360 1,190 1970 50 50 300 400 DSW 201223 STLCOPCB4052588 -3- 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 USA and UK) being supplied by domestic pro ducers and therefore not available to Monsanto Germany, Prance and Japan. 4. The use of other cheaper dielectrics such as chlori nated 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. Longer range - the possible development of silicon diodes as a technical replacement for Aroclor type capacitors for some applications. 6. Higher production costs at MCL - resulting in greater vulnerability of this market to the European producers. The difficulty of getting greater tariff protections in the UK. 7. Prodelec technology and possible patent position in the manufacture of biphenyl. 8. Prodelec's development of Pyralene 1500 - providing a good technical image for this company. 9. The fact that Monsanto has over 67# of the world's business - makes it difficult and dangerous to take risks to increase our share of the global market. 10. The development of capacitors utilizing plastic film instead of paper - could result in a decrease in Aroclor used in each unit. Ir~ SW 201224 STLCOPCB4052589 -4- C. Competition The major producers of Aroclor together with their estimated production capacities are shown, in Table III. The most important of these are Bayer and Prodelec and secondarily Kanegufuchi, Caffaro, Plix and producers in East Germany and Russia, The latter group sell very little material outside of their own domestic markets. Since Aroclor is used in many other applications and markets, only a portion of the total production (appro ximately 4o$) goes into capacitors. A separate strategy will be required for other markets. The breakdown of competitive activity in capacitor Aroclor in the various world markets is shown in Table IV. Outside of the USA market our major competition is Bayer and Prodelec. These two companies are described in more detail below. Table V shows a general comparison of strengths 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 USA. 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. In spite of this, Bayer does not appear to be very aggressive in expanding their share of the chlorinated biphenyl market. They appear to be reasonably satis fied 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 ex pansion 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. Ds>N20A225 v. STLCOPCB4052590 U.S.A. FRANCE TJ.K. GERMANY ITALY SPAIN JAPAN TABLE III ESTIMATED WORLD PRODUCTION CAPACITY* . TOTAL AROCLORS Million Pounds Tons Monsanto 90 41,200 Prodelec 10 4,600 M.C.L. 10 4,600 Bayer 10 4,600 Caffaro 2 1,000 Flix 1 500 Kanegafuchi 7 3,500 Total 130 60,000 Also produced in East Germany and Russia DSW 201226 STLCOPCB4052591 MAJOR DOMESTIC MARKETS E.P.T.A. E.E.C, E. EUROPE COMMONWEALTH REST OF AMERICAS REST OF WORLD TOTAL M.C.L. 930 65 60 45 129 0 35 1,264 TABLE IV KNOWN WORLD MARKET BY PRODUCER - 1964 (METRIC TONS) BAYER PRODELEC CAFFARO FLIX KANEGAFUCHI 1,010 155 835 205 47 100 0 2,352 810 455 310 60 35 0 30 1,700 0 0 1,000 00 0 65 0 0 00 0 00 0 00 0 0 165 0 65 165 1,000 M.C. 8,500 15 0 0 549 4oo 0 9,464 TOTAL 12,250 690 1,270 310 760 500 230 16,010 TABLE V ELECTRICAL AROCLOR TABLE OF COMPETITIVE STRENGTHS R.M.POSITION Benzene Chlorine PROD. QUALITY 1254 1242 ANALYTICAL DATE PROD. STARTED Years PRODUCT RANGE SALES ORGANIZATION Strength Method Visit Frequency Customer Relations TECHNICAL SERVICE OTHER ASSETS SUPPLY SITUATION MCL/MC Buy/Make Make Good/Fair Fair/Fair Adequate 1951/1930 14 35 Very large Good Direct/Agents Much respect Good EFTA (Large Comp.) Drums OK Bulk ? BAYER Buy Make Good Good Adequate 1930 35 Very large Good Direct/Agents Europe more than MCL Much respect Good EEC (Large Comp.) Drums OK Bulk Good PRODELEC Buy (Progil) Make (Progil) Good Good Adequate 1938-1939 27 Limited (Progil) Good Direct/Agents Europe more than MCL Much respect Good EEC (Progil) Drums OK Bulk Good CAFFARO Buy Make Good Fair Adequate Post 1945 Limited . Italy only - Weak Direct . Italy OK Bit amateur Not as good as Big Three Local Drums OK Tabl T (Page 2) RESEARCH EFFORT NEW PRODUCTS AROCLOR . IMPORTANCE (ZjS) PRICE LEADERS/ CUTTERS PHILOSOPHY MCL/MC Needs MC/MCL liaison Yes BAYER Not obviously energetic No PRODELEC Very active Very active (1500) CAFFARO Non-existent No Small but valuable Small but valuable Large Medium Stability- Stability Leaders Cutters Common schedule Common schedule Common schedule To capacity -5- 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 protect their present business. They do have a large domestic market in Germany and probably consider the rest of the EEC (outside of Prance) as an area where they have maximum advantage, Prodelec (Prance) Prodelec has been producing 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 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 intro duced the 3-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. ' DSW 201230 STLCOPCB4052595 -6- II. Long Range Objectives A. Maintain 100# of the US and UK dielectric Aroclor business - at maximum profit. Increase sales from 23 ft pounds in 1965 to 28 ft pounds by 1970. B. Except for the EEC and Japan, establish a dominant position in supplying Aroclor to the rest of the world - at maximum profit. C. Increase non-domestic sales from 8,500,000 pounds ($45Q,000) in 1965 to 15,000,000 pounds ($1,400,000) by 1970. D. Establish Monsanto image through common world-wide product identification and specifications and insure that our quality and manufacturing cost is as good or better than competitive producers. DSW 201231 STLCOPCB4052596 7- III. General Strategy Monsanto now supplies approximately 70# of the world's requirements for dielectric Aroclor. Our major markets are the USA, the UK and Canada where we have iOO# of the available business. We have a share of the markets in many other areas in the face of stiff competition - pri marily from Bayer and Prodelec. Fundamental to our attempt to get additional business around the world is the complete understanding that we do nothing to Jeopardize the profitability of our domestic markets - US and UK. Every aggressive move we make to take business away from the competition must weigh the risk of losing any portion of our domestic markets. There is no indication that this will happen in the USA (as far as im porting is concerned), but the UK market is presently open to competitive moves by Bayer or Prodelec. We will make every attempt to strengthen our position in the UK through a reduction in manufacturing costs. Our basic marketing strategy for capacitor Aroclor around the world will include the following: A. We will concentrate our efforts where we have maximum strengths - in other words lead from strengths instead of weaknesses. In selected areas we will use all avail able 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 area strategies. C. We will develop area strategies for all important marketing areas. These strategies will describe what we plan to do and how we will accomplish our objectives in these 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 (USA and UK) and ship material from that source which yields maximum profit - always considering customer needs and market requirements. DSW 201232 STLCOPCB4052597 -8- P. We will Investigate our competition in depth in an attempt to get more definite information regarding processes and estimated production cost. This 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 world-wide basis regardless of their present location. Additional people will be added as required to meet agreed upon objectives. H. We will coordinate manufacturing, research and market ing on a world-wide basis tp accomplish common product identification. Product specifications, quality, product names, etc. will be common through the world. I. Any basic plan to market Aroclor in the UK and the EEC will recpgnize the importance of the non-electric NCR account. J. Constantly review the technical innovations which could adversely affect the use of Aroclor in capacitors for example, silicon diodes, plastic films, etc. 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 consider ing at all times the risk of any action to maintaining 100# of our domestic markets. DSW 201233 STLCOPCB4052598 -9- IV. Goals (1966-1967) A. Maintain current business and expand market share of capacitor as follows: 1. Maintain 100# of the business In the USA. 2. Maintain 100# of the business In the U.K. 3. Maintain 100# of the business In Canada. 4. Maintain essentially 100# of the business in Mexico and South America. 5. Obtain 100# of the business In Australia. 6. Obtain 100# of the business in India. 7. Obtain 100# of the business in Israel. 8. Obtain 100# of the business in Denmark, Finland and Norway and 67# of the business in Sweden. ' 9. Maintain present business in the EEC with minimum marketing effort, and take opportunities for new business as they arise. 10. Locate and define the markets in East Germany. 11. Obtain 100# of the business in Poland, Romania and Czechoslovakia. 12. Investigate markets and, if desirable, establish a plan to get the business in the following areas: Hungary, Greece, Turkey, USSR, South Africa 13. Obtain 50# of the business in Spain - avoid tariff troubles with Flix (local Spanish producer). B. Eva-luate technical and commercial aspects of silicon diodes and plastic films in replacing Aroclor in capaci tors - establish appropriate plan to protect Aroclor in this application. C. Evaluate technical and commercial potential of Pyralene 1500 becoming a competitor for Aroclor in capacitors establish appropriate plan to protect Aroclor in this application. D. Determine the value of G. E. Pyranol P-2 to Monsanto establish plan of action applying conclusions to Monsanto Aroclor program. DSW 201234 l___ -- - - STLCOPCB4052599 -10- E. Determine the technical and commercial need for quality improvement, common specifications and identification of capacitor Aroclor and establish appropriate plan for implementation. F. Obtain better information regarding Bayer and Prodelec production costs for capacitor Aroclor. 0. Develop comparable production cost information on capacitor Aroclor from Monsanto's U.S. and U.K. plants. H. Determine technical and economic feasibility of reduc ing production cost on U.K. plant Aroclor - establish appropriate plan for implementation. X. Maximize profit on export capacitor Aroclor by shipping from lowest cost production plant. J. Improve technical and commercial liaison between OrganicInternational Division, particularly European areas. K. Improve Monsanto technology in biphenyl. L. Complete area market strategies on all important markets of the world. M. Coordinate and standardize as much as possible the MC and MCL testing procedures - resolve and understand any differences. DSW 201235 STLCOPCB4052600 -11- V. Plans (1966-1967) A. Establish specific Global and Area strategies, complete with goals and plans, to attain indicated market share iri selected areas. Strategy Responsibility Due Date Global Market GRB 2nd Qtr. 1966 U. S. Area GRB 2nd Qtr. 1966 Spain Area JMC 2nd Qtr. 1966 EFTA Area JMC 2nd Qtr. 1966 U.K. Area JMC 2nd Qtr. 1966 Canada Area EPC 3rd Qtr. 1966 Mexico Area EPC 2nd Qtr. 1966 Brazil EPC 2nd Qtr. 1966 Argentina Area EPC 2nd Qtr. 1966 Australia/New Zealand Area JMC/EPC 2nd Qtr. 1966 E. Europe Area JMC 2nd Qtr. 1966 Israel Area JMC 2nd Qtr. 1966 India Area JMC/EPC 2nd Qtr. 1966 EEC Area JMC 3rd Qtr. 1966 Greece Area JMC 4th Qtr. 1966 Turkey Area JMC 4th Qtr. 1966 USSR Area JMC 4th Qtr. 1966 South Africa Area JMC/EPC 3rd Qtr. 1966 Responsibility Action Due Date JMC Investigate and summarize technical and commercial competition potential of silicon diodes in Europe. 1st Qtr. 1966 1 DSW 201236 STLCOPCB4052601 -12- Responsibllity Action Due Date PGB, RH Munch Investigate and sum- marize technical and commercial competition potential of plastic films for capacitors. 2nd Qtr. 1966 Organic/ Establish and implement 2nd Qtr. 1966 International plans as required to meet this competition. C. JMC Investigate and summarize potential com petitive threat of Pyralene 1500 in Europe. 2nd Qtr. 1966 PGB Investigate and summarize potential com petitive threat of Pyralene 1500 in USA. 2nd Qtr. 1966 Organic/ Establish and implement 2nd Qtr. 1966 International plans as required to meet this competition. D. GRB/PGB Discuss patent and tech- 1st Qtr. 1966 nology aspects of Pyranol P-2 with G.E. GRB Obtain G.E. attitude toward license. 2nd Qtr. 1966 JMC Summarize potential 2nd Qtr. 1966 need of Pyranol P-2 in Europe. GRB/Legal Establish plan and take action accordingly. 2nd Qtr. 1966 E. Organic/ Develop Aroclor sympos- 1st Qtr. 1966 International ium with Mfg./Research/ Marketing to discuss world-wide product quality specifications, identifica tion, test procedures, etc. Organic/ Agree upon objectives, 1st Qtr. 1966 International new specifications, plans and responsibility. . Organic/ International Achieve Aroclor quality at all US and UK plants at least equivalent to Bayer and Prodelec. 1966-1967 DSW 201237 STLCOPCB4052602 -13- Responsibillty Action Due Date F. JMC Obtain and summarize information on pro cesses used by Bayer/ Prodelec. 3rd Qtr. 1966 JMC/Purchasing Obtain and summarize information on raw material quality, availability and cost to competition. 3rd Qtr. 1966 CJS/DBH Estimate Aroclor pro duction costs by competitors. 3rd Qtr. 1966 G. CJS/DBH Determine comparable capacitor Aroclor production cost from U.S. and U.K. plants. 1st Qtr. 1966 CJS/DBH Evaluate technical and economic requirements of making U.K. Aroclor production costs equiva lent to U.S. 2nd Qtr. 1966 CJS/DBH Recommend plan of action. 3rd Qtr. 1966 CJS Implement plan of action. 1967 H. GRB/JMC/EPC Considering customer needs and Monsanto eco nomic factors develop customer supply plan which maximizes Monsanto profit. 2nd Qtr. 1966 I. Organic/ Develop and Implement 1st Qtr. 1966 International communication procedure between Organic Division/ International Division St. Louis and member companies. J. Organic/ Establish short and long 3rd Qtr. 1966 International term technical and com mercial manpower require ments (especially on-the- spot field sales needs) to reach sales objectives for dielectric Aroclor DSW 201238 STLCOPCB4052603 -14- Responsibility Action Due Date Organic/ Implement plan to ac bth Qtr. 1966 International quire and train necessary manpower. K. MC/MCL Resolve and attempt to standardize MC and MCL testing procedures. December 1967 PpB/Colln Coleman Investigate MCL and European test procedures during June trip to Europe. June 1966 PGB/CC/Munch/ Organic Analytical Resolve and understand January 1967 differences and standard ize where possible. MC/MCL/International Introduce standard pro cedures to world-wide customers. During 1967 DSW 201239 STLCOPCB4052604