BASF Essay ⋆ Business Essay Examples ⋆ EssayEmpire

BASF AG (Badische Anilin-und Soda-Fabrik) is the world’s largest chemical company (in terms of both net sales and number of employees). The company has its headquarters in Ludwigshafen am Rhein (RhinelandPalatinate, Germany). BASF handles a diverse, yet interrelated, portfolio of products, including chemicals, plastics, agricultural products, fine and specialty chemicals, petrochemicals, and fossil fuels and materials. As of December 2007 BASF had net sales of nearly $70 billion and employed over 95,000 people.

BASF, along with Bayer and Hoechst, was one of the important German chemical companies of the late 19th and 20th centuries. Its history of technological achievement—particularly between the 1870s and the 1940s—is unprecedented. BASF’s early achievements revolved around coal-tar processes and high pressure synthesis and catalytic processing. Its successes, through international technology transfer to the United States, helped to revolutionize the modern petroleum refining and petrochemicals industries.

BASF was founded in 1865 by Friedrich Engelhorn in Mannheim, Germany. As with the other major German chemical companies of the late 19th century, BASF’s success was based on advanced scientific and technical research in the synthesis of coal-tar-based organics. BASF’s first important commercial products were coal-tar dyes for use in the textile industry. Indigo dye was its first important commercial technology. Profits from its synthetic dyes went into financing expansion of the company into the heavy chemical business. Prior to World War I, BASF employed approximately 10,000 people and had built its largest facility across the Rhine from its Mannheim plant, at Ludwigshafen.

At this time, BASF expanded beyond synthetic dyes to high-pressure synthesis. Under the technical direction of Fritz Haber and Carl Bosch, BASF developed two of the most important technologies of the 20th century chemical industry: a continuous sulfuric acid process and the famous high-pressure synthetic ammonia-methanol method. With these critical innovations, BASF could make the basic heavy chemicals cheaply, in mass quantities, and using inexpensive, abundant raw materials (e.g., nitrogen from the air to make ammonia).

During this period, the United States and European countries considered BASF the world’s most important chemical company. BASF leveraged its technological superiority into market growth through strict patent control and predatory pricing strategies. Thus, BASF sold dyes, ammonia, and methanol at “below market prices” to U.S. firms to dissuade the U.S. chemical industry from expanding production at home. BASF played a prominent role for Germany during World War I since its technologies assured Germany of ready supplies of coal-tar dyes and drugs as well as explosives (for weapons and construction) and fertilizers (for food production) to carry on the war effort.

Even following Germany’s defeat, it did not take long for BASF to resume production of its prewar product line and reestablish its market networks internationally. Its power and influence would soon grow within Germany when in 1925 it, along with Bayer, Hoechst, and other German-based chemical companies, joined in membership in the giant chemical cartel I. G. Farbenindustrie (IG Farben). By the late 1930s, the Nazis elevated IG Farben as its technical (and financial) right arm. During World War II, BASF remained the technological center of the cartel, developing the field of high-pressure hydrogenation that produced needed supplies of aviation and automotive fuels and synthetic rubber for the war effort.

Following the defeat in Germany, members of Bayer’s board of directors were convicted of war crimes, but were given relatively lenient sentences of no more than four years. Under Allied supervision for seven years, IG Farben itself was finally broken up by the Allies in 1952 into its component corporate parts.

The post–World War II period presented difficult challenges, and offered unprecedented business opportunities, to the former IG Farben companies. This was certainly the case with BASF, which now had to go it alone, as it had done before the formation of the cartel. In an ironic twist, the economic difficulties of West Germany in the 1950s helped propel the company back into the limelight; without money to import chemicals from the United States and other countries, BASF became an important supplier of chemical intermediates and products domestically. By the late 1950s, the company produced nitrogen, ammonia, and related products very near wartime levels.

BASF deftly steered its way into an impressive growth cycle during the next half century. Indeed, BASF, like Dow Chemical, was one of the larger chemical companies that remained in the field as a competitor to the oil companies, which had integrated backward into petrochemicals. BASF realized its growth by using a strategy similar to that embraced by companies such as the American company Dow Chemical.

Recent Strategies

BASF has continued to embrace an active research and development program and linked this work with an aggressive capital expenditures strategy. BASF has in the past dedicated part its its research and development (R&D) budget for developing new, high value products, such as pharmaceuticals, crop protection agents, fertilizers, and coatings. However, in the 1990s, the company sharply reduced its activities in consumer product lines. As is the case with Dow, BASF excels in improving economies of production (and finding cheap raw materials and feedstock).

Throughout the period from the 1960s to the present time, BASF R&D worked to design larger, more integrated, high-efficiency plants within Germany and worldwide making existing products—e.g., nylon, polypropylene, the amines, polystyrene, and a variety of petrochemical intermediates—cheaply and in mass quantities that effectively competed in their designated markets. The culmination of this strategy came in 2001 when BASF, in partnership with ATOFINA Petrochemicals, completed work on the world’s largest steam cracker located in Port Arthur, Texas, to provide a wide range of petrochemical intermediates at low cost to the United States and the global chemical industry.

BASF also has proven itself very flexible in modifying its organizational structure as made necessary by economic circumstances and internal growth. In part, this strategy entailed divestitures of underperforming business units, such as (in the 1990s) flavors and fragrances and advanced materials. It also meant creative reorganization to rationalize operations and streamline the company’s operations and to create maximum synergies with its R&D activities. In the 1980s, for example, BASF consolidated all of its North American operations under a newly created subsidiary, BASF Corporation. This consolidation generated substantial economies across the organization. This subsidiary now generates one fifth of all company sales, with 90 percent of all sales by the corporation coming from plants operating within North America.

In 2001 BASF reorganized its core businesses into its five product segments—chemicals, plastics and fibers, performance products, agricultural products, and oil and gas—and these segments divided into 12 operating divisions. This new organization rationalized and maximized the functioning of value-added chains through the economies arising from “bundling” together products with common properties, production processes, and markets.

Equally important, BASF continually expanded internationally in order to sidestep the problems of restricted markets and cyclical downturns that the German economy as a whole, and the German chemical industry in particular, faced during the 1980s and 1990s. As with its competitor Dow Chemical, BASF internationalized through the strategic use of mergers, acquisitions, and joint ventures. Through the 1970s and 1980s, BASF’s strategy was to expand its business and production capacity in North America through the construction of Greenfield plants as well as targeted acquisitions and selected joint partnerships. This expansion culminated in the consolidation in 1986 of all North American operations under a new subsidiary.

This period also saw the company begin operating in other strategic locations as well, including western Europe (Belgium, France, Spain, Denmark, the United Kingdom, Italy), Latin America (Argentina, Brazil, Mexico), Asia (Japan, India, China, South Korea), Australia, Africa (South Africa), and eastern Europe. By 2007 BASF entered into approximately 160 subsidiaries and joint ventures and operated more than 150 plant facilities worldwide.

Bibliography:

Aftalion, A History of the International Chemical Industry, 2nd ed. (Chemical Heritage Press, 2001);
Arora, E. Landau, and N. Rosenberg, eds., Chemicals and Long-Term Economic Growth (John Wiley & Sons, 1998);
BASF, Annual Report (2007);
Beer, The Emergence of the German Dye Industry (University of Illinois Press, 1959);
Findlay, A Hundred Years of Chemistry, 3rd ed. (G. Duckworth, 1965);
com, “BASF, AG” (2007);
Goran, The Story of Fritz Haber (University of Oklahoma Press, 1967);
Haber, The Chemical Industry, 1900–1930: International Growth and Technological Change (Oxford University Press, 1971);
Hohenberg, Chemicals in Western Europe, 1850–1914: An Economic Study of Technical Change (Rand-McNally, 1967);
Spitz, Petrochemicals: The Rise of an Industry (John Wiley & Sons, 1989);
Taylor, A History of Industrial Chemistry (Abelard-Schuman, 1957).

This example BASF Essay is published for educational and informational purposes only. If you need a custom essay or research paper on this topic please use our writing services. EssayEmpire.com offers reliable custom essay writing services that can help you to receive high grades and impress your professors with the quality of each essay or research paper you hand in.