E.I. du Pont de Nemours and Company Report

by

Van Anh Nguyen

Strategic Management Forum

Professor Donald Goeltz

March 3rd, 2011

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E. I. duPont de Nemours & Company

HISTORY:

Founded in 1802 by Eleuthere Irenee du Pont, E.I. du Pont de Nemours and Company

(DuPont) is an explosives American-based company headquartered in Wilmington, Delaware.

Throughout its history of development, growth, merger and acquisition, the company offers

variegated products and services in chemicals, agricultural, nutrition, communications,

electronics, safety and protection, home and construction, transportation and apparel. DuPont has

expanded operations in approximately 90 countries with 60,000 employees worldwide. Total

revenues reached $31.5 billion in 2010. The company is known for its strong research and

development with more than 75 labs in 12 countries worldwide.

VISION

“Our vision is to be the world’s most dynamic science company, creating sustainable

solutions essential to a better, safer and healthier life for people everywhere.”

(www.DuPont.com)

MISSION, GOALS & OBJECTIVES:

DuPont has a mission of sustainable growth, which we define as the creation of

shareholder and societal value while we reduce our environmental footprint along the value

chains in which we operate. (www.DuPont.com)

DIVERSITY: “In DuPont we will have an organization in which people of all backgrounds can

contribute and achieve their full potential in pursuit of personal and organizational excellence.”

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As a global corporation, DuPont has promoted diversity and had racially and ethnically diverse

body of employees across various functions and business units. Ellen J. Kullman has been the

CEO of DuPont since January 1st, 2009 and the first woman to lead the company in DuPont’s

209 year history.

HUMAN RIGHTS: “DuPont is committed to the protection and advancement of human rights

wherever we operate. The DuPont Human Rights Policy is based on our core values of Safety

and Health, Environmental Stewardship, Ethical Behavior, and Respect for People. This policy

operates in conjunction with and is supportive of our Business Conduct Guide, our Safety,

Health and Environmental Commitment, our product stewardship programs, our regulatory

compliance program, and our endorsement of the 10 Principles in the UN Global Compact.”

DuPont has taken serious steps concerning safety for its workers since the establishment of the

company in 1802. Explosives and chemicals by nature are dangerous; therefore, the company

pays a great deal of attention to safety for its workers. This step and other aspects show the

company’s respect and honesty for its employees.

PHILANTHROPY: “DuPont is committed to improving the quality of life and enhancing the

vitality of the communities in which it operates throughout the world. Through financial

contributions and the volunteer efforts of its employees, DuPont supports programs and

organizations that address social progress, economic success and environmental excellence – all

vital components of community sustainability."

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SUSTAINABILITY: “The need for truly sustainable options for 21st century life remains one of

the most critical challenges facing the global community. As a science company, DuPont has the

experience and expertise to put our science to work in ways that can design in – at the early

stages of product development – attributes that can deliver solutions that help protect or enhance

human health, safety and the environment. We believe this is a direct route to a successful,

profitable business that adds value to our customers, their customers, consumers, and the planet.”

DuPont has put sustainability into daily actions, short-term plans, and long-term goals. Its

employees are asked to change printing practices, which will save the company $700,000

annually. DuPont also has improved logistics and distribution in a way that helps reduce NOx

emissions by 4,000 kilogram and CO2 by 3,500 tons in 2007. Highest standards for safety,

health, and environment have been applied at many plants. The company also makes goal to

double investment in research and development of new renewable and sustainable products to

$640 million by 2015 and has reached $660 million in 2010.

CURRENT SITUATION:

Headquarters

E. I. DuPont de Nemours & Company’ headquarters is a fourteen-story high-rise building

located in Wilmington, Delaware.

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Brand Concepts

DuPont is a top and heritage-rich name domestically and globally. Because of a diversity

of products and services, DuPont has a multitude of brands and trademarks. Many brands are

familiar to customers in their homes, commercial environments, and communities. Some brands

and trademarks are Corian, Kevlar, SentryGlas, Teflon, and so on. The brand name for the whole

organization is DuPont – The miracles of science. According to the former DuPont CEO Chad

Holliday, the slogan implies the company’s ability to provide science-based solutions for a better

world. The company’s direction has been on the right track, which focuses on research and

development of renewable, recyclable, and sustainable products. The logo is the red “DuPont” in

a horizontal oval with the black phrase “The miracles of science” underneath it.

Operations & Marketing

DuPont has global operations in about 90 countries, more than 75 R&D labs in 12

countries, and a total of 60,000 employees worldwide. In the increasingly globalized age,

DuPont focuses on a larger scale of global operations and markets. The company determines

excellence in operations is not optional but crucial to success in the intensely competitive global

marketplace. The DuPont Operational Excellence (OE) model has been implemented with the

following aspects:

Asset productivity

Capital effectiveness

Operational risk management

This model is designed to lower costs, to minimize potential incurring injuries and

damages, to increase efficiency, to maximize sustainable returns on operating assets, and

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enhance competitive position in the market. The following chart illustrates the stages of the

model. The model helps DuPont and its clients cooperate and work together efficiently.

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The OE model has helped DuPont minimize costs and improve efficiency. The diversity

of products and services requires DuPont to various versions of the models to adapt to the

business types. Operating across industries and nations, DuPont also have different marketing

strategies, plans, and programs for the business units, industries, domestic and global markets.

CURRENT ISSUES

Declining sales and revenues

Affected by the economic recession, DuPont’s sales and revenues decreased in

chemicals, materials, coatings, safety and protection, electronic and communications segments

and in global markets including the United States, Europe, Middle East, Africa, Asia Pacific, and

Latin America in FY2009 compared to sales and revenues in FY2008. On the other hand, the

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agriculture and nutrition and the other segments recorded an increase in sales and revenues. The

overall decrease is 14.5% in FY2009 compared to FY2008.

Environmental legal charges

DuPont has faced many legal charges regarding environmental adulteration. According to

a report by the Political Economy Research Institute (PERI) at University of Massachusetts,

DuPont is ranked number one with 17.15 millions of pounds of toxic air releases.1 The company

has settled many class action lawsuits regarding environmental pollution. A class action lawsuit

by 60,000 residents of Ohio and West Virginia in 2004 over the chemical C8, also known as

ammonium perfluourooctanoate, or PFOA cost DuPont more than $340 million in settlement.

Another class action lawsuit in New Jersey cost the company $8.3 million in settlement with

5,000 homes.

Competition

Being a large global organization, DuPont faces intense competition industry-wide and

worldwide. Major competitors include large chemical companies in the United States, Europe,

and Asia. Some of them are Dow Chemical Company, Monsanto Company, BASF AG, PPG

Industries, Inc., Akzo Nobel N.V., PolyOne Corporation, Eastman Chemical Company, and

others. In addition to these firms, DuPont also has to compete with smaller and more specialized

firms around the globe.

GOVERNANCE ISSUES

DuPont has a strong record of governance organization that is “committed to having

sound corporate governance principles and practices.”

1 http://www.peri.umass.edu/Toxic-100-Table.265.0.html

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EXTERNAL ANALYSIS

THE GENERAL ENVIRONMENT

Demographic Segment

It is estimated that the global population will reach 9 billion in 2050, of which 8 billion

people reside in developing countries. Since DuPont operates in many developing countries,

innovation and business practices need to be adapted to the demographic change. Developed

markets have experienced declining birth rates and aging population, which will soon affect

negatively labor resource as well as market demand. Those expected declines in labor and

market demand can be offset by growing population, rising middle class, and increasing demand

in emerging markets.

Sociocultural Segment

“An organization’s values are those principles, ideas and ideals that its members adhere

to, often without consciously recognizing that they are doing so. Values are the glue that holds an

organization together in good times and especially in bad ones.” Throughout more than 200

years of history, DuPont has grown from a family business into a global corporation. The

company embraces good ideas, innovation, emphasis on employee safety, diversity and success,

commitment to research, consumer products revolution, green revolution, and environmental

impact.

Political/Legal Segment

DuPont was charged for failure to report toxic chemical studies by the U.S.

Environmental Protection Agency (EPA) in 2010. The required settlement that was worth $3.3

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million is to resolve 57 Toxic Substances Control Act (TSCA) violations. Another case is the

violation of Comprehensive Environmental Response, Compensation and Liability Act

(CERLA), which requires DuPont to pay for the cleanup costs

Technological Segment

DuPont has strong R&D. They also invented many new technologies for the industries

they participate in. As a science-based company, DuPont has a long and impressive list of

patents and trademarks of many products, inventions, and technologies. The company has

continuously improve the workplace so that it is safer, more efficient, and more comfortable.

Billions of dollars are spent on R&D worldwide annually. Realizing the green trend in the

economy, the company has invested in sustainable technology and renewable energy such as bio-

fuel energy. The 2015 goals include reducing greenhouse gas emissions, water consumption by

at least 30% at global sites, air carcinogens and completing an independent third-party

verification of the effectiveness of their environmental management goals and systems at 100%

of DuPont’s global manufacturing sites. Current clean technologies products and services are

BELCO Clean Air Technologies, STRATCO Alkylation, Global Engineered Solutions,

IsoTherming Hydroprocessing Technology, and training solutions.

Economic Segment

During the financial crisis, the company experienced a revenue decrease of 14.8 percent

in FY2009. DuPont has an advantage of a diversified stream of revenues because they operate in

seven industries. Therefore, decrease of sales and revenues in some business segments and

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markets have been offset by increase in other ones. The following pie charts show DuPont 2010

sales by markets and segments. Total sales were $32.7 billion.

US35%

Europe, Mid-dle East, Africa

25%

Asia/Pacific22%

Latin America11%

Canada3%

Other4%

DuPont 2010 Sales by Markets - Total $32.7 bil-lion

Agriculture & Nu-tritrion

28%

Performance Chemicals

19%

Performance Mate-rials19%

Performance Coat-ings12%

Safety & Protection10%

Electronics & Communications

9%

Other3%

DuPont 2010 Sales by Segments - Total $32.7 bil-lion

From the charts, one can see the U.S., Europe, Middle East, and Africa accounted for

more than 80 percent of the market sales. Chemicals manufacturing including performance

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chemicals, performance materials, and performance coatings accounts for more than 50 percent

of the sales by segments. Agriculture and nutrition segment amounts to nearly one third of the

sales by segments. Diverse streams of revenues and global markets give DuPont advantage and

flexibility to reduce risks of one or more markets or segments.

PORTER’S FIVE FORCES MODEL OF INDUSTRY COMPETITION

Threat of New Entrants

HIGH MEDIUM LOW

Economies of Scale XProduct Differentiation XCapital Requirements XSwitching Costs XAccess to Distribution Channels X

Science-based businesses required capital invested in R&D, equipment, and plants, all of

which are costly. Therefore, it is hard for new entrants. The threats can be low since two of

DuPont’s strongest strengths are R&D globally and capital. Nevertheless, product differentiation

threat is high because many different kinds and sizes of firms in the chemical manufacturing

industry offer comparable products at competitive prices. Threat of economies of scale and

access to distribution channels are medium because of the increasing number of competitors and

the growing global market.

Bargaining Power of Buyers

HIGH MEDIUM LOW

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Switching Costs XIndustry’s Product Quality is Unimportant

X

Large Volume Buyers XStandard/Undifferentiated Products

X

The switching costs for buyers are low because competitors are able to offer comparable

products at competitive prices. Product quality is important because chemicals easily and highly

affect health and environment. Large volume buyers are medium because there is a balance

between DuPont’s reputation of product quality and the number of other companies that can

offer comparable products. Standard/undifferentiated products are high because those products

can be easily manufactured by any chemical-manufacturing firms.

Bargaining Power of Suppliers

HIGH MEDIUM LOWSuppliers Group Dominated by Few

X

Importance of Customer to the Supplier

X

Supplier’s Product Important Input to Buyer’s Business

X

Switching Costs X

DuPont has faced threats from volatile prices of raw material and energy. In addition,

increasing demand of raw materials for manufacturing gives supplier more power. Therefore, the

first two are considered medium. Supplier’s products are highly important input to buyer’s

business since DuPont is in manufacturing industry. Switching costs can be low because

commodity would have similar prices.

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Threat of Substitute Products

HIGH MEDIUM LOWDifferentiation of Substitute Product XPrice-Performance relationship of Substitute Product

X

The threat of differentiation of substitute product is medium since science and technology

products require R&D. DuPont is very strong at R&D and has thousands of patents and

trademarks. Certain products cannot be substituted even with differentiation. The price-

performance relationship of substitute product is medium because

Rivalry among Competitors in Industry

HIGH MEDIUM LOWNumber of Competitors XIndustry Growth Rate XFixed Costs XProduct Differentiation XSwitching Costs X

DuPont has a multitude of competitors of all sizes because it operates in several business

segments. Within the chemical manufacturing, DuPont face competition domestically and

internationally. Competitors include firms that are as large as DuPont such as Dow Chemical

Company, medium to specialized firms. Industry growth rate is medium because chemical

manufacturing is quite mature compared to other industries. Fixed costs are high because of

plants, equipment, R&D, and labor. Product differentiation is also very high because as

mentioned, chemical manufacturing industry is developed. The switch costs is high because of

heavy capital required to initially invest in working capital.

INDUSTRY KEY SUCCESS FACTORS

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Access to low-cost material will help DuPont improve operation margins since the company has

low operation margins.

Innovation Capability is DuPont strength in the industry. The company has thousands of

patents and innovation s that have been applied in its plants and used for consulting services.

Supply Chain Excellence is the key to the company success because supply chain management

creates cost savings and time-to-market reduction.

Ability to fund growth investments is very crucial since DuPont is a science-based technology.

Available fund is very important to new R&D projects or new plants in new regions or countries.

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INTERNAL ANALYSIS

E. I. duPont de Nemours & Company VALUE CHAIN ANALYSIS

Value chain analysis is the strategic model of a set of interrelated value-creating activities

common to a wide range of firm. The diagram demonstrates support and primary activity that a

firm operates. In addition to the value chain analysis, DuPont has a more complicated model that

is discussed in Operations & Marketing part. The complexity is inevitable because the nature of

DuPont company. It has operated more than 200 years and in seven industries offering a wide

range of products and services. It is the Operating Excellence Model (OEM) that helps DuPont

focuses on and manages efficiently the primary aspects of operations.

Inbound logistics

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Inbound logistics handles all the initial incoming and processing activities before

operations. DuPont has applied the six sigma logistics to manage efficiently inbound logistics

regionally and globally.

Operations

Operations are the stage in which inputs are transformed into the final products. As

discussed, DuPont uses Operation Excellence Model (OEM) to maximize values and manage

resources efficiently during this process.

Outbound logistics

Outbound logistics include activities necessary to deliver finished products to customers

including warehousing and order fulfillment. DuPont employs a private internet transportation

portal that allows employees around the global to instantly exchange freight data with carriers

and suppliers.

Marketing and Sales

These activities are to communicate with customers about products and their values. The

goal is to get customers to purchase the products via different distribution channels and

marketing strategies such as advertising, pricing, promotion, and place. DuPont has marketing

facilities throughout the world to do these activites.

Customer Services

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Customer services are to maintain and enhance products’ values including support,

replacement, repair services, and so on. DuPont has a strong customer services team to carry out

these activities.

RESOURCE-BASED VIEW

VRIN Analysis of E. I. duPont de Nemours & Company’s Resources and Capabilities

Valuable RareHard to Imitate

Hard to Substitute

Tangible Resources

Plants X

R&D Labs X X X XTrademarks X

Intangible Resources

Brand Name and Patents

X X X X

Organizational Capabilities

Innovative of Products

X

Tangible Resources

Tangible resources include firstly the fourteen-story headquarters located in Wilmington,

DE. DuPont also has many plans across the United States and other countries. The plans include

specialty science equipment. Financial numbers usually outweigh industry averages. In addition

to plants, the company also operates 75 R&D labs in 12 countries.

Intangible Resources

The name DuPont itself is already a huge intangible asset. It is not just a brand name but

also a heritage of over 200 year history. In addition, DuPont’s R&D is granted hundreds and

thousands of patents and trademarks worldwide. Each business segment has a score of brand

names and trademarks.

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Organizational Capabilities

DuPont has strong organizational capabilities. The company has achieved thousands of

patents through its investment in R&D. Its labs and technologies are unique as well as effective

marketing of these products and services to customers through its long-time reputation and

heritage brand name.

Continuing and continuously improving the current path, DuPont will be able to maintain

its leading position in the market and competitive advantages in the global market.

SW/OT Matrix Format

Opportunities

Emerging market growth

Strategic global M&A

Growing demand for environment-friendly products

Alternative energy market

Threats

Global economic crisis

International market risks

Tightening environmental regulations

Volatile energy and raw materials prices

Strengths Strong R&D Diverse range of

products and services

Leading position in the market

International operations

Strong financial figures

M&A

R&D for environmental-friendly products and alternative energy

M&A foreign firms Generate more

revenues from Include new

products and services

Diversify services and products portfolios

Diversify geographic operations

Purchase commodity options

Backward Integration

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Weaknesses Lawsuits Legal and

environmental charges

Declining market share

Low operation margin and liquidity

Settle lawsuits Reduce minimum

pollutant wastes M&A to increase

market share Offshore

manufacturing to reduce costs

Pay attention to environmental issues in global operations

Pay attention to legal issues both international and local

Improve operation margin and liquidity

RECOMMENDATIONS

International expansion

DuPont is very strong at M&A and joint ventures. Continuing doing so will help the

company expand its market share in the world and to compete with other major competitors.

Environmental legal charges

Environmental concerns have been growing. In addition, DuPont has faced many legal

charges regarding environmental pollution and millions of dollars of settlements. Paying more

attention to environmental issues is necessary for the company to avoid class action lawsuits

regarding environment and huge settlement fees accordingly. In addition, doing so will help

improve the company’s “green” image. With strong R&D, strict health and safety policies, and

excellent management, DuPont should be able to find out new cleaner and safer technologies

than the current ones.

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Improve operation margins

While having strong financial figures compared to the industry averages, DuPont has low

operation margins. The company should consider different strategic management to improve

operation margins such as lowering costs of production.

Strategies for E.I. du Pont de Nemours and Company

CURRENT STRATEGY RECOMMEND STRATEGY

BUSINESS STRATEGY

Differentiation

Focus

Differentiation

Differentiation in products,

services, and brand images

Develop new brand names

and intangible assets

Introduce improved products

to extend industry life cycle

Enhance pricing strategy

CORPORATE

STRATEGY

Growth

Diversification Vertical integration

Related diversification

Unrelated diversification

INTERNATIONAL

STRATEGY

Multi-domestic

Merger and acquisitions

Join ventures

Wholly-owned subsidiaries

Continue current strategies of

M&A and joint ventures

ENTREPRENEURIAL

STRATEGY

Differentiation

Competitive:

Strategic and

Tactical

Logistics Innovative products, services,

and logistics

IMPLEMENTATION

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DuPont formulates different strategies for various business segments and units within the

organization. The company uses contemporary approach together with its own models that suit

the businesses. The above diagram the relationships of formulating, implementing, and

controlling strategies. Behavioral control is interactive between strategic control and

implementing strategies. Information control is between formulating strategies and strategic

control.

OVERALL OUTLOOK

E.I. du Pont de Nemours and Company is not just a business as many others. The name

itself is reputation and heritage. In addition to that, the company has grown from a family

business into a global corporation. It has a firm and leading position in the market as well as

strong expansion and growth outlook. While many businesses suffered from a great deal of

losses during the economic recession, DuPont has been able to maintain its relative revenues and

sales thanks to its diverse streams of incomes from seven business segments and global markets.

Strong R&D certainly gives DuPont an advantage particularly for the renewable, sustainable, and

clean technologies. The market-drive science research reflects the growing concerns about the

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global environment and meets the increasing global demand for clean energy and products for a

better world. Furthermore, global operations allow flexibility and adaptability to social,

economic, and demographic changes. With M&A, join ventures, and foreign subsidiary

activities, DuPont has been focusing on expanding its global operations and R&D. The business

model is very advanced and unique across industries and in the world. Overall, DuPont has a

very firm background, successful present business operations, and promising future outlook in

the rapidly changing world. Hence, E.I. du Pont de Nemours and Company’s outlook is very

positive and visible.

Work Reference:

DuPont website:

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http://www2.dupont.com

http://www2.dupont.com/Consulting_Services/pt_BR/assets/downloads/OP%20E_White

%20Paper_FINAL_12%2014%2005.pdf

http://yosemite.epa.gov/oa/EAB_Web_Docket.nsf/Filings%20By%20Appeal%20Number/

972AA52D3BEADFE0852577FF0059A226/$File/Consent%20Agreement...1.pdf

DuPont Investor Relations:

http://phx.corporate-ir.net/phoenix.zhtml?c=73320&p=irol-irhome

Datamonitor 360 Database

Hoover’s Company Records

Lexis Nexis Database

Plunkett Research Online Database

Articles:

http://www.quickmba.com/strategy/value-chain/

http://www.msnbc.msn.com/id/5953878/ns/us_news-environment/t/dupont-settle-teflon-

pollution-lawsuit/

http://www.environmentalleader.com/2007/07/24/clean-air-act-violations-cost-dupont-70-

million/

http://www.legafi.com/lawsuits/news/705-dupont-settles-another-toxic-c8-class-action-lawsuit