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The current economic crisis has posed unprecedented near-term challenges that have forced
executives to take drastic actions to stem the decline in their companies’ performance. As a
result of a sharply declining demand, chemical companies are driving cost reduction through
workforce reductions, shut downs and production cutbacks. These immediate actions are
being taken to survive and strengthen financial position in the near term without completely
undermining the long-term objectives.
Concurrently, management needs to assess scenarios for economic recovery and be
prepared to pursue initiatives to react aggressively and improve their competitive positioning.
These initiatives are broadly segmented in two categories:
• Evaluation of strategic options (for recovery and growth) to improve top line performance• Performance improvement programs based on competitive cost benchmarking
A key area of focus in performance improvement programs is lowering the cost of goods sold
through operational improvements and supply chain optimization by identifying opportunities
to reduce cost of inputs, improve plant utilization, decrease staffing, optimize products
portfolio and reduce manufacturing costs. However, accurate benchmarks of competitors’
costs & profitability are needed to identify the gaps and cost reduction opportunities.
Many companies believe that it is impossible to develop accurate, granular assessments of
competitors’ cost structures and profitability in an ethical way. This is untrue. Using
competitive intelligence techniques and considerable industry experience, it is possible to
ethically assess competitors capabilities, practices and cost structure. The alternatives – such
as internally-driven estimates, generic external benchmarking or ‘blind’ industry surveys – do
not provide the insights required to understand the competitive potential of performance
improvements and their sustainability in the face of competitor reactions.
For example, one of our clients could not understand why a major competitor continued to
fight aggressively for market share even though it was known to be close to bankruptcy.
Once we had unraveled the competitor’s business unit cost structure and P&L, it became
clear that although the company was performing badly overall, the specific business
competing with our client was making very healthy returns.
The full benefits of performance improvement programs can only be realized with in-depth
industry knowledge and more reliable input on the manufacturing and supply chain position of
major competitors, and strengths / vulnerabilities and positioning on various KPIs, and not by
any sophisticated analysis of internal data.
Growth DirectionsJune 2009Consulting Research
Viewpoints
Cost leadership often
translates into bettermargins for the business,
but can also provide for
additional resources in
sales & marketing, and new
product development, to
drive growth.
Kline’s Competitor Cost and
Profitability Analysis service
is unique in its ability to
develop insights into
competitors’ revenues and
pricing, manufacturingcapabilities, COGS, sales &
marketing, new product
development, and business
strategies. We have the
expertise to meet clients’
needs in this area in both
developed and emerging
markets.
Dilip Chandwani Vice President
Sitting on the sidelines during economic downturn?Prepare for Competitive Advantage
Dilip Chandw ani, Vice President, Manufacturing and Supply Chain
• Americas
• Asia Pacific
• Europe
• Middle East
© 2009 Kline & Company, Inc.
All rights reserved
www.KlineGroup.com
Conference Papers & Research Examples of Recent Engagements
• Chemical Industry Workshop - Competitor Cost
and Profitability Analysis, Kuala Lumpur 2006
• Competitive Cost & Profitability Analysis, SCIP
Euro Summit, Rome, October 2008
• Global Business Opportunities in Synthetic
Latex Polymers, Ten-Year Outlook
• Specialty Chemicals: Understanding the
Threats from a Newly-Commercialized Process
• Medical Devices: Achieving Sustainable Cost
and Market Leadership
• Consumer Products: Assessing Potential
Opportunities from Competitor Costs and P&L
Chemicals and M aterials
