Germany: Business Strategy
BASF Presents New Strategy and Aims at Sustainability and Digitalization
Further Development of Segment Structure
The chemicals company undertook a review of its segment structure and will introduce changes as of the beginning of 2019. “We will sharpen our portfolio and focus our capital allocation more towards growing business areas,” said Brudermüller. The new segment structure is to create more transparency regarding how the management steers the businesses, the importance of value chains and the role of our Verbund.
As of January 1, 2019, BASF will have six segments, each containing two operating divisions, with the exception of Agricultural Solutions which will continue to comprise one division:
- Petrochemicals and Intermediates
- Performance Materials and Monomers
- Industrial Solutions
- Dispersions & Pigments and Performance Chemicals
- Surface Technologies
- Catalysts and Coatings
- Nutrition & Care
- Care Chemicals and Nutrition & Health
- Agricultural Solutions
The company aims to clearly position its businesses against their relevant competitors and establish a high-performance producer to enable the company to be successful in an increasingly competitive market environment.
The group will focus primarily on organic growth through capital expenditures and innovation, but will make acquisitions where necessary. According to Brudermüller, the main emphasis will be on designing processes to be efficient and reliable. Businesses where they cannot achieve such a position will eventually be exited.
Verbund Plays a Central Role
The Verbund will continue to play a central role for BASF. The company’s portfolio has unique benefits because of physical as well as technological, market-related and digital Verbund advantages, the company argues. The Verbund helped the company realize technological advantages throughout all segments.
Moreover, value chains can only be operated truly efficiently in the Verbund. Thanks to the integrated production in the Verbund, the producer achieves annual cost savings of at least $ 1.1 billion, for example, for raw materials, energy and logistics. At the same time, the company also avoids considerable emissions as a result of the Verbund. The group announced that it would continue to lead the industry in building and developing Verbund structures and in consolidating operations at fewer, highly efficient sites.
Creating a High-Performance Organization
To successfully change the business, the company is also improving internal processes and how people work together.
As part of the further development of the organization, BASF is creating leaner structures for services, in R&D and in governance functions. By embedding significant parts of the functional services into the operating divisions, the company is intending to bring its employees closer to its customers. Moreover, the remaining functional and research activities will be more efficiently organized. Approximately 20,000 employees worldwide will be directly or indirectly affected by this reorganization.
When appropriate, greater decision-making authority will be transferred to the business units. Engel: “This means we will enable more entrepreneurial freedom, but also assign clear responsibilities.” BASF is thus enhancing the effectiveness of the business units, and consequently improving customer satisfaction as well. To ensure that BASF captures potential market opportunities in every country, the company will introduce complementary market development models. The operating divisions will decide which local markets they will treat as focus markets served by their own personnel and in which markets they will hand over the business mandate to local country organizations. Furthermore, BASF has established a process simplification task force to focus on making key processes less complicated. The company will simplify and shorten processes and enable faster decision-making.
Leveraging Digitalization Across the Company
Digitalization offers unprecedented opportunities along the entire life cycle of BASF’s assets. For example, different processes or investment ideas can be simulated on computers, which helps to minimize costs. Augmented reality is already being used to support the workforce in daily operations. The company aims to digitalize processes at more than 350 of its plants worldwide by 2022.
The group intends to create additional value for customers, grow its business and improve efficiency through digitalization. It also plans to increase creativity in R&D, not least owing to a more intensive use of its supercomputer Quriosity. To ensure that they get the best value from its data, the company will further improve data availability and quality, provide the necessary infrastructure to connect its backend systems and use existing data to support decision-making.