Contents

Abstract...............................................................................................................................................2

Company’s Introduction....................................................................................................................3

Competitive Situation:.........................................................................................................................3

RBV Analysis........................................................................................................................................5

References...........................................................................................................................................6

Abstract

ICI is working in Pakistan from past 75 years and is a subsidiary of UK based company. It is working on cost minimization strategy and has developed brand reputation throughout its working era.

ICI has number of businesses with different resources. Continuous improvement in quality and innovation has provided it edge in all those years. The company is facing strong competition as market is very saturated, especially in the business of chemicals and life sciences.

The key findings were that ICI has rare resource like customer centrality and Soda Ash plant near the salt mines, where no other plant is located, has provided it some serious competitive advantage over its competitors.

Company’s Introduction

ICI has been setting trends continuously in innovative business areas, since its creation in 1926, by the merger of four big chemical companies of UK. Today it has been the pioneer of many business sectors. They are not only technologically advance, but also very innovative in their operation which is why ICI paints are one of the most successful brands of paints globally. Its manufacturing products are used almost in everything from adhesives to building materials, foods to sports items and many other things.

ICI runs a group of business with an outstanding history in innovation and competency to advance with rapidly changing global market by taking the necessary measurements. It has product range more than 50,000 and has 200 manufacturing units in more than 55 countries globally. Pakistan is one of the countries where ICI has been operating successfully since 1952 and it is partly owned by ICI Plc, UK. ICI is working in four major businesses in Pakistan, which are as follow:

ICI Soda Ash ICI polyesters Chemicals Life sciences

In 2014 its turnover was Rs. 42.7 billion and it has been one of the largest profits making company in the country, despite of the energy crisis situation. (www.ici.com.pk)

Competitive Situation:

Among all the other business, ICI had faced some serious competition in the polyester business with Ibrahim Fibers Pvt. Ltd and Pakistan synthetic fibers. They both are one of the largest manufacturers of Polyester Staple Fiber (PSF), which is use vastly in garments. Ibrahim Fibers has state of art plant which was built with the help of Zimmer AG Germany, who are the pioneer of PSF industry around the world. Because of this reason their quality and production capacity was bigger than ICI polyester. Every PSF manufacturer company needs to have Pure Terathalic Acid (PTA) for its production. In 1992, ICI decided to launch its own PTA manufacturing plant and also to increase its production capacity in order to achieve a competitive advantage over Ibrahim Fibers. In 1996 PTA plant started to work and then ICI does not need to buy PTA from other suppliers, which has a huge advantage over Ibrahim Fibers. The investment in PTA manufacturing plant was about $450 million and its main goal was to get a critical strategic advantage in textile chain industry in Pakistan. ICI had a first mover advantage and because of that ICI was supported by Government of Pakistan by providing them favor to neutralize the cost impact due to this huge infrastructure investment. (HAMID, 2012)

Other than that ICI polyester use natural gas boiler for its production, whereas Ibrahim Fibers utilize only 40% of natural gas and 60% of furnace oil which is quite expensive. These factors had provided ICI a competitive edge over Ibrahim Fibers. ICI polyester is continuously improving and recently has decided to increase their production capacity more in order to become a market leader in the region. It has been continuously striving for the best technology around and has recently installed two vacuum pumps, which helps to improve the quality of fiber. Innovation in technology is of one of the reason why ICI is continuously improving its position in the market. (LTD., 2012)

Porter’s Five Force Analysis

Rivalry among Competitors

- Low exit barriers makes the competition more tough.- Continous improvements and large network makes it more efficient.- Government policies make competition more limited which is good for ICI.- Good geographical location like soda ash plant near salt mine provide little edge to ICI over competitotrs

Threat of New Entrants- Need large scale of economy.

- High Initial capital investment.- Geographically ICI is very secure and have many advantage. Therefore new entrant has limitations.

Threat of Substitutes- Product quality is high due to which customers avoid substitutes.

- High cost of switching to substitutes also makes it less affective.- ICI has set new trends in performance that substitutes cannot compete with.

Threat of Buyers- ICI is quite good with customize products due to which buyers need to stick with it for their good.- Low dependency on distributors and vast chain of network makes it more effective in buyer's point of view.- Innovations and continous improvement in quality decrease the bargaining power of buyers.

Threat of Suppliers- Low cost inputs make ICI has advantage over suppliers.- Large number of substitute suppliers available.- Brand power name.- Bulk buy by ICI makes decrease suppliers's bargaining power.-High competition among suppliers.

RBV Analysis

Resource based view analysis is an approach to attain competitive advantage that gained popularity in 1980s and 1990s, after the large scale submission of works by Hamel and Prahalad (“The Core Competence of The Corporation”), Wernerfelt B. (“The RBV of the Firm”) and, Barney J. (“Firm resources and sustained competitive advantage”). People who believe in this view argue that organizations should see the bigger picture to point out their sources of competitive edge instead of scratching off their competitive environment. (Jurevicius, 2013)

Keeping this in mind we can analyze ICI to check whether its current resources provide it any competitive edge or not. Resources can be tangible or intangible. They must be unique in order to achieve maximum out of them. ICI resources can be seen in the table below:

Tangible IntangibleBuilding facilities especially the soda ash plant which is near to the salt mine providing benefit over all competitors.

Brand reputation

Employees High qualityStorage facilities Vast networkPower plant Customer centricity

Cost minimization

ICI follows the cost minimization strategy and some of the government policies provide it more edge than other companies. For sure on larger scale, companies like Engro and FFC who also have businesses in different sectors, giving ICI tough time especially in chemical sector in which it falls behind those mentioned companies, but still in other businesses like ICI Soda Ash plant and ICI polyester give it a competitive edge mainly because of the geographical advantage of being near to salt mines and having their own manufacturing of Pure Terathalic Acid.

Heterogeneous ImmobileStorage facilities Soda Ash plant near salt minesCost minimization PTA plantBrand reputation

Out of these resources and in the line of VRIO framework the only unique and long term resources ICI have are the two immobile resources which are mentioned above. Not a single competitor has Soda ash plant near the biggest salt mine which gives ICI near access to raw material of NaCl for soda and therefore no transportation cost is incurred by ICI. This is right now the most profitable business for ICI. PTA plant is not that unique because competitors like Ibrahim Fibers Pvt. Ltd. are also planning to construct their own PTA plant. Therefore in my opinion Soda Ash plant near salt is the unique resource that gives ICI upper hand over its

competitors and it will be last longer as ICI is expanding throughout the place with Government legislation and not allowing anyone to build their facility near it.

References

HAMID, M. (2012, 08 12). A history of ICI in Pakistan: Story of an icon.

Jurevicius, O. (2013, 10 14). strategic management insight. Retrieved 09 18, 2015, from http://www.strategicmanagementinsight.com/topics/resource-based-view.html

LTD., I. F. (2012, 12 31). Investers guide. Retrieved 09 17, 2015, from http://www.pakinvestorsguide.com/index.php?topic=159.0

www.ici.com.pk. (n.d.). Retrieved 09 17, 2015, from http://www.ici.com.pk/wp-content/uploads/2014/10/annual_report_2013-14.pdf