BASF is the world’s largest chemical company, with about 70% of its businesses currently maintaining top-three market positions. Its diverse portfolio is almost evenly split between commodities and specialties. BASF’s success so far largely relies on its operational efficiency and cost advantage, stemming from its dominant scale and integrated value chain called Verbund structure. It has also constantly worked to reduce its exposure to cyclical commodities by shifting its product mix toward higher-value specialty solutions. In recent years, BASF has undertaken an overall careful corporate strategy on both in-house innovation and technology scouting. This indeed helps the firm steadily adjust its portfolio while keeping a healthy cash flow during volatile market conditions, but has resulted in its overall moderate innovation performance relative to its major rivals, which leaves the big company vulnerable to increased competition and market swings. BASF needs a more flexible and efficient business model to balance its portfolio between commodities and specialties in order to sustain its future growth.
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