BASF International Business Strategy
business-BASF SE (Germany) (information of business in file) .Critically analyse the international business strategy of the assigned firm. Support your answers with specific, well-explained, well-analysed, real hard facts, data and examples by consulting various sources of information and data (lecture materials, core textbook, reading lists, company websites, company annual reports, business news, academic journals, etc.). Each question has the same marks.
1) Explain whether or not this firm qualifies as a multinational enterprise (MNE). By reading and analysing the annual reports of the firm for the five-year period (2016-2020), report data on the total revenues/ sales/turnover, domestic revenues/ sales/turnover, foreign revenues/ sales/turnover (in absolute values), and the number of foreign subsidiaries/ affiliates of the firm for each year for the five-year period (2016-2020). Calculate the ratio (in percentage) of foreign revenues/ sales/turnover to total revenues/ sales/turnover (FS/TS), and the ratio (in percentage) of foreign subsidiaries/ affiliates to total subsidiaries/affiliates for each year for the five year period (2016-2020).
2) Present and calculate data revenues/ sales/turnover by regions (in absolute values and in percentage) as reported by the firm. Present and calculate home sales to total sales (HOMES/TS), rest of region sales to total sales (ROR/TS), total regional sales to total sales (RS/TS) and rest of world sales to total sales (ROWS/TS) (in absolute values and in percentage) for each year for the five year period (2016-2020). Identify and explain the strategy of the firm (i.e. whether it pursues a global, bi-region oriented, host-region oriented, or home-region oriented strategy). On the basis of historical data analysis, discuss the strategy that the firm will likely pursue in the next five years.
3) Explicitly state and identify the firm in the relevant cell of the FSAs/CSAs matrix (FSAs: firm-specific advantages; CSAs: country-specific advantages). You will need to discuss the FSAs of the firm with supporting data and evidence, and explain how these FSAs have been developed on the basis of home country CSAs (if applicable).
4) Explicitly state and identify in a diagram whether the firm builds its strategy based upon Porter’s single home country diamond, or whether it uses Rugman & D’Cruz’s double diamond/generalised double diamond approach. Critically analyse all attributes of CSAs based on the theoretical model that you use.
5) Use Dunning’s four foreign direct investment (FDI) motives to make plausible arguments about FDI motives of the firm. Support your answer with specific examples for each motive.
6) Apply appropriate theoretical concept(s) to analyse the type of corporate culture of the firm (not the home country-level national culture). Explain whether or not this corporate culture contributes to the FSAs discussed above in question 3.
BASF International Business Strategy
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BASF Multinational Enterprise
A multinational company needs to be incorporated in one country and do business in other countries. However, this is not the only criteria used to determine if the corporation is a multinational. For instance, BASF opened up operations in more than a single country or continent. The company opened a bio-acrylamide in Suffolk, Virginia, the United States of America in 2014, a new plant in Bradford, England, in 2016, and another plant in Asia that commenced operation in 2017 CITATION BAS17 \l 1033 (BASF, 2017). The company is operating on three continents at an international level CITATION BAS18 \l 1033 (BASF, 2018). According to the BASF 2018 report, the company operates in more than 90 countries CITATION BAS19 \l 1033 (BASF, 2019) and has over 10 000 employees from across the world CITATION BAS18 \l 1033 (BASF, 2018).
BASF's volume of export and imports demands and requirements to fulfill her clients and customers across the globe can be considered a multinational corporation. The imports and exports of the supplies from one factory situated in one country to another factory in a different country, or from a factory from one country to the consumer in a foreign country are done in bulk; unlike small and medium enterprises which import or export in small quantities CITATION BAS17 \l 1033 (BASF, 2017). The bulkiness of operations and massive volume of raw materials required to produce bio-acrylamide or shipment to the destinations set the company apart from local and national enterprises.
The advancement of technology has opened up a new world for corporations because a multinational corporation enterprise can compete as a small business through its website. The integration of websites into business and is used to market, advertise, and attract new customers no matter where they are located around the globe has become a tool that BASF has made full use to its advantage. However, the business aspect of a corporation cannot be determined only through the number of activities done without money aspect. The company operations in over 90 countries are only viable through precise and timely communication between branch offices, headquarters, and customers to ensure quality service delivery (BASF, 2019). As the calculations below show, the level of revenues generated and net profit gained indicate that the company is a multinational enterprise.
The percentage ratio of foreign revenues/sales to total revenues/sales is given by
2016
Foreign sales ratio = (Foreign sales/revenue÷Total Revenue) × 100
5040857550 × 100 = 87.59%
2017
Foreign sales ratio = (Foreign sales/revenue÷Total Revenue) × 100
56116/64475 × 100 = 87.04%
2018
Foreign sales ratio = (Foreign sales/revenue÷Total Revenue) × 100
55710/62675 × 100 = 88.89%
2019
Foreign sales ratio = (Foreign sales/revenue÷Total Revenue) × 100
53533/60220 × 100 = 88.90%
2020
Foreign sales ratio = (Foreign sales/revenue÷Total Revenue) × 100
= 53639/59149 × 100 = 90.68%
Question 2
Present and calculate data revenues/ sales/turnover by regions (in absolute values and percentage) as reported by the firm. Present and calculate home sales to total sales (HOMES/TS), rest of region sales to total sales (ROR/TS), total regional sales to total sales (RS/TS), and rest of world sales to total sales (ROWS/TS) (in absolute values and percentage) for each year for the five years (2016-2020). Identify and explain the strategy of the firm (i.e., whether it pursues a global, bi-region oriented, host-region oriented or home-region oriented strategy). Based on historical data analysis, discuss the process that the firm will likely follow in the next five years.
2016
Foreign sales ratio = foreign saletotal sales × 100
50408575050 × 100 =87.59%
Home sale ratio = Home saletotal sales × 100
= 754057550 × 100 = 12.41%
Rest of Region sales ratio = Rest of the region saletotal sales × 100
= 5040857550 × 100 = 87.59%
Regional sales ratios = Regional salestotal sales × 100
Europe sales ratio = 2603957550 × 100 = 45.24%
North America sales ratio = 1404257550 × 100 = 24.40%
Asia Pacific sales ratio = 1216557550 × 100 = 21.14%
Rest of the World (South America, Africa, Middle East)
= 530457550 × 100 = 9.22%
2017
Foreign sales ratio = foreign saletotal sales × 100
5611664475 × 100 =87.04%
Home sale ratio = Home saletotal sales × 100
835964475 × 100 =12.96%
Rest of the Region = 5611664475 × 100 =87.04%
Regional sales ratios
Europe = 2921464475 × 100 = 45.31%
North America = 1535764475 × 100 =23.82%
Asia Pacific = 1434364475 × 100 =22.25%
Rest of the World (South America, Africa, Middle East)
= 556164475 × 100 = 8.63%
2018
Foreign sales ratio = foreign saletotal sales × 100
= 5571062675 × 100 =88.89%
Home sale ratio = 696562675 × 100 =11.11%
Rest of the Region sales ratio = 5571062675 × 100 =88.89%
Regional sales ratios
Europe = 2654662675 × 100 =42.36%
North America = 1614362675 × 100 =25.76%
Asia Pacific = 1464662675× 100 =23.37%
Rest of the World (South America, Africa, Middle East)
534062675× 100 = 8.52%
2019
Foreign sales ratio = foreign saletotal sales × 100
= 5353360220× 100 = 88.90%
Home sales ratio = 668760220× 100 = 11.10%
Rest of the Region sale ratio = 5353360220× 100 = 88.90%
Regional sales ratios
Europe sales ratio = 2558960220× 100 = 42.49%
North America = 1538860220× 100 = 25.55%
Asia Pacific = 1421060220× 100 = 23.60%
Rest of the World (South America, Africa, Middle East)
= 503360220× 100 = 88.90%
2020
Foreign sales ratio = foreign saletotal sales × 100
= 5363959149× 100 = 90.68%
Home sales ration = 5363959149× 100 = 90.68%
Rest of the Region = 5363959149× 100 = 90.68%
Regional sales ratios
Europe sales ratio = 2312959149× 100 = 39.10%
North America sale ratio = 1570959149× 100 = 26.56%
Asia Pacific sales ratio = 1540659149× 100 = 26.05%
Rest of the World (South America, Africa, Middle East)
= 490559149× 100 = 8.29%
Identify and explain the strategy of the firm (i.e., whether it pursues a global, bi-region oriented, host-region oriented or home-region oriented strategy). Based on historical data analysis, discuss the approach that the firm will likely follow in the next five years.
BASF SE's strategic approach to its objective is a global perspective to satisfy the clientele and customers. The global is aligned to the company's vision of being the leading chemical company. For instance, the multination enterprise should have a global strategy. However, with each specific country and the needs of different regions in its activity, the strategy should align with the government or areas. For instance, pension scheme contribution is country-specific based on the level of the taxation regulations of the host country laws (BASF, 2021, p. 283). International multinational enterprises or corporations hardly stick to a single orientation strategy. However, when they narrow down to a specific country, they adopt and realign their approach to fit the country they are operating in to be competitive and relevant. The cliché thinks globally but acts locally applies to the case of BASF SE.
The company's goal of capturing and retaining emerging markets is key to its regional/country-specific strategy. For instance, Asia, specifically China, is the emerging market for the company's product providing 40% of the marketCITATION BAS17 \p 9 \l 1033 (BASF, 2017, p. 9). Therefore, the company operations and products are customized to fit the Asia Pacific markets because of their rapid increase in consumption of BASF products. The company's focus on regional/country-specific strategy aligns with the global vision of the company. Twerking the global vision to fit the region is a critical element to the operation manager to ensure the company's goals and vision are achieved.
BASF SE strategic planning for the next five years is guided by the four pillars which enable them to retain their global perspective that is tailored to regions and countries they operate in. the pillar guiding them are as follows:
* It identifies suitable...