Dow Chemical Case

Dow Chemical Case When Petroquímica Bahia Blanca S.A. (PBB) began the process of becoming privatized by the Argentine government, Dow Chemicals saw the acquisition of this company as a golden opportunity to become the leading polyethylene player in Latin America. Dow Chemical’s was already a major player in the chemicals (ethylene), plastics (polyethylene), and agricultural products industries holding position as a low-cost producer. Breaking each segment of their business down into these categories respectively, Dow Chemicals was able to generate annual revenues of 20.2 billion making them the leader in market position worldwide for some chemical product lines accounting for 7% of global capacity. Dow embraced a strategy of horizontal and vertical, integration, technological leadership, and international presence. Dow’s largest volume chemical was Ethylene, in which, 11.3 billion pounds were in capacity. Dow had expanded across the globe by locating world-scale petrochemical complexes in emerging economies accounting for 94 plants in more than 30 countries by 1995. Most of Dow’s investments were concentrated in Brazil where they had built a petrochemical complex that manufactured products other than ethylene and polyethylene as well as in Argentina where over 100 million was invested in facilities that produced petrochemicals, herbicides, insecticides, and fungicides. Dow Chemical’s always saw a benefit in expanding business in Argentina but never pursued it because the state controlled the oil supplies, gas and power. PBB, being in Argentina, and the expected growth in polyethylene demand made this acquisition very appealing. The decision to buy PBB would prove to be a meticulous one as it was one step in a grandeur plan for Dow. They not only had to consider what to bid for PBB in the privatization, but also develop an overall plan for the development of Dow’s polyethylene business in Argentina.

The ethylene and polyethylene