Kent chemical: organizing for international growth
Internacional Management
Executive Summary - Kent chemical: organizing for international growth
Kent Chemicals Pvt. Ldt. is a leading specialty-chemical company, which started as a family-owned rubber producing company in the United States and then expanded into international grounds with three significant business divisions: fire protection products division, medical plastics division and consumer goods division.
As the corporation expanded to international markets, its subsidiary grew in size
– to remember the separation between Kent Chemical Products (KCP) and Kent Chemical
International (KCI), its legal subsidiary, in 2006 - it turned out complicated coordinating the headquarters’ strategies with the local subsidiary division’s interests.
The lack of coordination and communication resulted in potential value being destroyed due to competition between the subsidiary’s divisions – corporate cannibalism.
Therefore, the main problem was not only the lack of articulation between the subsidiary’s divisions - fire protection products, medical plastics and consumer goods and the lack of integration of the subsidiary with the headquarters, but also the excessive concentration of power and ethnocentric approach conducted by the headquarters.
In the end, these problems resulted in increased cost of sales - $ 1300M in 2004 to $1700M in 2007 – and decreased net revenues - $ 150M in 2004 to $ 90M in 20071.
In theory, the international strategy conducted by Kent Chemicals was closer to a
Global Strategy, according to the Global Integration-Local Responsiveness matrix
(Bartlett, 1986), where a company expands to foreign markets and consolidates the standardized and practiced supply chain. Also, Kent Chemicals were practicing a
Geographic division structure that, despite having representation of regional directors, lacked the market knowledge to counter the negative trend the subsidiary’s divisions and the whole corporation were facing.
1
Approximated values
Group Nº8
1
Executive Summary - Kent chemical: organizing for international growth
Kent Chemicals Pvt. Ldt. is a leading specialty-chemical company, which started as a family-owned rubber producing company in the United States and then expanded into international grounds with three significant business divisions: fire protection products division, medical plastics division and consumer goods division.
As the corporation expanded to international markets, its subsidiary grew in size
– to remember the separation between Kent Chemical Products (KCP) and Kent Chemical
International (KCI), its legal subsidiary, in 2006 - it turned out complicated coordinating the headquarters’ strategies with the local subsidiary division’s interests.
The lack of coordination and communication resulted in potential value being destroyed due to competition between the subsidiary’s divisions – corporate cannibalism.
Therefore, the main problem was not only the lack of articulation between the subsidiary’s divisions - fire protection products, medical plastics and consumer goods and the lack of integration of the subsidiary with the headquarters, but also the excessive concentration of power and ethnocentric approach conducted by the headquarters.
In the end, these problems resulted in increased cost of sales - $ 1300M in 2004 to $1700M in 2007 – and decreased net revenues - $ 150M in 2004 to $ 90M in 20071.
In theory, the international strategy conducted by Kent Chemicals was closer to a
Global Strategy, according to the Global Integration-Local Responsiveness matrix
(Bartlett, 1986), where a company expands to foreign markets and consolidates the standardized and practiced supply chain. Also, Kent Chemicals were practicing a
Geographic division structure that, despite having representation of regional directors, lacked the market knowledge to counter the negative trend the subsidiary’s divisions and the whole corporation were facing.
1
Approximated values
Group Nº8
1