Last night I had a long coversation with an old friend of mine. He has been associated with advanced materials industries,e.g., plastics, polymers, and other high-value products made from these materials. He gave me an insight into what is really going on at some of the companies in this space. It was depressing. He said that these companies simply have no clue what to do with their business in the United States. In these capital intensive industries, the goal has always been to get a high RONA (return on net assets) and with pressure on prices and flat or declining demand, the margin pressure is intense. So they do what is easy to do: cut costs left and right (including R&D, which I strongly oppose for the reason that when you stop innovating, you die pretty quickly), shutdown plants, relocate offices within the US, etc. Yeah, good for short-term performance improvement, but where does it leave them long-term? There has to be a better way to create shareholder value.
While most of the growth is coming from China and India, where demand for advanced materials is rapidly growing, these companies have a hard time developing an Asia strategy too. Most executives struggle to do business there for the simple reason that they don't really understand these markets. If you have a hard time growing in the US, Asia is not going to be a piece of cake despite rapidly rising demand.
While most of the growth is coming from China and India, where demand for advanced materials is rapidly growing, these companies have a hard time developing an Asia strategy too. Most executives struggle to do business there for the simple reason that they don't really understand these markets. If you have a hard time growing in the US, Asia is not going to be a piece of cake despite rapidly rising demand.