The Dow Chemical Company manufactures and supplies products that are used as raw materials in the manufacture of customer's products and services worldwide. The company's Agricultural Sciences segment provides crop protection and seed/plant biotechnology products, urban pest management solutions, and healthy oils. Its Consumer Solutions segment offers customized materials using technology and chemistries for specialty applications, such as semiconductors and organic light-emitting diodes, adhesives, and foams for use in the transportation industry; cellulosics and other polymers for pharmaceutical formulations and food solutions; and silicone solutions for consumer goods and automotive applications. The company's Infrastructure Solutions segment provides architectural and industrial coatings, construction material ingredients, building insulation products, adhesives, and microbial protection products for the oil and gas industry, telecommunications, and light and water technologies. Its Performance Materials & Chemicals segment offers chlorine and caustic soda; industrial solutions; and isocyanates, polyols, polyurethane systems, and propylene oxide/propylene glycols. The company's Performance Plastics segment provides elastomers, polyolefin plastomers, and ethylene propylene diene monomer elastomers; wire and cable insulation, semiconductive, and jacketing compound solutions, as well as bio-based plasticizers; acrylics, polyethylene, and polyolefin plastomers; and ethylene, propylene, benzene, butadiene, octane, aromatics co-products, and crude c4 products, as well as products for power, steam, and other utilities. It serves packaging, infrastructure, transportation, consumer care, electronics, and agriculture sectors. The Dow Chemical Company has a collaboration agreement with 1QB Information Technologies to develop quantum computing tools for the chemicals and materials science technology spaces. The company was founded in 1897 and is based in Midland, Michigan.
Business Analysis of Dow Chemical
The Basic Materials Sector is witnessing a major shakeup, new age business models in the industry are transforming both customers and businesses. Faced with this uncertainity, companies are investing resources to transform their business. An in-depth business analysis is a valuable resource to identify and articulate the need for a business model change. At R&P Research we believe, the starting point for a business analysis is Benchmarking. Business benchmarking can be done at various levels: 1) Industry Benchmarking 2) Peer Benchmarking 3) Disruptors Benchmarking. In this report, we share the snapshot of how Dow Chemical compares against the industry on the major performance indicators. This analysis, along with peer group/disruptors benchmarking and revenue model understanding can help identify growth and cost optimization opportunities to maximize the value delivered by Dow Chemical to its stakeholders. R&P Research Industry Intelligence Platform provides historical data for last 15 years with an easy to use benchmarking interface for an in-depth comparative business analysis.
Here is the performance snapshot of Dow Chemical with an interactive chart.
- Revenue Growth: Dow Chemical reported a revenue growth of -1.3% year-on-year during 2016. Chemicals Industry grew at -4.1% in the same period
- COGS share of Revenues: As a percentage of revenue, Dow Chemical spent 78.2% of its total revenues on COGS. Chemicals industry average (COGS share of revenue) in the same period was 70.2%
- R&D share of Revenues: As a percentage of revenue, Dow Chemical spent 3.3% of its total revenues on R&D. Chemicals industry average R&D spending in the same period was 2.5%
- SG&A share of Revenues: As a percentage of revenue, Dow Chemical spent 6.9% of its total revenues on Sales, Marketing, and General Administration (SG&A). Chemicals industry average SG&A spending in the same period was 13.0%
- Inventory share of Revenues: As a percentage of revenue, Dow Chemical spent 15.3% of its total revenues on Inventories. Chemicals industry average Inventory spending in the same period was 14.6%
- Accounts Payable share of Revenues: As a percentage of revenue, Dow Chemical invested 15.4% of its total revenues on Accounts Payable (A/P) Chemicals industry average Accounts Payable investment in the same period was 12.6%
- Accounts Receivable share of Revenues: As a percentage of revenue, Dow Chemical invested 20.2% of its total revenues on Accounts Receivable (A/R). Chemicals industry average Accounts Receivable investment in the same period was 16.8%
- PP&E share of Revenues: As a percentage of revenue, Dow Chemical invested 48.8% of its total revenues on Property, Plants, and Equipments (PP&E). Chemicals industry average PPE investment in the same period was 52.9%
- Intangibles share of Revenues: As a percentage of revenue, Dow Chemical invested 44.2% of its total revenues on Intangibles. Chemicals industry average Intangibles investment in the same period was 31.4%
- Net Margins: Dow Chemical Net Margins in the year 2016 were 9.0%. Chemicals industry average Net Margins in the same period were 8.1%
Sector and Industry Association of Dow Chemical
For the purpose of performance benchmarking of a company with a sector or industry average, R&P Research associates every company with one sector and one industry. An industry consists of companies with related/similar business models. A sector comprises of a group of related/similar industries.
Dow Chemical is associated with Basic Materials Sector and Chemicals Industry.
Basic Materials sector is comprised of the following industries: Metal Mining; Coal Mining; Chemicals. The definitions for each of the industries is as follows:
- Metal Mining industry includes companies primarily engaged in mining, developing mines, or exploring for precious metals such as Gold, Silver, Platinum and base metals such as Iron, Copper, Aluminum, Lead, and Zinc. It also includes companies that manufacture alloys such as steel.
- Coal Mining industry includes companies engaged in the exploration for and/or mining of coal.
- Chemicals industry includes companies that produce and/or distribute commodity and specialty chemicals. The companies manufacture three general classes of products: (1) basic chemicals, such as acids, alkalies, salts, and organic chemicals; (2) chemical products to be used in further manufacture, such as synthetic fibers, plastics materials, dry colors, and pigments; and (3) finished chemical products to be used as materials or supplies in other industries, such as paints, fertilizers, and explosives.
Industry Ranking of Dow Chemical
With $48.2 billion revenues, Dow Chemical ranked number 1 of all the companies in the US Chemicals industry. There were a total of 66 public companies in the US Chemicals industry that had revenues greater than $50 million during 2016.
The top-10 companies in the US Chemicals industry by revenues during 2016 were:
Business Model Analysis (BMA) Framework
We use the following framework to assess the business model of a company. Business Model Analysis framework can be used by organizations to articulate growth strategies and identify cost optimization opportunities. Technology and consulting companies can use this framework to identify the value drivers and pain points of their targeted customers. Entrepreneurs can use this framework to understand the language of business and identify promising business opportunities. This framework can be used by any professional aspiring to take up a leadership role to better understand the businesses challenges, articulate growth strategy, and monitor the business improvement requirements for the organization.