THE IMPACT OF THE e-ECONOMY ON CHEMICAL INDUSTRY

STRUCTURES, PRODUCTIVITY & BUSINESS MODELS

Presentation to EU Seminar on‘The e-Economy in Europe: its

potential impact on EU enterprises’

Paul Hodges, Chairman

‘One way of distinguishing form from function is to substitute a verb for a noun. Banking is essential,

banks are not.’ Richard Kovacevich, CEO Wells Fargo

What Impact?

W Europe leads global chemical production

Source: CEFIC

1999 production – €1370 billion

0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 1600 1700 1800

Electronics (non-defense)

Consumer Products (B2B)

Food/Beverage/Tobacco

Medical Equipment/Transport

Financial Services

Construction and Real Estate

Pharmaceutical

Transportation/Freight

Motor Vehicles and Parts

Information Services

Aerospace/Defense Electronics

Paper

Agriculture

Energy: Oil/Gas/Mining

Industrial Equipment

Hardware/SW/Networking

Chemicals

B2B Revenues (Millions $US)

Industry B2B Revenues in 2004Industry B2B Revenues in 2004Industry B2B Revenues in 2004Industry B2B Revenues in 2004

Chemicals will lead in B2B as today’s fragmented structure is networked

Source: Accenture

OLD: INTEGRATED

NEW: NETWORKED

Feed-stocks

Commercial

Finance

Logistics

Production

Company B focuses on Commercial/LogisticsCompany A focuses on

Feedstocks/Production

Production Commercial Finance LogisticsFeedstocks

Business structures will become networked…

Service ProvidersLowest cost ‘utility’ suppliers

Margin is squeezed out of many quasi speciality and intermediates

Growth driven

companies

ROCE driven

companies

…whilst its underlying structure also changes

ServiceSpecialitiesIntermediatesBasic ChemicalsTODAY

FUTURE

Source: Deutsche Bank

Networks are powerful tools

Source: Forrester

1) Links are free

3) Assets live on the network

2) Information

diffuses instantly

eBusinessnetworks

Productivity will improve due to increased operational transparency...

Process focus

Industry priority

Data strategy

Inter-company links

Decision making

Intra company

Focus/consolidation

Own & hide

Relationship based

Computer assisted

Integrated Networked

Inter company

Specialisation

Share & exploit

Performance

based

Human assisted

…as Operating Models are redefined

Technologyfocus

Internal External

Market/product developmentProduction led Customer led

Partner relationships

Opaque Transparent

Outsourcing Limited Ubiquitous

Financialreporting

Historical Real-time

Today Future

eBusiness adoption is now set to accelerate

0%

25%

50%

75%

100%

1997 1998 1999 2000 2001 2002 2003

Telephone/FaxEDI/EXTRANETE-mailERP to ERPBranded websitesSpot ExchangesContract Auctions

Source: BP

ISSUES

Ensuring Europe stays ahead – creating a common framework Catching up with the US on internet adoption – broadband accessAllowing information to flow – defining competition concerns upfrontEncouraging personal IT literacy – schools and local communitiesRepeat success of GSM standard – adapt for mCommerce