Dow Chemical Business Analysis Essay

Historically, the chemic industry has operated in a competitive environment, which is not anticipate to change. Dow experiences significant competitions in each of its operating segments as well as in each of the geographic areas in which it operates. Dow competes globally on the foundation of quality, technology, price, and customer service and operates in an integrated manufacturing environment. Basic raw materials are processed through many stages to produce many products that are sold as end goods at different points in the process. Dow has two major raw material streams that feed the production of the finished goods which are chlorine-based and hydrocarbon based raw materials. (Dow chemic Company, n.d.) work EnvironmentThe business environment of Dow is one that has strategically positioned itself to withstand the invariably-changing forces of economic, social, political and technological factors it faces daily. Dow consistently identifies opportunities and new technologie s before its competition which stimulates their industry-leader position. (1)Financial wellnessDow has great financial strength. Their sensible financial discipline has proven beneficial in young global economic challenges and has actually helped position it for future growth. The recent global economic challenges forced Dow to take steps towards strengthening and diversifying its portfolio. The companion has come out on the some other side of the challenges with a portfolio that is better supply for economic uncertainties. (Dow Chemical Company, n.d.)During 2011, Dow* had double-digit gains in revenue and earnings per share * postedrecord revenues at a Company level, as well as in emerging geographies * introduced game-changing investings and partnerships that will allow the Company to capture more demand in the worlds fastest growing regions * recognized a stronger than ever before R&D innovation pipeline Analyzing the data attained from Dows 2011 financial statements confirm the Companys financial heath and sustainability.Dows fluidity proportionality is a follows true Assets = 23,442 millionCurrent Liabilities = 13,634 millionLiquidity proportion = 23,422/13,634 = 1.72Dow has $1.72 of current assets for either $1.00 of current liability. The current ratio should be at a 2 or greater to be considered a fail-safe risk however, Dow is a reputable global organization accepting the investment to be a safe risk. Dows Acid-test ratio is a follows hard cash = 5,444 millionAccounts receivable = 4,900 millionMeasurable Securities = 7,057 millionCurrent Liabilities = 13,634 millionAcid-test ratio = 4,444+4,900+7,057/13,634 = 1.28Dow has 1.28 acid-test ratio. The ratio needs to be between a 0.05 and 1.0 to be satisfactory. The acid-test ratio determines whether an organization has luxuriant short-term assets to c everywhere immediate liabilities without selling inventory. (Nickels, McHugh, & McHugh, 2010, p. 20-21) Dows ratio is just slightly above 1.0, allow ing it to be considered satisfactory.Dows Debt to owners ratio is as followsTotal Liabilities = 27,476 million owners Equity = 22,281 millionDebt to owners ratio = 27,476/22,281 = 1.23 or 123%The debt to owners ratio should be anything 100% or less. (Nickels, McHugh, & McHugh, 2010, p. 20-21) Dow is just over however, other competitors in the industry have similar ratios signifying debt financing in the chemical industry is more grateful and commonplace. Dows Return on sales is as follows crystalise Income = 3,200 millionNet Sales = 52,985 millionReturn on sales = 3,200/52,985 = 0.06 or 6%Return on sales for Dow is slightly glower than its researched competitors in producing income from sales.CompetitorsAs previously stated, the chemical industry is a highly competitive environment. Two of Dows leading competitors include BASF and DuPont. BASF is the worlds leading chemical company with about 111,000 employees and just under 370 production sites worldwide. BASF serve customers and partners in almost every country in the world. In 2011, BASF posted sales of $73.5 billion. (BASF web site) BASFs Liquidity ratio is a followsCurrent Assets = 27,088 millionCurrent Liabilities = 16,447 millionLiquidity ratio = 27,088/16,477 = 1.64BASF has $1.64 of current assets for every $1.00 of current liability. The current ratio should be at a 2 or greater to be considered a safe risk however, BASF is a reputable global organization considering the investment to be a safe risk. (Nickels, McHugh, & McHugh, 2010, p. 20-21) BASFs Acid-test ratio is a followsCash = 2,048 millionAccounts Receivable = 10,886 millionCurrent Liabilities = 16,477 millionAcid-test ratio = 2,048+10,886/16,477 =. 78BASF has a .78 acid-test ratio. The ratio needs to be between a 0.05 and 1.0 to be satisfactory. The acid-test ratio determines whether an organization has enough short-term assets to cover immediate liabilities without selling inventory. (Nickels, McHugh, & McHugh, 2010, p. 20-21) BASFs ratio is in line and right where it should be furthermore, considered satisfactory in regards to this measure. BASFs Debt to owners ratio is as followsTotal Liabilities = 35,790 millionOwners Equity = 25,385 millionDebt to owners ratio = 35,790/25,385 = 1.41 or 141%The Debt to owners ratio should be anything 100% or less. (Nickels, McHugh, & McHugh, 2010, p. 20-21) BASF is just over however, other competitors in the industry have similar ratios signifying debt financing in the chemical industry is more acceptable. BASFs Return on sales is as followsNet Income = 6,188 millionNet Sales = 73,497 millionReturn on sales = 6,188/73,497 = 0.08 or 8%Return on sales is higher than Dows and lower than DuPont. Another strong competitor is DuPont. DuPont is a world leader in market-driven innovation and science. DuPont brings science and engineering to the global marketplace through innovative products, materials and serve which enable their customers in almost all industries to meet the current and future needs of society. (DuPont.com) DuPonts Liquidity ratio is a followsCurrent Assets = 18,058 millionCurrent Liabilities = 11,185 millionLiquidity ratio = 18,058/11,185 = 1.61DuPont has $1.61 of current assets for every $1.00 of current liability. The current ratio should be at a 2 or greater to be considered a safe risk however, DuPont is a reputable global organization permitting the investment as a safe risk. (Nickels, McHugh, & McHugh, 2010, p. 20-21)DuPonts Acid-test ratio is a followsCash = 3,586 millionAccounts Receivable = 4,598 millionMeasurable Securities = 433 millionCurrent Liabilities = 11,185 millionAcid-test ratio = 3,586+4,598+433/11,185 = .77DuPont has a 0.77 acid-test ratio. The ratio needs to be between a 0.05 and 1.0 to be satisfactory. The acid-test ratio determines whether an organization has enough short-term assets to cover immediate liabilities without selling inventory. (Nickels, McHugh, & McHugh, 2010, p. 20-21) DuPonts ratio is satisfactory.DuPonts D ebt to owners ratio is as followsTotal Liabilities = 39,899 millionOwners Equity = 8,593 millionDebt to owners ratio = 39,899/8,593 = 4.64 or 464%The Debt to owners ratio should be anything 100% or less. (Nickels, McHugh, & McHugh, 2010, p. 20-21) DuPont is importantly over this desired range at 464%, indicating that the significantly financed based on borrowed funds that must be paid back. In comparing this ratio to industry competitors, DuPont is still considerably over. DuPonts Return on sales is as followsNet Income = 3,474 millionNet Sales = 37,961 millionReturn on sales = 3,474/37.961 = 0.09 or 9%DuPonts return on sales is strong when comparing DuPont to Dow and BASF.Technological AdvantagesDows innovation sets them apart from the competition on numerous levels. Dow is the worlds * largest and most experienced ethene and chlorine producer * largest producer of chlorine and caustic* leader in the production of purified ethylene oxideAs of December 31, 2011, Dow owned a total of 18,120 patents world-wide. These patents value the results of its research. The company had revenue related to patents and technology royalties of $437 million in 2011.Today, Dows innovation efforts further supports a new level world-wide growth, generates strong cash flows and enables them to commercialize or bring the technologies to the market. (Dow Chemical Company, n.d.) Dows innovations from 2011 include * DOW POWERHOUSE Solar Shingle a solar panel which aesthetically looks like a waggle for the housing industry. * PASCAL Technology a new polyurethane insulating solution to boost energy efficiency in appliances. * EVOQUE Pre-Composite Polymer Technology allows paint manufactures to maximize covert efficiencies. GlobalizationIn an effort to satisfy the demands of a growing world, Dow is putting their innovations to work on every continent. In 2011, 32% of sales were gained from emerging geographies. Dows increasing investment into developed and emerging regions of the g lobe is empowering them to take advantage and capitalize on growth where it is happening. (Dow Chemical Company, n.d.)BenchmarkingDows vast and well-balanced portfolio enables the company to face the complex realities of today and the future head-on. The company has united its businesses with geographies and end-markets for significant growth. Dow is commercializing game-changing technologies today that are delivering real value to the bottom line. In 2011 nearly leash of its sales were from products launched in the last five years reinforcing their strategic goals.DuPont is an industry leader in safety. DuPont quickly realized that in order for the organizations safety mindset to be successful, safety had to be embraced from the top down. The safety culture of the company has proven successful in many areas. In 2000, over 90% of DuPonts sites world-wide, operated with zero injuries, an unheard of accomplishment. In addition, DuPont has leveraged its acclaimed safety program and ha d provided safety training to other companies including General Motors, GE and Alcoa, Inc. (Vinas, 2002)ConclusionDow is the third largest chemical company in the world. The healthy business environment fosters sustainability for decades to come. Dow offers financial and technological strengths with a promising future in the world-wide market.ReferencesNickels, W. G., McHugh, J. M., & McHugh, S. M. (2010). Understanding Business (9th ed.). McGraw-Hill. Dow Chemical Company. (n.d.). Retrieved from http//www.dow.com BASF Chemical Company. (n.d.) Retrieved from http//www.basf.com DuPont. (n.d.) Retrieved from http//www.dupont.comVinas, T. (2002, Summer). Best Practices DuPont safety starts at the top. Industry Week, (), Retrieved from http//hhtpwww.industryweek.com/articles/best_practices__dupont_safety_starts_at_the_top