Allied Chemicals (A)

Darren Henderson, CEO of Allied Chemicals (AC), was looking at the set of memos on the desk in his office in the company’s headquarters in Danbury, Connecticut. They concerned his corporation’s latest expansion into the Indian market, the setting up a chemicals plant in Indore, a city in Madya Pradesh in central India.Over the years, through a variety of mergers, Allied Chemicals had grown into a diversified chemical conglomerate of a substantial size. Indeed, if you counted all the employees it had on its payroll in its various subsidiaries and divisions across the world – despite having its main presence in the US, the company was active in several dozen countries – it added up to a number larger than the entire population of the town of Danbury, home to about 50,000 people.It had also expanded into about 60 business areas, several of which had commoditised and offered relatively low margins. In an effort to refocus the company Darren had just sold off a substantial number of businesses, including the significant European petrochemical and plastics operations. He intended to redirect the cash raised from this into various growth businesses, in particular graphite electrodes, batteries, polyethylene and agricultural products.The expansion into India – centred round a state-of-the-art pesticide plant, one of its targeted growth areas – fitted well with this focus on growth. The technology used to build complex chemical plants was clearly one of AC’s key strategic assets and the Indian agricultural market looked very promising; not least due to its vast size. Moreover, despite their history of smothering bureaucracy, both the national and local Indian governments had been very cooperative, welcoming the influx of hi-tech knowledge and the jobs it would create.