Founded in 1955 by Dr Emmett Brown, the Dreich Chemicals Group is a Scotland-based multinational chemical company that focuses on the production of water treatment chemicals (e.g., antifoams, disinfectants, and resin cleaners) and the provision of analytical services. Dreich has business operations in North America, Europe, Asia, and Australia. Traditionally, the company offered a range of products and services to various customer segments under the umbrella of Dreich Chemicals. But in the early 2000s Dreich went through a re-structuring process and as a result created two separate business units. Since then, the company sells commodity chemicals under the Dreich Water Chemicals brand, where it offers customers competitive prices and ‘no-frills’ standardized products sold over the internet. It also operates a value-driven business model under the Dreich Solutions brand, where it targets customers who expect customized, high-quality products, and sophisticated analytical services. To serve these customers, the company has developed trusted relationships with large customers like Swiss-based Nestlé and Dasani in Georgia, USA.
In recent years, the company has noted that customers increasingly struggle to pay for some of its high-end products and services. At the same time, low-cost competitors are disrupting the low-end of the market by offering commodity chemicals at prices below those of Dreich. The company is, therefore, considering changing the way it does business, potentially going back to the roots by integrating both of its units, while moving towards a new “performance pay” model. As Marty McFly, CEO of the Dreich Chemicals Group, explains: “Instead of simply selling our commodity or high-end products, this new model would allow customers to purchase a desired result rather than the chemicals. On the other hand, staying connected to the water treatment chemicals in use, would allow us as a company to optimize the water treatment process of our customers around the world and present the opportunity to build a large and valuable knowledge base that we can use to improve chemical use across our customer base and charge for the service.” The proposed integration strategy would also support one of Dreich’snew digital transformation projects on predictive maintenance, which focuses on estimating risks of unwanted operating conditions and events. These predictions enable demand-oriented planning of maintenance activities. With this explorative project, Dreich aims to develop new, digital competencies that, in the future, can enable the company to create new products and services that complement its traditional chemicals business.
While Dreich has successfully operated two businesses simultaneously for almost two decades, it is now considering to bring its two businesses back together, eventually moving back to its original historic structure, but with a different business model: “performance pay”.
Answer ALL questions. Questions carry equal marks. Word limit per question: 1,500 (+10%)
- Critically discuss the proposed integration strategy. In your discussion, compare and contrast separation and integration and also analyse what capabilities Dreich would require to keep separate or integrate the business models.
- Critically discuss if Dreich should operate (1) a global business model, i.e., one transferable to and applicable in other national settings, (2) a local business model for each market it operates in, or (3) a hybrid between the two. In your analysis, develop a strategy for implementing the solution you propose.