Arco Chemical Case Write Up

1. ARCO Chemical's rationale for globalizing was primarily due to the fact that they had to follow their automotive customers. Since theses customers have expanded internationally, ARCO Chemical was pulled in the same direction. In addition, since they streamlined their products to respond better to globally political and economic events, this forced ARCO to expand its customer base since they were offering fewer but more competitive products. It the past selling to the auto industry meant only focusing on Detroit's big Three in the US Market. In order to expand or keep up with their current customers, ARCO Chemical had to be able to meet the needs of these customers anywhere in the world. The inability to meet or keep up with these customers would have resulted in lost sales and ultimately in these customers turning to other competitors that would be able to meet these needs.

2. The advantages that ARCO Chemical realized from its global operations were many. The most evident advantage was an expanded customer base around the world in multiple continents. They expanded in a short period of time from the U.S. market into European and Japanese markets. Secondly, these expanded global sales results in market diversification which is important for minimizing risk especially if political or economic conditions arise in a particular market they will not impact the entire sales but only a portion. Thirdly, ARCO Chemical gained competitive intelligence from setting up operations overseas as well as entering into joint ventures with strategic alliances ( such as Sumitomo Chemical). This enabled ARCO to understand the different markets and enabled them to watch and keep track of its competitors and to counteract them when needed as in the case of Asahi Glass. Lastly, they also had advantages of scale and scope because of their increased size and breadth of their market operations. ARCO Chemical had developed a platform structured for future and international and domestic growth and had developed strategic alliances and partnerships with other companies.

The threats that have arose from ARCO Chemical's globalizing efforts were increased competition, the potential stealing of current customers and entering into new markets where there was little or no understanding or knowledge. In addition to domestic competition, the competition abroad was fierce as experienced by ARCO and they were not familiar with the tactics that the competitors abroad would use. They had to counteract quickly on the price cuts that occurred in the Asia and Europe markets by their competitor, Asahi, and ended up counterattacking by stealing one of Asahi's customers. Entering a new market is a threat in itself since there is not a lot of knowledge on that market or the culture and therefore this is a lot of ambiguity as to how ARCOs products would do or any obstacles that may arise. There is a lot of money and time that needs to