Akzo Nobel - A European Integration perspective

Contents

List of abbreviations

Executive Summary

1. Introduction

2. Economic aspects
2.1 Akzo Nobel – Brief description
2.2 Commercial and market
2.3 Strategy

3. Cultural aspects
3.1 National cultures
3.2 Akzo Nobels culture
3.2 Cross-cultural alliance

4. Legal issues
3.1 Akzo Nobels legal structure
3.2 Marketosition
3.2 State – aid

5. Conclusion

Literature and Sources

Appendix

List of abbreviations

illustration not visible in this excerpt

Executive Summary

The following report gives a review about the chemical company Akzo Nobel in a European Integration perspective and is based mainly at the annual report 2004. Furthermore the authors explain a European Integration perspective between Akzo and Nobel. The first part of the available report contains a brief introduction about our topic and the general economic situation in the Netherlands.

In the second part the authors explain the economic aspects and give an overview about the company Akzo Nobel, the commercial and market and the company strategy.

The cultural aspects are the third part of this report and show the national and company cultures and the cross-cultural alliance.

In the fourth part we explain the Legal issues and show the legal structure, the market position and state aids of Akzo Nobel.

With the fifth part we give a summary and conclusion about our project topic and show our opinion about the merger between Akzo and Nobel.

1. Introduction

Since the merger between Akzo and Nobel in 1994 the company has seen the number of subsidiaries working underneath them. For a multinational team of students to develop insight into European Integration from marketing, financial, legal and cross-cultural perspective, Akzo Nobel is a perfect company to research. Akzo Nobel is a multicultural company headquartered in Arnhem - Netherlands and because we are studying there as well we are also interested in the local economy.

The Netherlands has a prosperous and open economy, which depends heavily on foreign trade. Dutch are proficient in languages and skilled in negotiating trade agreements and implementing projects against the odds. The economy is noted for stable industrial relations, moderate unemployment and inflation, a sizable current account surplus, and an important role as a European transportation hub. As an open economy, the Netherlands is susceptible to international developments, notably in recent years the global recession – which has been exacerbated by falling share prices, the attacks of 11 September 2001, the war in Iraq and the outbreak of SARS. Industrial activity is predominantly in food processing, chemicals, petroleum refining, and electrical machinery. A highly mechanized agricultural sector employs no more than 4% of the labour force but provides large surpluses for the food-processing industry and for exports. The Netherlands, along with 11 of its EU partners, began circulating the euro currency on 1st January 2002. The country continues to be one of the leading European nations for attracting foreign direct investment. Netherlands was the world’s eighth largest exporter of goods and services in 2003. Dutch manufacturers too have a global outlook. They export goods worldwide, maintain subsidiaries in many countries and often join forces with foreign partners. The main manufacturing industries are chemicals, food processing, metalworking and the refining of gas and oil. The printing and electronic engineering industries are also world-class. Dutch metalworking companies specialize in making machinery driven by advanced electronic controls, food processing equipment and machinery for the chemical industry. It has also bolstered the electronics industry.

Netherlands’ workforce numbered 7.5 million, three-quarters of whom worked in the service sector. Per capita gross domestic product (GDP) was €27,900 in 2003. The unemployment rate was 5.3% and growth was strongest in the public sector, education and health care. The seaport of Rotterdam is the largest in Europe, transshipping tens of millions of tones of goods per year. The Amsterdam Schiphol Airport is the fourth largest airport in Europe and very important for both – passenger and goods traffic. ¹

2. Economic aspects

2.1 Akzo Nobel – Brief description

The company which is this report about started as two separate companies Akzo / Netherlands (established in 1777) and Nobel / Sweden (established in 1871). In 1994 the both companies merged to Akzo Nobel, which is now a multicultural worldwide acting company with around 64,000 employees and subsidiaries in more than 80 countries. The company conducts its activities through 16 decentralized business units, supplies over 2,000 chemical products and hold many leading positions in pharma products, coatings and chemicals. The Headquarter is located in Arnhem / Netherlands and sales in 2004 aggregated EUR 12.7 billion, of which 25% in pharma products, 41% in coatings and 34% in chemical products. The ambition of Akzo Nobel is to be a company which talented people are proud to work for because they are employees at a company that is respected in the societies in which it operates. Akzo Nobel N.V. is a public limited liability company (listed on AEX) established under the laws of the Netherlands and with Hans Wijers as CEO the company realized a profit of EUR 856 million in 2004 and distributed EUR 1.20 dividend for the shareholders. At this point of time the company has three classes of shares – common shares, cumulative preferred shares and priority shares. Around 90% are in widespread shareholdings at institutional investors’ hand .²

2.2 Commercial and market

The company is operating on a global market. Akzo Nobel operates in over eighty countries worldwide. As can be seen from the diagram at the appendix (figure 1), the company sells the majority of its produce within the European Union. They take full advantage of EU membership and the free trade benefits associated with operating in this trading-bloc. The second largest geographic area for Akzo Nobel sales is other European countries outside of the European Union. This accounts for many countries in this area and does not accurately reflect sales breakdowns by country but merely by region. The largest volume of produce to be sold in any one country is probably the USA as they and Canada account for 20% of all Akzo Nobel sales.

Akzo Nobel produces and sells a very wide range of products. The company’s products come under three different main headings of Pharmaceuticals, Coatings and Chemicals.³

Within the Pharmaceuticals sector the company operates under four more main headings, Organon, Intervet, Diosynth and Nobilon. Within Organon, their main products are human healthcare drugs such as oral contraceptives and anti-depressants. Intervet, as the title suggests, produces mainly animal healthcare drugs for the veterinary market. Diosynth produces active pharmaceutical and biopharmaceutical ingredients for the final producers of pharmaceutical drugs such as Pfizers. Nobilon are concerned with the production and development of vaccines and healthcare products for the travellers market. Examples of this include malaria tablets and traveller's diarrhoea for tropical climates.

The Coatings division of Akzo Nobel develops coating products under six different sub-divisions. These are Car Refinishes, Decorative Coatings, Industrial Finishes, Marine and Protective Coatings, Nobilas and Power Coatings. The Car Refinishes department mainly develops coatings such as paints and specialised equipment for the car repair and the transportation market. Under the heading of Decorative Coatings, Akzo Nobel produces decorative and protective products such as paints and adhesives for the architectural and interior design markets. The Industrial Finishes division produces wood, plastic and coil coatings as well as adhesives for a very diverse selection of industrial customers. The Marine and Protective Coatings department of the company develop protective paints and anti-fouling agents for ships, boats and yachts. They also make coatings for the aero-space market. Nobilas are mainly concerned with car repair and supply chain management and also with services regarding fleet imaging. The Powder Coatings department operates in nearly all of its markets in the Coatings division. It produces the powder based coatings used in these areas.

The third and final division of Akzo Nobel is the Chemicals division. Within this area the company operates under six more main departments. These are Base Chemicals, Functional Chemicals, Polymer Chemicals, Pulp and Paper Chemicals, Salt and Surfactants. The Base Chemicals sector of the company produces chemicals that play a key role in numerous industries, such as the manufacture of glass and detergent and also in paper production.

Under the title of Functional Chemicals, Akzo Nobel develop various chemicals used in a wide range of products such as toothpaste, deodorants, cosmetics, detergents, ice cream and flame retardants. The Polymer Chemicals department of the company mainly develop organic peroxides, thermo set chemicals, metal alkyls and polymerization catalysts for the polymer production and processing industries. ⁴

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¹ Note http://www.hollandtrade.com - last access 05.05.2005

² Note “Creating a platform for growth”, Annual Report 2004, Akzo Nobel

³ Note “Creating a platform for growth”, Annual Report 2004, Akzo Nobel

⁴ Note“Creating a platform for growth”, Annual Report 2004, Akzo Nobel