Harvard Case - Asahi Kasei: Building an Inclusive Value Chain in India
"Asahi Kasei: Building an Inclusive Value Chain in India" Harvard business case study is written by Savita Shankar, Masahiro Okada. It deals with the challenges in the field of International Business. The case study is 8 page(s) long and it was first published on : Jul 27, 2018
At Fern Fort University, we recommend Asahi Kasei implement a comprehensive strategy to build an inclusive value chain in India, focusing on sustainable growth, local sourcing, and community development. This strategy should be guided by a strong commitment to corporate social responsibility (CSR), environmental sustainability, and ethical business practices. This approach will not only enhance Asahi Kasei's brand image and reputation but also contribute to long-term profitability and sustainable growth in the Indian market.
2. Background
Asahi Kasei, a Japanese multinational corporation (MNC) with a strong presence in the global chemical industry, is facing a strategic dilemma in India. The company has a successful manufacturing facility in India, but it is facing challenges in building a sustainable and inclusive value chain. The case study highlights the need for Asahi Kasei to address issues related to local sourcing, community development, and ethical business practices.
The main protagonists in the case study are:
- Asahi Kasei management: They are responsible for developing and implementing a strategy to address the challenges in India.
- Local suppliers and communities: They are impacted by Asahi Kasei's operations and have a stake in the company's success.
- Government officials: They play a role in shaping the regulatory environment and influencing Asahi Kasei's business operations.
3. Analysis of the Case Study
Asahi Kasei's current situation in India presents both opportunities and challenges. The company has a strong foothold in the market with a well-established manufacturing facility. However, its reliance on imported raw materials and lack of engagement with local communities are hindering its long-term sustainability and growth potential.
Using Porter's Five Forces framework, we can analyze the competitive landscape:
- Threat of New Entrants: The Indian chemical industry is highly competitive, with both domestic and international players. However, the high barriers to entry, including capital investment and regulatory compliance, make the threat of new entrants relatively low.
- Bargaining Power of Suppliers: Asahi Kasei's dependence on imported raw materials exposes it to volatile global pricing and supply chain disruptions. This gives suppliers significant bargaining power.
- Bargaining Power of Buyers: The Indian chemical market is characterized by a large number of buyers, limiting their individual bargaining power. However, buyers are increasingly demanding sustainable and ethically sourced products, which could influence Asahi Kasei's pricing and product offerings.
- Threat of Substitute Products: The availability of substitutes, particularly from local manufacturers, could pose a threat to Asahi Kasei's market share.
- Competitive Rivalry: The Indian chemical industry is characterized by intense competition, with several established players vying for market share. This necessitates a strong focus on innovation, product differentiation, and customer service.
Applying the VRIO framework to analyze Asahi Kasei's resources and capabilities:
- Valuable: Asahi Kasei's technological expertise and brand reputation are valuable assets in the Indian market.
- Rare: While the company's technological capabilities are valuable, they are not unique in the industry.
- Inimitable: Asahi Kasei's manufacturing processes and technologies are difficult to imitate, providing a competitive advantage.
- Organized: The company's organizational structure and culture need to be adapted to effectively leverage its resources and capabilities in the Indian context.
Furthermore, analyzing the case through a SWOT framework reveals:
Strengths:
- Strong brand reputation
- Established manufacturing facility
- Technological expertise
- Global experience
Weaknesses:
- Dependence on imported raw materials
- Limited local sourcing
- Lack of community engagement
- Potential for ethical concerns
Opportunities:
- Growing Indian chemical market
- Government support for local sourcing and manufacturing
- Potential for strategic partnerships with local suppliers
- Opportunities for innovation and product development
Threats:
- Volatility in global raw material prices
- Increasing competition from local players
- Regulatory changes
- Potential for reputational damage due to ethical concerns
4. Recommendations
To address the challenges and capitalize on the opportunities, Asahi Kasei should implement the following recommendations:
1. Build a Sustainable and Inclusive Value Chain:
- Local Sourcing: Prioritize sourcing raw materials and components from local suppliers. This will reduce dependence on global markets, enhance supply chain resilience, and create economic opportunities for local communities.
- Community Development: Invest in community development initiatives, such as skill development programs, infrastructure improvements, and environmental protection projects. This will foster a positive relationship with local communities and improve the company's social impact.
- Ethical Sourcing: Implement strict ethical sourcing policies and ensure that all suppliers adhere to international standards of labor rights, environmental protection, and ethical business practices. This will enhance the company's reputation and build trust with stakeholders.
2. Leverage Innovation and Technology:
- Product Development: Invest in research and development to develop innovative products that meet the specific needs of the Indian market. This will create a competitive advantage and enhance customer satisfaction.
- Process Optimization: Implement lean manufacturing principles and advanced technologies to improve efficiency, reduce costs, and enhance sustainability in production processes.
3. Strengthen Business and Government Relations:
- Government Engagement: Engage proactively with government officials to understand and comply with local regulations, and to advocate for policies that support sustainable business practices.
- Strategic Partnerships: Explore opportunities for strategic partnerships with government agencies and local businesses to enhance access to resources and markets.
4. Enhance Brand Management and Marketing:
- Brand Positioning: Develop a strong brand positioning that emphasizes Asahi Kasei's commitment to sustainability, community development, and ethical business practices.
- Targeted Marketing: Implement targeted marketing campaigns to reach specific customer segments and communicate the company's value proposition.
5. Basis of Recommendations
These recommendations are based on a comprehensive analysis of the case study, considering the following factors:
- Core Competencies and Consistency with Mission: The recommendations align with Asahi Kasei's core competencies in manufacturing and technology, and its commitment to sustainable development and ethical business practices.
- External Customers and Internal Clients: The recommendations address the needs of external customers by providing them with high-quality, ethically sourced products, and the needs of internal clients by fostering a positive work environment and creating opportunities for growth.
- Competitors: The recommendations aim to differentiate Asahi Kasei from its competitors by emphasizing its commitment to sustainability, community development, and ethical business practices.
- Attractiveness: The recommendations are expected to enhance the company's profitability by reducing costs, increasing efficiency, and expanding its market share.
Assumptions:
- The Indian chemical market will continue to grow in the coming years.
- Government policies will support sustainable business practices.
- Local suppliers will be able to meet Asahi Kasei's quality and ethical standards.
6. Conclusion
By implementing these recommendations, Asahi Kasei can build a sustainable and inclusive value chain in India, enhancing its brand image, fostering community development, and achieving long-term profitability. This approach will position the company as a responsible corporate citizen and a leader in the Indian chemical industry.
7. Discussion
Alternatives:
- Maintaining the status quo: This option would involve continuing with Asahi Kasei's current approach, which relies heavily on imported raw materials and has limited engagement with local communities. This would likely lead to continued challenges in sustainability, ethical sourcing, and community relations.
- Focusing solely on profitability: This option would prioritize short-term profits over long-term sustainability and ethical considerations. This could lead to negative consequences for the company's reputation and long-term growth.
Risks:
- Regulatory changes: Changes in government regulations could impact Asahi Kasei's operations and profitability.
- Economic downturn: A global economic downturn could lead to reduced demand for chemical products, impacting the company's sales and profitability.
- Ethical challenges: The company may face ethical challenges in sourcing raw materials and managing its supply chain.
Key Assumptions:
- The recommendations assume that the Indian chemical market will continue to grow in the coming years.
- The recommendations assume that the government will continue to support sustainable business practices.
- The recommendations assume that local suppliers will be able to meet Asahi Kasei's quality and ethical standards.
8. Next Steps
- Develop a detailed implementation plan: This plan should outline the specific steps required to implement each recommendation, including timelines, budgets, and responsibilities.
- Establish a dedicated team: Assemble a cross-functional team to oversee the implementation of the recommendations and monitor progress.
- Engage stakeholders: Communicate the recommendations to key stakeholders, including local suppliers, community leaders, and government officials, and seek their input and support.
- Monitor progress and adapt: Regularly monitor the progress of the implementation and make adjustments as needed based on changing market conditions and stakeholder feedback.
By taking these steps, Asahi Kasei can successfully build a sustainable and inclusive value chain in India, creating long-term value for the company, its stakeholders, and the local community.
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Case Description
Asahi Kasei Corporation (Asahi Kasei), a diversified company based in Japan, had partnerships with weavers in India for its cupro yarn, which was used to make traditional garments for Indian women. The company developed a unique, inclusive value chain in India and began focusing on enhancing the development impact of its operations there. With a growing market for cupro yarn in India, Asahi Kasei expanded the capacity of its production facility in Japan in 2014, even though the domestic market for the product was shrinking. However, in 2015, the product started to face intense price competition in India from viscose rayon, which was an inferior but cheaper product. In 2016, the company had to address the competitive pressures while considering its economic and social objectives.
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