Ethylene Development Strategy

Shanghai Petrochemical Company Limited (SPC) is one of the most important modernized enterprise intergrated with production of oil refining, petrochemicals, chemical fiber and plastics. The stock of SPC is the first one in China which is exchanged in New York, Shanghai and Hongkong. The total capital of SPC in 2000 reached to 22.1 billion Yuan and 34.9 thousand employee were worked in SPC. At present, the fourth expansion phase of SPC is constructing. After completion the ethylene capacity will reach to 700 thousand metric tons annually. The joint ventures with BP of 900 thousand metric tons annually ethylene capacity has been approved by authorities.Recently with the steady improvement of socialist market economic system, facing the opportunities and challenges of China entering into WTO and economic globalization, the market competitions have been continuously intensified. Domestic enterprises have suffered great pressure from market at home and abroad. For taking the initiative in keen market competitions, more and more enterprises, especially the state owned enterprises, begin to pay great attention to the research of enterprise's business strategy.The Tenth "Five-Year-Plan" of China is the key period for China petrochemical industry. the domestic large-scale petrochemical enterprises are launching great stresses with solid measures in adjusting the mechanism, scaling up the managing activities as well as innovating and developing of science and technology in order to strengthen the competitive power. Since SPC plays an important role in the development of China petrochemical industry, it is more significant to research and orient its development strategy.Ethylene and its derivatives are the most important products in SPC. So the main problem for SPC now is how to improve the economic profits in ethylene production and after- processing of ethylene, strengthen the competitive power of its products. With SPC as research object, this dissertation makes a detailed analysis of the external environment, resources and competitive capabilities of SPC, and puts forward accordingly the company's competitive strategy. This dissertation focuses on analyzing the execution conditions of low-cost leadership strategy and strategic alliances. By above analysis and comparison with the practice of domestic and abroad competitors to reduce cost and make strategic alliance, puts forward the main strategic measures and orientation foundation of ethylene business of SPC. The result of analysis has definitely indicated that SPC has the potential to further reduce production cost, and has the capabilities to execute low-cost leadership strategy. The low-cost leadership strategy ought to be SPC an essential strategy. By continuously reducing cost, SPC can keep and improve the marketing competition. Using intergration experiences of abroad competitors, SPC can reduce costs by expansion of existing plants, scheme adjustment of derivatives, prolongation of operation period, improvement of raw materials supply, saving energy and improvement of sales system. However, meanwhileSPC should avoid excessive rivalry and neglecting characteristics of products. The other result of analysis is that establishment of strategic alliances can also improve the competition power of SPC. The ethylene market and market potential in China are enormous, many multinationals are actively searching for strategic alliance partner. So SPC has favourable opportunities to establish strategic alliances to raise fund, import advanced technology and improve management. SPC can also establish strategic alliance with the domestic petrochemical company for ordly rivalry and technology share together.So from the view of overall profit maximization, the strategic orientation, development target and steps of SPC ethylene are determined accordingly, a competitive and practical adjustment scheme on products mix, scale structure, management and technology improvement is put forward, and the overall competitive strategy of SPC is finally obtained.