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Leadership throughout the crisis
By Ren Jianxin (chinadaily.com.cn)
Updated: 2009-05-10 08:58

To seize the initiative and survive further intensified competition in the post-crisis era will depend on our ability to forecast trends and adjust our future development accordingly. Every crisis creates opportunities for economic restructuring; therefore, I believe, the best policy for us is to avail ourselves of the favorable conditions and accept and embrace the opportunity that now stands before us.

We have noted the focus on alternative energy as a highlight in the economic policies of the new US administration. Although somewhat overshadowed by the economic crisis, global climate change, and the environmental challenge it presents, will undoubtedly remain a major concern for humanity in the 21st century.

For China, as a late developer in the process of industrialization and urbanization, the major sources of economic growth are likely to be the safety, environmental protection, energy consumption and emission reduction businesses.

In tandem with this, related life sciences, environmental sciences and material science sectors will be the focus for further industrial expansion. In line with the new growth point of the world economy, these three areas are where the future of the global chemical industry lies.

As such, in the forthcoming 12th Five-Year Plan (2011-15), we shall position the basic chemical business as our foundation whilst fully tapping the potential of life sciences, material science and environmental science to form the "3 plus 1" industrial pattern.

With a strong focus on these sectors, we will speed up the restructuring of our business composition and seek to exploit our differentiation as a late-comer by seizing the opportunities of the global shift in production and IT-based management transformation.

We have also noted that it was during the economic recession in the 1870s that Rockefeller and Carnegie beat competitors with new technologies and eventually ascended to the very top of the oil refining and iron and steel smelting respectively. A century later, Warren Buffett successfully transformed a textile company, named Berkshire Hathaway, into one of the most reputable investment funds in the world through ingenuity and creativity.

Today, for ChemChina, the demarcation of 2009 as a year of innovation is by no means cosmetic, but rather a sign of our commitment to seeking change and combative measures amidst difficulties, whilst defining our orientation for the post-crisis era.

This demarcation entails innovation in organization, institutions and technologies involving changes in their way of thinking, philosophies and production technologies and processes. It essentially requires effective leadership in a crisis to provide impetus and create an underpinning for a successful corporate transformation.

The US-based Boston Consulting Group recognizes ChemChina as one of the 2008 BCG 100 New Global Challengers for our ambition and vision to go global through learning and adapting rapidly to new business models in a market of free competition. However, to be worthy of that citation, ChemChina managers need to meet three major challenges on top of sound operational management, enhanced cost control and market growth.

Firstly there is the need to strengthen the core competitiveness of the company through self-innovation.

Self-innovation is an essential part of the transformation of our business model and the key to enhanced competitive edge within our companies. We must proactively upgrade traditional businesses with high-tech and advanced technologies, build upon advantageous businesses with independent IPRs and raise the overall level of industrial technologies. We need to fully harness the key technologies obtained through overseas acquisition or, indeed, developed independently. Keeping aligned with domestic and overseas demands, we will develop and expand new businesses in biopesticides, animal nutrition additives, advanced chemical materials and specialty fibers and optimize our investment in silicone, water treatment and environmental protection businesses. Wherever possible, we will seek to increase the added-value that we bring to our customers and strengthen the competitiveness of our companies.

Secondly we need to change the management model and boost intensional development.

We need to make the best of ongoing IT construction to introduce the global best practices, maximize business integration, realize synergies and increase our responsiveness to changing market conditions. Through accelerated organizational transformation, we will enhance corporate governance and restructure to meet market demand and improve the efficiency and effectiveness of day-to-day operations.

The management of capital, procurement, sales and logistics will be centralized to improve the efficiency of resources and fully tap the potential of the management. In the meantime, the building of an information system, with ERP at the core, will be pushed forward vigorously to set up a unified management platform and achieve the integration of capital flow, logistics and information. The Lean Six-Sigma management method will be promoted while the continuous improvement approach will be embedded so as to establish a solid foundation for sustained development. Likewise, a market-driven technological innovation system has to be explored and fostered to allow our businesses to be more proactive. Resource allocation and utilization will be optimized to enhance the advantages in R&D and increase the contribution of scientific and technological innovation toward more effective product commercialization and economic growth.

Thirdly to further our mission of energy conservation and emission reduction, we will adopt the concept of "zero-emissions" through product upgrading, process optimization and capacity centralization. This will be achieved by means of technological innovation, structural adjustment, enhanced management and business consolidation.

All the companies under the ChemChina banner will be required to benchmark themselves against the leading chemical producers in the world. This will be in terms of executing our "zero-emission" strategy in technologies, processes and post-process treatment. Rigorous measures will be adopted to save energy, reduce emissions and prevent pollution from the very source of production in a bid to change the old practice of "treatment after pollution".

This strategy will not only help us to reduce costs, but also protect the resources and the environment. This in turn will lead to a sustainable business that not only creates value for our customers and shareholders, but also for the environment and society.

Here I want to stress the fact that the economic crisis, triggered by the assets value evaporation in major economies, will leave the global economy struggling with recession for a long period to come.

In response to this we need to reflect upon our conventional practices of expanding capacity when the economy reaches the bottom. We should keep vigilant against the ensuing risks.


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