1. What are du Pont's competitive advantages in the TiO2 market as of 1972? How permanent or defensible are they? What must du Pont do to retain its competitive advantages in the future? 2. Given the forecasts provided in the case, estimate the expected incremental free cash flows associated with du Pont's growth strategy and maintain strategy for the TiO2 market. How much risk and uncertainty surround these future cash flows? Which strategy looks most attractive? 3. How might competitors respond to du Pont's choice of either strategy in the TiO2 market? What other factors should du Pont consider in making this decision? 4. Which strategy should du Pont pursue?
Note: In 1972, bond yields and the inflation rate were approximately as follows. Long-term treasuries = 6.2%; Aaa corporate bonds = 7.2%; Baa corporate bonds = 7.8%; inflation rate (CPI) = 3.2%.
▪ Diversified manufacturer of fibers, plastics, industrial chemicals and other specialty chemical products ▪ Conservatively managed company with longstanding AAA bond rating ▪ Relied on retained earnings to fund capital expenditure programs ▪ Organized into 10 industrial departments (second smallest being pigments)
Titanium Dioxide Market
▪ White chemical agent used in manufacture of paints, paper, synthetic fibers, plastics, ink and synthetic rubber ▪ Manufacturing TiO2 involve sulfate process and chloride process ▪ Projected sales expected to reach $340 million by end of 1972 ▪ Volume of sales had been growing at 3% per year over past decade ▪ Sales projected to reach over 1 million by 1985
▪ Introduced ilmenite chloride technology at Edge Moor plant in 1952 (only company with operational knowledge of this method) ▪ Another ilmenite chloride plant opened in 1985 in New Johnsonville, TN ▪ National Lead was second largest supplier of TiO2
▪ National Lead generally less...