Rohm And Haas Case Analysis

Topics: Marketing, Dow Chemical Company, Pricing Pages: 9 (1915 words) Published: April 25, 2015
When analyzing the Rohm & Haas case, it is important to understand the current situation it finds itself in vis-à-vis Kathon MWX. Rohm & Haas, a current worldwide leader in the chemical technology industry, was founded in Germany in 1906. Since its inception, the company has significantly expanded its services into the United States market, achieving sales of $2 billion in 1983, largely derived from the company’s operations in four business segments: 1) Polymers, Resins, and Monomers, 2) Plastics, 3) Agricultural Chemicals, and 4) Industrial Chemicals. The Industrial Chemicals segment is further subdivided into three product groups: Fluid Process Chemicals, Petroleum Chemicals and Specialty Chemicals. The Specialty Chemicals product division was responsible for developing, formulating and launching the two Kathon metalworking fluid (MWF) biocides: Kathon 886 MW and Kathon MWX. Kathon 886 MW, a liquid maintenance biocide developed for large central reservoir systems, enjoyed a 30% share of the $18 million market in 1983. Subsequently, as a result of the success of Kathon 886 MW in extending fluid life in these larger systems, end user customers requested a “convenient, safe-to-use version for their smaller (50- to 100-gallon) reservoirs.” (Page 4 of case) Kathon MWX was designed to keep metalworking systems free of bacteria, yeast and fungi to extend fluid life in these smaller systems. The positioning of Kathon MWX had tremendous market potential, $20 million projected sales in 1984. Unfortunately, it significantly underperformed ($12,000 sales in the first five months of 1984) after product launch in December 1983. There are several issues Rohm & Haas should address, one of which is the distribution channels for the Kathon MWX market. Again, the end users of Kathon 886 MW initially expressed an interest in the development of a biocide for smaller reservoirs. However, Kathon MWX would be distributed predominantly through 10 large distributors/formulators, who were not permitted to private brand the new biocide, unlike Kathon 886 MW. Thus, distributors were not sufficiently incentivized to promote Kathon MWX through to the secondary distribution network. In addition, from a financial perspective, the large distributors predominantly benefit from selling their metalworking product to the smaller distributors/end users, who have not adequately been educated from Rohm & Haas about the benefits of extending fluid life. Thus, Rohm & Haas may never realize the true potential market without a clear identification and realization of the situation. There also appears to have been minimal to no advertising expenditure leading up to the product launch in December 1983. No announcements were made from Rohm & Haas in leading industry journals in anticipation of the new Kathon MWX biocide. The minimal advertising expenditure/resources appear to have had a limited impact on the true benefits/cost-effectiveness of the new biocide. Cited by Joan Macey when she stated, “Many small users are either unaware or don’t see the need for biocides in their metalworking fluid treatment.” This is precisely the awareness and education that was not provided by the company prior to and at the product launch. Fortunately, for Rohm & Haas, even though they are in a competitive marketplace overall (15-20% share each of maintenance biocide market with Lehn and Fink, Dow Chemical and Angus Chemical), Kathon MWX has tremendous market potential as it is highly-effective against various microorganisms (unlike the Angus product Tris Nitro) and does not possess a heavy ammonia odor (unlike the Dow Chemical product Dowicil 75) in the small reservoir segment. The decision to buy Kathon MWX is made by customers who acknowledge the need for a product that will effectively eliminate the odor released and dermatitis caused by the bacteria that forms in untreated MWF. This odor is known to be very unpleasant to machine operators and in many cases...
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