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Ciba Case Analysis

Ciba Specialty Chemicals (SC) developed a focused organization based on the roles and responsibilities they have made up on the global division. Ciba saw the global market and wanted to expands it companies by having many different divisions. Ciba’s feels strong that their potential market in the future for acquiring Allied Colloids, and could market a new line of water treatment in the industry and gain a completive advantage. Ciba acquired Allied Colloids as a part of its strategy to establish a new pillar for profitability and sustainable growth in the area of water treatment additives.

Ciba projected and felt that they could lead the market for clean water or water treatment and could create a new platform in the water treatment industry. Beside the water treatment of Allied Colloids, Ciba also has taken control over the division of Additives, Colors, Consumer Care, Performance Polymers. They feel strong that if they could control a small section of the economy, they could be in control in the chemical product. Ciba wanted to build on the global market position aiming to grow above the market.

They also wanted to continue to build on the key market in Europe and North America and expand east

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and west ward. Ciba wanted to focus on high value added products and services. This included developing high value products and services. Ciba wanted to distinguish itself through product differentiation by product and supply. Ciba wanted to promote and accelerate innovation. Through Research and development, Ciba could build a framework of improvement. Ciba felt it needed to achieve operational excellence through continuous efficiency improvements.

Ciba strived for simple, fast, and smooth business by practicing efficiency and indentifying the supply chain for potential improvement. Ciba had a reputation for producing high-value effects for its customers’ product. Their mission was to be the global leader and they were committed to be number one in the market. They seeked innovation to enhance the performance of their products. Their core value was to produce and sell specialty chemicals and enhances the durability and performance of their products throughout the world. Ciba was the leader in biological and chemicals group.

They were dedicated to meet the needs in healthcare, and agriculture. Ciba made themselves the corporate giant by introducing several new lines of product in the industry such as Additives, Colors, Consumer Care, Performance Polymers and Water Treatment. Ciba drove on the concept of Value Based Management. It seeked the evaluation of strategic projects, portfolio adjustment, financial reporting, compensation, incentives and share investment plans. Ciba entered the strategic alliances and joint ventures to start selecting portfolio adjustments.

The company also provided shareholder’s with regular and more comprehensive financial information. Then, Ciba introduced incentive share plans and variable pay schemes to ensure that the interests of shareholders were tightly linked. The core dimension was to create a stronger infrastructure, expand the company aboard, and maximize the quality and durability of their product. And most importantly, Ciba created a global organizational structure, business support center, efficient chain supply, cross functional team, etc.

Ciba net present value remained on the positive side. While referring to Ciba’s Annual Operating Income, Ciba’s Net Sales had increased to about nine percent from 1997 to 1998; research and development had a three percent increase from the previous year. Ciba was growing fast within a short period. However, with all the rapid growth, Ciba earned their first loss in June of ’98 of about 791 CHF m. It was primarily a write-off of CHF 1 billion in the acquisition of Allied Colloids in March of ’98. (Refer to Appendix 2)

The performance of both the Additives and Pigments divisions was outstanding. Profit margins had increased in both divisions, partly due to volume and mix improvements, and better capacity utilization. Consumer Care results remained the same, while Textile Dyes’ where somewhat weaker with the notation that there were tougher textile market conditions. Ciba concentrated on profitable top line growth, expanding margin, higher velocity, strategic projects and performance-based leadership to keep the company at a rapid and fast growing trend.

Referring to the Appendix 3, Ciba’s objective was to have sales growth be greater than the market. As a result, the performance of sales grew to 19%. Ciba projected EBITDA to be 15% of Sales and a result in performance, EBITDA grew to 15. 7% of Sales Ciba focused on sales growth, the improvement of the sales to its net assets ration and the cost of capital to drive performance on sales. Ciba measured performance with financial and non-financial indicators. It measured it’s value by its Economic profit.

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