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Problems of Industrial Enterprises' And PROBLEMS OF INDUSTRIAL ENTERPRISES’ AND PRODUCTION COMPLEXES’ ECONOMICS UDC 338.24:005.7:661(470) Anna Zievna Shevtsova, PhD in Economics The Institute of the Economy of Industry of the NAS of Ukraine, Donetsk ORGANIZED SYNERGY AS AN IMPERATIVE OF INTEGRATION STRATEGIES (BASED ON THE STUDY OF RUSSIAN CHEMICAL AND PETROCHEMICAL HOLDINGS) Ukrainian chemical industry is under- The importance of studying Russian expe- going important institutional changes in the re- rience in the enterprise integration development cent years. They are caused by active industry is also caused by the fact that the issues of sup- reformation and consolidation processes. The plying Ukrainian industry (including nitric sub- transition to bifurcation mechanisms in devel- sector) with energy and natural resources have opment of large chemical enterprises was cata- mainly situational solutions. Ukrainian relations lyzed by the fall in market conjuncture and with major natural gas supplying countries are growth in commercial risks caused by global instable. But even if not taking this fact into ac- financial and economical crisis as well as deteri- count, it has been obvious for a while that in the orating situation in the energy sector. It is ob- long term perspective domestic producers will vious that in modern conditions the ability of not independently withstand the strong pressure enterprise owners to ensure a stable supply of from the gas monopolists. Therefore, it is neces- energy and material resources at affordable pric- sary to develop new ways of managing institu- es became the main external profitability factor tional changes in the chemical industry, form in the industry. Hence, the search of competitive and use the full synergetic interactions potential advantage factors has shifted from the economic in the framework of implementing different in- area into institutional and political areas. tegration strategies. These actions will help to Starting from 2010 the key events on the maintain and enhance the competitive advantag- mergers and acquisitions (M&A) industry mar- es of basic enterprises. ket are related to activities in the nitrogen and A wide range of foreign and domestic titanium sub-sectors of Ostchem Holding AG publications on strategic synergism became a which is controlled by the Group DF holding. theoretical and methodological basis for the cur- The forming and structural features of groups’ rent study. The collection of papers by known chemical assets in Ukraine were studied in the Western scientists (I. Ansoff, M. Porter, R. previous article [1]. The study showed that the Moss Kanter, R. Rumelt, A. Campbell, S. Gho- key motives and benefits for creating this group shal, H. Itami and others) [2] has been a basic of companies were organizing synergy and es- information source in a Russian-speaking scien- tablishing almost monopolistic control over the tific community for a decade. The core of these industry. studies lays in understanding the high synergism The large Russian chemical holdings have potential and the need for its use in the enter- similar in content but wider in scale experience prises integration strategies (including M&A). in using strategic synergism. Therefore, study- The article by Campbell [3] should be also men- ing, systematization and analysis of their expe- tioned within the context of current study. The rience is a relevant scientific and practical task author describes the difference between two within the general problem of improving the types of acquisition – integration deals and port- enterprise management efficiency based on syn- folio deals. He points on the growing success of ergy. deals especially when “each type of deal is justi- © A.Z. Shevtsova, 2014 –––––––––––––––––––––––––– Економіка промисловості Economy of Industry –––––––––––––––––––––––––– 118 ISSN 1562-109X 2014, № 1 (65) fied by a different logic and managed in a dif- financial and economic indicators of leading ferent way” (p. 22). In addition, Campbell re- chemical, petrochemical and agrochemical hold- views areas from where synergies may come. R. ings (see Table 1) reveal the scale and efficiency Moss Kanter also writes about the importance of of this business. finding synergism during the integration oppor- EuroChem created in 2001 includes en- tunities analysis in a growing economy: “A great terprises in mining and chemical industries: company can become even better by learning Kovdorskiy GOK (Murmansk region), Euro- from an acquisition's best talent” [4, р. 123]. Chem – Usolskiy Potash Complex (Perm re- Big attention to the essence, types, gion), Phosphorit (Leningrad region), Nevinno- sources, assessment and ensuring of positive mysskiy Azot (Stavropol region), Novomoskov- synergism in the integration processes is also skiy Azot (Tula region ), EuroChem – BMU given in the publications of Ukrainian and Rus- (Krasnodar region), Kazakh EuroChem Fertiliz- sian scientists. In particular, this study is based ers and Lithuanian Lifosa [14]. Following an on scientific works of S. Savchuk [5], Y. Rod active trade policy EuroChem created a network and A. Savuschyk [6], O. Kyrychenko and O. of distribution centers in Russia and Ukraine. Vaganova [7], M. Gluschenko [8], Y. Dejneka The holding also includes EuroChem – [9], V. Makedon [10]. Part of the studies is em- VolgaKaliy that was created to develop the pirical and examines the characteristics of syn- Gremyachinskoe potash deposit in the Volgo- ergy-based integration strategies in particular grad region. After commissioning the produc- industries. For example, I. Buleev and S. Boga- tion capacities of potassium chloride at Gremya- chev [11] study the formation of integrated chinskiy GOK, EuroChem will become the first structures and their practical activity in the steel company in Russia and third in the world to industry and municipal sector based on the syn- produce the whole range of mineral fertilizers – ergetic approach. F. Dermentli [12] examines nitrogen, phosphate and potash. the characteristics of organizing integrated cor- In 2012 EuroChem acquired a mineral porate structures in the tube production and of- fertilizers production asset in Antwerp (Bel- fers a methods for determining the synergetic gium) from BASF. This asset was named Euro- effect caused by such integration. Chem Antwerpen. The same year EuroChem Similar problems are standing in front of bought K+S Nitrogen (currently known as Eu- business structures in the Ukrainian chemical roChem Agro distribution network) from a industry. Hence, the main objective of the cur- German manufacturer of chemical fertilizers and rent work is to study and summarize the rich plant protection products called K+S Group. Russian experience in implementation of inte- These agreements were signed within the Euro- gration strategies in the chemical complex and Chems strategic plans in expanding its presence analyze their synergetic basis. This is a logical on the global fertilizer market, including through step forward within the general synergy-focused acquisitions. research direction. However, the main problem of chemical Powerful vertically and horizontally inte- and petrochemical industry is its heavy depen- grated companies play a dominant role in the dency on raw materials and energy costs. If dis- institutional structure of Russian chemical and cussing the nitrogen segment, recently the situa- petrochemical industry since late 1990s. They tion became even more exacerbated. The reason combine upstream and downstream enterprises, behind that is liberalization of the Russian natu- logistics operators and distribution networks ral gas market. (Surely, the target price of $150 / (currently they are SIBUR, EuroChem, Acron, thousand cubic meters for Russian fertilizer pro- PhosAgro, URALCHEM, Uralkali , SDS Azot, ducers seems not very high compared to sky- Bashkirian Chemistry, SANORS and others). high natural gas prices for domestic industrial The Figure shows the share of the main consumers. But when comparing it to the prices Russian producers in the nitrogen segment of the for main competitors – $16-48 in the Persian “big” chemistry. The figure proves the role of Bay countries, $32-48 in Latin America, it be- these companies and their importance in the sec- comes clear that maintaining competitiveness is toral production structure. Moreover, the key a relevant issue for Russian chemists). –––––––––––––––––––––– Економіка промисловості Экономика промышленности –––––––––––––––––––––– ISSN 1562-109X 119 2014, № 1 (65) Ammonia Euro Chem 19,8% URALCHEM Others 20,2% 3,9% Kuibyshev Azot 4,1% SDS Azot 7,6% TogliattiAzot ProsAgro 16,0% 8,0% MINUDOBRENIYA Acron (Rossosh) 12,3% 8,1% Nitrogenous fertilizers URALCHEM 20,30% Euro Chem 26,90% Acron 13,80% Others 7,60% Kuibyshev Azot MINUDOBRENIYA 5,40% (Rossosh) 4,80% SDS Azot ProsAgro 8,30% 13% Figure. Production structure for the nitric subsector main products in Russia, 2012 (data from AZOTECON PLUS Ltd., source [13, p. 23, 24]) Hence, the manufacturers’ efforts in this natural gas producer to create a resource security segment aimed at implementing the strategy of foundation and develop own nitrogen business. backward integration and investment in gas pro- As a result, the groups’ self-sufficiency in natu- duction assets seems reasonable. For example, ral gas increased to 25%. in 2012 EuroChem acquired Severneft-Urengoy –––––––––––––––––––––––––– Економіка промисловості Economy of Industry –––––––––––––––––––––––––– 120 ISSN 1562-109X 2014, № 1 (65) Table The main performance indicators
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