Q&A WITH CEO
Chemistry is just right for Dow’s growth p15
Energy and capital intensive giant willing to stay longer and share more in China
Against a backdrop of reports that some multinationals are pulling back their low-end manufacturing operations from China in the face of struggles with rising labor costs and growing competition from local rivals, Dow Chemical Chief Executive Andrew Liveris is resolute, saying: “That’s not Dow.”
Panasonic, as one example, ceased manufacturing of televisions in China in 2015 after 37 years of operating in the mainland.
But as some international companies have developed a more cautious attitude to their investments or moved their factories to neighboring countries, Liveris said his company was doing the exact opposite.
“Those multinational factories leaving for either Vietnam or the Philippines are seeking low costs, whereas Dow is not labor intensive — we are energy intensive and we are capital intensive.”
“Science and R&D is growing in China and we are part of that growth,” said Liveris.
“Dow has been investing in intellectual property development that’s invented in China, made in China and sold in China, and that should keep growing in China for the obvious reasons.”
Liveris suggest the government should further encourage entrepreneurial innovation to invest in technology that will allow China to move up the value chain in many industries.
“China has now reached the stage where it’s big enough in its own right to develop its own intellectual property, and Dow welcomes that because it raises standards and the barriers to entry and means very few companies have the capability of developing the technology by investing in R&D and science,” he said.
“I have seen us grow spectacularly in 10 years, better than our peers, and we are not leaving China.”
Recently, he spoke with China Daily about the company’s strategy, business opportunities and prospects. The following are edited excerpts from the interview: Has the company witnessed a growth or decline in the past year’s performance in China?
We have seen volume growth and the driver behind that is the fit between Dow’s solutions and the market’s needs in China.
China is big enough with many different geographies, markets and industries, so that when high-tech meets manufacturing and the old economy, China should be a leader in these areas, especially in environmental protection.
Dow is very suited to growing with China, with a strategy of integration and innovation, and that’s why we are expanding here. We have a large R&D presence in China. Our Shanghai Dow Center has 700 scientists, working together with our customers to develop China solutions.
We have also diversified our geographical footprint away from just Shanghai, Guangzhou and Beijing. We now have business centers in western, central, northeastern and northwestern China — to be close to local markets and provide on-the-ground support to our local customers. What business opportunities do you see as China promotes the Belt and Road Initiative?
The Belt and Road Initiative is unleashing tremendous opportunities in China, particularly in less developed inland areas.
For example, sustainable urbanization of western and northwestern China and the technological development to lift people out of the low end of the income scale is creating demand for advanced technologies and products and ultimately factories that we build to supply them.
Dow has expertise in addressing the needs in infrastructure, housing, transportation, food and water. We are now building a coating plant in Chengdu, which will provide high-end coatings for buildings, construction and roads in the vast western region of China.
Dow opened its office in the Xinjiang Uygur autonomous region in 2015 to follow the government’s Belt and Road Initiative. Since then, our business in the northwest has been expanding quickly as we forge partnerships to explore business opportunities there and in Central Asian markets. Dow Chemical now operates 17 manufacturing sites and 10 offices in China. Will you consider investing more?
Yes. I think China and Dow share the same strategy: that dollars shouldn’t be invested in yesterday’s factories but in the human capital to invent better solutions for China’s drive to improve living standards, food safety, water management, sustainable urbanization and efficient transportation.
Investments focusing on research and development are where we have been and where we are going. Dow doesn’t aim to build big petrochemical plants, but to build high value product lines and to invest in human capital to help customers use modern technologies. How do you see the effect of economic conditions on your businesses in China?
At Dow we made sustainability a business strategy. We can find solutions to these problems with technology and be efficient in delivering answers to our customers. So we are having no problem growing and actually the company has had 18 quarters in a row of earnings growth and 14 quarters in a row of volume growth, year-on-year. So you may say the world has slowed down, but we haven’t seen it and now I am being asked to put more capacity in place. How has globalization benefited your business?
To companies like Dow who have been global for a longtime, globalization has meant very efficient localization. We have developed our local people, because these guys are good examples of how we globalize. Whatever you think of the word globalization, we are not afraid of it. We welcome it because we are global. What is your biggest achievement in China? How has the company’s expansion in China been going so far?
The biggest achievement has been with the human capital. We have incredible talent here that we get from universities and we can pretty much hire anybody.
We can compete for human talent because we are a great company to work for here. We have incredible people, a lot of them young, energized and motivated to do well for Dow in China. How do you see the competition with your counterparts in China?
The other global foreign multinationals may have similar strategies, but I think our new approach to business is unique — cooperative partnerships, innovation and marrying the problems of the customer with solutions. Frankly, competitors may do the same things, but we are being very successful with that and I am not concerned.
We come up with technological answers that are specific to China, so no foreign company can copy us. The barriers to entry are high, because we have set them high. What will be the size of the combined Dow/DuPont business in China and what will be the focus of the business activities?
The size of the company in China and around the world is roughly the same as we are now. The merger of equals between Dow and DuPont is complicated and size is not relevant because we are going to put the two together to create three separate companies, one focusing on materials science that Dow will take the lead, the other two focused on agriculture and specialty businesses where DuPont will take the lead.
The time together has been short at 18 months, especially when you compare the history of DuPont which is 215 years old and Dow which is 120 years old. What essential leadership qualities do you consider important?
The new leadership is called “followship”. Leadership used to be about management, but that changed decades ago. In this era, you literarily have to let your team lead and you follow and it’s followship. Followship means you have to see the big picture and little picture. What are your hobbies? How do you spend your time off while in China?
My hobby is my family and I don’t get any downtime. I pretty much read everything. I am an avaricious reader, and a speed reader too. One day I will start writing again, because I love to write and I am a decent writer.