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Dow Chemicals

In: Business and Management

Submitted By lakhanironak
Words 410
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STUDENT BOARD ROOM
AGENDA
Today’s Date: 22 Mar 14 Course Name: Microeconomics-2 Faculty: Dr. Preeta George
Team Members (GROUP 2)
1. Identify team leader by circling their name
2. Team leader to rate each team member’s contribution (1-5 scale; 5 = excellent)
Team Leader’s Evaluation of Team’s Board Meeting Discussion
Ronak Lakhani: 5 Sonal Sharma : 5
____________________________________________ _______________________________________
Rohan Dhaigude: 5 Naveen Venkatesh: 5
____________________________________________ _______________________________________
(1-5 scale; 5 = excellent) : 5
Assignment Being Discussed : Dow Chemicals
Group work:
Why is there a move towards splitting the upstream and downstream divisions? 1. The overvalued acquisition of Rohn & Haas increased Dow Chemical’s debts, which further led to a reduction in their margins. Due to this sticky financial situation, they were unable to capitalize on the boom in cheap shale gas. Further the overvalued acquisition had reduced their working capital and this also resulted in suspension of their dividends. 2. To increase transparency in the transfer pricing for the materials that are being supplied to the downstream. Currently the costs for the subsidiaries are not well accounted for. 3. No visible profits from the downstream. The downstream is currently overshadowing the gains made by upstream through the cheap shale gas. 4. Imbalanced R&D investment between the upstream and downstream sections. 5. Difficulty in analyzing the performance of the various subsidiaries (AgroSciences, Specialty Chemicals) 6. Reduced confidence from large investors
What difference will it make and how will it benefit the company.( answer the question based on the article and don’t do extensive research on this) 1. Improved Transfer Pricing policies: Increase in margins for the parent company (Dow Chemicals). Would help the shareholders get a better clarity to ascertain which business unit are more challenged. As of now, due to inconsistent transfer policy (shale gas) it is very difficult to have a transparency for the same. 2. Proper Capital Allocation and Savings on costs and would thereby improve financial performance. 3. The spin-off would lead to a rise in EBITDA, which currently stand at $8 billion. 4. There is a speculation about the chemical business doing significantly well individually which would help Dow Specialty rather than an integrated approach. 5. A rise in share price is expected, Dow Chemicals could pay off the current debts ($4.0 billion) 6. Another chemical company Dupont could split its agricultural business. A merger between Dow AG and Dow Ag would benefit as it would mean single R&D budget, central costs and improved costs savings.…...

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