Business model of Ashland

Customer Segments

Ashland is a global leader in providing specialty chemical solutions to customers in a wide range of consumer and industrial markets, including adhesives, architectural coatings, automotive, construction, energy, food and beverage, personal care and pharmaceutical. The Company’s customers can be organised by operating segment:

• Specialty Ingredients Customers, including pharmaceutical companies, manufacturers of consumer goods and food and beverage products, manufacturers of paint and construction materials, packaging companies, and oilfield service companies;
• Performance Materials Customers, including manufacturers of residential and commercial building products, industrial product specifiers and manufacturers, wind blade manufacturers, pipe manufacturers, automotive and truck parts suppliers, boatbuilders, chemical producers, and electronics makers; and
• Valvoline Customers, including retail auto parts stores and mass merchandisers, automotive dealers and repair shops, commercial fleets operators, and specialist distributors.

Ashland principally serves clients in the US and North America, which account for more than half of its business. The Company also serves an international client base spanning Europe, Asia Pacific, Latin America, and other markets around the world.

Value Propositions

Ashland provides value to its customers in the following ways:

• Its industry standing and reputation, with the Company established as one of the leading producers of specialty chemicals and lubricants in the US, having a positive reputation and a track record for providing reliable and effective products;
• Its broad product portfolio, with the Company producing and selling a broad range of products, including adhesive, encapsulates, preservatives, and automotive chemicals, and serving a diverse client base spanning multiple industries;
• Its proprietary technologies, with the Company owning a number of intellectual properties that are used in its production operations, making its products unique in the specialty chemicals market;
• Its international reach, with the Company serving a large domestic market, as well as overseas customers across markets in Asia Pacific, Latin America, Europe, and other jurisdictions; and
• Its commitment to sustainability, with the Company working with a number of organisations to ensure that its products are manufactured responsibly and sustainably.

Channels

Ashland operates a website at www.ashland.com, through which it provides information on its products, target industries, and corporate operations. The Company also operates an online ordering platform and customer portal at www.ezashland.com, through which customers can make purchase orders, manage transactions, and track deliveries.

Ashland markets and sells its products primarily through its own in-house direct sales force, which is organised by operating segment and geographic region. These sales personnel operate out of the Company’s international network of regional offices across dealing with clients across the Americas, Europe, the Middle East, Africa and Asia Pacific. Ashland also markets and distributes its products through a network of third party distributors. The Company notably has a strategic alliance with Cummins to distribute heavy duty lubricants to the commercial market.

Ashland operates its own extensive network of manufacturing and distribution facilities across its operating regions, including in the UK, Germany, China, and Brazil. The Company additionally has a joint venture manufacturing agreement through which it manufactures products in two plants in Saudi Arabia.

Customer Relationships

Ashland offers many of its products to customers on a self-service basis through its online ordering platform and customer portal. This digital channel allows customers to browse products, place orders, make payments, and track deliveries without interacting directly with members of the Company’s sales and support teams.

The bulk of Ashland’s sales are made directly to customers through its in-house sales force, the members of which consult closely with clients before agreeing the details of each individual sales and supply contract. The Company seeks to establish long-term relationships with its clients, with supply contract often running for multiple years.

Ashland provides ongoing support to its clients, primarily through account management teams and executives that closely follow the needs of individual clients. The Company also provides personalised assistance to new and existing customers over the phone or via an online contact form hosted on the Company’s website.

Ashland additionally provides detail product information on its website, as well as operating social media accounts with Google+, YouTube, Facebook, Twitter, and LinkedIn, through which it is able to interact with customers directly and provide updates on its business activities.

Key Activities

Ashland is engaged in the production, marketing and sale of specialty chemicals, as well as consumer-branded lubricant products. The Company organises its operations into three reportable business segments: Specialty Ingredients, which provides a range of cellulose ethers, vinyl pyrrolidones, and biofunctionals through two operating divisions – Consumer Specialties and Industrial Specialties; Performance Materials, which provides a range of unsaturated polyester resins and vinyl ester resins through two operating divisions – Composites and Intermediates/Solvents; and Valvoline, which produces and distributes automotive, commercial and industrial lubricants, and specialist automotive chemicals.

Ashland serves a diverse selection of markets, including the automotive, construction, energy, food and beverage, personal care, and pharmaceutical sectors.

Key Partners

Ashland works in collaboration with a range of companies and organisations throughout the production and distribution of its products. These partners can be organised into the following categories:

• Supplier and Vendor Partners, including suppliers of raw materials, equipment, and tools used in the Company’s production of chemicals and lubricants, as well as providers of services and technologies that more broadly support the Company’s operations;
• Channel and Distribution Partners, principally comprising the Company’s network of third party distributors, which assist the Company by extending its sales and marketing reach, particularly in jurisdiction where the Company is not itself well-served;
• Joint Venture Partners, including a range of manufacturing and chemicals companies, with which the Company jointly produces and distributes products through mutually owned entities; and
• Sustainability Partners, including various non-profits and charitable organisations, with which he Company collaborates on community and sustainability projects around the world.

Ashland has launched a number of partnerships in recent years, including a distribution partnership with HORN concerning the delivery and sale of the Company’s products across the US oil and gas sector.

Key Resources

Ashland’s key resources are its technologies and intellectual properties, its raw materials and supply chain, its manufacturing and distribution facilities, its sales channels, its IT and communications infrastructure, its partnerships, and its personnel.

Ashland controls an extensive intellectual property portfolio, which is key to the Company’s operations across all three segments. Searches of records published by the US Patent and Trademark Office identified a number of patent applications filed in the name of Ashland subsidiary Ashland Licensing and Intellectual Property. This included applications entitled ‘Ultraviolet radiation curable pressure sensitive acrylic adhesive’, ‘Extended operation engine coolant composition’ and ‘Lubrication system and method for reducing dip lubrication power loss’.

Ashland additionally owns a number of key physical properties that are material to the Company’s operations, notably its extensive international network of production facilities across the Americas, Asia Pacific, Europe, and the Middle East.

Cost Structure

Ashland incurs costs in relation to the development of its technologies, the procurement of supplies and services, the operation of its manufacturing and distribution facilities, the maintenance of its IT and communications infrastructure, the implementation of marketing campaigns, the operation of its physical and digital sales channels, the management of its partnerships, and the retention of its personnel.

In 2015 Ashland recorded total cost of sales for the year in the amount of $3.32 billion, selling, general and administrative costs in the amount of $1.23 billion, and research and development costs in the amount of $100 million.

Revenue Streams

Ashland generates revenue through the production, marketing and sale of a broad range of specialty chemicals and lubricant products to a diverse customer international customer base. The Company’s revenue is divided into three broad product lines that correspond with the Company’s operating segments: specialty ingredients, performance materials, and automotive lubricants and chemicals.

In 2016 Ashland generated sales for the year in the amount of $4.95 billion, down slightly on the $5.39 billion recorded by the Company the previous year. The Company’s largest revenue generator was its Specialty Ingredients segment, which alone recorded annual sales totalling $2.09 billion. This was followed by the Valvoline segment with $1.93 billion, with the Performance Materials segment recording $930 million in annual sales.