geographical structure and a high degree of multinationality, operating
in between thirty-one and fifty-five countries. In addition, their
geographical structure is highly decentralised with, on average, only
26 per cent of subsidiary companies located domestically in the country
in which the organisation is incorporated. Host country
characteristics of these business organisations differ from those in
other clusters in respect of their orientation towards countries with
high income levels (47 per cent of activities) and also in respect of
their strong orientation towards host countries with medium income
levels (43 per cent of activities). The suggestion is that although
they have an extensive and decentralised multinational network, these
business organisations have a structure which is concentrated on the
more developed countries.
The organisational structure of business organisations in the
first cluster is highy differentiated, with an average of 7.6 product
and/or regional divisions. Activities are concentrated on the
production of 'core' chemicals (59.7 per cent of total sales) and
derivative products (21.8 per cent), indicating that while production
is proportionately less vertically-integrated compared to organisations
in other clusters, the administrative structure is highly integrated
because of the smaller spread of activities. This conclusion is
strengthened by the fact that over 84 per cent of the large number of
subsidiary companies (between 76 and 258), are directly owned.
In terms of production, these business organisations are also
massive employers. In 1980, the average size of their workforces was
over 114,000, with an annual growth rate of 2,525 jobs. Production was
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Furthermore, turnover per employee was relatively low (0.12) and
slightly increasing, suggesting either a concentration on products of
high added value or a relative inefficiency in production.
Performance of business organisations in the first cluster must be
seen in relation to their substantial capital base. Average assets and
stockholders equity capital represented $9,538m and $3,848m, for
example. Though each of these capital sources is decreasing at a rate
greater than $30m per annum, the financial strength of these
organisations is plain. The average sales figures are approximately
$11,300m, increasing rapidly at over $45m per annum. In fact all the
business indicators point towards a degree of certainty in the
operational environment. As a measure of performance, the returns on
business are appropriate indicators. Average profits in 1980 were
$426m and these are growing at over $0.5m annually. Net profit ratios
(i.e. profits as a percentage of sales) at over 4 per cent, are also
higher than in the other three clusters, and this is the only cluster
with an annual increase in the ratio. The return on stockholders
equity capital is over 11 per cent, exceeded only by organisations in
Cluster IV. Profitability levels (i.e. return on assets) are perhaps
the most telling indicators of the steady performance of business
organisations in this cluster. This figure was, on average, 4.6 per
cent, which is over one percentage point higher than in any other
cluster, and there is a steady annual increase.
Cluster II
Structurally, the five business organisations in this cluster are very
similar to those in Cluster I, in particular in their level of
contrast, they are geographically more centralised with over 40 per
cent of their subsidiaries located in the country in which they are
incorporated. Furthermore, these business organisations have more
subsidiaries located in host countries of 'low' income than any other
cluster (13.6 per cent). Their organisational structure is more
differentiated, with an average of 8.6 product or regional divisions,
and is less integrated. There is, however, a greater level of
downstream diversification, especially into 'chemical derivatives'
(16.2 per cent) and 'non-chemical' activities (21.2 per cent). One
important difference is in the ownership structure, which at 79.6 per
cent of subsidiaries directly owned, is almost 5 per cent less than the
same feature of Cluster I.
The structure of production also contrasts with that of business
organisations in Cluster I. The average size of the workforce
(89,646), is significantly smaller and there has been a heavy shedding
of jobs annually (3,177). Capital intensity of production is also
lower (2.04), and coupled with the higher turnover per employee, this
indicates a greater concentration on products of lower added value.
The main feature distinguishing these business organisations from
those in Cluster I, however, is their performance. Not only is their
capital base smaller (assets $7,399m; stockholders equity $2,226m),
but it is also becoming more restricted, with rapid annual declines in
each of these sources. Part of the reason for this is the vitality of
business. In 1980, sales were 67 per cent of the average for Cluster I
and they are declining rapidly at an average of $33m per annum.
Turnover (i.e. sales/assets) is lower than for any of the segments,
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comparatively low. The return on business indicators all consistently
show bad performance: net profits ($-197m); net profit ratio (-1.72
per cent); capital return (-12.7 per cent) and profitability (-1.6 per
cent).
Cluster III
Relative to the first two clusters, the fifty-two business
organisations in this cluster possess a modest multinational structure,
operating in between six and twenty-eight countries. There is also a
reasonable degree of centrality in the geographical structure (42.9 per
cent average), most of the subsidiary companies being located in host
countries of high income (61.1 per cent) and medium income (30.8 per
cent). Organisational structure is less differentiated, with 5.6
divisions as an average and is less integrated: over 30 per cent of
sales take place in each of the areas of 'core' chemicals, chemical
derivatives, and non-chemical activities. This feature implies a shift
away from activities centred on the chemicals industry per se, not only
into 'downstream' chemicals, but also into non-chemical activities.
The scale of activities is smaller than the first two clusters, with an
average of fifty-five subsidiary companies, and fewer subsidiaries are
directly-owned (75.2 per cent).
All of the production indicators suggest a decrease in the overall
scale of business organisations in this group. The average workforce
(19,532) is 20-25 per cent of the size of typical workforces in the
first two clusters, and is increasing modestly at forty-six jobs
annually. Capital intensity of production (2.97) and turnover per
The performance of business organisations in this cluster is based on a smaller capital starting point, with average assets of $l,927m and stockholders equity of $703m. Each of these is declining slightly each y e a r . Business indicators show that sales volume ($2,075m) represents between 18 and 25 per cent of that carried on by business organisations in the first two clusters, despite the larger number of organisations. Although sales are dropping, turnover is still increasing because of
the drop in a s s e t s . Net profits ratios are quite high, with a 3.23 per cent return on sales, being second only to the first segment. The profitability measure of performance, which highlights the return on equity c a p i t a l , displays the same pattern.
Cluster IV
The geographical structure of the thirteen business organisations in the final cluster is much more restricted. The level of multinationality is on average, only seven countries, but this varies from one extreme of over thirteen countries, to the other extreme, in which the activities of some organisations are wholly national. This
structure is therefore highly centralised, with a mean value of 74.6 per cent subsidiary companies being located in the country of incorporation. As with the other clusters, these organisations are primarily located in high income and medium income host countries.
The organisational structure is less differentiated than the other clusters, with only 4.8 divisions. The orientation towards 'core' chemicals and 'extractive/feedstock' activities, indicates an emphasis on upstream diversification and a tightly integrated structure. The scale of activities is relatively small (forty-two subsidiaries) and the level of direct ownership of subsidiaries (48 per cent) is the
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smallest of the four clusters. What this suggests is that over half of the subsidiaries are indirectly o w n e d .
The average size of the workforce of business organisations in this cluster is 13,113 and the modest annual increase of seventy-eight jobs, reflects this comparatively small scale of activities. However, production is extremely capital intensive (7.79 per cent) and it is the only cluster in which it is increasing. As a result, turnover per employee is very high (1.35), in comparison with Clusters I - I I I .
Though business organisations in this cluster are structurally and geographically smaller than those in Cluster III, they differ in their much larger asset base ($3,013m), which is unique in its tendency to increase; and also in sales volume ($3,990m). Annual sales are increasing faster in these business organisations than in any other cluster ($56m), as is turnover, and sales per employee. The implications of these factors are a high return on capital (22 per cent); the low profits possibly indicating growth which is based on the retention of earnings.