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Dow Chemical sees Union Carbide fitting smoothly into marketing setup

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What part does the marketing department play in the day-to-day integration of an acquired rival? Dow Chemical Co.'s sales and marketing organization is poised to find out in the first quarter of next year.

That's when Midland, Mich.-based Dow Chemical's pending $11.6 billion deal to acquire Union Carbide Corp., Danbury, Conn., is expected to close. Stock analysts say the combined companies, which will have annual revenue of more than $24 billion, operating income of $3 billion and a market capitalization of $35 billion, could have pretty fair chemistry.

"The combination will be stronger than just Dow itself," said Frank Mitsch, an analyst with Deutsche Banc Alex. Brown, Baltimore. Together, Dow Chemical and Union Carbide will form the second-largest chemical company in the world.

But in any merger-and-acquisition deal, implementation is a critical step in realizing the anticipated benefits. Dow's globally oriented structure will play a central role in integrating the two companies. And a key part of making Dow's 14 global businesses operate smoothly is the company's sales and marketing organization.

While declining to talk specifically about the Dow-Union Carbide deal, which has yet to clear regulatory hurdles, J.C. "Mike" Butcher, Dow's global director-marketing and sales resources, expressed confidence in his company's ability to handle such an acquisition.

"With a system that allows 14 businesses to work well together across such disparate divisions and groups of businesses within our company," he said, "I don't think there would be difficulty in adapting that to bringing in another company's businesses."

Global tech center

Mr. Butcher helps run Dow's marketing and sales global technology center. The center, which is in Midland and employs about 200 people, is designed to lend marketing support to all the company's global divisions, which operate as individual businesses under the Dow brand.

The center's duties include:

• Sharing best practices.

• Maintaining corporate identity standards.

• Keeping pace with computer and communications technology.

• Overseeing the Global Agency Advisory Council, an occasional gathering of all of Dow's marketing communications agencies worldwide.

• Assigning dollar value to marketing and sales practices.

The sharing of best practices is designed to help Dow's global businesses operate more efficiently. "Everything they do is global," said Robert Bauman, VP, Chem Systems, a Tarrytown, N.Y-based consulting company. "They are the most globally oriented commodity chemical company in the world."

In keeping with the company's marketing philosophy of "communicating in one voice, with many accents," Dow's global technology center asks its marketers to analyze buying and selling processes around the world.

The center encourages the individual businesses to ask such questions as: Who is the buying influence? What is the best channel to market? What is the most relevant message for customers? Through what medium would they like to hear that message?

The center communicates to all of Dow's businesses proven practices in such areas as developing marketing plans and dealing with ad agencies. The individual businesses are not required to follow the center's suggestions. While Dow wants to leverage its corporate brand globally, the company also wants to remain flexible to meet local market needs, Mr. Butcher said.

"We share this information with the businesses," he said. "They're the ones who decide if they want to do it or not."

Of course, Dow does have corporate identity guidelines that must be followed when creating marketing communications materials. Ads, for instance, are generally required to feature prominently the red Dow logo and the tagline, "What good thinking can do."

Simplified communication

While there is some flexibility in how Dow's businesses speak to their markets, there is no latitude in the computer technology that the company's employees use.

Mr. Butcher said all of Dow's 38,000 employees have virtually identical workstations that use the same operating system and software. It seems likely that about 12,000 Union Carbide employees will be provided with the same equipment if the deal goes through.

Dow's global technology center also holds quarterly satellite broadcasts for marketing and sales staffs around the globe. These broadcasts present the advantages of new technologies, such as streaming video.

Dow views technology as a tool to simplify communication. A stated goal of the center is to ensure that the same digital file can be used to print, to fax and to post materials on a Web site.

The center also tries to create face-to-face communication. Dow occasionally brings together its many marketing communications agencies for the Global Agency Advisory Council.

"We operate with the philosophy that any time something significant is to be shared with our employees, it also makes sense to share it with the agencies," Mr. Butcher said. Once again, the idea is to create one voice for Dow's communications.

"I don't know of any other GAAC," at least in terms of scope and format, said Axel Zundler, president of AWZ Communication GmbH, one of Dow's global agencies. "And, frankly, I don't know why they [other companies] are not doing it."

Scientific approach

Dow Chemical describes itself as a science company, and it takes a scientific view of communications. It wants to correlate actions with results.

Unlike many companies, Dow recommends that at its various business units the marketing communications staffs manage the handling of inquiries. That way, the people creating the ads will have a greater stake in making sure they achieve measurable results.

"If the marketing communications people look at this [inquiry management]," Mr. Butcher said, "they can make good judgments about what investments are workªing."

Another way that the global technology center has injected science into the art of communications is by assigning dollar values to marketing activities. "Up until a few years ago, we used to talk about very soft marketing kinds of things, like 'we've enhanced awareness' or 'we've expanded reach.' That's not really the language of business. The language of business is return on investment."

Mr. Butcher said, for instance, that Dow knows the cost of an average sales call is about $500. If sales and marketing, through other forms of communications--whether advertising, e-mail or telephone--can eliminate unnecessary or unproductive sales calls, it creates value for the company.

When the global technology center started, it had a stated goal of creating $100 million of value in six years. Mr. Butcher said the center has reached that figure in four years.

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