American Cyanamid - Strategic Issues

Strategic Issues

Cyanamid's enormous range and diversity of products was in some ways a strategic blunder. It added great complexity in managing the corporation, because of the vast differences in advertising and promotion among different types of products, differing forms of distribution, differing characteristics of various markets, different types and scales of manufacturing needed, and the very large numbers of companies Cyanamid competed against.

Also, making many different products of a particular type—many with relatively small sales volume—added considerably to costs, hurting profitability. For example, in the early 1970s the Shulton line had been enlarged to about two dozen brand names of men's toiletry products, without any appreciable product differentiation among the lines. Profits improved greatly when the minor products were discontinued and the company concentrated on the Old Spice brand. Similar improvements occurred when the acrylic fibers product group was cut from about 30 types and sizes of fibers, to a single product which could be produced in great volume. Another example was that Cyanamid produced hundreds of different dyes, many in only one or two small batches a year; and profits improved when the number of dyes was cut in half.

The difficulties extended into problems of managing at the higher levels. Knowledge and know-how gained in one area of the company was often not very useful in another area. Hence it often became unproductive to transfer executives from one operating division to another, because they had to learn the new business from the ground up, and they had to unlearn principles or truisms from their former business areas. At the senior officer level, it became difficult for the top executives to contribute insightfully to decisions needed in businesses unfamiliar to them. Matters such as inventory management, production scheduling, pricing, and consumers differed dramatically among the businesses, sometimes leading to disputes about the "right" or "best" approach to a particular problem. As a result, key decisions were often made at the Divisional level, with senior officers merely rubber-stamping them without fully understanding the strategic or financial implications.

Also a problem arising from the company's diversity, was making research decisions. The nature of successful research in discovering new chemicals differs widely from the approaches needed for discovering beneficial and safe new pharmaceuticals, or discovering effective pesticides and herbicides—not to mention the duration and magnitude of research needed to validate, say, a plastics additive or rubber chemical versus that needed to ascertain efficacy, applicability, dosage levels, and safety for a new drug.

By the late 1970s, Cyanamid recognized these difficulties, and delegated major decision-making responsibility to a number of Strategy Boards, which were specialized by product area. These Boards included subsets of the company's Executive Committee, involving only those persons with first-hand experience in the relevant areas. The only persons common to all Strategy Boards were the Chairman/CEO and the Director of Corporate Development and Planning.