DOW CHEMICAL AND THE MAGNESIUM INDUSTRY
Marvin B. Lieberman
Magnesium is the lightest metal in commercial use. The Dow Chemical Company has dominated the U.S. magnesium industry since the early twentieth century and continues to be the world's largest magnesium producer despite a decline in market share since the mid-1970s when Dow's strategy shifted markedly. (See Figure 5.1 for Dow's historical share of magnesium production in the United States and worldwide.) Few firms in the metals and chemicals industries have matched Dow's success in maintaining market dominance.
This chapter describes the evolution of the magnesium industry and the methods employed by Dow to acquire and sustain its dominant position.1 The focus is mainly on the United States, although global competition is also addressed. The first part of the chapter describes how Dow's dominance can be attributed partly to superior manufacturing efficiency and partly to a pattern of sophisticated strategic behavior that was successful in deterring or delaying entry. The second section covers the development of the industry through the early 1960s, when serious attempts at commercial entry began to occur in the U.S. market. The third and fourth sections describe magnesium's end uses and its production technology. Dow exploited various features of magnesium demand and technology to maintain leadership and maximize returns. The fifth section describes the specific attempts at entry, and the deterrence tactics used by Dow, since the 1950s. Dow's behavior is consistent with a wide array of entry-deterring tactics proposed in the theoretical
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Publication information: Book title: Market Dominance:How Firms Gain, Hold, or Lose It and the Impact on Economic Performance. Contributors: David I. Rosenbaum - Editor. Publisher: Praeger. Place of publication: Westport, CT. Publication year: 1998. Page number: 69.
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