Global perspective, a significant gap—lessons from Germany’s three major chemical companies for China

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Synthetic dyes: The common starting point for the “Big Three” companies. In the history of the world’s chemical industry, Germany was a latecomer. In 1862, British and French scientists ushered in the era of synthetic dyes in the chemical industry, while the Germans could only imitate them, establishing a number of companies to produce synthetic dyes. Among them were Bayer, BASF, and Hoechst – companies that later became the “Big Three” in Germany’s chemical industry. In 1863, Bayer was founded in Leverkusen, Germany, focusing on the development and production of aniline synthetic dyes, while also beginning to pursue independent innovation. In 1869, scientists Grebe and Liepmann in the Bayer company’s laboratory successfully synthesized alizarin dyes. In 1872, the company began producing alizarin dyes, which became its flagship product. This move put an end to German companies’ attempts to imitate the production processes of synthetic dyes developed by Britain and France. In 1878, the scientist and entrepreneur Bayer achieved the experimental synthesis of indigo dye, starting from indigo dye. In 1880, a patent was filed for the synthetic indigo dye. In 1883, Bayer experimentally uncovered the atomic structure of the indigo molecule. In 1885, Bayer scientist Dusburg invented and applied for a patent for the benzoin red dye; he later developed other new dyes suitable for industrial production. In 1865, Badische Anilin- und Sodafabrik, the predecessor of BASF, was founded in Mannheim, a small town in southwestern Germany. In 1869, Carl, a chemist at BASF, collaborated with Gräbe and Liepmann from Bayer to synthetically produce alizarin dyes, which opened the door for BASF to enter the world market. Subsequently, BASF invented new dyes such as Eosin, Sophor Yellow, and Azo dyes, which established its leading position in the dye industry. In 1876, thanks to the efforts of BASF, German chemists successfully developed and were the first to introduce various azo dyes. In the same year, BASF successfully synthesized methyl blue and filed a patent for it. Starting in 1880, BASF invested heavily in the research and development of indigo dye. Finally, in 1897, it achieved success and began industrial-scale production. In 1901, chemist Baun invented new quinone-reduction dyes, adding more colors to the diverse world of dyes; as a result, BASF became the world’s largest chemical manufacturer focused on dyes. In 1863, Meister, Lucius & Co., the predecessor of Hoechst AG, was founded in the town of Höchst near Frankfurt. It primarily produced magenta, synthetic alizarin, and azo dyes. After the 1980s, Hoechst invested heavily in the development of synthetic indigo dye. In 1901, it achieved success, thus ushering in the era of industrial production of indigo dye together with Bayer and BASF. The three leading companies, which began their operations with synthetic dye products, successfully synthesized dyes such as alizarin dyes, azo dyes, and indigo over time; at the same time, they shifted from competition to cooperation. For example, in the research and development and production of alizarin dyes, in order to avoid unnecessary competition, in 1881, nine German companies including Hoesch, BASF, and Bayer, along with one British company, engaged in discussions and negotiations over prices and market shares, eventually signing the \"Alizarin Treaty\" to form a primary cartel. In 1885, the “Alizarin Treaty” cartel disintegrated. After numerous discussions, in April 1900, the three companies Hoechst, BASF, and Bayer concluded the New Alizarin Treaty, forming a new cartel aimed at reaping substantial profits through price monopolization. Synthetic dyes not only enabled the three major companies to succeed in starting up their businesses, but also allowed Germany to gain control over the vast majority of technical patents and production processes in this field, thereby giving impetus to the development of Germany’s dye industry. In 1880, German synthetic dyes accounted for 50% of the world’s total production at that time; by 1900, they made up about 90% of the world’s total output. By 1914, Germany had replaced Britain and France as the center of the chemical industry, controlling 88% of the global dye industry, which amounted to an almost exclusive monopoly. Differiated cooperation, competition, and monopoly: In the first half of the 20th century, the \"big three\" companies in Germany’s chemical industry entered a very special stage of development. Competition and cooperation, war and monopoly have always gone hand in hand. Firstly, enterprises have transitioned from competitive cooperation to advanced monopoly. The cartels mentioned earlier are merely a preliminary form of monopoly organizations; they involve only a certain sector or type of products among independent enterprises, with little interdependence between them, which inevitably leads to fierce competition. To this end, Bayer advocates the establishment of a higher-level monopoly organization—a syndicate. Although the participating enterprises remain independent in terms of production and law, they are completely subject to the head office in their business operations. In 1904, Bayer, BASF, and Agfa formed a syndicate-style \"interest alliance,\" namely the small I.G. Group, to share profits among themselves, with BASF and Bayer each holding 43% and Agfa holding 14%. Hirschstetter Company forms a group organization with itself as the absolute core by acquiring or merging with various small and medium-sized enterprises. These two major dye groups almost monopolize 90% of the world’s dye market. In 1914, after Germany launched World War I, for reasons related to the war, strong support was given to the merger of the small I.G. group and the Hoesch group in order to create a larger monopoly organization. In 1916, the large I.G. Group was founded; it virtually absorbed all independent small enterprises in Germany’s chemical manufacturing sector. After the establishment of the large I.G. Group, problems such as bureaucratic bloat, redundant products, and low efficiency arose, making reform imperative; turning it into a higher-level monopoly organization—a trust—became the best option. On New Year’s Day 1925, the German I.G. Farbenindustrie AG (i.e., the trust group) was officially established, with its headquarters in Berlin. Among them, BASF, Hoechst, and Bayer each held a 27.4% share of the initial capital, making them the three largest founding companies; all German chemical manufacturers were merged into this single enterprise. The once independently operating \"big three\" companies have now become three components of a trust group. I.G. Farben is a huge corporate group managed by \"operational communities,\" but the individual companies retain their independence. Each community is composed of multiple product lines based on similar technologies, giving rise to a market structure characterized by differentiated cooperation, competition, and monopolies. The Upper Rhine Community was formed with BASF as its core; although it continued to produce dye products, intermediates, other chemicals, as well as chemicals derived from coal-to-oil processes and synthetic materials, its main business activities focused on the production of synthetic ammonia and nitrogen-containing agricultural fertilizers. The Middle Rhine Community was formed with Hoesch as its core entity; although it remained a center for pharmaceutical production, it also manufactured vat dyes, acetylene, and acetate products, and was responsible for the development of synthetic rubber. With Bayer as the main entity, the Lower Rhine Community was established, continuing to produce fine dye products, pharmaceuticals, photographic chemicals, and paper. Originally, Bayer’s headquarters in Leverkusen developed into a production base for basic and intermediate chemicals, as well as the largest dye-producing region; synthetic rubber and polymers became the main areas of research and development. Each operational community operates under the supervision of the central office, striving to manage itself autonomously and exercise self-control, while engaging in cooperation and competition with other operational communities. I.G. Farbenindustrie was a large monopoly group of a conglomerate type; it not only monopolized the production of dyes, **, and synthetic ammonia across Germany, controlling 85% of the German chemical manufacturing sector, but it was also the largest conglomerate in Europe at that time and a \"giant\" in the global chemical manufacturing industry, establishing a global monopoly. During World War II, I.G. Farben was inevitably drawn into the vortex of the war. Its subsidiary, BASF, used almost all of its “chemical innovations” to meet the various needs of the Nazis. At the end of World War II, BASF suffered heavy losses; statistics show that 33% of its factories were completely destroyed, while 61% were severely damaged. Germany’s defeat in World War II marked the end of the era of I.G. Farben’s monopoly. In 1950, the Allied occupation authorities decided to dissolve I.G. Farben, with the companies Bayer, Hoechst, and BASF, located along the Rhine River, becoming its three main successors. In December 1951, Bayer was re-established, reviving the four production sites of the original Bayer company from before 1925 – Leverkusen, Dormagen, Elberfeld, and Uerdingen – and focusing on expanding the production of its pharmaceutical products in order to strengthen its core competitiveness in drug research and development. In 1952, BASF was reestablished under the name “Badische Anilin- und Sodafabrik AG”, but it could only resume operations at its facilities dating back to before 1925. The agricultural stations established before the war and the technologies for developing agricultural fertilizers played a crucial role at this time. Following this research path, BASF developed a series of new agrochemical products. At the same time, leveraging its pre-war technological advantages in polymer materials such as rayon and nylon, BASF achieved great success in developing plastic products like polyethylene films for packaging. The raw materials for polyethylene are oil and natural gas, which were relatively inexpensive at that time; through the integration of upstream and downstream industries, BASF was able to enter the petrochemical sector. In 1953, the Hirschstetter Company was reorganized. In addition to its pharmaceuticals and fine chemicals business, it also retains operations in pharmaceuticals, cellophane, cellulose derivatives, and intermediate chemicals. Later, Hirschstetter Company collaborated with American companies, thereby entering the field of producing polymer household goods. And so, the three major companies in Germany’s chemical manufacturing industry got back on their feet from the ruins of war and embarked on a new path of development in the second half of the 20th century. BASF Group: From dyes to chemical innovation. In the second half of the 20th century, leveraging its research and development expertise and foundation in various synthetic dyes, BASF embarked on a new journey in chemical innovation. In the 1950s, the production of polystyrene resin paved the way for BASF’s overseas \"chemical creation\". Through joint ventures and collaborations with companies in the UK and the US, BASF not only expanded into markets in the United States, France, Brazil, and Argentina, but also entered the field of manufacturing polymer-based textile fibers. Starting from the mid-to-late 1960s, BASF entered markets in Europe, North America, Asia-Pacific, and Africa through acquisitions and joint ventures. After the 1980s, BASF focused on developing **markets in emerging countries. In 1965, BASF began to diversify its business activities and gradually became active in the printing industry. In 1970, BASF began producing printing inks, insulating coatings, and electrical materials, laying the technical foundation for it to later become a manufacturer of automotive coatings and polishing materials. In 1975, BASF increased its research and development activities in areas such as pharmaceuticals and medical supplies. In 1987, researchers at BASF discovered a new technique for producing vitamin B2, and they attempted to use biotechnology to develop natural additives for beverages and dairy products. During the oil and economic crises of the 1970s, BASF once again adjusted its development strategy, adopting integration as the source of strength for continuous chemical innovation. Integration refers to a network of interconnected intelligent production workshops, energy flows, and infrastructure within a group, as well as interconnected technical expertise and customers, including the integration of production, technology, customers, and employees. Under its integration strategy, BASF has 6 collaborative production platforms and over 390 production sites, forming a global production network that enables it to provide support to customers and partners anywhere in the world. Under its integration strategy, BASF focused on the vertical development of its core chemical business, which includes basic and intermediate chemicals. By acquiring companies at various stages of the supply chain, it created a large-scale \"production chain.\" At the same time, it began to turn its attention to areas that were separate from chemistry and its core business areas – namely, the interdisciplinary fields where chemistry meets technology and biology, such as biotechnology and nanotechnology – thereby gradually evolving into a comprehensive large-scale chemical manufacturing group. After more than 20 years of integration and global operations and development, BASF currently produces a wide range of chemicals, including industrial chemicals, plastics, and high-performance additives. It also offers functional coatings, catalysts, curing agents, and other products tailored to specific customers. In addition, it produces agrochemicals as well as oil and gas products. The pollution caused by chemical companies has long been a source of criticism. To build a positive corporate image and ensure the long-term sustainable development of its business, BASF has chosen to develop green and environmentally friendly chemicals. The company has been committed to environmental protection since the 1960s, continuously investing substantial funds in the treatment of chemical production waste, wastewater, and exhaust gases. BASF, which originated from synthetic dyes, has used technology to create the chemical world, won over the market through collaboration, and continues to advance chemical innovation by embracing new concepts of sustainability and cleanliness. From dyes to a focus on the development of chemical drugs, Bayer began research and development in chemical drugs at an early stage as a company engaged in the production of synthetic dyes, always staying at the forefront of scientific research and manufacturing. The anti-inflammatory drug phenacetin, developed in the 19th century, and aspirin, an effective treatment for rheumatism, established Bayer as a major producer of chemical drugs. Having gone through the trials of World War I and World War II, Bayer eventually turned its focus back to expanding the research and production of its range of pharmaceutical products, striving to use science and technology to improve the quality of life for humanity. Throughout the 1950s and 1960s, Bayer rebuilt its facilities for producing chemicals and pharmaceuticals, while also attempting to enter the field of petrochemical and polymer product production through partnerships with companies in the UK and the US, but with limited success. Therefore, after the 1970s, Bayer implemented the reconstruction strategy established after the war primarily through acquisitions, focusing on the research and development as well as production of pharmaceuticals. In the 1980s, Bayer underwent another transformation in the area of chemical drug research and development, shifting from its previous focus on advertising-intensive over-the-counter drugs to research-intensive prescription drugs, and striving to become a company capable of manufacturing various diagnostic devices. By 1994, Bayer had become one of the world’s top five manufacturers of over-the-counter drugs, and it began to enter the field of new biotechnologies, though at a relatively slow pace. Both originating from companies involved in the chemical production of synthetic dyes, Bayer and BASF have pursued different paths of development. Through long-term development and business refinement, Bayer has come to understand more and more clearly the mission and values of its enterprise. Bayer summarizes its cultural values in two phrases. One is LIFE, which is an acronym for four English words: Leader, Integrity, Flexibility, and Efficiency. It represents leadership and being a role model, integrity and honesty, flexibility and adaptability, as well as efficiency ； Another phrase is “Technology serves a better life,” focusing on human health care, agricultural technology that supports human survival, and environmental protection for sustainable development in the future. Today, as one of the three major companies in Germany’s chemical industry, Bayer is a global enterprise with core competencies in the fields of healthcare, biology, and high-tech materials. It offers over 10,000 different products, and its history reflects humanity’s ongoing pursuit of a higher quality of life. The Hachette Group: a company that moved from dyes to pharmaceuticals, before eventually disappearing from the life sciences sector. Like BASF and Bayer, Hachette also began its activities by developing and producing dyes, while also getting involved in the development of chemical drugs. The difference is that Hirschstetter Company adopts an integrated business strategy to develop new drugs that other companies do not have, such as serum products for treating diphtheria and other infectious diseases, vaccines, and pain-relieving medications. After the end of World War II, Hoechst embarked on a new journey. In 1953, the Hirschstetter Company was reorganized. In the 1950s, by relying on external suppliers for oil and polymer raw materials, paraffin and aromatic compounds, as well as other intermediate products, Hirschstett Corporation managed to enter the polymer and petrochemical products market. Meanwhile, the company focused on utilizing new technologies to enhance the production of dyes, pharmaceuticals, and newly developed pesticides. In 1953, an exclusive licensing agreement was obtained from Imperial Chemical Industries of the UK, and on this basis, the company was able to enter the production of polymer end products. In 1956, thanks to close cooperation with the American company Hercules**, Hoechst was able to enter the field of manufacturing everyday-use polymer products. In the 1960s and 1970s, Heschler Company maintained a multi-product business structure, comprising five product divisions: organic chemicals, agrochemicals, pharmaceuticals, polymers and plastic products, as well as fibers and film. Between 1970 and 1995, through two acquisitions, Hexion Corporation became one of the largest chemical companies in the world. Unexpectedly, starting from the 1990s, Hirschstetter’s development trajectory underwent significant changes, shifting gradually from the research and development of dyes and chemicals to new product areas based on life sciences. For businesses that are not related to this, the transformation of the product structure is achieved through acquisitions and restructuring. For example, in 1992, the company withdrew from its high-density polyethylene business in the United States and sold its production facilities. In Germany, the intermediate and PVC production plants were closed, and shares in Lake Carbon Company in the United States and Canada, as well as Russell-Sonoda Company in Japan, were acquired. In 1995, Hoffmann-La Roche invested $7 billion to acquire the U.S.-based company MMD Pharmaceuticals, which enabled it to rank among the world’s top four pharmaceutical companies and to transform itself into a full-fledged pharmaceutical and life sciences company. In 1996, it purchased 43% of shares in the French pharmaceutical company Marion Russell for $3 billion, thereby establishing Hyster Marion Russell. In 1999, the newly established company merged with the French company Rhône-Poulenc to form the cross-border German-French company Aventis, in an effort to become a leading player in pharmaceutical production. The company focused on developing core product lines such as vaccines, prescription drugs, and protein-based medications; meanwhile, the Hershey Company disappeared quietly within this new name. In 2004, Aventis merged with the French pharmaceutical company Sanofi-Synthélabo to form Sanofi-Aventis, creating the largest pharmaceutical company in the EU and the third-largest pharmaceutical giant in the world. In 2011, Sanofi-Aventis was officially renamed Sanofi. The newly formed company Sanofi was actually created through the successive merger of 5 corporate entities, while the trademarks and names of the century-old \"big three\" companies, such as Hershey’s, have faded from people’s sight. As an independent company, Heschler’s eventual disappearance from the field of life sciences is undoubtedly a great regret in its history of development.