Strategic Management Seminar Dr.

Carmen Castro
ARMANDO PREZ MARA FERNANDA FERNNDEZ GUILLERMO GARZA MICHEL SILVA ALEJANDRO CASILLAS PEDRO GONZLEZ

Introduction and backgroung

Koch industries is owned mainly by the Koch brothers (84%), Charles and David, they are the 6th and 7th richest people in the planet with a combined fortune of 68 billion usd.
Since 2010 (3 years) they have doubled their fortune from 34 billion to 68 billion.

The Koch brothers are also ranked in the place 35 of the most powerful people in the world by Forbes.
Koch Industries is the second largest private company in America, just after Cargill. Annual revenues: $115 billion usd.

Koch Industries employs around 60,000 people.

Key members and supporters of the Tea Party and republicans. Koch industries is formed by 10 different companies covering different markets. Their products have presence in 80% of U.S houses.

Flint Hills Resources, LP

Description: Refining and chemical company that has combined crude oil processing capacity of more than 800,000 barrels of oil per day.

Products: Asphalt, base oils, gasoline, jet fuel, diesel, and heating oils Locations: Alaska, Minnesota, and Texas. The company has expanded its operations through capital projects and acquisitions worth more than $7.6 billion since 2002.

Koch Supply & Trading, LP

Description: Provides risk management in crude oil, refined petroleum products, natural gas, and other commodities. Products: Crude oil, refined products and derivatives, natural gas liquids, natural gas, metals. Financials including foreign currency, interest rates, and exchange-traded commodities and freight. Locations: Houston, New York City, Wichita, London, Geneva, Singapore, India, and the Netherlands. Koch companies have completed about $50 billion in acquisitions and other capital expenditures since 2003

Koch Pipeline Company

Description: Koch Pipeline owns and operates 4,000 miles of pipeline to transport crude oil, refined petroleum, natural gas liquids, and other chemicals. Locations: It operates the 540-mile South Texas system, which moves domestic crude oil to Corpus Christi.

Georgia-Pacific
Description: Bought in 2005 by Koch Industries for $21 billion. It is a manufacturer and marketer of tissue, packaging, paper, pulp, and building products and related chemicals. North American brands include: Quilted Northern, Angel Soft, Brawny, Sparkle, Soft n gentle, Mardi Gras, Vanity Fair, and Dixie. Locations: Georgia, Florida, Mississippi, California, Oregon, Arkansas, North Carolina, Texas, Alabama, South Carolina, Wisconsin, Virginia, Michigan, Tennessee, Ohio, Iowa, Pennsylvania, Washington, Illinois, Indiana, Kentucky, Louisiana, New Jersey, New York Massachusetts, Oklahoma, and West Virginia.

INVISTA B.V.
Description: It was acquired by Koch industries in 2004. It is a producer of nylon, spandex, and polyester polymers and fibers. Products: Lycra fiber, stainmaster carpet, antron carpet fiber, and coolmax fabric. Locations: Wichita, Kansas.

Koch Chemical Technology Group, LLC

Description: It manufactures and sells pollution-control equipment. The company has many different affiliates which contribute to the over all processing of the pollution control equipment. These include: Koch-Glitsch LP, Koch Membrane Systems Inc., Koch Heat Transfer Company LP, John Zink Company LLC, Optimized Process Designs Inc., and Koch Knight LLC.

Koch Mineral Services LLC

Description: It is among the largest dry-bulk commodity handler. It markets and trades 40 million tons of product per year. Along with its affiliates, it is one of the worlds largest producers and marketers of nitrogen fertilizers. Locations: Wichita, Geneva, London, Cayman Islands, Paris, and Beijing.

Matador Cattle Company

Description: It is a company that operates ranches that together comprise 425,000 managed acres, and support 15,000 cattle in production herds. It also operates three ranches: Beaverhead, Matador, and Spring Creek.
Locations: Montana, Texas, and Kansas.

Strategies of Koch Brothers

The Koch brothers issue agenda

A list of the top policy issues in which the Koch brothers are engaged
Issue Repealing health reform Denying climate change Fighting Wall Street reform Dismantling collective bargaining rights Fighting reductions in carbon emissions Koch brothers fighting? Yes Yes Yes Yes Yes

Keeping corporate money in elections Fighting internet neutrality

Yes Yes

"Right wing action Groups"

SWOT Analysis
Strengths Weaknesses

Wide spread business operations A portfolio of strong brand names

Opportunities

Lacking economies of scale in the refining and chemical business

Threats

Expanding operations through organic Environmental laws and regulations and inorganic growth initiatives Sluggish global economic recovery The growth in the unconventional natural gas industry
(Koch Industries, 2013)

Strengths
Wide spread business operations
In 2012, second largest privately held company in the US by Forbes magazine. Strong market position by establishing itself in diversified businesses which ensures a stable cash flow and revenue generation. As well as diversifying risk (60 countries). (Koch Industries, 2013)

A portfolio of strong brand names

A strong line of brands give Koch Industries a competitive edge over its peer group and also ensures continuous flow of revenues. The company's key brand portfolio comprises Angel Soft, Brawny, CoolMax, Dixie, LYCRA, Quilted Northern, Cormatic, and Easy Nap, among others. (Koch Industries, 2013)

Weaknesses
Lacking economies of scale in the refining and chemical business
Economies of scale brings in with it benefits like higher bargaining power, ability to offer products at nominal prices, lower costs, greater financial resources, and greater geographical scope. (Koch Industries, 2013)
Koch Industries Refining capacity: 800,000 barrels/day Operates: 4,000 miles of pipelines that transport refined petroleum products, natural gas liquids, and chemicals. Chevron Refining capacity: 1 million barrels/day Operates 6 refineries: 10,500 net miles of pipelines for moving crude oil, natural gas, and refined products. Network of more than 8,900 Chevron and Texaco branded service stations. Exxon Mobil Refining capacity: 5.4 million barrels/day

(Koch Industries, 2013)

Opportunities
The growth in the unconventional natural gas industry
According to industry estimates, shale gas now dominates the global energy scenario.
Production: over 13 billion cubic feet/ day, (about 30% of the natural-gas supply, 50% in the next few years.) (Koch Industries, 2013)

Exploration of shale gas has increased. Investment in shale and other unconventional natural gas exploration has been increasing. (Koch Industries, 2013)

The demand for natural gas vehicles (NGV) is expected to increase.

Government initiatives. Koch Industries has about 4,000 miles of pipelines that transport refined petroleum products, natural gas liquids, and chemicals. (Koch Industries, 2013)

Opportunities
Expanding operations through organic and inorganic growth initiatives
Since 2003: $43 billion in acquisitions and other capital expenditures. Reinvests up to 90% of its profit (Koch Industries, 2013)

Widening its customer base and strengthening its market position. (Koch
Industries, 2013)

Threats
Environmental laws and regulations
Company subject to extensive federal, state, local, and foreign environmental, safety, and health laws and regulations. (Koch Industries, 2013) Under certain environmental laws, the company could be :
held strictly liable for hazardous substance contamination. required to maintain various environmental permits and licenses. (Koch Industries, 2013)

Non-compliance could subject the company to :

significant liabilities, such as government fines, third-party lawsuits, etc. significant site or operational modifications. restrict or eliminate the use of or modifications to its products. (Koch Industries, 2013)

Threats
Uncertain global economic recovery
Concerns about the weakening effects of stimulus policies in advanced countries and inflation in emerging economies. (Koch Industries, 2013) Declines in consumption and restrained investment have affected both individual consumer and corporate sales. The consumption level is subdued due to high unemployment rates and low consumer demand for products and services, making the recovery and growth fragile. (Koch Industries, 2013) According to the World Economic Outlook projections by IMF:
2012 Global economy growth Emerging economies Eurozone Recessionary trend in the past 3% Expected 2013 3.5% 5.5% (Koch Industries, 2013)

Pipelines Updates
International Forum of Globalization has concluded that the billionaire duo, David and Charles Koch, stand to make as much as $100 billion in profits from their holdings in the tar sands of Alberta if President Obama approves the Keystone XL pipeline. Because it would cross the boundary between Canada and the United States, the pipeline, which would connect the tar sands to refineries on the Texas gulf coast, requires a presidential permit based on U.S. national interest. Given the mandates of the review process, a decision isn't likely until early 2014. (Blades, 2013)

References
Blades, M. (Oct 21, 2013). For the Koch brothers: Possible $100 billion in tar sands profit if Keystone XL pipeline is approved. Dalily Kos. Retrieved from: http://www.dailykos.com/story/2013/10/21/1249269/-For-the-Koch-brothers-possible-100billion-in-tar-sands-profit-if-Keystone-XL-pipeline-is-approved# Carrk, T. (April, 2011) The Koch Brothers: What You Need to Know About the Financiers of the Radical Right. Center for American Progress Action Fund. Gold, M., Hamburguer, T. (Nov. 4, 2013). California donor disclosure case exposes how nonprofits play in politics. Koch Facts. Retrieved from: http://www.kochfacts.com/kf/ Koch Industries, Inc., SWOT Analysis. (2013). Koch Industries, Inc SWOT Analysis, 1-7. Forbes. (2013). www.forbes.com/companies/koch-industries/