Hostname: page-component-78c5997874-m6dg7 Total loading time: 0 Render date: 2024-11-09T08:01:19.562Z Has data issue: false hasContentIssue false

Market Power and Market Failure The Decline of the European Fertilizer Industry and the Expansion of Norsk Hydro

Published online by Cambridge University Press:  18 February 2015

Abstract

During the 1980s, the fertilizer industry in Western Europe underwent some radical changes. Reduced profitability and overcapacity forced a number of smaller producers to close down, and most of the major firms in the business either withdrew from the market or reduced their capacity. The exception was the Norwegian industrial conglomerate Norsk Hydro, which expanded rapidly and established itself as the largest producer in Europe and later globally.

The article discusses the strategy behind Hydro's expansion in relation to the changing structure of the fertilizer market, which historically was characterized by tacit and explicit agreements on prices and market shares between the major producers. Hydro's strategy and growth are analyzed in relation to some theoretical contributions from the study of transnationalisation of enterprises. A main argument is that Hydro's expansion was not driven by advantages in cost structure or organizational capabilities, nor did the expansion create such advantages. The Norwegian company expanded in foreignmarkets partly because it had less to lose from a counterattack than competitors in largermarkets and partly because of strategic disadvantages. Contrary to most of its large European competitors, Hydro failed to identify the long term threats to the stability and profitability of the Western European market.

Type
Articles
Copyright
Copyright © The Author(s) 2008. Published by Cambridge University Press on behalf of the Business History Conference. All rights reserved.

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Bibliography of Works Cited

Books

Andersen, Ketil G. Flaggskip i fremmed eie. Hydro 1905–1945. Oslo, 2005.Google Scholar
Berkel, Th., van, P. Thirty-Five years of Nitrex AG. A Short History of the Export Association of the West European Fertilizers Producers. Zurich, 1997.Google Scholar
Chandler, Alfred D. Strategy and Structure. The History of American Industrial Enterprise. Cambridge, MA, 1962.Google Scholar
Chandler, Alfred D. The Visible Hand. The Managerial Revolution in American Business. Cambridge, MA, 1977.Google Scholar
Chandler, Alfred D. Scale and Scope. The Dynamics of Industrial Capitalism. Cambridge, MA, 1990.Google Scholar
Dunning, John H. Alliance Capitalism and Global Business. London, 1997.Google Scholar
Dunning, John H. Multinational Enterprise and the Global Economy. Cambridge, MA, 1993.Google Scholar
Gaddis, John L. Strategies of Containment: ACritical Appraisal of Postwar American National Security Policy. Oxford, 1982.Google Scholar
Haber, Ludwig F. The Chemical Industry 1900–1930: International Growth and Technological Change. Oxford, 1971.Google Scholar
Hymer, Stephen. The International Operations of National Firms: Study of Direct Investments. Cambridge, MA, 1976.Google Scholar
Johannessen, Finn E., Pål, T. Sandvik, , and Rønning, Asle O. Nasjonal kontroll ogindustriell fornyelse. Oslo, 2005.Google Scholar
Lie, Einar. Oljerikdommer oginternasjonalisering. Oslo, 2005.Google Scholar
Newfarmer, Richard, ed. Profit, Progress and Poverty: Case Studies of International Industries in Latin America. Notre Dame, IN, 1985.Google Scholar
Murray, Park, Fertilizer Industry. Cambridge, 2001.Google Scholar
Savary, Julien. French Multinationals. London, 1984.Google Scholar

Articles

Chapman, Keith. “Restructuring the European Fertilizers Industry”. European Urban and Regional Studies 5 (1998): 355–74.Google Scholar
Graham, Edward M. “Market Structure and the Multinational Enterprise: A Game-theoretic Approach.” Journal of International Business Studies 29 (1998): 6783.Google Scholar
Langlois, Catherine C. and Langlois, Jean-Pierre. “Tacit Bargaining in International Relations.” Journal of Conflict Revolution 40 (1996): 569–96.Google Scholar
Thaler, Richard H. “Anomalies. The Winners Curse.” Journal of Economic Perspectives 2 (1988): 191202.Google Scholar

Unpublished sources

Dybesland, Svein Bertil. Tro, vilje og evne, Master thesis in history, University of Oslo, 2001.Google Scholar
Rønning, Asle O. “Norsk Hydro og strategier overfor de nordiske markedene for kunstgjødsel i perioden 1960–1975.” Unpublished manuscript. Oslo, 1998, Available from author.Google Scholar
Tønnesson, Øyvind. Fra selvstendighetslinje til forpliktende internasjonalt samarbeid. Master thesis in History, University of Oslo, 1979.Google Scholar

Primary sources

Norsk Hydro’s company archives in Oslo Hydro’s annual reports, 1975–2003. Google Scholar
Archives from Hydros Nitrogen division, later the Fertilizers division, 1972–1998. Google Scholar
Archives from the Corporate Management Board, 1975–2003. Google Scholar
Archives from the Board of Directors, 1975–2003. Google Scholar

Statistical sources

FAOSTAT. The Food and Agricultural Organization of the United Nations. http://faostat/fao.org// Google Scholar
EFMA. European Fertilizers Manufacturers Association. http://www.efma.org/Statistics/Index/ Google Scholar