BASF is successfully marketing Styropor to moulders of packaging and insulation materials in China. However, their imported chemicals are too expensive and too sophisticated to reach a broader market. Rapid expansion of local production capacity and the rapid technological upgrading of Asian competitors have endangered BASFs position. BASF starts to produce locally, too, thereby adding to the already existing oversupply of the market.
The case raises the question of how a large MNC can cope with local or regional competition in an industry characterised by commoditisation and oversupply. BASF must use its company reputation and Styorpor�s brand name to differentiate, knowing that in terms of product and price it does not have a competitive advantage.