Nissan Chemical
Corporate History & Strategy

Nissan Chemical entered petrochemicals in 1965, but as a late entrant compared to zaibatsu-affiliated chemical manufacturers such as Mitsui, Sumitomo, and Mitsubishi. Because the Nissan zaibatsu was completely dissolved after the war, the company could not enjoy the financial backing or affiliated transactions that other zaibatsu-linked companies benefited from, and was in an inferior position in terms of capital investment scale compared to first movers. The company attempted differentiation by specializing in vinyl chloride, polyethylene, and higher alcohols, which were considered technically challenging, but commoditization of these products was unavoidable.

Triggered by the 1973 oil shock, overproduction problems across the petrochemical industry intensified, and Nissan Chemical faced slumping sales and falling prices. The company fell into net loss for two consecutive years in FY1982 and FY1983, with accumulated losses reaching 5.7 billion yen. With dim prospects of competing with first movers through economies of scale as a late entrant, the very viability of the petrochemical business became the focus of management.

In 1988, Nissan Chemical's president Takeo Nakai (formerly of IBJ) decided on complete withdrawal from all three divisions of the petrochemical business—vinyl chloride, polyethylene, and higher alcohols. The approach was to sell the development and sales personnel and equipment of each business as whole units to industry peers: the vinyl chloride division to Tosoh, the higher alcohols division to Kyowa Hakko, and the polyethylene division to Maruzen Petrochemical. Gradual business transfers through joint venture arrangements had already begun in 1980, and withdrawal was completed through the sale of joint venture equity stakes.

For the withdrawal, a special team including external consultants was formed, and Vice President Tokushima personally engaged in dialogue with approximately 1,000 employees to ensure the necessity of reform permeated the workplace. Through careful explanations to stakeholders including retirees, the withdrawal was completed without provoking employee backlash. The timing of withdrawal in 1987-1988 coincided with a temporary improvement in petrochemical product market conditions, which fortunately facilitated smooth sales negotiations. President Nakai positioned the withdrawal 'not as mere downsizing but as transformation,' explicitly presenting the agrochemical-centered fine chemicals strategy as the post-withdrawal scenario.

The divestiture of petrochemicals and related businesses reduced Nissan Chemical's sales, but profitability improved dramatically. In FY1993, the company achieved record ordinary income of 5.4 billion yen, and the results of the business transformation were reflected in the numbers. With management resources concentrated on agrochemicals, pharmaceuticals, and functional materials through the petrochemical withdrawal, R&D investment efficiency improved, and multiple flagship products were developed in succession from 1989 onward.

Nissan Chemical's petrochemical withdrawal was a decision unprecedented in the petrochemical industry—completely relinquishing a core business. Despite other companies also struggling with low profitability in petrochemicals, virtually no other company took the step of complete withdrawal, making Nissan Chemical's decision stand out in the industry. After the withdrawal, Nissan Chemical transformed into a high-value-added chemical manufacturer where development capability is the key competitive factor in agrochemicals, pharmaceuticals, and functional materials, establishing a management philosophy that prioritizes profitability over scale.

With the complete withdrawal from the petrochemical business in 1988, Nissan Chemical was pressed to construct a new growth strategy having lost its core business. In 1989, President Takeo Nakai formulated a five-year medium-term plan, clearly setting a policy of investing primarily in high-performance chemical products such as agrochemicals, pharmaceuticals, and liquid crystal materials. The company shifted management to prioritize profits over sales scale, declaring a company-wide strategy of concentrating on niche but highly profitable product areas.

Following the painful decision of petrochemical withdrawal, a sense of crisis and mission regarding new businesses was shared among the remaining employees. President Nakai had indicated the direction of 'aiming to become a distinctive company through a fine-chemicals strategy centered on the agrochemical business,' and with the strategy clearly articulated, employees devoted themselves fully to R&D. President Nakai later reflected that 'with the company's survival at stake, employee morale rose rapidly, and they threw themselves into new businesses with changed determination,' indicating that the withdrawal served as a catalyst for organizational revitalization.

In the agrochemical division, the company successively launched Sirius (rice paddy herbicide) in 1989, Sanmite (fruit and vegetable insecticide) in 1991, and Permit (corn herbicide) in 1994. All were products specialized for niche crops and applications, securing high profit margins despite limited market sizes. In the pharmaceutical field, clinical trials for a blood coagulation agent began in 1986, and in 1994, the first self-developed pharmaceutical Landel (antihypertensive) was launched, followed by Livalo (hypercholesterolemia treatment) in 2003, building a stable earnings base.

In the functional materials field, the company entered the alignment film material market for LCD panels in 1989 and the coating material market for semiconductors in 1998. Riding the tailwind of semiconductor and LCD panel demand expansion throughout the 2000s, functional materials grew into Nissan Chemical's high-growth, high-profitability business. By establishing flagship products across the three fields of agrochemicals, pharmaceuticals, and functional materials in the approximately 10 years after the petrochemical withdrawal, Nissan Chemical realized the transformation into a high-value-added chemical manufacturer that competes through R&D capability rather than pursuing scale.