Gas and Beyond: International Expansion Strategies of Air Liquide S.A.

Introduction

Air Liquide S.A. is a French multinational company that produces and supplies industrial gases including oxygen, nitrogen, hydrogen and other industrial and medical gases to various industries include the medical, chemical and electronics manufacturing industries. Chemical parks (2019) point out that the company’s operations and activities are divided between gas and services as well as Engineering and construction. Gases and services activities are further divided to customer segments, Industrial merchants, Health care and Electronics while engineering and construction activities involve the construction of production units. Founded in 1902, the company is the second largest supplier of industrial gas by revenue after Linde and has operations in up to 80 countries worldwide all of which are managed on a national level and have an international SA as the highest ranking official. It also employs up to 66,000 employees and serves 3.6 million customers and patients worldwide (Air Liquide, 2020). The study aims to analyze the organizations international management strategy with specific reference to how it is involved in management of subsidiaries such as Air Liquide UK Limited.

Question 1

The parent firm’s international management strategy includes affording its subsidiary companies autonomy of operations and management while monitoring development from a centralized headquarters in the parent company. As such, the strategy fits within the Multinational cell of the integration/responsiveness (I/R) theoretical framework that indicates high forces of responsiveness and low global integration forces. Geppert (2016) points out that companies subscribing to the multinational strategy build flexibility to respond to national differences through strong, resourceful, entrepreneurial, and a level of independent national or regional operations. This is spear headed by Research and Development and often leads to independent operations within the regional or national level of the subsidiary organizations.

Air Liquide (2020) points out an emphasis on research and development (R&D) activities throughout the Air Liquide Company and its subsidiaries highlighting the independence of the subsidiary companies and the parent Company’s general high forces of responsiveness in the core of its strategies. Through effective research and development the company can be better suited to operate independently in satisfying the needs of the local consumers. The parent company further indicates low forces of global integration through the lack of collaboration within different subsidiaries in different countries. Companies house.gov.uk (2020) highlights that the subsidiary company, Air Liquide UK, is governed by a board of directors selected from the local population and an international SA who is a French citizen to facilitate correspondences with the parent company.

Question 2

Out of the four common types of organizational structures according to Point Park University (2020) including: Functional, Divisional Matrix and Flatarchy structures. Divisional organizational structure would be the most appropriate and relevant structure used by the company based on the strategies adopted in the multinational company management. Kenton (2019) points out that, companies operating across several horizontal objectives use divisional organization structures which allow for creation of different divisions of the organization with autonomy of operations. For instance Air Liquides SA company operations and activities are divided between gas and services as well as Engineering and construction both of which operate independently with respect to the control of resources.

Point park University (2020) highlight that the division can also occur on the geographical scope with companies having divisions in geographical regions or like in Air Liquide’s case, using national boundaries to define divisions of the parent company. As such, different subsidiary companies in different countries including UK, Germany and others despite having their operations divided between gas and services as well as Engineering and construction which manage their resources independently, also operate independent of each other and report back to the parent company in France.

Different company subsidiaries of Air Liquide within a single country for instance in different cities, report to a country headquarter company which is liable to the parent company in France. All these companies however are also divided into different divisions.

Question 3

Rugman and D’Cruz (1997) define a flagship firm as a multinational enterprise which has taken on the strategic leadership of a business network consisting of four other partners: key suppliers, key customers, selected competitors and the non-business infrastructure making up the flagship framework. Air Liquede in each and every country it operates in has developed an effective network of effective partnerships that enabled sustainable production and supply of their products in these countries. These partnerships include suppliers of raw materials including methane and other hydrocarbons, customers including medical institutions and companies, competitors and infrastructure. Consistent attachment and evaluation of these different partnerships enable effective operations and continued profitability.

The company operates independently in all the countries which highlight a possible long term need of raw material and other resources supplies. This impact the development of a consistent flagship relationship with different suppliers of the materials needed within these countries. The company has to also establish a relationship with local hospitals and industries to ensure sustainability in its operations. The company has to also maintain tabs and relationships with its respective competitors within the different countries and locations. Rival their production, marketing and consumer outreach techniques in order to stay competitive. The company must also keep up with relevant non business infrastructure including corporate responsibility and and enhancing the environment with which it operates in for guaranteed sustainability in profits and productivity.

Question 4

According to Air Liquide (2020) the company’s subsidiary in the UK, Air Liquide UK’s business activities include; delivering gas solutions to a wide range of industries including metal fabrication, automotive, chemical, pharmaceutical, food, beverage and the offshore oil and gas industry. The company is also involved in the energy transition sector with biomethane and hydrogen projects and in the supply of medical gases to hospitals and healthcare professionals. In addition it also engages in the provision of a range of services to patients in their homes.

Air Liquide Parent Company I /R strategy includes granting full autonomy to subsidiary companies in different countries all across the world including the UK. This enables an effective response to the national differences and development of a strategy to align the company’s activities and operations as well as product and service with the local consumer in a bid to maximize profitability. The company according to Air Liquide (2020) has effectively implemented the parent company’s I/R strategy of through the establishment of an entirely different operation strategy compared to the model by Air Liquide SA, France.

Air Liquide UK Limited has developed different sub companies under its national management to manage different aspects of its activities and engagements in a bid to increase consumer responsiveness. Some of these include: Air Liquide Ltd; to provide gas to the NHS and private hospitals and other healthcare professionals including the veterinary sector, Air Liquide (Homecare) Ltd; to provide healthcare services to patients with long term conditions such as Chronic Obstructive Pulmonary Disease as well as Energas Ltd; which offers industrial, food grade, laboratory, leisure and LPG gas cylinders to the customer directly among others. This highlights a high adoption of the forces for local responsiveness in their strategy.

Question 5

Air Liquide UK’s major financial source is the revenue from the sale of products including gases and provision of services. Air liquide (2020) however highlights that the company diversifies its financing sources through accessing various debt markets. However in the long run, the group funds itself with bond issues. These highlight the major sources of the company’s finances in the last five years. Given the independence of operation of the different subsidiaries in different countries around the world this operations are not in any way impacted by the parent company including financial operations. Each of the companies operates individually and as such carry out individual financial assessment yearly before the figures are included in the multinational computations. This indicates that while budgeting may be done at a multinational level, once the funds have been allocated for a financial year then the parent company does not intervene financially to support the subsidiary in any way.

Conclusion

Air Liquide includes one of the most successful multinational companies given the effective strategy for operation that enables the maximization of consumer preference through a focus on high forces of consumer responsiveness as opposed to global integration. The company through allowing autonomy of management and operation of its subsidiary companies enables them to adapt to the required consumer preferences thereby enhancing its eventual productivity and performance. The subsidiary companies are further quite effective at taking up the I/R framework strategy of the company through charting out their independent strategies that are suitable for operating in their host countries. Eventually while the company is not quite effective in global integration and international collaboration of the different subsidiaries, its high consumer responsiveness strategy guarantees it success and enables its continued growth.

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References

Rugman, A. and D'Cruz, J. (1997). The theory of the flagship firm. European Management Journal, 15(4), pp.403-412.