Strategy Analyses We start the strategic analyses with Porters five forces model and its amount of competitiveness

in the industry. We describe as mentioned five forces; Bargaining power of suppliers, Bargaining power of customers, Threat of new entrants, Threat of substitute products, and Competitive rivalry within an industry (sum of all indicators). Bargaining power of suppliers Akzo Nobel makes corporate agreements with its suppliers like delivery terms for lower amounts of accounts receivable. Akzo Nobel is highly depending on suppliers of raw materials and they give an indication in the annual report of 2010 that they will face ongoing price pressure in 2011. Although it could be positive for Akzo Nobel to apply long term contracts with supplier they also, as the largest paint and coating producer, have the power to change between suppliers and guarantee sales. Bargaining power of customers Akzo Nobel produces standard products and very specific products. The standard products are very similar to the products produced by competitors and face bargaining power of customers. On the other hand are specific products produced which are not brought on the market by others which subsequently do not face bargaining power of customers. The private customers do not have the power due to low quantity but corporations are more able to bargain on prices. Threat of new entrants The investment in factories and R&D are typically very high in the sector which as a start-up might be impossible to afford. Akzo Nobel has stable relations with retailers for better places in the store which make it more difficult for new entrants to sell their products. As a result we conclude that this threat is not present in the market. Threat of substitute products The standard products already face threat by substitute products but the specific products can be copied by competitors. This threat can results in a costly experience due to the fact that the specific products have had a long route of R&D and all its expenses. As a result it might take some time before the product becomes profitable and when these products are being copied there is a big chance that they would never become profitable.

Competitive rivalry within an industry Akzo Nobel faces some competition because there are similar products on the market produced by competitors. Akzo Nobel follows the strategy to invest in R&D which can become costly when products are being copied. Overall we can say that Akzo Nobel does face competitive rivalry but not that quantity that it is loosing market share and profit. Competitive strategy The strategy Value and Values of Akzo Nobel consists of six main targets: growing faster than the market, EBITDA margin higher than 14%, improving operational working capital by 0,5% annually to 12% eventually, improving safety, obtaining top three in sustainability index of the Dow Jones, and improving employee involvement. Three out of six targets has been achieved and others are being improved but not yet realised. Besides the mentioned targets is it important for Akzo Nobel to obtain stable positions in the worlds fastest growing economies. As the annual report of 2010 shows this has been achieved by higher growth rates in these economies than the market. This is for example done by investing in a factory in China to meet with demand and generate market share. Besides investing in growing economies Akzo Nobel also improves partnership in countries which grow autonomous like becoming the main supplier of paint for Walmart in the US. Akzo Nobel has also been selected as a leader in sustainability in their sector by investing in innovations which are good for the environment. Change in competitive strategy The strategy of the last years consists out of two periods: first (2003-2007) changing its portfolio of products and divisions, and second (2008-2010) the integration and reorganisation to gain from synergies between Akzo Nobel and ICI together with adjusting for a worldwide recession. The first period is known for disinvestments (selling divisions medicine and care for human & animals) and focus on specialty chemicals. ICI has been bought in the same period where its divisions Adhesives and Electronic Materials were resold. In the second period National Starch was sold and reorganisation due to the financial crisis resulted in a saving of 350 million euro compared to an estimated 200 million euro. The amount of brands decreased from 100 to 75 along with a decrease in products from 90.000 to 75.000 and the amount of factories decreased from 80 to 58. The gain from synergies between Akzo Nobel and ICI was 340 million euro although 270 million euro was estimated. Fluctuations in revenues during the last years might be possibly the result of the many changes in strategy. Transaction costs

Akzo Nobel has a less diversified portfolio of products than a standard multi-business organization due to reorganisation last years. Unless the reorganisation of Akzo Nobel they are still called a multi-business organization because they produce different kinds of chemical products. Transaction costs are very high for the sector in which Akzo Nobel operates as a result of investments in R&D and factories and venture capitalism does not exist that much apart from the US which result in difficulties for start-up companies. On the other hand are transaction costs high for Akzo Nobel because they used from the origin of the company a division structure with fragmented sales-divisions and employee-divisions. This led to less optimal functioning of employee-division. Processes have started to decrease communication costs and improve the sharing of non-tradable assets to use each others innovation and knowledge. Accounting analyses Biotechnology companies are more strictly limited in valuating its value of R&D projects which results in a less informative annual report. Compared to a gas company like Shell who have to value the volumes of commodities hold have incentives to increase these if managers receive bonuses. Based on the annual report of 2010 we conclude that board members receive 57% variable and 43% fixed income which is consist of four components; salary, short term achievements, specific achievements, and pension facilities. Long term achievements are not clearly described but only mentioned in the annual report as a component. This could be seen as an incentive for managers to achieve short term achievements at the expense of long term or firm risk. Since 2009 the short term achievement changed to be based on EBITDA and EVA instead of earlier years where it was on EVA. The difference between EVA and EBITDA is the core revenue source comes from EBITDA and EVA calculates the profitability of investments. The EVA was -492 million in 2009 and 2008 -1,723 million in 2008. Unless these negative results substantial bonuses where given to board members although only 2009 was profitable. Key accounting policies Akzo Nobel calculates research cost and preparation and start-up expenses and is charged to the statement of income as incurred. This confirms that Akzo Nobel use cash basis of accounting and not accrual basis of accounting. This makes it more difficult to calculate true cost and profit of a research project. This way we could not differ which project will have a positive NPV and which not. Intangible assets are valued at cost less accumulated amortization and impairment

charges. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Before 2010 the cost of an acquisition also included expenses directly attributable to the acquisition. This could show a deviating result from the real of an acquisition because it might result in a higher depreciation than expected. Depreciations are calculated using the straight-line method based on the estimated useful life; plant, equipment, and machinery are 10 years and buildings 20-30 years. Cash flow statement does not shows large differences in depreciations per year which confirms that acquisitions are not valued higher than realistic to gain bonuses. Pension assets are not shown on the balance sheet and are outsourced to a trust or foundation although adjustments are shown in p&l statement. The annual report of 2010 reports that Akzo Nobel has 1 billion less in pension funds due to lowered interest rates than they should have. This could have had a big effect on the balance sheet and credit rating but because it is not shown it has no direct effect. Accounting adjustments We chose to leave the annual report unchanged due to the fact that we did not find any possibilities to misleading statements. Due to restrictions in biotechnology valuation of Research programs and information given in the annual reports we found calculations reliable.