Johnson Diversey/ EcoLab Strategic Management


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Johnson Diversey/ EcoLab Strategic Management

  1. 1. Strategy Analysis Christopher Mowbray Jessica Soares Eddie Basiliere Mike Silva
  2. 2. Industry <ul><li>Industry: I nstitutional and Industrial Cleaning and Sanitizing </li></ul><ul><li>Main Categories: Janitorial and housekeeping, food processing and industrial, foodservice, and laundry </li></ul><ul><li>$18 Billion Market </li></ul>
  3. 3. History / Industry <ul><li>Public Company – Ticker: ECL </li></ul><ul><li>1923: Founded by Merritt J. Osborn “ Economics Laboratory” </li></ul><ul><li>1986: Ecolab </li></ul><ul><li>1960-2004: 15 Acquisitions </li></ul><ul><ul><li>Detergent Manufacturers </li></ul></ul><ul><ul><li>Pest Elimination Business </li></ul></ul><ul><ul><li>Vehicle-care Products </li></ul></ul><ul><li>2004: Douglas Baker, CEO </li></ul><ul><li>Market: Foodservices </li></ul><ul><ul><li>Global Market </li></ul></ul><ul><li>Consumers: </li></ul><ul><ul><li>Lodging Establishments </li></ul></ul><ul><ul><li>Hospitals </li></ul></ul><ul><ul><li>Schools </li></ul></ul><ul><ul><li>Full-service & fast food restaurants </li></ul></ul><ul><ul><li>& more. . </li></ul></ul><ul><li>Location: More than 160 Countries </li></ul><ul><li>Employ: 26,000 associates </li></ul><ul><li>Johnson Diversey </li></ul><ul><li>Private Company – Family owned </li></ul><ul><li>2002 : Johnson Holdings acquired Diversey Lever </li></ul><ul><ul><li>Johnson Diversey </li></ul></ul><ul><li>S. Curtis Johnson III., CEO </li></ul><ul><li>Market: Floor Care </li></ul><ul><ul><li>Global Market </li></ul></ul><ul><li>Consumers: </li></ul><ul><ul><li>Coca-Cola </li></ul></ul><ul><ul><li>McDonald’s </li></ul></ul><ul><ul><li>Wal-Mart </li></ul></ul><ul><ul><li>Hilton Hotels </li></ul></ul><ul><li>2006: Scrubber-Drier - floor cleaning </li></ul><ul><ul><li>Productivity 30% </li></ul></ul><ul><ul><li>Water & Electrical energy reduced by 50% </li></ul></ul><ul><li>Location: More than 50 Countries </li></ul><ul><li>Employ: 11,000 </li></ul>
  4. 4. Johnson Diversey Ecolab Web Site Comparison = Location of H1N1 information
  5. 5. Porter’s Five Forces <ul><li>Threat of New Competitors </li></ul><ul><li>Low barriers to entry leads to many small suppliers competing for business. </li></ul><ul><li>New entrants are very much attracted to this industry: </li></ul><ul><ul><ul><li>Limited Scale Economies </li></ul></ul></ul><ul><ul><ul><li>Moderate Product Differentiation </li></ul></ul></ul><ul><ul><ul><li>Low Capital Requirements </li></ul></ul></ul><ul><ul><ul><li>Minimal Switching Costs </li></ul></ul></ul><ul><li>EcoLab has made many attempts to create a larger barrier of entry into their industry. </li></ul><ul><ul><ul><li>Acquisitions </li></ul></ul></ul>
  6. 6. Porter’s Five Forces <ul><li>Threat of Substitute Products </li></ul><ul><li>New products can take companies in this industry out of business. </li></ul><ul><li>New product innovation is key within this industry for both EcoLab and JohnsonDiversey. </li></ul><ul><li>Environmental Innovation </li></ul><ul><ul><li>JohnsonDiversey has been at the top of Environmental Innovation. </li></ul></ul><ul><ul><li>Many new competitive innovations are consistently being released. </li></ul></ul>
  7. 7. Porter’s Five Forces <ul><li>Intensity of Competitive Rivalry </li></ul><ul><li>JohnsonDiversey and EcoLab setting themselves apart from the rest of the industry. </li></ul><ul><ul><li>JohnsonDiversey is able to use the big names of their partners to penetrate new global markets. </li></ul></ul><ul><ul><ul><li>SC Johnson </li></ul></ul></ul><ul><li>Sizing of Divisions </li></ul><ul><ul><li>JohnsonDiversey has only a fraction of the sales and service force that EcoLab has. </li></ul></ul><ul><ul><li>R&D </li></ul></ul><ul><ul><li>EcoLab bases acquisitions on their ability to reduce competitive threats. </li></ul></ul>
  8. 8. Porter’s Five Forces <ul><li>Bargaining Power of Suppliers </li></ul><ul><li>Suppliers make up a very large part of the business process within this industry. </li></ul><ul><li>The timing of shipments and services that EcoLab and JohnsonDiversey provide need to be precise. </li></ul><ul><li>Debt in 2007 </li></ul><ul><ul><li>JohnsonDiversey totals $1.1 billion in debt. </li></ul></ul><ul><ul><li>EcoLab totals $750 million in debt. </li></ul></ul>
  9. 9. Porter’s Five Forces <ul><li>Bargaining Power of Buyers </li></ul><ul><li>Multinational businesses make up a large part of the buyers within this industry. </li></ul><ul><ul><ul><li>McDonalds Chain </li></ul></ul></ul><ul><ul><ul><li>Hilton Hotel Chain </li></ul></ul></ul><ul><li>Industry is turning to global markets as a main source of business. </li></ul><ul><li>80% of distribution to buyers is dependant on the distributors and contractors. </li></ul><ul><ul><li>High level of quality assurance is needed for distributing products to customers. </li></ul></ul>
  10. 10. (Year End 2008) JohnsonDiversey Ecolab Net Income (59,521) 448,100 Total Sales 3,280,857 6,137,500 Total Asset 3,215,172 4,756,900 Total Stockholder's Equity (96,245) 1,571,600 COGS 1,990,082 3,141,600 Total Debt 2,854,542 1,138,200 Long Term Debt 1,956,652 799,300 Current Assets 1,150,292 1,691,100 Current Liabilities 897,890 1,441,900 Inventory 255,330 467,200
  11. 11. JohnsonDiversey Ecolab Return on Sales Ratio (0.02) 0.07 Return on Assets Ratio (0.02) 0.09 Gross Profit Margin Ratio 0.39 0.49 Debt Ratio 0.89 0.24 Asset Turn Over Ratio 1.02 1.29 Current Ratio 1.28 1.17 Quick Ratio 1.00 0.85
  12. 12. JohnsonDiversy Financials
  13. 13. JohnsonDiversy Debt
  14. 14. Ecolab Income Statement
  15. 15. Recommendation Ecolab <ul><li>Option A: </li></ul><ul><ul><li>Create Customer Support Groups/Sponsors/Memberships </li></ul></ul><ul><ul><ul><li>Cleaning and Sanitizing operations were flat </li></ul></ul></ul><ul><ul><ul><li>H1N1, other reocurring viruses, Flu shot clinic </li></ul></ul></ul><ul><ul><ul><li>Helps show care to the communities </li></ul></ul></ul><ul><ul><ul><li>Gains awareness of who Ecolab actually is to customers </li></ul></ul></ul><ul><ul><ul><li>Membership with “Climate Group” ( Help gain better image) </li></ul></ul></ul><ul><ul><ul><li>Work on giving more back to the community </li></ul></ul></ul><ul><li>Option B: </li></ul><ul><ul><li>Stick to what they are doing </li></ul></ul><ul><ul><ul><li>Stick to food safety (Strong growth, double digit gains) </li></ul></ul></ul><ul><ul><ul><li>Have globally growing customers </li></ul></ul></ul><ul><ul><ul><li>Great internal Factors (Strong, energetic, motivated) </li></ul></ul></ul><ul><ul><ul><li>Imbed sales force into their own culture </li></ul></ul></ul>
  16. 16. Recommendation Ecolab <ul><li>Option C: </li></ul><ul><ul><li>Look into Merger with Unilever </li></ul></ul><ul><ul><ul><li>Unilever </li></ul></ul></ul><ul><ul><ul><ul><li>Global market leader in all food categories that they operate in </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Global market leader in skin and deodorants </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Strong position in other home and personal care categories </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Very Sustainable company </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>2/3 raw materials from agriculture </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Reduce greenhouse emissions </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Will Ultimately Minimized resources used </li></ul></ul></ul></ul></ul><ul><ul><ul><li>Great support financially and strategically </li></ul></ul></ul><ul><li>Consequences </li></ul><ul><ul><li>Great support financially and strategically </li></ul></ul><ul><ul><li>Might not be free to do whatever you want </li></ul></ul><ul><ul><ul><li>Part ownership </li></ul></ul></ul>
  17. 17. Recommendation JohnsonDiversey <ul><li>Option A: </li></ul><ul><ul><li>Keep doing what your doing </li></ul></ul><ul><ul><ul><li>Very attractive in community </li></ul></ul></ul><ul><ul><ul><li>Moral is high, “going green” creates strong beliefs and happy workplace </li></ul></ul></ul><ul><ul><ul><li>Goals/Targets </li></ul></ul></ul><ul><ul><ul><li>They are the sustainable leader </li></ul></ul></ul><ul><li>Option B: </li></ul><ul><ul><li>Venture into personal care/cleaning market </li></ul></ul><ul><ul><ul><li>Merge with Proctor and Gamble </li></ul></ul></ul><ul><ul><ul><ul><li>Create heavy competition </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Help recover debt </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Gain market share </li></ul></ul></ul></ul><ul><ul><ul><ul><li>R & D costs will be taken care of easier </li></ul></ul></ul></ul>
  18. 18. Recommendation JohnsonDiversey <ul><li>Option C: </li></ul><ul><ul><li>GO PUBLIC </li></ul></ul><ul><ul><ul><li>IPO (initial public offering) </li></ul></ul></ul><ul><ul><ul><li>Allow investors to buy common stock </li></ul></ul></ul><ul><ul><ul><li>Large influx of cash </li></ul></ul></ul><ul><ul><ul><li>Board of directors help guide the company </li></ul></ul></ul><ul><ul><ul><li>More opportunity in new markets </li></ul></ul></ul><ul><li>Consequences: </li></ul><ul><ul><li>Have to answer to stock holders </li></ul></ul><ul><ul><li>Could lose their ultimate vision </li></ul></ul><ul><ul><li>Heavier Competition </li></ul></ul>
  19. 19. What’s going on now? <ul><li>October ’09: Relationship with Tennant Company to launch Scrub-N-Go ™ </li></ul><ul><li>2009: Received the 2009 Tekne Green Award from the Minnesota High Tech Association </li></ul><ul><ul><li>The award honors businesses that practice environmental awareness and responsibility </li></ul></ul><ul><li>October 7 th : Unilever announced that it is going to reduce its equity interest in Johnson Diversey from 33% to 4 % </li></ul><ul><ul><li>Dubillier & Rice, Inc are going to take 46% equity interest as part of a broader recapitalization transaction </li></ul></ul><ul><li>November ‘09: Committed to triple their absolute reduction in greenhouse gas emissions under WWF’s Climate Savers Program by 2013 </li></ul>