At first I wish to express all my devotion and reverence to Almighty ALLAH, most
merciful beneficent creator who has enabled us to complete the term paper.
We would like to thank our course teacher Hasan, Prof.Dr.M.Mahmudul for
skillfully elucidating the inner working on this concept.
25th November, 2013
1. Rashid Md. Rifat
2. Tarun Nahidul Hasan
3. Tarque Minhad Ahmed
Henkel operates worldwide with leading brands and technologies in three business
areas: Laundry & Home Care, Beauty Care and Adhesive Technologies. Founded in
1876, Henkel holds globally leading market positions both in the consumer and
industrial businesses with well-known brands.
Consumer goods industry operates successfully in virtually every part of the
economic market place in globally. This study draws on the experience and expertise
of consumer and industrial businesses sectors and observers the economic activities
how the industry operates and where its future lies.
Consumer and industrial businesses helps the country’s economic growth. Mostly, it
draws the relationship among Capital Market, Investment Banking & Economic
Development of a country. Developing a strong equity market as well as corporate
bond market is very essential for economic development. This paper highlights
various functions and activities of consumer and industrial businesses.
This paper also explains the strategy that HENKEL apply and also do some analysis
to find out the situation.
Finally, this paper contains some findings and recommendations, which may be
Definition of Strategy:
Strategic management can be defined as the art and science of formulating,
implementing and evaluating cross-functional decisions that enable an organization
to achieve its objectives.
If we know where are and something about how we got there, we might see where we
are trending- and if the outcomes which lies naturally in our course are unacceptable,
to make timely change (ABRAHAM LINCOLN).
Henry Mintzberg from McGill University defined strategy as "a pattern in a stream of
decisions" to contrast with a view of strategy as planning while Max McKeown (2011)
argues that "strategy is about shaping the future" and is the human attempt to get to
"desirable ends with available means".
In military theory, strategy is "the utilization during both peace and war, of all of the
nation's forces, through large scale, long-range planning and development, to ensure
security and victory" (Random House Dictionary).
Strategic priorities of Henkel:
1. Outperform: leverage potential in categories: Henkel will leverage its
full potential in categories by actively managing its portfolio, strengthening
top brands, launching powerful innovations and focusing on customers
2. Globalize: focus on regions with high potential: In mature markets,
Henkel will leverage its strengths and generate profitable growth by increased
brand investments and continued cost focus. By 2016, the company aims to
gain more top positions while increasing profitability.
In emerging markets, Henkel will expand its existing category positions
and accelerate growth in countries where the company has already a strong
presence. In addition, Henkel will selectively enter new countries. By 2016, 12
out of Henkel’s Top 20 countries are expected to be in emerging markets.
3. Simplify: drive operational excellence: Henkel will continuously
improve its operational excellence by making its processes faster, more
standardized and more digital, driving cost-efficiency and reducing
administration cost. To expand the global coverage of its Shared Services
Centers, Henkel will make significant investments and plans to open new
hubs for the Arabic speaking region and Greater China/North East Asia in
addition to its existing four Centers. A stronger IT focus will be critical to
increase the efficiency of business processes. Henkel will leverage an
integrated global IT platform supported by incremental IT investments of 140
million Euros until 2016. Henkel will also increase efficiency by sourcing via
global hubs, expanding e-sourcing and reducing the number of suppliers
globally by around 40 percent by 2016.
4. Inspire: strengthen our global team: To strengthen its global team
Henkel will focus on three areas Leadership, Talents & Performance
As part of its focus on developing strong leaders, Henkel will expand its
training and development programs, such as the Executive Resource
Program at Harvard Business School. To attract and retain talents
globally, Henkel will strengthen its employer brand and offer competitive
compensation linked to performance. Its revised Long-Term-Incentive Plan is
fully aligned with the new financial targets for 2016.
Strategy: Laundry & Home Care
The Laundry & Home Care business sector is globally active in the laundry and home
care Branded Consumer Goods business. Henkel aim is to continue generating
profitable growth through expansion of their continuing operations. Based on their
leading positions in the profitable mature markets of Western Europe and North
America, they plan to further expand the share of sales from emerging markets,
particularly Eastern Europe, Africa/ Middle East and Latin America. They intend to
leverage the dynamics of these regions in order to accelerate the growth of their
Henkel therefore intend to pursue both sustainable market share gains and further
margin improvements. By prioritizing categories and centrally steering their global
brand portfolio, Henkel are able to direct their investments toward those segments
that offer growth and profitability, enabling them to generate disproportionately
strong growth with their most important brands and market segments. By adopting
this approach, they are able to generate high synergies in their marketing mix.
Strategy: Beauty Care
The Beauty Care business sector is active in the Branded Consumer Goods business
with Hair Cosmetics, Body Care, Skin Care and Oral Care, as well as the professional
Hair Salon business.
In the Branded Consumer Goods business, Henkel want to continue expanding their
innovation leadership in the mature markets in order to further grow their market
shares. To this end, Henkel pursue a consistent, pro-active innovation strategy
accompanied by strict cost management to allow them to step up their market
investments and increase profitability. Henkel are driving business development in
their emerging markets by expanding their portfolio. The aim in their Hair Salon
business is to continue pursuing their strategy of globalization.
In Henkel Branded Consumer Goods business, their focus is on the international
expansion of their core businesses of Hair Cosmetics, Body Care, Oral Care and Skin
Care. Through targeted portfolio management and the associated marketing
activities aimed at strengthening their top brands, Henkel were able to further
develop their ten biggest brands in 2012.
Strategy: Adhesive Technologies
In the Adhesives for Consumers, Craftsmen and Building business, Henkel market a
wide range of brand name products for private and professional users. Based on their
four international brand platforms, namely Loctite, Pritt, Pattex and Ceresit, they
offer target group-aligned system solutions for applications in the household, schools
and offices, for do-it-yourselfers and craftsmen, and also for the building industry.
Henkel Transport and Metal business serves major international customers in the
automotive and metal-processing industries, offering tailored system solutions and
specialized technical services that cover the entire value chain from steel strip coating
to final vehicle assembly.
In the General Industry business, their customers comprise manufacturers from a
multitude of industries, ranging from household appliance producers to the wind
Sustainability : Strategy 2030 triple efficiency
At the beginning of 2012, Henkel already announced its long-term sustainability
strategy with the target to triple its resource efficiency by 2030 and defined specific
intermediate targets for five-year intervals.
1. Our corporate values as the foundation: Commitment to leadership
in sustainability is one of Henkel core corporate values.
Maintaining a balance between economic success, protection of the
environment, and social responsibility has been fundamental to
their corporate culture for decades.
2. Achieving more with less: Henkel are facing immense challenges, the
global human footprint is already greater today than the planet’s
resources can bear. By the year 2050, the world’s population is expected
to grow to 9 billion. The accompanying increase in global economic
output will lead to rising consumption and resource needs. The pressure
on available resources will thus intensify in the coming decades. This is
why the idea at the heart of Henkel’s new sustainability strategy is to
achieve more with less resource.
Most Strategic Model:
Red Ocean vs. Blue Ocean
Red Ocean Strategy
Blue Ocean Strategy
Compete in existing Market space
Create uncontested Market Space
Beat the competition
Make the competition irrelevant
Exploit existing demand
Create and capture untapped demand
Make the value-cost-trade-off
Break the value-cost-trade-off
Align the whole system of firm’s
Align the whole system of firm’s
activities with its strategic choices of
activities in pursuit of differentiations
differentiations of low cost.
of low cost.
Focuses on adapting to external trends
Participate in shaping external trends
as they occur.
No data available
External Thermal Insulation
Each product manager built on
sub-brands with their own
Sales channels: do it yourself
stores, specialist shops, drugstore
and food retailing shops.
Relocated the company
Dusseldorf to make
advantages of logistics and
better sales opportunities.
Took over Adhesive &
Electronic material business
from Akzo Nobel.
Preserve the tradition of an open
Produced “low dust” & “light
weight” tile adhesive.
Adding new features to improve the
Direct contract between the
producer and client for support
product enhancement, technical
advice, addressing complaint,
Henkel operates worldwide with leading brands and technologies in three business
areas: Laundry & Home Care, Beauty Care and Adhesive Technologies.
Founded in 1876, Henkel holds globally leading market positions both in the
consumer and industrial businesses with well-known brands such as Persil,
Schwarzkopf and Loctite.
Home and hearth are at the heart of Henkel. The company makes branded products
for laundry and homecare (Persil, Purex, Pril), cosmetics and toiletries (Schwarzkopf,
Dial, Syoss) and many adhesives (Loctite, Ceresit, UniBond). Henkel's business is
centered in Europe, with a growing presence in developing economies, such as Asia,
Africa and the Middle East, and Latin America. It owns The Dial Corporation,
anchoring its US market. Henkel owns subsidiaries in some 75 countries with offices
located nearly everywhere. Started in 1876, the company is owned by descendants of
the founding Henkel family.
Three Business Sectors
Henkel is organized into three globally operating business sectors.
Laundry & Home Care has always played an important role for Henkel: The
Company’s success story started with a product from this business sector. Henkel
operates in the laundry care and household cleaner segments. The laundry products
comprise heavy-duty detergents and special detergents. In fiscal 2012, the Laundry &
Home Care business sector generated sales of 4,556 million Euros, which equals 28
% of total company sales.
Product line of Henkel
Products from the Beauty Care business sector are available worldwide.
Schwarzkopf & Henkel stands for brand-name products in the fields of hair
colorants, hair styling hair care and form, toiletries, skin care and oral hygiene.
Schwarzkopf Professional is one of the world’s leading suppliers of hair salon
products. In fiscal 2012, the business sector generated sales of 3,542 million euros,
which equals 21 % of total company sales.
The Adhesive Technologies business sector is the world market leader in
adhesives, sealants and functional coatings for consumers, craftsmen and industrial
applications. Henkel offers a multitude of applications to satisfy the needs of
different target groups – consumers as well as craftsmen and industrial businesses.
In fiscal 2012, the business sector generated sales of 8,256 million euros, which
equals 50 % of total company sales.
At A Glance:
Over 55,000 employees
Sales is more than 125 countries
Global supplier of brands and technologies
102 years of brand success
Competence in three business sector:
Laundry and home care
World market leader for adhesive, sealants and surface treatment
Worldwide presence is more than 125 countries
Approx 6.7 billion EUR sales in 2008 ( 47% of Henkel’s sales)
A global leader in brands and technologies.
Is to be the most respected and attractive company in our industry, creating value for
our entire stakeholder.
PEST analysis (Political, Economic, Social and Technological analysis)
describes a framework of macro-environmental factors used in the environmental
scanning component of strategic management.
Now Henkel’s PEST analysis is given below in a table:
• The economic philosophy of the Saudi Arabian
royal family has not changed but the economic
role of the government has grown tremendously.
Te Saudi rulers wanted to improve the economic
conditions of the country's citizens while retaining
the society's Islamic values.
• In K.S.A the interest rate is continuously
increasing which affects their business. And
they face a lot of difficulties.
• The fluctuation in price cause many
problems. As there is no stable rate so
their average sales income decreases.
• The dominant religion in K.S.A is Islam. A
mixture of Islamic and Arab culture prevails.
• As Muslims are against western companies
Henkel faced problems in setting its
• In K.S.A, HENKEL company could avail good
and advanced technology as well as cheap
skilled labor. This results in low production
cost but better quality standard.
• Henkel company could also provide the
facility of Toll free numbers to get connected
with their customers at all times.
SWOT analysis (alternatively SWOT Matrix) is a structured planning method
used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in
a project or in a business venture.
Henkels SWOT analysis is presented below:
• Very good Image
• Brand awareness
• High quality product
• Distribution based, no
dealer- possible financial
• Margin erosion due to price
war in the market
• The National Program for
building insulation with EU
• Headhunting easier to find
right candidate in the market
• Changing customers taste
• Volumes impacted by crisis
Porters Five Forces Model:
Porter five forces analysis is a framework for industry analysis and business
strategy development. It draws upon industrial organization (IO) economics to
derive five forces that determine the competitive intensity and therefore
attractiveness of a market.
Henkel according to Porters Five Forces Model Is Presented Below:
Lots of products are already
established with high brand
awareness and generating
customer loyalty so
competition focus to cost
channel economic of scale
The few suppliers
make it on
that impact to
higher cost for the
company in this
in seeking the
way to reduce
cost to give the
lowest price to
almost the same
benefit and almost
the same price.
However it`s a
Rapid change in ICT
and Technology), make
differentiation in the industry
narrower. Customer can shift to
multi tasking product.
Value Chain Analysis:
Value chain described the sequence activities within an organization that design, produce, sell,
deliver and support its products or service (Ireland, Hoskisson and Hitt, 2011). Therefore to be
effective, value chain analysis needs to recognize and understand the relationship between primary
and support activities.
Primary value chain
Cut of to suppliers
• Channel to market
• Product, pricing, advetising, promo
• Customer value, cost to customer
• Sales force effectiveness
• Purchasing raw
material, suppliers, fixed asset
• Process design
• Product design
• Recruiting, hiring, training, develop
ment, compenesating all personnel
Above is Henkel`s value chain activities.
The primary activities are:(1) Research &Development
(2) Product safety
(3) Raw Materials
(6) Use: fostering sustainable consumption
(7) Usage: Industrial business, and
(8) Packages &disposal.
The support activities are procurement, human resources, infrastructure and general
support. Primary activities and support activities are linked to each other. Henkel has
to see that the activities not just a cost, but also a step that has to add some
increment value to the finished product or service. With the sorting activities in the
value chain, in order to reduce operating costs to do the pattern of out sourcing.
However, out sourcing can only be done in areas that do not create value or areas at a
substantial disadvantage compared to competitors. Therefore the selective strategy
has to be done as competitive advantage arises from the activities in a company`s
value chain. In order to perform different from competitor, Henkel has to meet
different needs and/or same needs at lower cost as its value. Thus it has advantage to
sustainable higher process and/or lower costs to compete on strategy.
ViSA and SMARTER Model:
Henkel’s ViSA model is given blow:
Vi (Vision) = A global leader in brands and technologies.
S (Strategy) = Advance through sustainable developments
A (Action Plan) = Market penetration and new market developments.
Henkel’s SMARTER Model can be shown as below:
S (Specific): Henkel focuses on specific objectives for market developments in
M (Measurable): Henkel’s objectives to get market share of 60% is measured
A (Achievable): Henkel emphasizes on achieving market share of 60%
R (Realistic): Henkel’s objectives are analyzed in the R&D department
accurately whether they are realistic or not.
T (Time): Henkel’s global objective the Sustainable Development achieved
before the scheduled time.
E (Encompassing): Henkel evaluates their strategies time to time.
R (Reviewed): Henkel’s strategies are reviewed according to the market
The BCG Chart:
The BCG (Boston Consulting Group) Matrix is a chart that helps the company
allocate resources and is used as an analytical tool in brand marketing, product
management, strategic management, and portfolio analysis.
Now according to our analysis Henkel is placed in the BCG Matrix which is shown
BCG Matrix of Henkel
Market Analysis and market Segmentation of Henkel:
On the basis of 4P’s Henkel’s market analysis is given as below:
Product: Henkel produces consumer goods. These are final products such as
detergents, shampoos, soaps, etc. which can directly be used by the
Price: Henkel is charging premium price of thei products in accordance to
sustain in the market.
Place: Henkel is a multinational company which is operating directly in more
than 50 countries.
Promotion: In accordance to the competitors activities Henkel has
emphasized on promoting their company through sustainable development
Henkel’s market segmentation is based on the Demographic, Geographic and
In Geographic Segmentation, the market is divided by locations. The theory behind
this strategy is that people who live in the same area share some similar needs and
wants and that these needs and wants differ from those of people living in other
areas. And Henkel is considering this factor very seriously.
In Demographic Segmentation, age, gender, marital status, income, occupation, and
education is analyzed in accordance of the geographic locations. Henkel’s R&D
department is very efficient on analyzing this factor as it is considered the vital factor
in the market.
In Psychological Segmentation consumers can be segmented in terms of their needs
and motivation, personality, perceptions, learning, level of involvement, and
attitudes. Henkel’s R&D department is conducting various market research to gather
information on these factors and to analyze them for future applications.
EFE (External Factors Evaluation) Matrix of Henkel:
Matrix method is a strategic-management tool often used for assessment of current
business conditions. The EFE matrix is a good tool to visualize and prioritize the
opportunities and threats that a business is facing.
Now Henkel’s EFE matrix is shown in below:
Removal of Trade Restrictions
Easy Access to Skilled Workforce
Expansion of Product Range
Greater Price Wars
Exchange Rate & Interest Rate Mobilization
Frequent New Product by Competitor’s
Diverted Customer Taste
4= the response is Superior
3= the response is Above Average
2= the response is Average
1= the response is Poor
Rating: Here, Henkel lies in the average position as it has scored 2.60. The total
weighted score of 2.10 indicating that the firm is in its effort to pursue strategies that
capitalize on external opportunities and avoid threats. Currently, huge market
competition as well as external forces fluctuation influenced the rating as such. Since
it has strong competitors like Unilever, Loreal, Avon etc. in the marketplace, they
should be more cautious regarding the external forces.
CPM (Competitive Profile Matrix) of Henkel:
A Competitive Profile Matrix is an analysis tool that helps you establish your
company's competitive advantage. It provides a portrait of your competitive
landscape and your position in the marketplace.
The weights and total weighted scores in both a CPM and EFE have the same meanin
However, the Factors in a CPM include both internal and external issues. Therefore,
the ratings refer to strengths and Weaknesses.
CPM Analysis of Henkel, P&G, and Loreal
Critical Success Factors
4= Major Strength, 3= Minor Strength, 2= Minor Weakness, 1= Major Weakness
According to the above study, Henkel is in a moderate position than its major rivals.
It is some moderate strength which may help to grow in future.
Here, advertising and global expansion are the most important critical success
factors, as indicated by a weight of 0.20. Henkel's and L'Oreal's product quality is
superior, as evidenced by a rating of 4 L'Oreal's "financial position" is good, as
indicated by a rating of 3 Procter & Gamble is the weakest firm overall, as indicated
by a total weighted score of 2.80.
QSPM (Quantitative Strategic Planning Matrix) of Henkel:
The Quantitative strategic planning Matrix or a QSPM approach attempts to
objectively select the best strategy using inputs from other management techniques
and some easy computations. In other words, the QSPM methods uses inputs from
stage 1 analyses, matches them with results from stage 2 analyses , and then decides
objectively among alternative strategies.
QSPM (Qualitative Strategic Planning Matrix) for Henkel
Alternative-1 (Global Expansion)
Alternative-2 (Emphasis on
Brand Image & Awareness
High Quality Product
Aggressive Marketing Campaign
Low Profit Margin Due to Price
Low Access to Cheap Resources
Slow Resolution of Customer
Removal of Trade Restrictions
Easy Access to Skilled Workforce
Expansion of Product Range
Lack of control on Some Areas
Greater Price Wars
Exchange Rate & Interest Rate
Frequent New Product by
Diverted Customer Taste
Sum Total Attractiveness Score
1 = not acceptable;
2 = possibly acceptable;
3 = probably acceptable;
4 = most acceptable;
0 = not relevant.
Interpretation: We would select global expansion strategy. Since it has lots of
quality product but these are not available in some part of the world. In addition,
recent technological advancement and workforce diversity is indicating positive sign
if Henkel decides to go more international. Therefore, it has got high chance of
market development though there are lots of related products.
EPS (Earning Per Share):
Earnings Per Share (EPS)
Net Income After Tax:
Net Income After Tax
Henkel’s 5 years Break-Even Point is shown throughout the calculation and a table
Total Fixed Cost
Variable Cost per Unit
Sales Price per Unit
According to the Calculation Henkel’s 5 years Break-Evan Points are shown in graphs
Key Success Factors Of Henkel:
1. Technology-related KSFs:
Expertise in Standard Chemical Products
Ability to improve production processes through latest technology
Henkel acquired the American cosmetics company Advanced
Research Laboratories (ARL).
2. Manufacturing-related KSFs:
Quality Control Know-How
Low-cost product design and engineering
Since establishment Henkel is been successful to keep skilled
3. Distribution-related KSFs:
Henkel maintains a strong network of wholesale/dealers throughout
Henkel enables customer to buy through internet.
4. Marketing-related KSFs
Henkel is considered one of the leading brands in cosmetic products
Henkel assuring customer service very strictly
Henkel is advertising them via sustainable development.
5. Skills & Capability-related KSFs
A talented workforce
Supply Chain Management Capabilities
6. Other types of KSFs
Henkel possesses a strong financial position
It has strong patent protection
We recommend the following ways:
Henkel research and development was laboratory driven rather than customer
driven, it has to be change.
Need to emphasis on web marketing.
Expansion of product range to capture the market share.
Need fast move on resolution of Customer Complain.
Utilize the cheap resources for decreasing the cost.
There must not be any communication gap between the employee and the
management so that they can discuss their problems among themselves.
Emphasis on every business areas & take control.
To use latest technology for satisfy customer need.
Henkel Investment focus on Leading brands and successful innovations, Strong
and growing foothold in Emerging Markets, Maintain strong focus on cost, Solid
financial position. Henkel faced several serious issues. For instance, while reporting
solid sales, it was less profitable than its industry peers.
Henkel is truly unique in the spread of their business units and their international
locations, products, brands, people, and job roles. Henkel is a company that serves
consumers and business customers alike. This variety opens up a wide range of
options as well as the chance to work in several different fields.
Henkel has been active in the field of detergents and household cleaning products for
over 100 years now. It has been recognized as a chemical industry leader with its
outstanding environmental policy communication process. Henkel's performance in
sustainability and corporate social responsibility impressed external experts. It
occupied the second place in sustainability ranking of the companies in Germany.
Henkel is looking forward to maximize the shareholder value along with sustainable
development and social responsibility in view.