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Term report on beiersdorf


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A Term Report Presented to the Faculty of Business Administration in Partial Fulfillment of the Requirements for the Degree of …

A Term Report Presented to the Faculty of Business Administration in Partial Fulfillment of the Requirements for the Degree of
Master of Business Administration

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  • 1. Strategy: “Strategy is a high level plan to achieve one or more goals under conditions of uncertainty. Strategy is important because the resources available to achieve these goals are usually limited.” “Strategy is also about attaining and maintaining a position of advantage over adversaries through the successive exploitation of known or emergent possibilities rather than committing to any specific fixed plan designed at the outset.” “Strategy is often the difference between:  Success and failure, between mediocrity and excellence.  A great manager and average managers.  Stumbling through life and moving ahead with purpose. “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". So we can say, a method or plan chosen to bring about a desired future, such as achievement of a goal or solution to a problem, is strategy. The art and science of planning and marshalling resources for most efficient and effective use. 1|Page
  • 2. Most Strategic Management Model: Strategic management model refers to the pattern or mode of strategic management. According to the strategic management model, a number of steps are taken to achieve the objectives of a company. Strategic management model is also known as strategic planning model. A strategic planning model is selected for the purpose of formulating and implementing the strategic management plan of a particular organization. There are eight (8) different strategic management models. Different strategic management models are chosen by various companies according to their conveniences. The eight different strategic management models are describe below: 1. PEST Analysis: PEST analysis stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. PEST analysis describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. 2. STEER Analysis: STEER analysis systematically considers Socio-cultural, Technological, Economic, Ecological, and Regulatory factors. 3. Porter's 5 Forces: Named after Michael E. Porter, this model identifies and analyzes 5 competitive forces that shape every industry, and helps determine an industry's weaknesses and strengths.  Competition in the industry.  Potential of new entrants into industry.  Power of suppliers.  Power of customers.  Threat of substitute products. 2|Page
  • 3. 4. Strategic Group Map:  Extent of product (or service) diversity.  Extent of geographic coverage.  Number of market segments served.  Distribution channels used.  Extent of branding.  Marketing effort.  Product (or service) quality.  Pricing policy. 5. SWOT Analysis:  Strengths: characteristics of the business or team that give it an advantage over others in the industry.  Weaknesses: are characteristics that place the firm at a disadvantage relative to others.  Opportunities: external chances to make greater sales or profits in the environment.  Threats: external elements in the environment that could cause trouble for the business. 6. Blue Ocean Strategy: is a business strategy book first published in 2005 and written by W. Chan Kim and Renée Mauborgne of The Blue Ocean Strategy Institute at INSEAD. The book illustrates what the authors believe is the high growth and profits an organization can generate by creating new demand in an uncontested market space, or a "Blue Ocean", than by competing head-to-head with other suppliers for known customers in an existing industry. 3|Page
  • 4. 7. Open innovation: is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology. 8. McKinsey – Seven S-Models: A model of organizational effectiveness that postulates that there are seven internal factors of an organization that need to be aligned and reinforced in order for it to be successful. The 7S Model was developed at McKinsey & Co. consulting firm in the early 1980s by consultants Tom Peters and Robert Waterman, authors of the management bestseller "In Search of Excellence." The McKinsey 7- S framework is a popular model used in organizations to analyze the environment to investigate if the company is achieving its intended objectives. i. Business Environment/Strategy: Competition, Economy, regulation/taxes, labor & supplier issues, Short-Term vs. Long-Term Goal etc. ii. Shared Values: How would you describe the mission of this company to your prospective buyers? iii. Structure: Organization Chart, Departments, the number of management layers iv. Staff: the strengths and weaknesses of the organization's key people. v. System/Infrastructure: reward system, manufacturing system, technology, customer feedback vi. Skills: key knowledge and skills are needed to succeed in this business/organization vii. Style: Emphasize on quality, encourage teamwork, reinforce standards 4|Page
  • 5. Company profile: BEIERSDORF 5|Page
  • 6. Introduction Beiersdorf AG is a German personal care company based in Hamburg, manufacturing personal care products. Its brands include Elastoplast, Eucerin (makers of Aquaphor), Labello, La Prairie and Nivea. Although its shares are publicly listed, Beiersdorf is controlled by Tchibo Holding AG (parent company of Tchibo), which directly owns 50.49 percent of shares. History He Company was founded in 1882 by pharmacist Paul Carl Beiersdorf in Hamburg and sold to Oscar Troplowitz in 1890. The patent of 28 March 1882 for Paul C. Beiersdorf is regarded as foundation date of the company. He received the patent for his development of a new manufacturing process of medical plasters. In 1911 Troplowitz launched the new product called Nivea, a stable fat moisturiser, after he had already sold a white soap in 1906. With BSN medical the company started on 1st oft April 2001 an independent subsidiary. It is a Joint Venture of the soon to be only German-based, Majority (soon to full) American-owned company Beiersdorf (Hamburg) and the now only British-based, American-owned Smith & Nephew (London) and serves on the market of surgical dressing, orthopaedics and phlebology. BSN Medical had 350 employees in Germany and 3.400 worldwide in 2004. The turnover received 504 mn euros and its operating income reached 70 mn euros. In 2006 BSN medical was sold to Montagu Private Equity for 1.03 bn euros. With "Beiersdorf Shared Services GmbH" (BSS, a ltd. company) in 2003 another subsidiary had been founded. BSS operates independently but internal as a partner for the whole Beiersdorf group in which IT and accounting services were outsourced. They have 275 employees in Hamburg and 350 in total worldwide. In the same year a two years lasting bidding war ended. The American company Procter & Gamble had a high interest in the now only German-based, majority (soon to full) Americanowned company Beiersdorf and offered the then owner of 19.6% of the shares, Allianz insurance, a takeover deal. Fears rose in Hamburg that Procter & Gamble is only interested in the 6|Page
  • 7. brands in fact and not in the company as a whole. Therefore a Hamburg solution was preferred by many in the city. The city of Hamburg with its HGV state owned share holding company managed it to create this solution. The German family the Herz family, owner of the German company Tchibo, who already had a stake in Beiersdorf increased the part of shares to 49.9%, Allianz still hold 3.6%, Beiersdorf company bought back 7.4% of shares and 3% were given to the Beiersdorf-pension fund. Another share holder, a private family, assured to hold their share. By this alliance of the city and some of their families the headquarter was rescued for Hamburg and is still providing hundreds of jobs and taxes of approximately 200 mn euros a year. In June 2009 Allianz announced, to have reduced its part of shares from 7.2 to 2.88 percent. On 22 December 2008, the Beiersdorf AG has been admitted to Deutschen Aktienindex (DAX). Mission Statement “We at Beiersdorf understand our consumers and delight them with innovative products for their skin and beauty care needs. This strengthens the trust and appeal that our brands enjoy. Every day. Worldwide.” Vision Statement “We have dedicated ourselves to meeting our consumers‟ individual needs and are considered to be the inventors of modern skin care. Our research and development expertise, innovative products, and strong brands are the reasons for our success. We want to be the number one skin care company. we are now committed to Vision 2015 which will take us 'from the Summit to the Stars'. This vision is supported by our values, balanced scorecard and cascading departmental objectives which ensure that everything that we do is focused on achieving our vision” 7|Page
  • 8. Organogram of Beiersdorf: Chairman Board of Directors Executive Directors Non-Executive Directors Chief Executive Officer and Executive Director Chief Operating Officer Chief of the Departments 8|Page
  • 9. Market share: Market share Procter & Gamble Avon Johnson & Johnson Beiersdorf Unilever Others 9|Page
  • 10. PESTEL Analysis of Beiersdorf: POLITICAL Trade agreements, tariffs restrictions. Market regulations. Tax levies and tax breaks. ECONOMICAL or SOCIAL High purchasing power of people. New source of employment. Walfare enhancing in the field of education ENVIRONMENTEL Changing weather. Climate change. Contribution per capital growth. Increasing demand for FMCG. Strong association between cosumer sector growth and FMCG development . TECHNOLOGICAL Growth of FMCG infrastructure. Shortage of innovative product and non brand Goods. skin care based product is available. LEGAL Changing customer law Changing employment law FMCG law 10 | P a g e
  • 11. SWOT Analysis of Beiersdorf: • Strong Brands • Existing distribution networks • Skilled workforce • Strong, increasing focus on research and development • Experienced management • • • • Low debt rating Too many taxes Low productivity Moderate brands image with other brands • High loan rates Strengths Opportunities • Venture capital • Income level is at a constant increase • Growing economy Weaknesses Threats • Increasing rates of interest • Technological problems • Limited financial capital • High competition 11 | P a g e
  • 12. PORTER’S 5 FORCES Analysis of Beiersdorf: SUPPLIER POWER  High competition  Concentration of suppliers RIVALRY BARRIERS TO ENTRY  High initial cost  Government regulation  Moderate high switching cost  Low exit barrier THREATS OF SUBSTITUTE  High price market  High switching  Brand identity BUYER POWER  High bargaining power  Buyer volume  Price sensitivity 12 | P a g e sensitive
  • 13. SWAN ANALYSIS & TWOS MATRIX: SWAN Analysis Strengths The Beiersdorf is capable of offering its all kind of product in worldwide with low cost. Weaknesses Could not acquire the market likes of its competitors did. Achievements The company has more than 20 million customers and serves individual consumers, enterprises and others providing various kinds of product last hundred years Next step To address the needs of the entire market and widen its customers. 13 | P a g e
  • 14. TWOS Matrix: Internal analysis (CPM Matrix) Strengths Weaknesses  Weak competitor brand image  Brand image  Distribution  low cost entry  Lack of competitive strength  product variation  Limited Budget  Networking Opportunities Threats  Presence of innovative product  Political destabilization  New specialist application  New entrants  New market  Market demand  Seasonality , weather effects External analysis (EFE Matrix) 14 | P a g e
  • 15. Value Chain Analysis: Primary Activities & Cost Value Chain Supply Chain Operation Distribution Customer Retailing Management ma Supportive Activities & Cost Product R & D, Technology and Systems Development Human Resource Management General Administration 1) Primary Activities:      Supply Chain Management Operation Distribution Retailing Customer 2) Support Activities:  Product R & D, Technology and Systems Development  Human Resource Management  General Administration 15 | P a g e
  • 16. ViSA Model & SMARTER Model: ViSA model: VI – Vision: By 2020, be amongst the top 3 most valued FMCG companies, providing Information, new innovation product and services, and being the industry benchmark in Customer Experience, Employee Centricity and Innovation. S – Strategy: to provide the latest product and facilities to every people at the low price level. A – Action Plan: Started sales promotion as a strategy to reach out to a mass audience and grab attention SMARTER– Model: Specific: Increase market coverage. Measurable: Explosive growth in usage by 25% Achievable: Major Performer in the global market - system presentation, lively invention, a comprehensive and influential brand, focused global extension and ongoing formation of new growing prospects. Realistic: Frequently advance product excellence of facility. Time: Fiscal target for 2020 Encompassing: Assessing the position in the market centered on the accessible facilities. Reviewed: Customer‟s needs are met with modified, personalized offers together with reasonable incentive for their reliability. 16 | P a g e
  • 17. Business Growth Rate (Market Growth) The BCG Matrix: Reliance Communications Relative position (Market share) Comment: Beiersdorf is one of the market leaders of FMCG business in world. It has a high market share but low growing market. They have share of 3% and are growing at the rate of 9 %. But it still needs support for promotion. So the position of Beiersdorf in BCG Matrix is the CASH COW. 17 | P a g e
  • 18. PURE Objectives & GREAT Models: Positive: Beiersdorf exposes positive attitude towards portion their regulars by determining their needs and wants with widespread marketing research and developing the marketing mix and service ideals according to the discoveries that makes the company very much customer focused. Understood: Performance: Their facility distribution recital as well as fiscal recital is very acceptable. Style: emphases on assessment obsessed facility plan and distribution. Jargon: They try to escape their practical terms or management Jargons while collaborating with the customers through commercial. Culture: Ironic operational philosophy due to the expanded HR and Worldwide tasks. Recorded: Beiersdorf preserves highest of all their activities through appropriate documentation. Ethical: Ethical standard of Beiersdorf is sponsored by the code of conduct of the organization that includes management-employee relations, management-customer relations, employee-customer relation, internal stakeholder relation and external stakeholder relation and ethics in conducting business and the management strictly follows the COC. Great Model: G – Goals: Proceeding towards a goal of achieving two third of the world's market. R – roles: designing the company„s offering and image to occupy a distinctive place in the mind of the target market. E – Expectations: become the top 3 among FMCG business by 2020. 18 | P a g e
  • 19. A – Abilities: They reached out aggressively to rural areas that contributed substantially to their customer acquisition. T – Timing: They are doing the right work in right time to achieve their target. Market Analysis including Market Segmentation: Geographic segmentation: divides markets into different geographical units. There are four main cellular segments.  Metro – the metropolitan areas of country are under this category.  Category A circles – mostly analogous of the European and North America countries.  Category B circles – mostly analogous of the African country.  Category C circles – mostly analogous developing countries Demographic segmentation: the buyers are divided into different groups on the basis of variables such as their age, family size, family life-cycle, gender, income, occupation, education, etc. Like the PCOs are senior citizens, unemployed youth, small shop owners, kirana stores and existing PCOs owners. Psychographic Segmentation: Skin care product is for those groups of people who caution about their skin. 19 | P a g e
  • 20. EFE Matrix: KEY EXTERNAL FACTORS Weight Rating Weighted Score OPPORTUNITIES Political Support. 0.15 3 0.45 Huge potential customer in rural area 0.05 4 0.20 Income level is at a constant increase 0.09 3 0.27 Could develop new product 0.10 4 0.40 increasing rates of interest 0.20 4 0.80 technological problems 0.15 3 0.45 limited financial capital 0.12 4 0.48 high competition 0.14 3 0.42 THREATS 4 = The response is superior 3 = The response is above average Rating 2 = The response is average 1 = The response is poor TOTAL 1.00 3.47 20 | P a g e
  • 21. CPM Matrix: Beiersdorf Avon J&J Critical success factor Weight Rating Score Rating Score Rating Score Advertising .06 4 .24 3 .18 2 .12 Quality .o8 4 .32 2 .16 2 .16 Price .09 3 .27 4 .36 3 .27 Management .07 3 .21 4 .28 3 .21 Financial Position .09 4 .36 3 .27 2 .18 Customer loyalty .07 3 .21 4 .28 3 .21 Branding .08 3 .24 4 .32 2 .16 Market Share .11 4 .44 2 .22 1 .11 Infrastructure .05 4 .20 2 .10 1 .05 Technology .06 4 .24 4 .24 2 .12 Global expansion .07 4 .28 3 .21 2 .14 Distribution network .o4 3 .12 3 .12 2 .08 Product line .04 4 .16 3 .12 2 .08 R&D .03 4 .12 2 .06 2 .06 Consumer feed back .o6 3 .18 4 .24 3 .18 Total 1.00 3.69 3.16 2.13 Score system: 4= major strength, 3= minor strength, 2=minor weakness, 1=major weakness The CPM matrix of Beiersdorf is completed by taking two more FMCG company Avon and Johnson & Johnson. In order to complete this CPM matrix of Beiersdorf some critical success factors are identified. Weight is assigned to each of the success factors and maximum weight is given to Advertising, Quality, Price etc. and total weight is 1.00. Rating ranges from 1 to 4 where 1 = major weakness and 4 = major strength. Score is given by multiplying each factor by its weight and rating. Total score for Beiersdorf is 3.69, Avon is 3.16 and J & J is 2.13 so competitive positions of Beiersdorf are better than Avon and J & J. 21 | P a g e
  • 22. QSPM analysis: 22 | P a g e
  • 23. Financial Analysis: Net Income Year Net Income (in millions of Euros) 2012 451 2011 259 2010 326 Net Income 500 450 400 350 300 250 Net Income 200 150 100 50 0 2010 2011 2012 23 | P a g e
  • 24. Earnings Per share Year EPS (in Euros) 2012 0.82 2011 3.67 2010 3.96 EPS 3 2.5 2.48 2 1.95 1.93 1.65 1.5 1.4 EPS 1.1 1 0.5 0 2007 2008 2009 2010 2011 2012 24 | P a g e
  • 25. Ten - year overview 25 | P a g e
  • 26. Competitor Analysis: The competition is high in the industry which has forced competitor to indulge in both price and non-price competition. Consumer product retail is leading factor in industry‟s revenue stream. Market share Procter & Gamble Avon Johnson & Johnson Beiersdorf Unilever Others Competitors: L’Oreal  Incorporated: 1939  Headquarters: Paris, France  Employees: 52,403  Net Income: $2,237 million (2006)  Company Type: Public  Brands: Lancôme, Maybelline, Garnier, Redken, and Matrix 26 | P a g e
  • 27. Competitors: Johnson & Johnson  Incorporated: 1887  Headquarters: New Brunswick, New Jersey, USA  Employees: 116,200  Net Income: $11 billion (2006)  Company Type: Public  Brands: Band-Aid, Tylenol, JOHNSON'S, Neutrogena, Clean & Clear Competitors: Avon Products  Incorporated: 1886  Headquarters: New York, New York, USA  Employees: 40,300  Net Income: $477.6 million (2006)  Company Type: Public  Products Lines: Avon Color, Anew and Solutions, Skin-So-Soft and Naturals 27 | P a g e
  • 28. Breakeven Analysis: The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or a loss has not been made, although opportunity costs have been "paid", and capital has received the risk-adjusted, expected return. In short, all costs that needs to be paid are paid by the firm but the profit is equal to 0. Beiersdorf had reached their Break Even point within their 5 years of operation since its inception. If we analyze its last 3 years date, we can see that Orange is facing a downward slopping revenue line due to the tremendous level of global competition. As we can see in the graph, in 2010 it had revenue of 326 Million Euros which was much higher than their cost curve which had later equal to the cost at 2011 and went down below the cost line last year (2012). This is a strong weakness as well as a threat for Orange FMCG to work on seriously either to increase revenue or to reduce their costs to place them above the cost line in the break even diagram. Although Orange telecom is facing downward revenue, they are still holding the market leader position in terms of customer satisfaction of service quality in different dimensions. 28 | P a g e
  • 29. KSF Analysis (Industry key Success Factor): Technology-related KSFs Beiersdorf is among the top three providers of new product services in the world. Beiersdorf has all kind of FMCG product and they launched new product for new segment. Manufacturing-related KSFs Beiersdorf, a subsidiary product 0f FMCG which main target to provide low cost product to all of their customer. Identified the high potential employees and develop as the leaders for future business requirement. Those can help them for good manufacturing. Distribution-related KSFs Because of strong network of wholesaler Beiersdorf able to reach million of individual, enterprise and carrier customer. Beiersdorf World platform which gives ready access to the customers. Marketing-related KSFs Beiersdorf got several national and international awards that make it a brand company. One of the World largest FMCG Company. Skills & Capability-related KSFs Company introduced several other employee related initiatives aimed at enhancing productivity, morale and motivation with greater focus on development and retention of the „Quality‟ talent. 29 | P a g e
  • 30. Strategy Evaluation and Contingency Plan: Strategy Evaluation: The Company‟s strategy for consistent growth in future will always be sustainable value creation for all stakeholders of the Company. Contract with new and existing operator had been an effective strategy for their cost saving and improving better quality of service. Beiersdorf is to deliver sensible growth with long term profitability as the ultimate objective. Contingency Plan:  Both Kind of product.  Combination of global and enterprise business.  Product diversification. 30 | P a g e
  • 31. Recommendation: One of the weaknesses of Beiersdorf is high turnover rates amongst employees. Its means their employees are not satisfy with their jobs. So Beiersdorf has to give more emphasis on Employee Satisfaction, by designing better salary structure, incentive for performance etc. also Increase returns and inventory turnover, Increase marketing for low sales rate products. They can Decrease the over reliance on Europe, increase Strategy for demographic trends in the US, Prospective of growth in Men‟s personal care sector, Clear geographical focus to deal with the price war As the request for FMCG and other related services are intensely cumulative in the Asian area Beiersdorf should conduct a widespread marketing investigation on that to know the possibility of business development in this area. 31 | P a g e
  • 32. Conclusion Beiersdorf is Europe's leading skincare company. It continually seeks to grow through developing its products and its markets. Beiersdorf UK‟s development of the NIVEA brands fits in well with Igor Ansoff's ideas. The company continues to build a successful business by developing new and existing products and markets as well as diversifying into new markets with new products. 32 | P a g e
  • 33. Reference: 1. 2. 3. 4. 5. 6. 7. 8. 33 | P a g e