Henkel AG is a 139-year-old German multinational corporation with business units in laundry and home care, beauty care, and adhesive technologies. The document analyzes Henkel's corporate strategy, including its growth by acquisition strategy, financial performance compared to competitors, and strategic issues such as changing consumer preferences. It recommends Henkel focus on core competencies, reduce costs, upgrade performance management, and make new acquisitions or alliances to drive future growth.

1. Corporate Strategy Analysis
09-23-2015
Yinka Daramola
Giovanni Disanto

2. Outline
• Background
• Company Structure
• Strategic Issues
• SWOT Analysis
• Financial Analysis- Industry
• Key Learned Concepts
• Henkel’s Current Strategy
• Some Recommendations

3. • Henkel AG is a 139 year old multinational corporation headquartered
in Düsseldorf, Germany
• Business units: Laundry & Home care, Beauty Care, and Adhesive
Technologies
• Has customarily adopted a growth by acquisition strategy to expand
• The firm earned €16.4 billion in its last fiscal year
• 50,000 employees from over 120 countries
Background

4. Top Brands

5. Laundry & Home Care
28%
Beauty Care
22%
Adhesive Technologies
50%
SOURCES OF REVENUE- HENKEL AG 2014

6. Other
3%
North America
18%
Western Europe
35%
Emerging Markets
44%
SALES BY REGION- HENKEL AG 2014

7. Strategic Issues
Internal Environment External Environment
Internal Culture Change Global Economic Crisis
Unclear Strategic Objectives Increasing Input Pricing
Accountability and Performance
Management
Changing consumer preferences
Streamlining for Efficiency

8. SWOT Analysis
Strengths Weaknesses
 High R & D expenditure
 Performance improvement
 Leadership in Adhesive technologies market
 Several billion Euro brands in portfolio
 Supply chain inefficiencies
 Lower R & D spend than competition
 Low operating and net margins
Opportunities Threats
 Increasing R & D spending
 Investing more in emerging markets
 Greenfield investment opportunities
 Abundance of opportunities to acquire related
businesses
 Economic and political unrest in key growth
markets
 Consumer feedback in real time
 Innovation-driven growth is becoming a
necessity
 High advertising budget
 Volatility of global economy
 Increasing IT dependence

9. Revenues
2010 2011 2012 2013 2014
P& G 78,938 82,559 83,680 84,167 83,062
Unilever 44,262 46,467 51,324 49,797 48,436
3M 26,662 29,611 29,904 30,871 31,821
L' Oreal 19,496 20,343 22,463 22,977 22,532
Henkel 15,092 15,605 16,510 16,355 16,428
Financial Analysis- Industry

10. 83,062
48,436
31,821
22,532
16,428
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
P& G Unilever 3M L' Oreal Henkel
P& G
Unilever
3M
L' Oreal
Henkel
Industry Revenues 2014

11. Financial Analysis- Industry
Henkel 2014
Industry
Ranking
Revenues 16,428 5
Revenue Growth (%) 1.71 4
EBT Margin (%) 13.36 4
Gross Margin (%) 47 4
Operating Margin (%) 13.66 5
Net Margin (%) 9.91 5
Return on Assets (%) 8.08 4
Return on Equity (%) 15.11 4
EPS Growth (%) 2.47 5
Current Ratio 1.22 2
Debt/Equity 0.12 4
Days Inventory 66.3 3
Inventory Turnover 5.51 2
Net Income 1,628 5

12. Income Statement

13. 15,092 15,605
16,510 16,355 16,428
1,143 1,283 1,510 1,589 1,628
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2010 2011 2012 2013 2014
Revenue
Gross profit
Income before taxes
Net income
Earnings per share
Financial Performance

14. Balance Sheet

15. Key Learned Concepts
• Competition from rivals and producers of substitute products
stifling growth potential
• Volatility in consumer behavior
• Diversification strategy allows for economies of scale and
scope
• Restructuring has significantly reduced brand portfolio

16. Henkel’s Current Strategy
• New Strategic Objectives:
1. € 20 billion in sales in 2016
2. € 10 billion in sales from emerging markets
3. 10% annual growth in EPS
• Strengthen Market Position in Mature Markets
• Streamline Supply Chain
• Relinquish Family Control in 2033

17. Some Recommendations
• Plan and implement an emerging-market strategy
• Reduce production costs
• Upgrade performance evaluation system
Focus on core competencies
Make new acquisitions and/or strategic alliances
Customer-driven production
Supply chain re-engineering
Conduct quarterly 360O feedback evaluations

19. References
3M Company (2015). Annual report 2014. Retrieved from
http://investors.3m.com/files/doc_financials/2014/ar/2014_3M_Annual_Repo
rt.pdf
Henkel AG & Co. KGaA (2015). Annual report 2014. Retrieved from
http://www.henkel.com/blob/397740/3e0904425fba0ac26ad9df539554ff33/d
ata/2014-annual-report.pdf
Morningstar, Inc. (2015). Key ratios: Henkel AG & Co KGaA ADR. Retrieved from
http://financials.morningstar.com/ratios/r.html?t=HENKY&region=usa&culture
=en-US
Morningstar, Inc. (2015). Key ratios: L’oreal SA ADR. Retrieved from
http://financials.morningstar.com/ratios/r.html?t=LRLCY&region=usa&culture=
en-US

20. References
Morningstar, Inc. (2015). Key ratios: Procter & Gamble Co. Retrieved from
http://financials.morningstar.com/ratios/r.html?t=PG
Morningstar, Inc. (2015). Key ratios: Unilever PLC ADR. Retrieved from
http://financials.morningstar.com/ratios/r.html?t=UL
The Procter & Gamble Company (2015). 2014Annual Report. Retrieved from
http://www.pginvestor.com/interactive/lookandfeel/4004124/PG_Annual_R
eport_2014.pdf
Thompson, A.A., Peteraf, M.A., Strickland, A.J., & Gamble, J.E. (2014). Crafting and
executing strategy: the quest for competitive advantage. (19th ed.). New
York, NY: McGraw Hill Irwin