Reckitt Benckiser's Marketing and Strategy Analysis - Assignment Example

Reckitt Benckiser Marketing and Strategy Analysis Part-I FMCG major, Reckitt Benckiser started off1 in the year 1814 when Jeremiah Colman began milling flour and mustard in Norwich, UK. In the year 1999, Reckitt & Colman plc and Benckiser N.V. merged to become Reckitt Benckiser plc - The world no.1 in household cleaning products company. The purpose of company's Code of Business Conduct states, 'to ensure that management and employees across the Group have a clear understanding of the principles and ethical values that the Company wants to uphold.' Company recorded revenues of 4,179 million during the fiscal year ended December 2005, an increase of 8% over 2004. Strategic decisions are concerned with the issue of setting a direction for the organization to move or the course the organization will follow. Though very crucial, yet preparing 'strategic moves' for future often is not always based on hard fact, but on presumptions as well. It involves past experience, forecasting and 'surround-effect'. Reckitt Benckiser has over the year successfully implemented the strategy of building strong brands across all its key categories like surface care, fabric care, dishwashing, home care, health and personal care and food. If Lysol is a leading brand in disinfectant cleaning, Calgon holds the number one market position in fabric care in Europe. Similarly placed are the major categories like Vanish (fabric care), Veet (cosmetic depilatories), Mortein (pest control) and Airwick (air fragrance). This strategy has paid rich dividends for the company with its top 15 brands consistently accounting for a majority of the company's revenues, from 40% of total revenues in 2001 to about 56% in 2005. such a brand creation in different categories allows Reckitt to; Differentiate its products and earn a price premium and Provides a competitive advantage to the company in the market place. The consumer products business is mainly driven by three basic demographic factors: population growth, household formation and household income growth. Reckitt Benckiser has been consistently on the lookout for such a market in order to register strong growth in many such developing markets. Increasing focus on the developing markets like India and China are part of this strategy. The strategy of Brand building in such a market helps in deep penetration of the product reach. This way the investment in brand building is more than compensated by the market revenues. Reckitt Benckiser has made strategic moves with the help of the management comprising of young as well as experienced with careful selection of team from different nationalities in order to solicit contributions from them in good measure which helps in devising marketing strategies for different markets. Bart Becht, Chief Executive Officer, a Dutch national leads the pack. He has served many good companies in various capacities. Bart is followed by five Executive Vice Presidents with Javed Ahmed (a Pakistani), Freddy Caspers (a German), Rakesh Kapoor (Indian), Alain Le Goff (French national) and Elio Leoni-Sceti (Italian). Company has segmented its market broadly in three categories worldwide; North America & Australia, Europe and Developing markets. This helps the company in gaining a broader outlook about different markets. PESTLE analysis for Reckitt Benckiser PESTLE stands for political, economical, socio-cultural, technological, legal and ecological factors. Political: The range of products that Reckitt Benckiser is in, doesn't make it too controversial and unpopular with any government or society. The company has committed itself to the health, safety and welfare at work of its employees; complying with applicable health & safety legal requirements; and, the continual improvement of its health & safety control arrangements and performance. The products too are categorized as safe and great emphasis is laid in understanding all the issues involving safety associated with its products. Keeping high standards of safety saves it from the ire of the political classes as well. For example the soft drink giants Coke and Pepsi are in the middle of a storm in the emerging markets like India as their products are said to have high content of pesticides in it. Encouraging safety and health awareness amongst the masses is one of the prime concerns amongst the governments of any nation. Therefore the business ideology of Reckitt Benckiser with its commitment to the health, safety and welfare makes it quite popular amongst the political class. Reckitt has a diversified business in terms of geography and products. The company operates in 60 countries and markets products in nearly 200. Europe, the company's largest market, accounted for about 51% of sales in fiscal 2005. Other regions led by North America, Australia and New Zealand (31% of revenues) and emerging markets including China and India (18%) accounted for the remaining revenues (Datamonitor, 2006). Economic: Economic factors are driven by Development of relevant economic indicators like inflation and GDP of the society at large. In fact the range of products of Reckitt Benckiser belongs to the general strata of masses. It customers don't' have to pay hefty amounts to buy a bottle of harpic or a strip of stripsil. Therefore on the micro level it is not much governed by such factors. But on the macro level, the company too needs a favourable investment climate and a healthy economic growth so that the buying power of its customers increases. This will result in better business prospects for the company. Reckitt Benckiser has a good market share in the two big markets of China and India. Both these countries have registered phenomenal growth over the last couple of years. The consumer products business is driven significantly by three basic demographic factors: population growth, household formation and household income growth. These factors are now driving strong growth in many of the company's developing markets including India and China. The liberalization process of both these economies coupled with, de-regulation of key sectors and progressive moves towards further integrating China and India with the global economy has been key drivers towards making these economies more suitable for consumerism dominant. Socio-Cultural: Inter-cultural influences on different societies as a result of globalisation have made it quite easy for MNC brands to be more acceptable in the international market. Now companies can make a product with requirements of minor adjustment for being accepted in the local market. Most of the products of Reckitt Benckiser have been uniformly accepted in the markets all across the globe. Increasing emphasis on marketing communication techniques gives a boost to the efforts of the company in serving its target markets. Marketing communication in turn helps a company in building a brand, creating brand loyalties, increase in sales, cutting costs, etc. UK market is a very diverse market in general which caters to customers/ consumers from different walks of life, different cultures, ethnic groups and age groups. This diversity further helps Reckitt Benckiser in identifying the needs for the global customer. Markets all across the global have become very much aware about the brands and their values. Therefore the societies are more amenable to accept a global brand. Moreover, in order to develop the brand, Reckitt Benckiser resorts to effective social responsibility steps like when it donated a 25,000 full-size products, with a total retail value of about $105,000, across all 50 states in US as part of a cause-marketing program involving Keep America Beautiful. (Angrisani, Carol, 2004). Earlier when Lysol worked with Keep America Beautiful in 2003, it won a Silver Halo Award in the environmental campaign category from the Cause Marketing Forum. Technological: Well, the pace of changes in technologies led by the IT sector has helped in taking the taking the businesses closer to the customer. Increasing emphasis towards TQM led by process improvements and value creation has no doubt helped in coming out with a better product. As internet is gradually maturing and presenting a paradigm shift in its very ideation, the infrastructure has acquired a business character, a transcontinental personality and a vending framework of wide-ranging, business, educational, scientific and personal data. Use of internet has given room for e-businesses. E-business in its simplest form can be described as doing business in electronic form. While Reckitt Benckiser has made fullest use of its internet website in informing and educating the customers about its products and brands, its products are available for through online retail stores of many retails stores like Tesco. Legal: Legal facilitation is an equally crucial factor when business involves regular interaction with person from across the boundaries. It appears the respective governments have been quite supportive of the company so far. Ecological: Taking care of ecological surroundings forms an integral part of any company. The corporate social responsibility has become more than a marketing communication technique now. Reckitt Benckiser too takes this quite seriously. Company's environmental policy states2; The company's environmental objectives have been chosen and are regularly reviewed to ensure that its actions match the commitments in the environmental policy. Part-II Over the years Reckitt Benckiser has proved to be world leader in many categories in the household, health and personal care markets. Company has been able to tap the markets in many parts of the world from Europe to Asia and from UK to India. It has established its brand identity quite well. In fact the company has propagated the concept of managing multiple brands simultaneously, with many of its products being well known brands in themselves. As a result the company has been able to secure a firm space for itself. It figures at 25th place amongst the FTSE 350. This includes the most highly capitalized blue chip companies in the UK and represents around 98% of UK market capitalization. Reckitt Benckiser generates revenues through seven business divisions: fabric care (26.6% of the total revenues during fiscal year 2005), surface care (20.8%), health and personal care (15.8%), home care (15%), dishwashing (13.9%), food (4.7%) and other household (3.1%). Company is number one worldwide in Surface Care. In the fabric care category Reckitt Benckiser is number one worldwide in Fabric Treatment and Water Softener categories, it is number one in automatic dishwashing while the company is number two worldwide in Air Care, Shoe Care and Pest Control. Similarly in the healthcare category Dettol is the world leader in antiseptics bought for use at home, Veet is the world leader in depilatories, Nurofen is the No.2 Analgesic in Europe, Strepsils is the No.1 sore throat product outside the US and Clearasil is the No.1 anti-acne treatment. Also in the food category, French's is the leading brand of mustard in the world. By resorting to such category of 'brands' the company has in fact been quite successful in segmenting the market. In order to attract buyers of all categories, the seller doesn't treat them all alike, nor does he want to treat them all very differently. After having successfully done the studies regarding the aspects of measurability, accessibility and substantiality the company has been able to segment its customers based on psychographic considerations and benefit considerations. In this type of segmentation, buyers' needs are more differentiated along life-style or personality lines than along straightforward demographic lines. In the benefit segmentation technique, buyers are subdivided in relation to the various benefits that the buyer may be seeking from a particular product (Kotler, 2003). In fact not all segmentation variables are appropriate for every market. It is for the company to discover which one's make the most sense in each case. Reckitt Benckiser has been quite successful in reading the pulse of the market and placing the product accordingly. As a result of this strategy, some of its products have become such household names that now products are known by these names. For example having served the industry for long years, brasso has now become the de-facto 'name' for any metal surface cleaner. Customers go to a grocery shop and ask for brasso, the retailer may hand them over another brand of metal cleaner. The customer will still prefer to call it brasso. Similarly, Dettol, has become the de-facto name for the antiseptic. Also consumers typically associate Reckitt Benckiser's Lysol brand with disinfectant spray. Yet Lysol has grown to become much more than that, and Reckitt Benckiser created an innovative sampling program to prove it (Angrisani, Carol, 2004). The European dishwashing products market grew by 3.6% in 2005 to reach a value of $2.5 billion. Reckitt Benckiser is the market leader with a 22.2% share of the market. Europe Dishwashing Products Market Segmentation I: % Share, by Value, 2005 Category % Share Automatic dishwashing products 49.30% Hand-washing products 41.30% Rinsing agents 9.50% Europe Dishwashing Products Market Segmentation II: % Share, by Value, 2005 Geography % Share Europe 40.60% US 34.50% Asia Pacific 10.90% Rest of the world 14.00% The European market has the lions' share in this particular product, therefore Reckitt Benckiser is quite correct in focusing on this market more. Reckitt Benckiser has been successful in pushing ahead the product by preferring to remain a low profile company name. Similarly, the UK air fresheners market grew by 6.1% in 2006 to reach a value of $294.7 million and Reckitt Benckiser PLC has a 39.7% share of this market's value as well. Company has been consistently giving stiff competition to its rivals at home and abroad. In one such recent case (23 Nov 2006), the company also won a legal battle against its rival in India, Hindustan Liver Ltd. (HLL), when the courts upheld the contention of Reckitt Benckiser concerning the advertisement of Dettol soap. This goes to say that Reckitt Benckiser has been resorting to ambush marketing depending upon the scenario of competition in those markets. For marketing the products the company has been dependent on Supermarkets and hypermarkets which form the most important distribution channel, e.g. accounting for 65.2% of the UK market's value and 69.5% of the European market's value. Product Differentiation Introduction of differential features in quality, style or image in the brands is one way of bringing in product differentiation. Another equally effective way is by resorting to innovation and thus leading the industry using the process of innovation diffusion (Kotler, 1974). In this approach innovations are assimilated into social systems over time and the new idea is spread from its source of invention or creation to its ultimate users or adopters. The company has used innovation as its core competitive strategy which helps the company in creating product differentiation and provides it the competitive edge. For example; In one of the recent products in the market Vanish Dual Power3 is being termed by the company as a 'breakthrough stain remover for the toughest laundry stains'. Working closely with industry leading packaging design and process experts, the company developed its novel 'dual chamber technology' with its unique nozzle design. This type of design allows the ingredients to be combined which may not be stable in a standard mono-chamber bottle. This type of mixing unlocks the cleaning power of the active ingredients (hydrogen peroxide, enzymes and alkalinity) delivering to consumers a better and wider cleaning performance than standard pre-treaters. Similarly, working in close collaboration with external experts, the Finish team developed an innovative polymer system. This was then combined with a novel processing technique to allow users to design a dishwasher detergent. This new Finish Quantum has three separate compartments enabling the use of highly active and otherwise incompatible cleaning agents in one single product. Also the company rolled out Cillit Bang /Easy Off BAM in over 68 countries in less than 2 years. Cillit Bang Grime & Lime remover uses acid technology to deliver robust cleaning on tough stains like bathroom grime, soap scum and lime scale in less than a minute! Company succeeded in this endeavor using strong marketing strategy that combines innovative formulation development with a unique series of "Wow!" demos to communicate performance and versatility stretch to the consumer. References: 1. Angrisani, Carol (2004), 'Lysol Cleans Up', SN: Supermarket News, 00395803, 8/2/2004, Vol. 52, Issue 31 2. Datamonitor, Reckitt Benckiser (July 2006) Plc SWOT Analysis, Datamonitor, USA, NY. 3. Reckitt Benckiser Plc, http://www.reckittbenckiser.com/ 4. Reckitt Benckiser Innovation centre, http://www.rb-idealink.com/ 5. Hong Liu, Lars-Uno Roos (2006), 'Managing strategic planning paradigms in China' Marketing Intelligence & Planning Volume 24 Number 5 2006 6. The Economist, (Feb 3rd 2005), 'The rise of the superbrands'. 7. Reckitt Benckiser, Full Year Results 2005, (8th February 2006), http://www.reckittbenckiser.com/documentlib/normal/annualresults20058february2006presentation-powerpoint.pdf 8. Kotler, Phillips (1974), 'Marketing Management, 2nd Ed, Prentice Hall. 9. The Hindu Business Line, (Nov 05, 2004 ), 'Reckitt Benckiser to bring in more power brands' available online at http://www.thehindubusinessline.com/2004/11/05/stories/2004110502560400.htm 10. The Hindu Business Line, (Mar 22, 2006 ), 'Reckitt Benckiser looking to bring in global brands', available online at http://www.thehindubusinessline.com/2006/03/22/stories/2006032202480200.htm 11. Industry Profile, Dishwashing Products in Europe, (December 2005), Datamonitor, London 12. Industry Profile, Dishwashing Products in the United Kingdom, (December 2005), Datamonitor, London. . Read More