Interpreting Company Behavior: The Henkel Organization - Report Example

Expansion the red part in essay（SWOT Analysisand Key Success Factors of Henkel）into 1500 worlds, please Conclude by interpreting the company’s strategy using Dunning’s OIL – what does it own, what has been the approach to control/internalisation, & why has it chosen locations. Table of Contents Expansion the red part in essay（SWOT Analysisand Key Success Factors of Henkel）into 1500 worlds, please Conclude by interpreting the company’s strategy using Dunning’s OIL – what does it own, what has been the approach to control/internalisation, & why has it chosen locations. 1 Introduction: 3 Geographic & product markets 3 Laundry and Home Care 3 Beauty Care 4 Adhesive Technologies: 5 History of Innovation and Development overtime 5 Nature of operations 7 Vision and Values of Henkel 7 Company’s Vision: 7 Company’s Values: 7 Challenges faced Henkel 7 Action Planning at Henkel 8 International Activities 9 Sustainability 9 Henkel & Aruba 10 Employees 10 Strategic Priorities for Henkel 11 Outperform: 11 Focused Marketing: 11 Inspiration: 11 SWOT Analysis 11 Strengths 11 Weaknesses 12 Opportunities 12 Threats 12 Key Success Factors of Henkel 13 Technology Related 13 Manufacturing Related 13 Marketing Related 14 Skills & Capability Related 14 Others 14 Conclusion 15 Reference List 16 Introduction: Henkel, founded in 1876, has a leading position in the worldwide market of consumer and industrial business. Henkel’s headquarter is situated in Germany has 47,000 employees worldwide from more than 120 nations. It is numbered amongst the most globally aligned German-based organizations in the worldwide commercial center. (Anon, 2014) The company was started by 28 years old merchant who launched a detergent focused around silicate. Over the time this company of ambitious people and many their representatives build Henkel into a worldwide organization. (KGaA, 2014) Geographic & product markets Henkel is currently operating in more than 125 countries across the globe. Its basic operational capabilities consist of 3 different fields Laundry and Home Care Beauty Care Adhesive Technologies (Sealants & Functional Coatings) Laundry and Home Care Has constantly assumed a paramount part forHenkel:The organizations success story began with an item from this business area. Henkel works in the laundry and household cleaner portions. The clothing items embody overwhelming obligation cleansers and extraordinary cleansers. In fiscal 2013, the Laundry & Home Care business part producedbusiness of 4,580 million euros, which approaches 28 % of aggregate organization’ssales. Over the years Henkel established several factories for the purpose of flourishing this section of business. Introduced several innovative products, also used by-product efficiently in a way that helped in generating revenue. To expand the company Henkel acquired several related organization and now dealing worldwide. History of establishment and acquisition can be viewed in the history of innovations section. According to fiscal 2013 the improvement rates in this business section are as followed S.NO. Rate (%) Area 1 45 Innovation 2 +5.7 Organic sales growth 3 85 Sales created from top 10 brands. (Anon, 2014) Major product lines of this business sections are as followed Laundry Home Care Beauty Care Items from the Beauty Care business section are accessible around the world. Schwarzkopf & Henkel remains for brand-name items in the fields as followed Hair colorants toiletries Hair care Body Skin Oral Schwarzkopf Professional is one of the worlds leading suppliers of hair salon items. In financial 2013, the business segment created sales of 3,510 million euros, which squares with 21 % of aggregate organization’ssales. Over the years Henkel established several factories for the purpose of flourishing this section of business. Introduced several innovative products, also used by-product efficiently in a way that helped in generating revenue. To expand the company Henkel acquired several related organization and now dealing worldwide. History of establishment and acquisition can be viewed in the history of innovations section. According to fiscal 2013 the improvement rates in this business section are as followed S.NO. Rate (%) Area 1 45 Innovation 2 +3.0 Organic sales growth 3 >90 Sales created from top 10 brands. (Anon, 2014) Adhesive Technologies: The Adhesive Technologies business area is the world business pioneer in cements, sealants and Functional coatings for purchasers, specialists and mechanical applications. Henkel offers a huge number of applications to fulfill the needs of diverse target markets segments – customers and in addition experts and mechanical organizations. In fiscal 2013, this business section created sales of 8,117 million euros, which rises to 50 % of aggregate organization’ssales. Over the years Henkel established several factories for the purpose of flourishing this section of business. Introduced several innovative products, also used by-product efficiently in a way that helped in generating revenue. To expand the company Henkel acquired several related organization and now dealing worldwide. History of establishment and acquisition can be viewed in the history of innovations section. According to fiscal 2013 the improvement rates in this business section are as followed S.NO. Rate (%) Area 1 30 Innovation 2 +2.7 Organic sales growth 3 >70 Sales created from top 10 brands. (Anon, 2014) Major product lines of this business sections are as followed Industrial Home, School and Office Do-it-yourself Craftsmen and Construction History of Innovation and Development overtime 1876 - The 28-year-old Fritz Henkel and his two partners founded the company Henkel & Cie in Aachen on September 26, 1876. Its first product was a washing powder based on water-glass. 1878–Henkel introduced new innovative product bleaching soda.It became so famous among customers that withinthe time span of one yearit gave exponential profits. From these profits Henkel was able to build his own factory, before this factory manufacturing was done in a rented factory. 1880 - Henkel bought new plot to build another new factory. 1881 – Henkel succeeded in introducing world’s first ready-to-use decorator’s glue. 1886 - Henkel took part in the international industrial exhibition for the first time, and received a certificate of honor in 1886. Henkel opened sales office in Austria; it was first office outside Germany. 1887 – Introduced Henkel’s Thee (tea) and sold it worldwide. New thing was that the company focused on packaging and made tea available in cans to preserve its aroma. Before Henkel’s thee packaging tea was sold lose and hence quickly loses its aroma. 1888 – Introduced ready-to-use wallpaper paste. The innovation of decorator’s glue and wallpaper paste revolutionized ancient working method in a very short span of time and improved methods. 1889 – Henkel started transactions with customers in Netherlands and Switzerland. 1893 – Build its first business link with England and Italy. 1898 – Developed a potassium fertilizer named Martellin, from by-product of water-glass manufacture. Use of Martellin is cultivation of tobacco, hops and wine. 1902- Company started to produce its own floor polish. Also produced floral flower fertilizer which remained in product line till 1917. 1903- Innovated hair-washing powder (Shampoo) previously use of hard soap was common. 1907-Persil, world’s first self-operating detergent. 1909 – Built a fatty acid factory. 1910 – Established glycerin factory, before glycerin was considered as a waste product. 1911 – Established oil extraction plant. 1913 – First subsidiary was founded. 1914 – Henkel acquired American Chemical Paint Company, the company use to produce rust inhibitor for automobile industries 1916 – Established new water-glass factory in Holthausen. 1918 – Closed production of Persil and replaced it with Sil, laundry rinsing agent. 1919 – Appointed 8 management companies to manage the company to take off the burden. 1920 – Henkel acquired all shares of Dreiring-Werke KG. 1921- William Pohl secured the Kepec .Chemische .Fabrik .GmBH in Bonn. It presented inventive items, particularly for cowhide handling. After it and its sister organization in Wisconsin, USA, were assumed control by Henkel in 1973 1922-Packaging Glues 1929-P3 Cleaner 1933-Alkaline free shampoo 1949-Schauma 1954-Teroson Original 1955-Taft 1956-Loctite 1962-Somat 1969-Pritt Glue Stick 1970 – Cordes did joint venture with Henkel; a company specializes in manufacturing of adhesives. 1983-Dixan 1987 – Henkel bought Nopco, a company producing vegetable oil for textile dyeing. 1991- Henkel acquired Teroson in Heidelberg, a company producing cleaning and care products for household. 1994-Persil 1995- Henkel acquired Schwarzkopf, big name in cosmetics business in Germany. 2010-Optal XP 2012-Persil Duo Caps (KGaA, 2014) Nature of operations As Henkel having several businesses and several product lines the nature of operations is of several kinds. There are operations which are handles and managed wholly by the organization itself, on the other hand Henkel also did joint ventures with several firm for example Henkel’s first East-West joint venture was launched in Hungary in 1987. And also acquired several companies, few are mentioned in the history section. Vision and Values of Henkel Company’s Vision: Trending to be one of the global leaders in brands and technologies. Henkel is a pioneer with brands and innovations that make individuals lives simpler, better and more wonderful. Company’s Values: Putting customers at the center of all happening Valuing, challenging and rewarding staff Driving excellent financial outflow Leadership in sustainability Family-Business Foundation ( GmbH. V, 2014) Challenges faced Henkel Henkel started from Germany which has its own unique set of culture and business courtesies, while emerging into newer markets Henkel faced some serious issues: In mid-China the culture was very different. The manners over there are given extreme importance even business scenarios and meetings. Learning their culture and appointing local managers can be and at some point is highly beneficial for Henkel in controlling the masses working under Henkel’s umbrella. Also managers in Central Asia need to be treated differently; they require more surveillance and a thorough check on them 24/7. Central Asia-India & Pakistan the products required, the adhesive products were required to be stronger. Beauty products in Central Asia had to be entirely reshaped at pointsdut to huge contrast in skin color difference. “Henkel Innovation Challenge” was launched by the company in 2007. Belgium, France, Germany, Italy, Netherlands and Spain were the 6 European countries that participated in it.The challenge given to the young apprentices was to develop and work on existing products that were innovative not just products but the business concepts for the segment of laundry and home care for the year 2050. So, this was a step that Henkel took to be pre-informed and stay ever-ready on calamity or disaster. Henkel and ASU- Life Cycle Impact Analysis. As mentioned before in the report sustainability is one of the core foundations of the organization. So, to strengthen the bonds with nature this project took place which had to take the responsibility to estimate issues regarding life cycles, carbon emissions etc. The basic purpose was to take products analyze them from “cradle to grave” and verify how much environmental damage is taking place and taking steps to eradicate that and making a greener society. (KGaA, H. , 2014) Action Planning at Henkel Henkel-A brand like a friend Since the 1980’s Henkel Corporation has focused on one thing extensively and that is getting feedback from employees by evaluating surveys thus, obtaining the opinions and suggestions of employees also pre-determining the attitudes of the employees. Over time problems arose with this technique of acquiring information from the employees. The major problem being faced was that the feedback being collected was so generalized and so many issues were put on the table all being drastic and requiring immediate action to the one addressing the problem. Due to a huge burden of pressing problems, not all problems could be catered for in time. Gradually the employees lost interest in future surveys that were of this kind as their problems were not being addressed to as quickly as they desired. So, what followed was that Henkel realized that in this era of competence the success of any company or the character of its culture. Denison Organizational Culture Survey (DOCS) with this Henkel was trying an approach using shorter surveys with the employees and also what was more important was that Henkel addressed those problems making efficient and effective action plans. Cross Divisional Job Rotation Current Affair Meetings on a weekly basis Core values, Co-ordination and Integration saw a huge boost in specific countries using these techniques. International Activities 1886 - Henkel took part in the international industrial exhibition for the first time, and received a certificate of honor in 1886. Henkel opened sales office in Austria; it was first office outside Germany. 1887 – Henkel’s tea was sold worldwide. 1889 –For the very first time Henkel started transactions with customers in Netherlands and Switzerland. In 1893 build its first business link with England and Italy. Henkel has continuously improved its occupational safety through systematic accident prevention. In 1959, the introduction of regular ecological quality checks for detergents and household cleaners was one of the first steps to ensure that products and production had no harmful effect on the environment. Over the time Henkel acquired many companies not only in Germany but also around the globe In 1991, Henkel was one of the first organizations to sign the Business Charter for Sustainable Development of the International Chamber of Commerce (ICC). More adaptable working examples have been implemented all through the organization with adaptable working plans recently concurred in various countries. Henkel sponsored 2007 Ice Hockey world cup in Russia which played great role in brand recognition Henkel’s record on sustainability has gained remarkable fame in various national and international platforms.  (KGaA, H, 2014) Sustainability For Henkel sustainability has been a prime factor since its advent in 1876 by Fritz Henkel. According to the company in 1991 they set up a medical and first aid center at the plant to facilitate all employees. Henkel continuously improved quality checks for environment and was one of the first companies in 1959 to make sure that the facility or the production had no harmful effects on the surroundings. Henkel is proud being one of the first companies to sign the Business Charter for Sustainable Development of the International Chamber of Commerce (ICC). All across the globe companies have only now realized about the harmful aspects of environmental pollution but Henkel is proud that it is the leading organization that has forever kept this aspect in mind and thoroughly worked to keep not only the consumers but the community at large peaceful and happy as well. Company’s sustainability strategy: Achieving more with less Tripling the values Increase efficiency by 30 percent Henkel & Aruba Henkel is currently operating in more than 125 countries across the globe so it is much easier to say that almost half of the world is using Henkel products at this point. Henkel needed a communication effort to keep these huge span controllable and connected at all times. To do so keeping the security hazards in mind as well in 2005 used a “thin” access point solution and merged a program with Aruba and launched it with Adaptive Radio Management (ARM). It turned out to be highly successful and fool-proof. Employees Henkel has approximately 47,000 creative, competent people from more than 120 nations which require a lot of training but the competitive advantage that Henkel has is that its employees are always ready to take on new task and come up with trendier innovations. Almost 32% of the managers are women. Exciting career opportunities for employees throughout the world. Culture of appreciation. Clear leadership principles, comprehensive training and development programs Sports and games area for employees Housekeeping schools for women Fid aid centers and full-time hired nurses in factories (Henkel Ltd., 2014) Strategic Priorities for Henkel Outperform: Henkel needs to launch powerful innovative products and by strengthening its top brands it should effectively and efficiently manage its portfolio. Focused Marketing: Henkel has to focus on those markets that show higher potential and try and open newer stations for the regions including Arabic Speaking and China and reducing its number of suppliers so it can effectively manage its resources and make newer products cost efficient. These above mentioned regions also require a stronger IT focus to increase the efficiency of business processes. Inspiration: Henkel should expand its training and development program such as the Executive Resource Program at Harvard Business School and get talented and aspiring young candidates so that innovation can breed a higher efficient global system. SWOT Analysis Strengths Henkel maintains a good public image. The company’s goodwill is dependent on its business operations and performances. The company highly emphasizes on maintaining their corporate value. The long term objectives and goals of the company are clearly defined so that it becomes easier for the organization to make developments and modifications that would help it to successfully achieve the desired target. This has always helped the company to excel and become one of the global leaders in terms of brand name and technological settings. The company regularly formulates strategies for growth and ensures that those strategies are effectively implemented (Henkel AG and Co. KGaA, 2014a). Henkel has always focused on building brand awareness within the market. The company has taken utmost care in marketing and promoting their most popular brands. Brands like Schwarzkopf, Loctite or Persil are its most valued brands. The brand portfolio of the company has been consolidated for better results. It has been forecasted that in the coming years, and more specifically by2016, about 60% of the company’s revenue will be generated by the company’s top ranking brands. The above result can be achieved by promoting its top brands and also expanding the brand operation globally. The company has also designed innovative marketing and advertising plans and investments to get the desired outcomes. For instance, even if Locite is very popular among households in the United States, still the company has designed strategies to create awareness for the brand. Henkel has also thrived to produce high quality products and therefore the company has set high standards for other competitors. Henkel has always aspired to develop products which would not only deliver outstanding performance to its customer but also ensure its contribution to sustainable growth. The company has always encouraged the development of innovative products. The quality of the products has been exceptional which has helped them to have strategic advantage to substantially build up their position in the global market. Henkel is renowned globally for its highly efficient service. The company has its leading brands which operates globally mainly in three sectors. The company has well efficient networks within the market which makes it easier for the company to reach its targeted consumers (Henkel AG and Co. KGaA, 2014). Weaknesses Henkel sometimes suffers due to problems in its distribution network. It lacks efficient dealers in some parts of business operations. The products are also not marketed equally in all parts. The company also suffers due to possible financial risks. With globalization, the markets for Henkel’s product are integrated. Financial depression in any one market can have an adverse effect on all the markets. The performance and growth of all the brands will suffer. This would also affect the profitability position of the company. Opportunities Henkel has used funding from European Union to promote and develop a national program that would help in building insulation. Henkel has the opportunity of employing an appropriate candidate by following the headhunting process of selection. It becomes easier for the company to spot the potential candidate. Then the normal employment process takes place which is carried out smoothly. Employing the right candidate is imperative for the company’s success (Schütte, 1995). Threats Changing customer tastes & preferences has always been a threat for the company. This has emphasized the need for continuous enhancement of business strategies and modification of products to keep pace with consumer requirements. Henkel has also faced threats due to crisis and global recessions. The global integration of markets for Henkel’s products increases such risks. Crisis in one market will adversely affect not only that market but also other markets. Threats due to natural calamities and disasters also affect the company’s growth prospects. The products suffer loss due to unavailability of raw materials. A person’s purchasing power also decrease and as a result sale of Henkel’s product experience a fall. Political instability is a rising concern for the company. The markets become weak and the company suffers from many limitations and restrictions. Trade rules and policies also become rigid. This affects company’s interest and thwarts growth of the company. Key Success Factors of Henkel Technology Related The company has sufficient expertise in standard chemical related products. The company has always tried to cater customer needs by encouraging development of innovative products using the latest technology. The products also maintained high standards. The company also has the ability to utilize the capabilities of its employees and the latest technology to continuously improve and enhance the production process. The production process is supported by advanced technology and therefore there arises fewer faults in products. The products are designed with respect to necessary guidelines. The American cosmetics company “Advanced Research Laboratories (ARL)” was acquired by Henkel to strategically expand its customer base and prosper in markets in which it lags behind. This acquisition has proved successful for Henkel by helping the company to focus more on the research & development of its products (BurgeSmani and Wheelwright, 2004). Manufacturing Related Henkel has an efficient group of individuals who works on maintain outstanding quality of every single product manufactures buy the company. All stages of the product cycle are properly scrutinized. At each stage of product manufacturing, quality checks are performed to maintain high standards. The products are monitored regularly. Product design is done by experts from the relevant fields (Nistorescu and Ploscaru, 2010). Henkel produces products in a cost effective manner. The company uses proficient engineering skills in its production process. This ensures that its products are appropriately priced and thus can be afforded by all sections of people. This also helps to increase the market base of the company. The company also employs skilled employees who are very efficient. Henkel attracts the most skillful talent who has sufficient practical knowledge. The employees are trained rigorously. This helps the employees to understand the objectives and goals of the company. The employees are motivated to develop innovative product processes and thus manufacture products which would help to increase company value (Ford and Mouzas, 2013). Marketing Related The marketing policies of Henkel have helped it to become one of the leading brands in cosmetics. The products are promoted through efficient distribution channels. Innovative advertising strategies are designed to market the products globally. Brand awareness programs are regularly organized to increase customer base. With the advancement of technology, Henkel has enabled the use of E-commerce to carry its business operations. Products reach the targeted customers easily through this mechanism. Transactions are more transparent. It also improves customer’s business experience with the company (Thompson, 2001). Skills & Capability Related Henkel employs a talented work force. Starting from the leader to the grass root employees, efficiency and skills of the employees are for Henkel’s growth in the industry. The leadership structure within the company also enhances growth prospects. Ambitious objectives are achieved by the highly efficient teams within the organization. The employees are regularly rewarded for their efforts. The products and services are implemented & delivered with efficiency. The technological capability is utilized productively to meet consumer requirements. The supply chain of the company is very well designed to avoid hindrances in the transaction processes. This ensures that the products reach the customer easily. Henkel’s has carries it operations through E-commerce effectively. It uses the web effectively to identify its target consumers. This also helps the company to understand the changes in customer taste & preferences. Others Henkel enjoys a strong financial position which is reflected in its balance sheet figures. The sales, operating profit, earning profit per share and other financial indicators support the above fact. The adjusted earnings before interest and tax (EBIT) margin have also been increased. The company has also increased the amount of dividend for its shareholders. Henkel has obtained strong patent protection for its product and services. This has ensured that their ideas are not copied by other competitors. The company was considered as a potential player in the market. Conclusion Henkel’s strategies of internationalization can be evaluated using Dunning OLI (ownership, location & internationalization) theory. This theory can be used to explain Henkel’s foreign investment plans. The theory evaluates the company’s global position based on various economic theories associated to cost & production (Dunning and Lundan, 2008). Henkel enjoys adequate ownership specific advantages that help it to control its business around the world. The company has exclusive ownership factors. This ensures competitive advantage for the company. Foreign operations can thus be carried in a cost effective manner. Henkel also enjoys location specific advantage due to some particular spatial criterions. The company has utilizes the natural endowment sustainably to avail such advantages. It also efficiently identifies the political, legal and economic factors of the locations where it invests. Henkel’s net benefits from internationalization has thus always been beneficial and helped it to grow in the long run. The company has expanded and diversified its products to markets all over the world (Hassel, 2003). The processes to enhance diversification have been carried out efficiently. Such strategies have helped the company to hold a strong position in the international market (Freeman, 2010). Reference List BurgeSmani, R. A. and Wheelwright, S. C., 2004. Strategic management of technology and innovation. Reading, 1(1). Dunning, J. H. and Lundan, S. M., 2008. Institutions and the OLI paradigm of the multinational enterprise. Asia Pacific Journal of Management, 25(4), pp. 573-593. Ford, D. and Mouzas, S., 2013. Service and value in the interactive business landscape. Industrial Marketing Management, 42(1), pp. 9-17. Freeman, R. E., 2010. Strategic management: A stakeholder approach. Cambridge University Press. Hassel, A., Höpner, M., Kurdelbusch, A., Rehder, B., and Zugehör, R., 2003. Two Dimensions of the Internationalization of Firms. Journal of Management Studies, 40(3), pp. 705-723. Henkel AG and Co. KGaA, 2014. About Henkel. [online] Available at: < http://www.henkel.com/about-henkel-11779.htm> [Accessed 4 September 2014]. Henkel AG and Co. KGaA, 2014a. Innovation. [online] Available at: < http://www.henkel.com/innovation-11783.htm > [Accessed 4 September 2014]. Nistorescu, T. and Ploscaru, C., 2010. A Strategic Approach of the Construction Sector in Romania. Annals of the University of Petrosani, Economics, 10(1), pp. 193-204. Schütte, H., 1995. Henkels strategy for Asia Pacific. Long Range Planning,28(1), pp. 95-103. Thompson, J. L., 2001. Strategic management. Thompson Learning. Read More