Case Study Description of Henkel KGaA: Detergents Division
Henkel has to decide whether to replace its strong local detergent brands in Italy and Spain with its leading international brand, Persil. It faces pressure from retailers for international brand standardization. Its competitors, including P&G and Unilever, are consolidating their portfolios around a few global "power brands."
Swot Analysis of "Henkel KGaA: Detergents Division" written by David J. Arnold includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Henkel Persil facing as an external strategic factors. Some of the topics covered in Henkel KGaA: Detergents Division case study are - Strategic Management Strategies, and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Henkel KGaA: Detergents Division casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion,
technology disruption, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Henkel KGaA: Detergents Division
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Henkel KGaA: Detergents Division case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Henkel Persil, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Henkel Persil operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Henkel KGaA: Detergents Division can be done for the following purposes –
1. Strategic planning using facts provided in Henkel KGaA: Detergents Division case study
2. Improving business portfolio management of Henkel Persil
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Henkel Persil
Strengths Henkel KGaA: Detergents Division | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Henkel Persil in Henkel KGaA: Detergents Division Harvard Business Review case study are -
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Henkel Persil digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Henkel Persil has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Ability to recruit top talent
– Henkel Persil is one of the leading recruiters in the industry. Managers in the Henkel KGaA: Detergents Division are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Strong track record of project management
– Henkel Persil is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Sales & Marketing industry
– Henkel KGaA: Detergents Division firm has clearly differentiated products in the market place. This has enabled Henkel Persil to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Henkel Persil to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Henkel Persil are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Superior customer experience
– The customer experience strategy of Henkel Persil in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy in the Henkel KGaA: Detergents Division Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Ability to lead change in Sales & Marketing field
– Henkel Persil is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Henkel Persil in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Henkel Persil is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Henkel Persil is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Henkel KGaA: Detergents Division Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Training and development
– Henkel Persil has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Henkel KGaA: Detergents Division Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High brand equity
– Henkel Persil has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Henkel Persil to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Henkel Persil is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by David J. Arnold can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses Henkel KGaA: Detergents Division | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Henkel KGaA: Detergents Division are -
Interest costs
– Compare to the competition, Henkel Persil has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Need for greater diversity
– Henkel Persil has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Capital Spending Reduction
– Even during the low interest decade, Henkel Persil has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High bargaining power of channel partners
– Because of the regulatory requirements, David J. Arnold suggests that, Henkel Persil is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Lack of clear differentiation of Henkel Persil products
– To increase the profitability and margins on the products, Henkel Persil needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Henkel KGaA: Detergents Division, in the dynamic environment Henkel Persil has struggled to respond to the nimble upstart competition. Henkel Persil has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Henkel KGaA: Detergents Division HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Henkel Persil has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Henkel KGaA: Detergents Division, is just above the industry average. Henkel Persil needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Aligning sales with marketing
– It come across in the case study Henkel KGaA: Detergents Division that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Henkel KGaA: Detergents Division can leverage the sales team experience to cultivate customer relationships as Henkel Persil is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Henkel Persil is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Henkel Persil needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Henkel Persil to focus more on services rather than just following the product oriented approach.
Products dominated business model
– Even though Henkel Persil has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Henkel KGaA: Detergents Division should strive to include more intangible value offerings along with its core products and services.
Opportunities Henkel KGaA: Detergents Division | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Henkel KGaA: Detergents Division are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Henkel Persil can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Better consumer reach
– The expansion of the 5G network will help Henkel Persil to increase its market reach. Henkel Persil will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Henkel Persil can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Henkel Persil can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Henkel Persil can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Henkel Persil to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Henkel Persil to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Henkel Persil can use the latest technology developments to improve its manufacturing and designing process in Sales & Marketing segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Developing new processes and practices
– Henkel Persil can develop new processes and procedures in Sales & Marketing industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Henkel Persil is facing challenges because of the dominance of functional experts in the organization. Henkel KGaA: Detergents Division case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Henkel Persil can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Buying journey improvements
– Henkel Persil can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Henkel KGaA: Detergents Division suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Loyalty marketing
– Henkel Persil has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Henkel Persil can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Creating value in data economy
– The success of analytics program of Henkel Persil has opened avenues for new revenue streams for the organization in the industry. This can help Henkel Persil to build a more holistic ecosystem as suggested in the Henkel KGaA: Detergents Division case study. Henkel Persil can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats Henkel KGaA: Detergents Division External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Henkel KGaA: Detergents Division are -
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Henkel Persil will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Shortening product life cycle
– it is one of the major threat that Henkel Persil is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Technology acceleration in Forth Industrial Revolution
– Henkel Persil has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Henkel Persil needs to keep up with the evolution of technology in the Sales & Marketing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Regulatory challenges
– Henkel Persil needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
Stagnating economy with rate increase
– Henkel Persil can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Henkel Persil can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Henkel Persil in the Sales & Marketing industry. The Sales & Marketing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Henkel Persil with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– Henkel Persil needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Henkel Persil can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Henkel Persil in the Sales & Marketing sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Henkel Persil can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Henkel KGaA: Detergents Division .
Consumer confidence and its impact on Henkel Persil demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Weighted SWOT Analysis of Henkel KGaA: Detergents Division Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Henkel KGaA: Detergents Division needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Henkel KGaA: Detergents Division is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Henkel KGaA: Detergents Division is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Henkel KGaA: Detergents Division is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Henkel Persil needs to make to build a sustainable competitive advantage.