Corporate Strategy Analysis

09-23-2015
Yinka Daramola
Giovanni Disanto
 Outline

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

Top Brands
 SOURCES OF REVENUE- HENKEL AG 2014

Laundry & Home Care

28%
Adhesive Technologies
50%

Beauty Care
22%
 SALES BY REGION- HENKEL AG 2014
Other
3%
North America
18%

Emerging Markets
44%

Western Europe
35%
 Strategic Issues

Internal Environment External Environment

Internal Culture Change Global Economic Crisis

Unclear Strategic Objectives Increasing Input Pricing

Accountability and Performance

Changing consumer preferences
Management

Streamlining for Efficiency


Strengths
 High R & D expenditure
 Performance improvement
 Leadership in Adhesive technologies market
 Several billion Euro brands in portfolio
Opportunities
 Increasing R & D spending
 Investing more in emerging markets
 Greenfield investment opportunities
 Abundance of opportunities to acquire related
businesses
SWOT Analysis
Weaknesses
 Supply chain inefficiencies
 Lower R & D spend than competition
 Low operating and net margins
Threats
 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
 Financial Analysis- Industry

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
 Industry Revenues 2014
90,000

80,000
83,062

70,000

60,000

P& G
50,000
Unilever
48,436 3M
40,000
L' Oreal
Henkel
30,000
31,821

20,000
22,532
16,428
10,000

0
P& G Unilever 3M L' Oreal Henkel
 Financial Analysis- Industry
Industry
Henkel 2014
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
Income Statement
 Financial Performance
18,000

16,510 16,355 16,428

15,092 15,605
16,000

14,000

12,000

Revenue
10,000
Gross profit
Income before taxes
8,000 Net income
Earnings per share
6,000

4,000

2,000 1,510 1,589 1,628

1,143 1,283

0
2010 2011 2012 2013 2014
Balance Sheet
 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

 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

 Some Recommendations
• Plan and implement an emerging-market strategy

Focus on core competencies

Make new acquisitions and/or strategic alliances

• Reduce production costs

Customer-driven production

Supply chain re-engineering

• Upgrade performance evaluation system

Conduct quarterly 360O feedback evaluations
 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
 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