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MM5012 Business Strategy

BLUE OCEAN AT HENKEL
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The Outline

5 Forces Analysis

Resources Based View

Blue Ocean Strategy

It`s all about HOW to think, not what to think

Case Synopsis
Business Sectors

2008 2002 Took over Adhesive “A brand like a and electronic friend” materials from Akzo Nobel

1922 1878 Relocated to Dusseldorf 1876 founded by Frits Henkel The Product range to adhesive

Product Sub brands

Case Problems
Henkel Market has Slow Down

Raw Material Price Has Increase

Pressure to Henkel Margin
One of Competitor in adhesive business just about enter with very low price

Henkel Should Develop a LongTerm Strategy

The External Analysis

Opportunity & Threats

Opportunity & Threats Politic
 The globalization reduces the trade barrier  Merger and acquisition are also a strategy to help Henkel expand its international global brand

Economy Social

 Focusing on emerging and developing Asian market especially India and China  Economic slowdown of Euro zone and US  Increasing price of raw material and energy

 maintain their customer relationship carefully through its products and services.  Consumer behavior

Technology

 Differentiation product of Adhesive Technology

FINANCIAL DATA - HENKEL

FINANCIAL DATA - MAPEI
Important Financial data of the fiscal year 2007 of Mapei (in million Euro)

Resources: http://www.mapei.com/public/COM/bilancio/2007/EN/PDF/BIL_EN_2007.pdf

Opportunity & Threats
Financial Performance of Henkel 2006 Revenue Operating Profit Margin Net Profit Margin Operating Expenses to Revenue 10.2% 6.84% 89.8% 2007 10.3% 7.20% 89.7% CAGR (%) 0.43% 2.59% -0.05%

OPPORTUNITY

Vs
Financial Performance of Mapei 2006 - 2007 2006 2007 8.84% 5.34% 91.2% CAGR -2.2% -2.4% 0.2%

Revenue
Operating Profit Margin Net Profit Margin Operating Expenses to Revenue 9.25% 5.61% 90.8%

The External Analysis

Porter 5 Forces

Porter 5 Forces
Bargaining Power of Buyer
 Same Product Benefit.  Price competition is sensitve

(Unattractive)

Thereat of New Entrants
 Lots of famous products competitor  Customer loyalty of product competitor

Bargaining Power of Supplier
The few suppliers make it on powerful position that impact to higher cost for the company. Means lowering industry profitability

(Unattractive)

(Attractive)

Rivalry Among Existing Competitor
 Competition in cost reduction & Low Price of Product

Threat of Substitute
Rapid change in ICT make differentiation in the industry narrower. Customer can shift to multitasking product.

(Unattractive)

(Unattractive)

Brand Management

Source: David Aaker

The Internal Analysis

Value Chain

Value Chain

Value Chain
(4) Production (5) Logistics

(3) Raw Materials

(6) Use: fostering sustainable consumption

(2) Product safety

(7) Usage: Industrial business,

(1) Research &Development

(8) Packages &disposal.

Outsourcing

Why We need outsourcing??
Efficiency (Priority & Cost efectively ) Focus on core activities

Henkel Co.: Procurement, Logistics, General supporting

The Internal Analysis

Resources Based

Resources (Tangible)

Resources (Intangible)

Capabilities

Area Distribution Supply Marketing Innovation Organization

Capability They have different sales channel in DIY stores, specialist shop, drugstore, food retailing shops Easy to access location (rhine river) for supply raw material Creative brand management of each sub-product R&D investment Large segment of product

Core Competencies
As core competencies are resources and capabilities that serve as a source of competitive advantage for a firm over its rivals, it should be met the four criteria

Conclusions

SWOT analysis

SWOT
STRENGTHS
Strong financial position, product innovation, broad product portfolio, strong R&D, intelligent brand management

WEAKNESSES
Weak presence in Asia compare with competitors such as Mapei & Bolton Group, PNG, Unilever

OPPORTUNITIES
Focus on developing and emerging countries (Asia), invest on new projects, positive market outlook for home care and laundry segments

THREATS
Increasing competitive pressure, economic slowdown in US and Euro zone, inflation impact to operating cost

Recommendation

Blue Ocean Strategy

Blue Ocean Vs. Red Ocean

Blue Ocean Strategy

Lessons Learned

Lessons Learned
1. Identify its resources in order to figure the strength and weaknesses from internal environment/ Firms has to determine its capabilities so that allow them to do better to create the opportunity to face its threat Firms has to select the strategy that best allow it to utilize its resources and capabilities to achieve sustainable competitive advantage Firms has to choose and focusing in primary activities that affect significantly to core competency of the company to be self handled & outsourcing for area that less influence.

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