Student No: 260319626

McGill University Desautels Faculty of Management

Markets and Globalization: Take Home Assignment Strategy Section

Rehan Ali

Section 1 260319626

Student No: 260319626

1(a) Macro environment Analysis using PESTEL and Industry Analysis: At the time of the case, the economic conditions are weak. However the market for green products is strong and is expected to grow since more people are becoming oriented towards sustainability especially the younger generation. The companys main competitors in traditional products are P&G and Unilever, whereas in natural cleaning segment, companys main competitors are Seventh Generation and Methods. Further Analysis of companys environment can be done by evaluating Porters five forces. Threat of Rivalry (low to moderate): As per information in the case, Clorox is already a established brand in traditional cleaning segment, however the substantial growth in the traditional cleaning industry may put the Clorox in direct competition with two major companies (P&G and Unilever). Brita and Burt Bees are leading brands ( i.e they have good brand equity), however Green Works products are still not that well established brands and face competition from Seventh Generation and Methods. The weak economic conditions may increase the rivalry among competitors in all the segments Threat of new entrants (low): Economic conditions are weak, Clorox has a already well established brand and has good distribution network (essential for sustainable products), thereby decreasing the incentive for new players to enter the market.Threat of substitutes (moderate to high): In traditional products, there arent many substitutes, however in green products, there are many substitutes and switching costs is lower since traditional cleaning products are cheaper than natural cleaning products. This presents opportunity for companys traditional cleaning products, whereas its a significant threat for companys green products. Bargaining power of suppliers (moderate to high): Limited supply of natural or organic materials increases suppliers powers, whereas in traditional cleaning products there are many
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suppliers, thereby reducing the bargaining power of suppliers in that segment. Bargaining power of customers (High): Most of the customers of Clorox are large retailers such as WalMart, Traders Joe, Whole Foods, etc. and hence due to their size they have high bargaining powers. Overall company has good fit with the environment since it has a well established brand in both traditional cleaning products as well as green products. 1b) The influence and expectations of non-transacting stake holders increased after Clorox adopted Centennial Strategy, with major emphasis on major global consumer trends such as health and wellness and environmental sustainability, enabling company to form alliance with Sierra Club, an influential environmental organization and also came under watch of several other environmental organizations, expecting not only to continue and grow the green products but also to adopt sustainability measures into its traditional cleaning products ( which constituted around 90% of the companys revenues). Even though the company didnt completely converted its traditional cleaning products into green products, but it started to take measures such as reducing solid waste, use of water, greenhouse gas emissions, etc to meet the expectations of eco-friendly people and environmental organizations. It is pertinent to mention that companys strategy was never to be fully green company. It implemented this strategy to take advantage of growth opportunities in this segment while maintaining the mainstream segment of traditional cleaning products. However the expectations grew to do more and therefore Clorox decided to implement some sustainability measures into mainstream products in order for its green products to be perceived as green and to sustain sales. 2a) By analyzing Executives component of 4-E fit model, we will evaluate how it changed the strategy of the company and how it affected the Enterprise. In September 2006, Donald
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Student No: 260319626

Knauss joined the Clorox after serving 12 years in Coca-Cola, where he had dealt with sustainability issues like health, water use and bottle waste. Furthermore he came to Clorox knowing the global consumer megatrends i.e. health and wellness and environmental sustainability. Soon after he joined the company, company came up with centennial strategy, providing roadmap for long term, accelerated growth by focusing on incorporating global consumer megatrends. The strategy was such that company will continue its mainstream business of traditional cleaning products, but the growth in business or the revenues of the company will come from greener products. By following this strategy company acquired Burt Bee, the leading premium brand in natural care and by leveraging its expertise on cleaning business; it came up with natural cleaning products by the name of Green Works. Through the same strategy (focusing more on sustainability), Clorox was able to turn around the growth of its Brita business from stagnant or no growth to high growth business. These three major events served the companys growth plan from 2007 to 2010 since most of the growth in revenues came from green or sustainable businesses and hence were consistent with the centennial strategy. This strategy not only focused on green products line but also affected mainstream business in the sense that measures were taken to reduce the waste in those businesses as well and eco criteria was added into executive performance scorecard and into the goals and business plans of the individual business units and it also made significant changes in operations of the business i.e logistics and operations. Hence the centennial strategy was not only changing the revenue mix of the company, it was changing the whole enterprise by changing the culture, operations and relations with non-stake holders.

Student No: 260319626

2(b) Considering the 4-E fit model and porters five forces, company doesnt seem to be facing any urgent problems, however its main strategic challenge appears to be how it wishes to grow. Analysis of executives reflects that this desirable, whereas analysis of expectations suggest that growth must be consistent with sustainability. Analysis of enterprise suggests that it has strengths on which to build ( i.e strong brand equity of Clorox) its growth, whereas analysis of environment suggest that growth in natural products due to weak economic conditions will be difficult. Hence company faces three options (1) To continue spending on natural products and push the growth by creating the demand in the local market (2) To stop spending on natural products and concentrate on mainstream traditional products ( flagship products of the company) (3) To expand in other markets. From the information in the case, it is not clear what the company mission is, however its corporate strategy currently in relation to products to sell both mainstream and natural products in primarily US market, whereas business strategy is to differentiate itself in terms of efficacy in both traditional and green products. In the short term I suggest that company focus on its mainstream products, since the economic conditions may not increase the sales of premium products (natural products), furthermore competitors are also not spending that much on advertising, hence by focusing one or two main natural products will be sufficient as company has lower threat of losing its market share against competitors. Furthermore any significant advertising may not yield substantial increase in sales or profits. In the long run, I suggest that company start expanding in other markets starting from Latin America since Clorox has lots of infrastructure there and natural category is just emerging. Furthermore company should be spending some portion of revenues in R&D of natural products

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to innovate, since the next generation is very health and sustainability conscious and hence differentiated natural products will enable the company to gain substantial market share.