Statement of the Problem
For any given company to remain viable in business, it should be able to cope with the aggressive and costly competition that emanates from other players in the industry. In this case, Henkel Company has over the years experienced intense competition from Unilever and Procter & Gamble (P&G).
Henkel regards the two companies as the main competitors. Both Unilever and P&G have applied a competitive dynamic that makes it easy for individual companies to focus largely on instituting a global brand other than concentrating on national subsidiaries.
The two companies find it appropriate to direct their resources toward a specific and defined portfolio that is capable of producing a powerful global brand, and offerings that are highly standardized. Henkel has for a very long time concentrated on producing strong brands for the local market, while ignoring the global consumers.
This strategy has not worked well for the company because consumers’ preferences are not uniform. This implies that whatever Henkel produces for the local market may not suit the needs of the targeted customers. It is possible for a given product to have more demand from customers who are not known to the company.
Changes in customers’ tastes and preferences may be caused by various factors such as increased the internationalization and changes in income level of consumers. Needless to say, pressure that comes from retailers can significantly affect the taste and preferences of the customers.
This is due to the fact that retailers will always want to convince consumers to buy a given product. However, this depends on the negotiation power of retailers. Retailers with strong negotiation power are likely to make more sales because of their ability to convince customers on the importance of purchasing a given product.
Henkel has made tremendous effort to address the above issues by ensuring that its products do not cater for the local customers only, but are also available globally. A typical example is Henkel’s decision to introduce the Persil brand to markets in Spain and Italy.
Even after the introduction of different brands (such as Persil) in new markets, there is no assurance that the company will manage to address the issue of increasing competition from its competitors. This is also in consideration of the fact that there exists opposing forces between retailers and the consumers.
Quite a good number of retailers prefer to deal with international brands, while consumers are interested in local brands.
Therefore, it implies that several companies (such as Henkel) will always experience problems when reviewing brand strategy to ensure that the demand from both the local and foreign consumers is met, and when trying to eliminate the opposing force that exists between the consumers and retailers.
This paper explores Henkel’s performance over the past few years while considering the increasing level of competition from competitors. It also tries to establish the best strategies or recommendations that can help the company to address the above issues.
Analysis
After it was founded in 1876, Henkel entered the market by launching various products (such as Persil). This made the company to become a market leader within a very short time. The outstanding performance of the company was reflected when it was ranked second position in Europe, and fourth position globally.
However, the company did not have major activities in other areas (such as UK and North America). This was mainly as a result of historical reasons.
The management of the company believed that it would make good use of its resources by concentrating most of its activities in Europe where the demand for its heavy-duty detergents was high. It should be understood that production of detergents was limited because of environmental concerns and consumers’ preferences.
However, preferences of consumers to detergents varied across countries. Therefore, this meant that the production of detergents was dependent on demand.
For example, some consumers preferred the concentrated version of liquid and powder detergent while other consumers were in favor of the version that had lower concentration level.
Henkel found it quite convenient to focus more on the production of powder detergents because production cost (especially packaging cost) of powdered detergent was lower than the production of liquid detergents.
It is worth to mention that Henkel’s Production of detergents was also in consideration of the specific regions where potential consumers were located. For example, the company ensured that adequate quantity of heavy-duty detergent was produced to cater for consumers within the northern markets.
For Italian consumers, the company produced blue detergent since blue is the favorite color for many Italians. Other issues that the company observed while producing its products included the environmental concerns and the performance of different brands in terms of product attributes and cleaning power.
Even with the development of these measures, Henkel failed to enjoy complete loyalty to its products from customers. This was largely as a result of extensive price promotions from the competitors.
Based on this fact, this paper provides quite a number of recommendations that can help companies (such as Henkel) to reduce or eliminate unnecessary competition and increase consumers’ brand loyalty.
Recommendations
There are a number of ways or strategies that Henkel can employ to reduce or completely eliminate unnecessary competition and increase consumers’ loyalty to its brands. To start with, the company can embark on massive brand standardization in order to increase the bargaining power of retailers.
A good number of retailers prefer to deal with adequately supported global brands that can be offered at lower prices to attract more customers. Standardization can be carried out in different ways. For instance, it may involve grouping the product into different categories.
This means that products that are believed to be more superior are sold at higher prices while the less superior products are sold at lower prices. In consideration of the fact that several consumers would demand for a top-tier premium brand, Henkel should focus a lot on marketing its brands within the mid-market.
Similarly, the company should supply its retailers and distributors with premium brands in order to enable increase in their sales since most of the customers prefer such brands.
Secondly, Henkel can also increase the number of products sold within the international market. In order to achieve this type of ambition, the company should try to merge different companies. The merged companies should all be under its ownership and single management.
The best method to undertake this process would be by completely acquiring the ownership of competing companies. If this strategy fails, then Henkel should find ways of merging with its competitors in order to eliminate unnecessary competition.
Needless to say, the company should introduce different portfolios in all the countries where it is undertaking its activities. This should go hand in hand with brand positioning.
The latter can b executed by targeting specific markets with favorable demand. However, the company should be careful to avoid instances of adopting a complex product portfolio that can turn out to be costly.
The management at Henkel can also develop an appropriate product performance strategy. This implies that Henkel should standardize its products in such a way that it does not cause destruction of product value in a given market.
In circumstances whereby the market is anticipated to make changes on brand preferences, Henkel should consider embarking on a brand platform strategy.
When introducing an existing product to a new market, or even when initiating a completely new product, Henkel can adopt a strategy that is capable of increasing consumer awareness on the attractiveness of the new product.
Such a strategy will require involvement of identical product advertising, formulation, and positioning. The success of this process depends on the ability of the company to back up its regional production as well as its international rollout.
Henkel can also benefit significantly by establishing strategies that can enable the company to reduce the cost of production and other related expenses. This can be achieved by undertaking extensive research in identifying appropriate techniques that limit the level of variable and distribution costs.
Conclusion
From the above discussion, it is indeed vital to assert that companies (such as Henkel) can improve their performance and cope with increasing competition by developing techniques that increase consumers’ loyalty to a given product.
While undertaking this process, a company should ensure that all its products are available both within the domestic and international markets. In situations where these techniques fail, the company can still resort to other alternatives (such as merging with competitors) in order to minimize competition.