Introduction
Hempel Paints is among the largest coating suppliers across the globe and operates in general industries. The company was established in 1982 as a subsidiary of Hempel Paints based in Denmark (Dun & Bradstreet, 2022). They are recognized for high-quality coatings and solutions that service major local and global markets. Hempel’s production enables quick availability of products and solutions, adequate customer support, and the flexibility to sell directly from stock or produce any product in its range in a timely manner.
Key Events
There are various key events that happened within and around Hempel Paints. In 1982, the company was formed as a subsidiary to capture the market in the Middle East. It was an expansion strategy to reach global markets. In 1986, the company was incorporated and started producing paints and other coating solutions (Dun & Bradstreet, 2022). In 2019, the company introduced sustainable development technology to reduce its environmental impact. In 2020, the emergence of the COVID-19 pandemic interrupted the company’s supply chain in the market.
Internal Analysis
SWOT Analysis
The strengths include having a strong brand name, known globally as the best manufacturer of paints. In addition, the company has a committed workforce and good access to distribution networks. The company is also active in contributing towards environmental sustainability. However, the weaknesses of the company include high prices of products due to the high cost of raw materials (Dun & Bradstreet, 2022). The firm can make use of opportunities such as increasing demand for sustainable products. It should consider developing products that are environmentally friendly. It also makes use of a high number of internet users to support its digital marketing. However, the threat that the company should minimize is the existence of intense rivalry in the industry.
VRIO Analysis
VRIO analysis is one of the key tools used to analyze the micro-environment of a business. It consists of aspects like value, rare, imitable, and organization.
- Value: It has reliable employees who help in the production of high-quality products for customers.
- Rare: The products of the company are unique.
- Imitable: Managing the employees is a costly venture and challenging to copy.
- Organization: One of the strengths of the organization is organization to attract value.
Value Chain
The value chain is a set of activities that an organization performs to create value for its customers.
- Inbound logistics: The organization obtains raw materials from verified suppliers. It also has effective inventory and storage processes.
- Operations: The organization constantly trains its employees to ensure that they have the right knowledge to produce quality products.
- Outbound logistics: Customers can get their products through its brick-and-mortar stores as well as make online orders.
- Marketing and sales: The organization uses modern marketing techniques to reach its customers.
- Service: The organization provides after-sale services such as free packaging to its customers.
Resources, Capabilities, and Competencies
The internal analysis through SWOT reveals the resources, capabilities, and competencies of Hempel Paints. The resources of the company are integral to its performance. For example, the organization has a strong brand and effective leadership (Dun & Bradstreet, 2022). The leaders are committed to achieving organizational goals. One of the capabilities of the organization identified is market dominance due to high-quality products. In addition, the company has a strong relationship with its stakeholders.
External Analysis
Porter’s Five Forces
The power of suppliers and buyers is among the five forces in this model. The bargaining power of buyers in this industry is low. Similarly, the bargaining power of suppliers in this sector is low. The suppliers are also many in the market, which makes it hard to control the prices of the products supplied (Goyal, 2020). In this industry, competition is high because the existing firms have the capacity to produce quality products. They also set competitive prices in the market to attract more customers. Some of the competitors to Hempel Paints are SP Group and Jotun. On the other hand, the threat of new entrants in the sector is low (Goyal, 2020).
PESTEL Analysis
PESTEL analysis is an important model in the analysis of the external business environment. The macro-environment analysis for Hempel includes;
- Political factor: They have a conducive environment for local and foreign businesses.
- Economic: It is economically stable, with an unemployment rate of 0.2%.
- Social: COVID-19 adversely affected social events.
- Technological: The country has invested heavily in its IT infrastructure.
- Environment: There is an increasing concern for environmental protection.
- Legal: The countries developed their laws using concepts from civil and Islamic law (Abdallah, 2020).
The performance of Hempel Paints
The performance of Hempel Paints can be determined by the profit earned. The organization performs well when it earns a profit and poorly when it gets a loss. For example, in 2017, 2018, and 2019, the company earned a profit of €55, 48, and 50, respectively (Hempel Paints, 2020, p.5). Although the company earns a profit, there was a decrease in profit earned from 2017 to 2018. However, there was a slight increase in profit from 2018 to 2019.
Trends in the Environment
There are various trends in the business environment that might affect the operations of Hempel Paints. The first trend is the adoption of new technology to improve the efficiency of operations. The second trend is the increasing demand for sustainable products. Consumers are becoming more conscious of environmental issues and want to engage with organizations that protect the environment. The third trend is the increasing demand for quality products in the market. Consumers want products that meet their needs (Hempel Paints, 2020).
Comparison and Competitive Advantage
Competitive advantage is integral for the effective performance of the organization in the market. When compared to the SP group, the organization’s products are high. This makes it possible for customers who are price sensitive to shift to the SP group. In terms of workforce, the company has a more reliable and committed workforce compared to its competitors. In addition, different from its rivals, the company is known globally due to its effective performance. Finally, the company has a high financial strength compared to its rivals.
Diagnosis
- Strengths: The company is known globally for the provision of quality products in the market.
- Weaknesses and threats: The high price of its products affects its competitive advantage in the industry (Hempel Paints, 2020).
- Value chain: The products are acceptable in the market because it meets the needs of customers.
- Clear strategy: The organization has set strategic goals which it intends to achieve.
- Opportunities: The organization wants to ensure that its products are environmentally friendly.
- Resources, capabilities, and external environment: The organization has skilled employees to help in the production of quality products.
Potential Problems
After the analysis of the internal and external business environment, the following problems were identified. Firstly, the prices of Hempel’s products are high in the market. One of the symptoms of this problem is the loss of customers. For example, customers are shifting to other brands in the market. Secondly, poor research is a problem that affects the performance of the organization. The symptoms are a reduction in sales, increasing cost of production, and the company only responding to the trends in the environment.
Solution
The leaders of Hempel Paints should consider improving its research and development department. Currently, the organization lacks a committed research and development team. The reason for this solution is to stay ahead of the trends in the market and remain relevant. In addition, having an active research and development team will enable the company to develop new products (Hempel Paints, 2020). The team will come up with new ideas for improving the products to meet the needs of customers. The ultimate purpose is to achieve a competitive advantage.
The second solution to the problems identified is reducing the cost of production by modernizing infrastructure. The cost of production affects the revenue and profit that an organization gets. It also determines the prices charged on products. As a result, the main purpose of lowering production costs is to increase profitability. When the cost of production is low, profitability becomes high. The other reason is to lower the price of products and become competitive.
The third solution to the issues identified is adopting new technology. This involves incorporating new technologies in the business environment that are able to make the organization more efficient. One of the reasons for this solution is to achieve the anticipated efficiency. This means that the operations of an organization are able to run effectively. The second reason is to reduce the cost of production. Adopting the right technology helps an organization to smoothly run its activities.
Implementation of Cost Reduction Measures
The implementation of cost reduction involves adopting measures to make it real. To achieve this, the leaders and managers of the organization should consider analyzing its supply chain and identify areas of improvement and make changes. For example, if the raw materials are costly, the organization can explore the market to find affordable materials. The process should take about three months to achieve the objective. The outcome of the process will be increased revenue and profitability.
The Implementation of New Technology
The implementation of the new technology will play an integral role in the production of quality products. To achieve this, it should focus on adopting technical tools that are able to improve its operations. They should analyze the tools and only select and invest in one that has the most benefit to the organization. It should take the company about one year to implement the solution. The possible outcome of this implementation is the production of quality products for customers and a reduction in the cost of operations (Varian, 2018).
Implementation: Revamping Research and Development Department
The next implementation involves creating an active research and development department. For the department to run effectively, skilled employees will be required to make research and development effective. As a result, the company should create a team of skilled and committed in the Department of Research and Development. This should take the company about six months. The possible outcome of this implementation is the ability to generate new and effective ideas for improving its products in the market. This will enable the company to have a competitive advantage (Kansal & Singhal, 2018).
Conclusion
Despite being a recognized brand in the market, Hempel Paints should incorporate appropriate strategies to perform effectively in the market. From the analysis of the external and internal business environment, the issues identified adversely affecting the company are high competition in the industry, technological disruptions, and shifts in customer needs. To solve this issue, the company should focus more on its research and development department. It should revamp its research team to ensure that they have the capacity to generate new ideas.
Reference List
Abdallah, A. (2020) ‘The Future of Green Cities in 2040: A Case Study on the Capital City of Qatar, Doha,’ Humanities and Social Sciences, 8(6), p.170.
Dun and Bradstreet (2022) Hempel Paints. Qatar. Web.
Goyal, A. (2020) ‘A critical analysis of Porter’s 5 Forces model of competitive advantage,’ A Critical Analysis of Porter’s, 5.
Hempel Paints. (2020) Annual report 2019.
Kansal, J., & Singhal, S. (2018) ‘Development of a competency model for enhancing the organisational effectiveness in a knowledge-based organization,’ International Journal of Indian Culture and Business Management, 16(3), 287-301.
Varian, H. (2018) ‘Artificial intelligence, economics, and industrial organization,’ The economics of artificial intelligence: an agenda, 24.