Student No: 260319626

1

McGill University

Desautels Faculty of Management

Markets and Globalization: Take Home

Assignment

Strategy Section

Section 1

Rehan Ali 260319626

Student No: 260319626

2

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 company’s main competitors in traditional products are P&G and

Unilever, whereas in natural cleaning segment, company’s main competitors are Seventh

Generation and Methods. Further Analysis of company’s environment can be done by evaluating

Porter’s 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 aren’t 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 company’s traditional cleaning products, whereas it’s a

significant threat for company’s 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

Student No: 260319626

3

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 Wal-

Mart, 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 company’s revenues). Even though the company didn’t 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 company’s

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

Student No: 260319626

4

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 company’s 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

5

2(b) Considering the 4-E fit model and porter’s five forces, company doesn’t 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

Student No: 260319626

6

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.