Church and Dwight Essay

A. Executive Summary 1. Summary statement of the problem: Church & Dwight, more commonly known by its brand name â€Å"Arm & Hammer,† has held a commanding lead in the sodium bicarbonate product market for over 160 years with virtually 99 percent of all consumer products in households within the United States. However, in order to promote growth and diversity while maintaining a steady profitability rate of three – five percent per year, the company has expanded uses of sodium bicarbonate products so that it is no longer the only focus. The acquisition of a diverse group of consumer products in international markets has been viewed as a viable option to sustain the profitability margins well into the 21st century (Wheelen & Hunger). 2. Summary statement of the recommended solution: Since Church and Dwight is a relatively small company, when compared to competitors in household and personal care product markets they must recognize the challenges of growing sales through acquisitions to promote growth and competitiveness within those markets. Church & Dwight must incorporate additional acquisitions of solid brands and products in order to grow market share through an expansion of product lines into a variety of â€Å"personal care, deodorizing and cleaning, and laundry products† as well as â€Å"specialty chemicals, animal nutrition, and specialty cleaners† (Wheelen & Hunger). In addition, to maintain its position in the world market place, Church & Dwight must expand into international markets and gain footholds in product markets through acquisition of manufacturing assets. Simply shipping domestic product lines overseas is cost prohibitive. Foreign manufacturing assets will allow product recogniti on by local consumers in foreign countries and markets. B. The Situation After 160 years, Church & Dwight is a giant in the household domestic product market with brand name recognition more commonly associated with â€Å"Arm & Hammer† products. However, this achievement in the market only nets $2.5 billion in annual sales worldwide. The company’s brand portfolio includes over 80 popular brands and competes for market share with other giants including Colgate-Palmolive, Clorox, and Proctor & Gamble, which have combined sales of over $100 billion. The company has also expanded over the past decade into other household product lines through acquisitions of consumer brands including Mentadent, Pepsodent, Aim, and Close-up, as well as Trojan. Church & Dwight has a core of specialty products primarily based on its successful sodium bicarbonate line of products. It currently holds 75% of the sodium bicarbonate market share. Expansion in the domestic markets has proven successful because of the â€Å"company’s pristine balance sheet†. Growth into the foreign markets has proven more challenging than domestic markets. Foreign market net sales in 2009 were only $393 million compared to domestic net sales of $1.8 billion (Cook). II. ANALYSIS A. Analysis of the Situation 1.Management – The Church & Dwight Company has continued a tradition of slow and steady leadership with a solid focus on long-term goals. The steadiness of the company’s leadership can be primarily attributed to the fact that 25 percent of outstanding common stock is owned by descendants of the company’s original cofounders, a tradition that continues today. In addition, the management of the company over the past 160 years has been handed down from generation-to-generation until recently when Dwight C. Minton passed on the position of Chief Executive Officer in 1995 to an outsider, Mr. Robert A. Davies, III (Wheelen & Hunger). This focused leadership style has enabled Church & Dwight to overcome potential leveraged buy-outs and hostile takeovers with a series of calculated actions and savvy business decisions. These actions allowed the board of directors and management to amend the company’s charter and allowed shareholders four votes per share. The board of directors was also re-structured into classes, in which each class serves staggered three-year terms (Wheelen & Hunger). In addition to staggering the tenure of the directors, the company initiated employee severance agreements with key officials, providing a severance package agreement to provide a â€Å"safety net† should any of the board member positions be terminated by a hostile takeover or leveraged buy-out by an unwanted suitor. By providing these lucrative packages for senior management, many were able to stay with Church & Dwight. This allowed for continuity of leadership styles, vision and mission focus. Because of this steadfast devotion to principles, steady growth over the years has occurred, identifying Church & Dwight as a Cash Cow, using the Boston Consulting Group (BCG) Growth-Share Matrix. However, as the company focuses more on international markets and enters other potential avenues of growing product lines, it will surely find itself labeled a s a Star. 2.Operations – Church & Dwight have peacefully existed over the past 60 years with sustained growth and profitability because it virtually held the market in the palm of its hands as other companies searched for ways to enter the household and personal care product lines. As a result of the constant forces in emerging markets, Church & Dwight has come to the realization that they have major challenges to overcome if they are to compete with other giants in the industry and continue to thrive. As the company gains a stronger market share in the international consumer products, the growth and profitability standard will continue well into the future. However, Church & Dwight also recognize they must remain vigilant to quickly and adequately deal with Porter’s Five Forces: Bargaining power of suppliers; Threat of new entrants; Threat of substitute products or services; Bargaining power of buyers (customers); and Rivalry among existing firms (competitors) (Wheelen & Hunger). When considering Bargaining Power of Suppliers, the force rating could be considered Medium as management must be constantly aware of any potential market shocks or trends. If an affiliate retailer is affected by unforeseen supply chain issues, like increased fuel prices, then those costs throughout the company may be affected to remain competitive. In addition, Church & Dwight are well aware of the economic situations that may affect their trade customers who may reduce distribution of products in which sales may decline, or adversely affect the financial performance of the company (Craigie). There was never historically a threat of new entrants into the sodium bicarbonate market prior to 1970. However, since the company has developed new product offerings and other established consumer brands, they now face the same competition threats of mature and domestic and international markets for consumer products. This threat of new entrants has emerged over the past decades and may now be rated high. The threat of substitute products or services is always considered high, as well, because consumers might choose a substitute item, if it is cheaper. This is a problem for any company. Bargaining power of buyers (customers) is generally a medium concern as consumer satisfaction is evaluated in a variety of ways. Otherwise, dissatisfactio n can drive prices up or down based on demand, or the lack of. Quality is a hallmark of Church & Dwight and the perception by consumers of any potential lowering of standards to decrease prices will typically drive loyal customers away. Finally, rivalry among existing firms (competitors) is high as competitors try to achieve greater market shares to grow potential profit shares. â€Å"Church & Dwight has in an enviable position to profit from its dominant niche in the sodium bicarbonate products market since it controlled the primary raw material used in its production† (Wheelen & Hunger). 3.Marketing – The Church & Dwight marketing strategy has been fairly simplistic since its focus has been on the sodium bicarbonate product lines for over a century. However, with additional acquisitions over the past 20 years, and the expansion into other household products, the brand recognition has become even more important. As a result, â€Å"marketing expenses for 2009 were $353.6 million, an increase of $59.5 million or 20% as compared to 2008† (Craigie). In addition, Church & Dwight caters to people of all ages and backgrounds. This wide range of customers allows them to develop more and more organic products and services with large scale agreements to satisfy those demographics. As the company expands globally, markets for one region could also be satisfied by other regions as production opportunities allowed greater cost-effectiveness. Unfortunately, â€Å"attempts to enter international markets have met with limited success, probably for two reasons: (1) lack of name recognition and (2) transportation costs† (Wheelen & Hunger). Finally, the company began a ground-breaking marketing campaign by airing commercials for condoms on prime-time television. This â€Å"shock† strategy increased its marketing strength and enabled the partnership with Quidel Corporation, â€Å"a provider of point-of-care diagnostic test, to meet women’s health and wellness needs† (Wheelen & Hunger). There are potential problems if various brand names fall into â€Å"the precarious line-extension snare† (Wheelen & Hunger). As the company expands and acquires more product lines bearing the â€Å"Arm & Hammer† trademark, the potential for substandard quality or customer satisfaction could cause a back-lash resulting in reduced sales around the world. Therefore, product marketing is essential to reinforce brand name recognition so consumers never forget the value and quality of a company’s name and its product lines. 4.Finance – Initially, the company’s domestic markets have proven successful. However, in keeping pace with competition in expanding product line markets, acquisition of assets has taken place, which could negatively impact the overall financial picture if profitability is not maintained. In 2009, Church & Dwight’s performance worldwide achieved an increase in sales of 4 percent; organic sales increased 5 percent, gross profit margin increased 44 percent while global marketing expenses only increased 20 percent; and the Net Cash Flow grew to a record level of $401 million (Craigie). Perhaps even more significant to investors is the report that earnings per share grew 23% and dividends on investments increased by 35 percent (Craigie). In contrast to the growing profits and expenses, the comp any also jettisoned noncore assets for the first time, including â€Å"five domestic and international consumer product brands acquired during the 2008 Del Laboratories transaction† (Wheelen & Hunger). This posturing of assets will enable a financially sound balance sheet in the future. Therefore, the financial status of Church & Dwight continues to grow as it has achieved modest gains from year to year, with hopes of even greater revenue and sales. Finally, the CEO remains focused on â€Å"building a portfolio of strong brands with sustainable competitive advantages† and the â€Å"long-term objective is to maintain the company’s track record of delivering outstanding TSR (Total Shareholder Return) relative to that of the S&P 500† (Wheelen & Hunger). 5.Administration – Church & Dwight enjoys a sound management strategy. It incorporates affiliates through agreements to sell its products. In addition, the former CEO, Mr. James R. Cragie, stated â€Å"†¦We have added $1 billion in sales in the past five years, a 72% increase, while reducing our total headcount by 5%, resulting in higher revenue per employee than all of our major competitors† (Wheelen & Hunger). While it may appear unsympathetic to the employee perspective, techno logical advancements allow for increased productivity in various aspects of manufacturing and labor allowing for greater productivity without the added expense of additional manpower. Church & Dwight also continue to operate with an ethical employment code in keeping with today’s expectations of utmost respect for both consumer and employee. The following is the company’s published Ethical Standards: â€Å"The reputation and integrity of Church & Dwight Co., Inc. are valuable corporate assets, vital to the Company’s success. Each Company employee, including each of the Company’s officers and general managers and each Company director, is responsible for conducting the Company’s business in a manner that demonstrates a commitment to the highest standards of integrity. Specifically, we encourage among Company personnel a culture of honesty, accountability and mutual respect. Additionally, we provide guidance to help Company personnel recognize and deal with ethical issues. Finally, we have provided mechanisms for Company personnel to report unethical conduct. Dishonest or unethical conduct or conduct that is illegal will constitut e a violation of these Standards and are grounds for disciplinary action† (Church & Dwight). 6.SWOT a.Strengths – The Church & Dwight Company has many strengths, with brand recognition being their greatest. In fact, Arm & Hammer continues to be their greatest asset and strongest product on the market today; the little yellow box is in over 95 percent of all households across the country. The sodium bicarbonate product line has proven itself for over 160 years with uses in baking, cleaning, and deodorizing, and as an added ingredient for things like drain openers and neutralizing agents. While there may be other similar products, Church & Dwight have virtually cornered the market by holding 85 percent of it. b.Weaknesses – A potential weakness within the company is the overextension of branding into many other product lines. â€Å"Until 1970, it produced and sold only two consumer products: Arm & Hammer Baking Soda and a laundry product marketed under the name Super Washing Soda† (Wheelen & Hunger). The company enjoyed success domestically, but â€Å"in the int ernational arena where growth was more product-driven and less marking sensitive, the company was less experienced† (Wheelen & Hunger). Therefore, they relied on acquisitions and management changes to improve its international footprint and reach. With ever-expanding product lines, suppliers, and retailers, the potential for an inferior product or service can cause a negative reputation, impacting the overall brand. Therefore, brand recognition should continue to be the focus when researching future products or investment avenues to ensure the quality of the product/service in the name of the company. Entire corporations have gone away because of a negative connotation to its brand name in the eyes of consumers. c.Opportunities – The possibilities are endless as Church & Dwight continue to pursue additional product lines in household, personal care, specialty, and international products. Future expansion in acquisitions and assets may prove more advantageous as potential consumer products become even more attractive to increase the profitability as the manufacturing base is expanded around the globe. Perhaps i n 20 years, we may have cars manufactured by Church & Dwight, as well. d.Threats – The primary threat to Church & Dwight is competition. Competitors have an even greater market share and larger marketing campaigns to remain leaders in their respective niche. There are always going to be threats to its business operations, products, services, and reputation. Therefore, ongoing evaluation of partnerships, agreements, consumer satisfaction, quality of production, quality of service, etc. is always continuing. Without a continuous evaluation process, companies may find themselves outsmarted, out-marketed, out-produced, and out of a job. Church & Dwight have done a great deal in maintaining a very loyal customer base through evaluations of consumer trends and ensuring affiliates maintain the highest standards to retain the reputation as the leading household product manufacturer 7.Products or Services – Church & Dwight continue to produce some of the most widely known household care products. These products are based on differences in the nature of their uses and organized into three reportable segments: Consumer Domestic, Consumer International and Specialty Products (SPD) (Craigie). The company currently produces 80 different product lines, in which eight major brands make up a total of 80 percent of its business (Craigie). The most famous of the company’s products is Arm & Hammer Baking Soda. As a company focused on quality and innovation, Church & Dwight has â€Å"a discreet marketing team focused solely on new product development† (Church & Dwight). In addition, the company is focused on goals to develop differentiated products with new and distinctive features, increased convenience and value, and engaging outside contractors for research and development activities (Church & Dwight). B. Problem Definition 1.The Church & Dwight case study identified a corporate problem needing to continue expansion in products and services, while presenting a consistent operating profit and increasing market shares of the household product industry. Expenses were continually evaluated and streamlined to reduce inefficiencies; including product research and development to identify â€Å"new uses/markets for an existing product† (Wheelen & Hunger). Unfortunately, constant pressure from global competitors seeking to enter domestic and international markets, as well as an overall poor economy, is creating an atmosphere where continued growth must be developed through new opportunities for expansion into new geographical markets, new products/uses, all while striving to control increasing transportation costs. 2.In order for Church & Dwight to retain its position as the leading household product manufacturer, it must continue to provide outstanding customer service, excellence in product quality, invest in cutting edge technology to remain a viable resource for consumers, as well as developing new uses for its primary product line to ensure customers remain satisfied with the product, as promised. In addition, expanding its share of other household product opportunities and innovations will be key to any future growth. Yet another opportunity for Church & Dwight to grow is in the business-to-business exchange market for suppliers, manufacturers, distributors, and retailers to use. By providing this service to its affiliates and partners, they would be able to achieve greater operational efficiencies in their supply chains. 3.As Church & Dwight enjoy a considerably large loyal customer base, competing with Proctor & Gamble and other industry giants to get customers to switch competitors is no easy task. However, with any challenge comes greater innovation and new ideas. Relationships with suppliers, manufacturers and other retailers allow for greater efficiencies in costs by consolidating orders, developing greater discounts on shipping costs, or even creating greater financial incentives for affiliates to increase sales and customer satisfaction rates by increasing consumer awareness of the quality and reliability of services and products available to them. III. SYNTHESIS A. Alternative Solutions Brand recognition for ARM & HAMMER brand products has already been established within the domestic markets of the United States. International markets continue to challenge emerging companies due to cultural differences in market populations, cultural differences in marketing strategies, and language barriers requiring new brand names more suitable for local languages/cultures. With low population growth rates and households in international markets, increasing transportation costs, and intense competition and higher commodities costs, manufacturers are turning to new and innovative processes to increase their share of the household product markets. For example, rising gas prices are a concern since it directly contributes to increased production costs. In response, household and personal care product companies are making efforts to stimulate sales in varying ways, such as entering new markets, creating new product segments, strengthening strong brand image, acquiring businesses, targeting market audiences, and increasing advertising budgets. Another alternative could be to develop joint-business ventures with suppliers, manufacturers, distributers, and retailers. The benefit to this option would be to streamline production and sales and allow the ease of marketing products and services to its affiliates and partners. This option would also allow greater operational efficiencies and translate into lower costs for Church & Dwight and lower prices for consumers. B. Recommendations and Conclusions As Church & Dwight look to satisfy competitive pressures while still reeling from the recent economic crisis, the following recommendation and solution is presented in hopes of reducing expenditures and continuing company growth through new product development and market expansion. Expanding into new markets with â€Å"major competitors jockeying for shelf space and retailers seeking to rationalize their breadth of product offerings, more changes may be considered† (Wheelen & Hunger). Therefore, the best recommendation for Church & Dwight at this point in time would be to implement the first alternative, delving into new product lines both in domestic markets and even greater exploration of international markets. This option would be advantageous because of the limited financial investment required to grow already established footholds in foreign countries to manufacture and transport new product lines. In addition, by improving upon past successes and avoiding past mistakes, a sound marketing campaign could attract additional consumer traffic to its existing retailers and product outlets. Arm & Hammer also has premier brand recognition within the United States, which would look to use its large customer base to compete against Proctor & Gamble or Colgate-Palmolive, and Clorox. Finally, to satisfy any shortcomings in this solution, it is further recommended that Church & Dwight initiate an aggressive marketing strategy incorporating foreign experts in business and marketing development to identify focus groups to better understand cultural differences and expectations in product innovations. Understanding why a specific culture or race chooses one brand over another is key to identifying potential aspects of a new product line that would be warmly received in another country rather than simply pushing an American-made product brand on a culture that has no experience with the product or whose name may have a derogatory meaning in their language. This option could also allow Church & Dwight to market potentially less expensive alternatives to Proctor & Gamble or other foreign corporations specializing in household products in another country or region. This recommendation provides a potential solution to increase sales while growing market share and staying ahead of the competition. References Church & Dwight, Co. Inc. (web). Churchdwight.com. Retrieved on April 8, 2012 from http://www.churchdwight.com/index.aspx Craigie, J. R. (February 24, 2010). Church & Dwight co., inc. 2009 annual report: Churchdwight.com. Retrieved on April 8, 2012 from http://www.churchdwight.com/PDF/AnnualReports/2009-CDH-Annual-Report.pdf Wheelen, T. L., & Hunger, J. D. (2012). Strategic management and business policy toward global sustainability. (13th ed., pp. 19-20). New York, NY: Pearson Hall.