Burts Bees - The Merger Sustainability Option - Essay Example

Burts Bees and Clorox, CEOs XX, M&A Advisor 3/5 Re: The merger sustainability option Introduction. The goal of Burt’s Bees is tobecome the number one personal care products company in the world, while maintaining its commitment to the environment. On the other hand, Clorox Company’s goal is to improve its own sustainability image. In 2008, net sales for Burt’s Bees increased to $170 million from $136 million in 2007. The Burt’s Bees business remains a very solid contributor to Clorox’s results, with sales Growth and profit margins above the company average while Clorox has been vital in creation of the company brand. It is evident that the two companies have mutually benefited from each other. Macro environment and industry trends. In recent years, there has been a shift toward natural and organic products. Consumers are becoming aware of the dangers of putting chemicals on their skin. Modern research has revealed that these chemicals are linked to cancer. Most of the customers prefer the products that are natural. Anti-aging products and men’s skin care products have become popular in the last few years and are gaining visibility in the marketplace. Because of these trends, skin cares share of total industry revenue has grown during the last five years. Threats and opportunities Burt’s Bees has strategically positioned itself in the industry as a manufacturer of natural products. However, the company faces threats of stiff competition from companies such as Kiss My Face, Jason Natural Products, Nature’s Gate, and Tom’s of Maine. Three of these companies, including Burt’s Bees, are now owned by larger companies with a wide range of product offerings. Ordinarily, there is need for the products that that are natural and organic. This is because most of the consumers have become aware of the effects of chemicals on the skin that causes cancer in the long run. This makes them not to buy most of such products. However, Burt’s and Bees’ is on the competitive advantage since it sales organic products that the customers love. The strategic positioning of the brand enables it to beat its competitors. Burt’s Bees is an earth friendly, all natural skin care company that strives to do good for humans, bees, and the planet. The company has also opportunity in increasing innovation through the advancement of technology. The merger sustainability options I. Value chain and value addition In contrast, Clorox Company is a brand primarily known for its bleach products; Toxic chemicals that can harm the environment. The acquisition of Burt’s Bees by Clorox was part of the company’s strategy to focus on creating value by investing in new and existing categories that were consistent with consumer trends in areas of health and wellness, sustainability, convenience, and a multicultural marketplace. Clorox has helped Burt and Bees to raise the existing brands by innovation, expand into adjacent product categories, enter new sales channels, and pursue new businesses in growing markets where it could gain and sustain a competitive advantage. II. Brand image Clorox Company has done enough to change its own image. This has been done by increasing competition by expanding product lines, improving current products, and introducing new products. Some of these new products included Burt’s Bees facial towelettes and lip crayons. Internationally, Clorox focused on the expansion of its Burt’s Bees brand, which continued its strong growth, and expanded to new locations, including the Middle East and North Africa. In the last five years Clorox has continued to bring stockholders superior returns compared to competitors and the market in general, mainly through stock appreciation. This has increased the profitability of the company in the long run. III. Market entry strategies and diversification The industry for natural personal care products has grown rapidly, with an expected increase in global demand of 9.6% by 2018 to reach $13.2 billion. The demand is greater in the US, with an expected increase in demand of over 10% by 2018.The company has been developing markets include Asia, Pacific and Latin America. These markets are expected to fuel future growth, led by a quickly expanding base of middle class population, rising standards of living, and globalization of cosmetic brands. The company should also consider China in their growth strategies. China is considered as the major consumer of cosmetics. The company should raise the exportation of their products to China by 20% so as to increase the profitability. IV. Increase sustainability through CSR The packaging of many Burt’s Bees products is very attractive and decorative, also making the products more valuable. Customers like the idea of being able to display the products on a bathroom counter rather than having to hide them in a drawer with other skin care products. Burt’s Bees has also proven to be a trustworthy company, making goals and then following through. The company has a strong commitment to charitable giving, and is extensively involved in saving honey bees. With many consumers today using sustainability as criteria for purchasing from a company, these efforts also add value to both companies Clorox has also increased the sustainability by conducting environmental assessments to evaluate product safety. These evaluations include things as biodegradation and bioaccumulation, and impact on septic systems, aquatic life, birds, and other wildlife. This has enabled the brand of the companies to strategically positioned. Recommendations 1. The company should diversify the products like other companies so as to be competitive. Most of the companies that compete with Burt’s Bees also carry product lines that Burt’s Bees does not, so it is hard to make a comparison. 2. Natural products are considered luxury items too many consumers. When consumers have extra income they will spend more on skin care needs. The company should try to change the customer’s perception of the product. The products should have value addition so that the price reflects the value of the good. The products should be made in small quantities that they can afford.(Wood,2012) 3. The company should engage in more the CSR as a form of advertising the company. Quimby donated the profits from the new lines to preserve 186,000 acres of forest land in Maine; this started her relationship with the with The Nature Conservancy Action Who When 1) Increase the Brand image through advertisement of the company CEO In half a month 2) Diversify the products to other products that are not common CEO Immediately 3) Increasing market share to China CEO In one year 4) Unitization. Products should be done in small quantities to meet all demand CEO Immediately 5)Increase sustainability through CSR CEO In six months time Appendix Balanced Scorecard OBJECTIVES MEASURES TARGETS Financial Profitability Profit margin 40 % CAGR Increase equity investment Increased profitability Constant increase Customer Diversity of Products Market Share in China and Asia 50% coverage Customer satisfaction Increased sales 92% Internal processes Increased number of products units and area Increased sales -Increased inventory 85% production Learning/Innovation Burts Bees and Clorox product diversity Sale increase and Effectiveness of distribution High Effectiveness Work sited Wood, Frank. "Business Accounting 2." Prentice Hall, 2012. Read More