International Business of Beiersdorf AG - Essay Example

International Business -Case of Beiersdorf- Introduction This paper addresses the theme of international business in the case of a company present globally i.e. Beiersdorf AG. A multinational enterprise is defined as a company, which has headquarters in one country, but also it is operating in other countries (Wall, et al., 2010). Beiersdorf is based in Hamburg, Germany and has brands such as Nivea, Eucerin, La Prairie, Labello, 8x4 and Hansaplast/Elastoplast (Beiersdorf, 2012), but also is operating in other countries around the globe. The organization of its headquarters includes five divisions and two segments: consumer business and teas business. Expanding Strategies Considering the long history of Beiersdorf and its presence on international markets, in this part,the expanding strategies of this company in the last 20 years will be examined. In the 1990s, Beiersdorf sales were coming mostly from the Nivea brand, brand that was constantly expanded by the company, starting from skin creams (including those for men), sun care creams, antiwrinkle creams, baby creams, shower products, to deodorant (Jones and Lubinski, 2011). Taking this into account, in 1993 Beiersdorfs has reacquired the rights to the Nivea brand name in the United Kingdom, rights that had been held by an English company since World War II. The company set up in 1994 a joint-venture with a state-owned chemical company in Shanghai called Daily Chemical Factory No. 2 in order to produce its products in the Asian market. Also, in this period, Beiersdorf contracted a 60% longtime joint-venture with Japanese consumer products giant Kao Corp. to market Nivea in Japan. By the end of the 1990s, Beiersdorf had 74 international affiliates and generated almost 70% of its sales outside its origin country - Germany. This multinational continued its policy of opening up to new countries and new product categories (e.g. synergistic expansion) even in 2000s (its presence globally can be seen in Figure no. 4). Synergistic expansion of Beiersdorf consisted of acquisition of the plaster brand Elastoplast in 2001 (which was the market leader in many countries, including the United Kingdom and Ireland). Following the acquisition, Beiersdorf has positioned itself as a global leader in this market. In 2008, Beiersdorf acquired C-Bons, a personal care firm from China and planned other acquisitions to expand further in China. This acquisition was a further initiative in the implementation of the company’s consumer business Strategy, enhancing the company’s business in China and in addition its activities in the growing hair care segment. In 2009, the company has invested €10 million in a factory in Bangplee, Thailand in order to double its manufacturing of Nivea products and to expand in the Asian Market. The factory which has 460 workers, supplies other countries in Southeast Asia e.g. Indonesia, Vietnam, Malaysia, but also Australia and New Zeeland markets (Weiping, 1999). These investments lead to the production of 31.000 tons of Nivea products per year. In 2011, Beiersdorf has decided to expand into Malaysia, completing an agreement with DKSH, which will provide warehousing, transportation, stock management, IT and back office services to Beiersdorf. The expansion in Malaysia consists of all Beiersdorfs flagship brands, including Nivea and Eucerin. The contract between DKSH and Beiersdorf started in 1982 on the first expansion of the company in Thailand and has since then been expanded into other Asian countries e.g. Singapore, Vietnam, Cambodia, Myanmar, Laos and Taiwan, where the company has established a leading market share for brands as Nivea and Eucerin. Considering the fact that nowadays Beiersdorf is globally present, Figure no. 1 offers a structure of the sales of this company by region for 2011. Figure no. 1 Structure of Sales by Region Source: Data processing from Beiersdorf, 2011. Annual Report. As it can be depicted from the figure, Europe brings the major sales for the company with a 65%, followed by Australia, Africa and Asia considered as a unity and America with 19%. To better analyze the expansion of Beiersdorf, outside Germany, Figure no. 2 presents the sales by region in the period 2002-2011. Figure no. 2 Evolution of Sales by Region (€millions) Source: Data processing from Beiersdorf, 2012. Ten Year Overview. As it is shown in the chart, Beiersdorf sales have increased outside Europe as a consequence of its investments and expanding strategies abroad. Most recently, Beiersdorf has extended its activity in Brazil, Colombia, Korea and the Dominican Republic. Also, considering Eastern European region, following the acquisition of majority interest in Pollena-Lechia, Beiersdorf has focused in developing its activity in Poland in 2012 and the following years. Analysis of an Investment Project This last part proposes to analyze an important investment project developed by Beiersdorf in recent years. In 2011, the company announced an investment in Nivea brand, having as main objective winning back its market share. The analysis of this project consists of a presentation of the situation of Beierdorf before involving in this project, after this a description of the costs and the main reasons behind this investment and expected results and finally, an overview of the outcomes of this investment for the first quarter of 2012. Before this investment in restructuring Nivea brand, Beiersdorf was considered by financial analysts as a takeover target for Unilever and Colgate-Palmolive. The main reasons for this consideration were that the company’s sales were suffering from slow economic growth, especially with 90% of profits coming from a sluggish Europe, a cyclical Tesa adhesive business, which made up 15% of sales and also a lack of investment in fast-growing Asian market. This facts lead to the replacement of the CEO Thomas Quaas with Stefan Heidenreich. With its new CEO, at the end of 2010, Beiersdorf set aside 270 million euros for a turnaround "Focus on skincare" package through to 2012 to invest in skincare and to get rid of unprofitable makeup and haircare lines. The amount invested in Nivea’s restructuring in 2011 was of 100 million euros. The main drivers for this high amount invested in Nivea were the worrying financial situation of the company, the lack of investments in the last years and also the forecast that by 2015, skin care will be the main growth driver in the global cosmetics market, accounting for 45% of growth. Also, the celebration of NIVEA’s 100th anniversary in fiscal year 2011 provided Beiersdorf with an excellent opportunity to do this investment and realign the brand, without taking to many risks. At the moment of this investment, company was expecting that the sales for the rest of 2011 and the coming years to be flourished by the investments in Nivea’s streamlining. Finally, this paper proposes an analysis of Beiersdorf’s results after taking over this investment project in Nivea. More specifically, in Figure no. 3 presented are the sales for the region for the first quarter of 2012, in comparison with the same quarter of 2011 (before the investment in Nivea’s realignment). Figure no. 3 Sales by Region (€millions) Source: Data processing from Beiersdorf, 2012. Interim Report. As it is depicted by the figure, sales rose significantly in 2012 in comparison with last year performance. This strong growth was influenced by various factors, from which the new strategy and the investment in Nivea are starting to bring a successful overall market trend. In what concerns Nivea’ sales, these rose by 10.1% compared with the previous year, from which Nivea Deodorant, Nivea Sun and Nivea Body Care recorded extremely good growth rates. Considering these results, it can be sustained this investment is paying out benefits for the company, which responds to the analysts forecasts that the last chance for Beiersdorf to recover from its sluggish sales and also from takeover threats was this investment in Nivea. Conclusion Throughout this paper were analyzed main points of international business in the case of Beiersdorf. This company has developed from the start a market based strategy and it is present globally in Europe, America, Africa, Asia and Australia. In what concerns the last twenty years, Beiersdorf has expanded in new regions and also in emerging markets, more recently being focused on Poland. An investment project considered by analysts the last chance for Beiersdorf to recover from its sluggish sales and also from takeover threats was the realignment of Nivea brand in 2011. As it was shown in the paper, this project has proved to be successful considering the sales of the company for the first quarter of 2012 and also it gave a good signal to the market in what concerns the price of the company’s shares. Reference List Beiersdorf, 2012. Beiersdorf. [online] Available at www.beiersdorf.com [Accessed 18 October 2012]. Beiersdorf, 2011. Annual Report 2011. Hamburg: Beiersdorf. Beiersdorf, 2012. Interim Report 2012. Hamburg: Beiersdorf. Beiersdorf, 2012. Ten Year Overview. Hamburg: Beiersdorf. Jones, G., Lubinski, C., 2011. Managing Political Risks in Global Business: Beiersdorf 1914-1990. Oxford Journal, 13(1), pp. 85-119. Wall, S., Minocha, S. and Rees, B., 2010. International Business. 3rd ed. Harlow: Prentice Hall. Weiping, M., 1999. The Beiersdorf Company. Journal of the GCPD, 5(1), pp. 37-39. Read More