Reckitt Benckiser

1. Introduction

By meaning, consumer goods refer to final products that are available to consume by customers directly rather than to be raw materials for further production of other goods. For example, health care products like shampoo or body wash are final goods since customer can directly use them but chemical substances such as Zinc Pyrithione and Glycerin (ingredients of shampoo and body wash, respectively) are not the final products since they are intermediate substances utilized to make the final products for customers.

There is interesting fact concerning the consumer goods industry since it continues growing faster in volume and spawning new players with their particular innovation that add up the fierce competition.

Many worldwide corporations compete in consumer goods industry including Procter & Gamble (P&G), Unilever, Reckitt Benckiser, and many others. Each company has produced much kind of consumer goods that are beneficial for customers by equipping the products with innovative substances and appropriate marketing strategy to target market effectively.

Since many factors and forces influence businesses, internally and externally, it is found that corporations continue coping with market challenges by developing brand new products. In order to analyze the strategy of a company, this paper will elaborate the current business strategy of Reckitt Benckiser, a company that produces many kinds of consumer goods including surface care, fabric care, dishwashing, home care, health & personal care, and food.

This paper will analyze issues about Reckitt Benckiser from strategy perspective by using PESTLE analysis and then identify key marketing features and its competitiveness by using the concept of product life cycle and innovation.

2. PESTLE Analysis

            Industrial analysis composes of two general forms: external and internal analysis. While SWOT analysis considers both external and internal forces, PESTLE analysis focuses on discussing the external environment that influences an organization or industry. PESTLE analysis consists of six elements: political, economical, socio-cultural, technological, legislation, and environmental.

• Political Factors

Political factors become key issue for business especially those operate in worldwide. This is because every government has its own policy towards business, products, and country of origin (QuickMBA.com, 2006).

According to QuickMBA.com, political factors include formal and informal regulations that influence the way a business conduct its operation. Several political issues include employment laws, trade restriction, tariffs, and political stability.

Concerning the political forces on Reckitt Benckiser, many issues influence the business of fast moving consumer goods (FMGC) such as British employment law and British Act on advertising and marketing services.

Regarding the advertising and marketing services, currently Reckitt Benckiser tests the current revision on European Union law, which is also known as the Transfer of Undertakings Protection of Employment. The changes on the 25-year old law have significant impact of FMGC business in the UK since April 2006 (McMains and Solman, 2006).

In order to take benefits of the new law, Reckitt Benckiser, in June 2006, consolidated its global creative duties that account for more than $600 million at Havas’ Euro RSCG. The impact of the new law has driven Reckitt Benckiser to shift its business from other shops (McMains and Solman, 2006).

Another political force on Reckitt Benckiser is the fact that UK becomes a major G8 economy that has significant role in Europe. The country’s political and economic stability has created well-developed legal and regulatory framework that encourage vast investment in research (The British and Colombian Chamber of Commerce, 2006).

In addition, the existence of reachable transportation via tunnel rail link to Europe also increase political strengths of British Companies to expand market much more easily to numerous market throughout the Europe (The British and Colombian Chamber of Commerce, 2006).

• Economic Factors

Economic factors have important influence on Reckitt Benckiser since it favors the business by influencing purchasing power of consumers and the firm cost of capital. Some issues on economic factors include economy growth, interest rates, foreign exchange rates, and inflation rate (QuickMBA.com, 2006).

Concerning the economic factors on Reckitt Benckiser business, the strategic geographical position of UK in the Europe encourages British companies such as Reckitt Benckiser to expand into major markets in the Europe especially and other markets in the world in order to increase their revenues.

The situation occurs since more than a century ago when in 1886, Reckitt Benckiser started its expansion plan by open businesses in Australia. In addition, the company also started expanding into Eastern Europe in 1991 and into Baltic countries, Belorussia, China, and Israel in 1996 (Reckitt Benckiser, 2007f).

Another economic factor that influences Reckitt Benckiser is the favorable economic indicator of UK as shown in the table 1. The table shows that the country has positive economic performance that sustains the business of Reckitt Benckiser.

Table 1            UK Economic Indicator

Source: (The Economist Intelligence Unit Limited, 2002)

2.3       Socio-cultural Factors

            Socio-cultural factors refer to demographic and cultural forces that influence a business. The factors include diverse customers’ needs, health consciousness, safety concerns, and age distribution (QuickMBA.com, 2006).

Concerning the business of Reckitt Benckiser, for instances, the need for innovative products on health care had driven the firm to conduct major breakthrough by inventing germicide Dettol in 1933, which fortunately also endorsed by physician at that time (Reckitt Benckiser, 2007f).

2.4       Technological Factors

            Another macro environmental factor is technology. In fast moving consumer goods industry, technology plays significant role since it reduces barriers to entry and increases production efficiencies, to name a few. Some activities relate to technological factor are the degree of R&D, production automation, rate of product invention, new technology or invention (QuickMBA.com, 2006).

            As company that competes in fast-changing consumer demands, Reckitt Benckiser realizes that innovation becomes the heart of business growth. Therefore, the company keeps inventing attractive products that are more efficient and affordable.

            The invention of Finish Quantum, for instances, marks the firm commitment to continues spawning new products as the result of improved technology. Finish Quantum is recent innovation in the first automatic dishwashing that combines powder, gel and Powerball technology (Reckitt Benckiser, 2005).

• Legal Factors

Legal factors refer to law in effect that influences the way business operates. In Reckitt Benckiser, many legal forces influence the firm such as employment, environmental, and safety, to name a few.

Reckitt Benckiser has great commitment to match its operation with health and safety legal requirements, to increase the welfare of employees, and to enhance the firm health & safety control arrangements and performances (Reckitt Benckiser, 2006 – health care).

Another legislation that affects Reckitt Benckiser is the statute regarding maerger and acquisition. This is highly prominent since Reckitt Benckiser grows through several M&A process. For example, in 1938, Reckitt & Sons merged with J&J Colman and form new company called Reckitt & Colman Ltd. Recently, the company also acquired Boots Healthcare International in a deal worth £1,926 million to strengthen its position in healthcare market (Reckitt Benckiser, 2007f).

2.6       Environmental Factors

            Environmental factors relate to environmental issues that influence an industry or business in local, national, and worldwide point of view. In Reckitt Benckiser, the firm pays great attention to such issues since they realize their waste of chemical production may endanger environment.

For that reason, the firm states that they have a strong commitment to conduct business with a great responsibility by generating environment-friendly product and process continuously. The company states this commitment in their strategy to enhance the environmental performance continuously (Reckitt Benckiser, 2006 – Environment).

3. Product Life Cycle and Innovation

Kotler and Amstrong (218-219) define product as everything that can be sold to a market for use or consumption of consumers that may fulfill their needs or wants. The definition suggests that since customers may have altered wants or needs. Therefore, products compose of two forms tangible and intangible including ideas and events.

Since customers may alter their wants or needs, firms may change the features of their products as well. In addition, a product may experience undulating performances due to several factors such as customers’ demands, technological changes, amendments in regulation, and many others. The concept that explains the situation is Product Life Cycle (PLC), which developed by Vernon in 1966. There are four stages of PLC concept as following:

• Introduction Stages

It refers to a period in a slow sales growth due to the introduction of product in a market. Concerning the Reckitt Benckiser, during first years of the firm birth in 1823, their core competence is industrial chemical products. From that time, the firm has spawned many products in six general segments; they are surface care, fabric care, dishwashing, home care, health & personal care, and food.

Regarding the dishwashing, the firm becomes the world’s number 1 dishwashing products with three brands: Calgonit, Finish, and Electrasol. Technically the dishwashing products appear in two forms: for use in dishwashing machines and by hand (Reckitt Benckiser, 2007b). The introduction stage for dishwashing product occurs in 1956 when the firm launched Calgon water softener (Reckitt Benckiser, 2007f). Figure 1 shows several dishwashing products of Reckitt Benckiser.

Figure 1           Reckitt Benckiser’s Dishwashing Products

Source: (Reckitt Benckiser, 2007b)

• Growth Stage

It is a stage where a product experience fast growth marked by rapid market acceptance, increasing demands and huge profits. In Reckitt Benckiser, the growth stage occurs when the company successfully diversifies their offering into other household products including washing blue and black lead for polishing. Another fact of Reckitt Benckiser’s growth stage is its expansion into international market such as Australia in 1886 and Eastern Europe in 1991, and Baltic countries, Belorussia, China in 1996 (Reckitt Benckiser, 2007f).

• Maturity Stage

It is an era where a product experiences slow growth since it has reached almost all market. The situation caused the decrease of profits level in order to maintain the growth. In Reckitt Benckiser, the maturity stage occurs when the firm has launched many format of cleaning dishes products ranging from powder, gels (standard and 2in1), liquid (standard and 2in1), and many others (Reckitt Benckiser, 2007b).

In addition, the company has also successfully launched several complementary products in dishwashing including rinse agents, deodorizers, dishwasher cleaners, decalcifying salts, and glass corrosion protectors. The maturity stage reached the peak in 1999 when the Reckitt & Colman plc merged with Benckiser N.V. to be Reckitt Benckiser, the world’s number 1 in household cleaning products (Reckitt Benckiser, 2007b).

• Decline Stage

It is a stage when a product experience the severe sales fall off and profits drop. The situation occurs in 2003 when the firm experiences a drop in sales in some markets such as Germany, France and Italy although the market shares are up in UK and Spain. In order to obtain the second S-curve, Reckitt Benckiser tries to offer their products attractively by going online. Figure 2 shows the four stages of product life cycle at Reckitt Benckiser.

Figure 2           Product Life Cycle of Reckitt Benckiser

Source: (Internet Center for Management and Business Administration, 2004)

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—. (2007b). Dishwashing. Retrieved January 5, 2007 from http://www.reckittbenckiser.com/ourbrands/brandslice.cfm?cID=3

—. (2007c). Fabric Care. Retrieved January 5, 2007 from http://www.reckittbenckiser.com/ourbrands/brandslice.cfm?cID=2

—. (2007d). Food. Retrieved January 5, 2007 from http://www.reckittbenckiser.com/ourbrands/brandslice.cfm?cID=6

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