SITUATION ANALYSIS CHECK LIST To help you ensure your situation analysis is complete, here is a list of items the grader will look for when grading your papers. I highly recommend that you use this as a check list. Please note however, the mere presence of the topic in your paper is not enough to warrant a good grade. It is the quality of the coverage and the clarity of your work that matters. All the items shown on this checklist will be graded. COMPANY Recommended number of pages for this section:2 Company description Mission and Goals SWOT Recommended number of pages for this section:3 SWOT Table (Strengths, Weaknesses, Opportunities, Threats) -Text in the tables could be single spaced SWOT Description COMPETITOR ANALYSIS Recommended number of pages for this section:3 SWOT Table for at least 2 competitors -Text in the tables could be single spaced State your “educated” opinion regarding “gaps” in the market and trends at industry level CUSTOMER ANALYSIS Recommended number of pages for this section:3 Define the segment(s) at the industry level (be specific with your segmentation variables) Identify the Needs and Wants for the segment(s) MARKETING & PRODUCT OBJECTIVES Recommended number of pages for this section:3 Current market and Target Markets (Be specific) New product/Service (Present your new/revised product(s)/Service(s) here) Positioning (Perceptual map required) EXECUTIVE SUMMARY (Write ES only after you have completed all sections of the paper) Maximum 2 pages Two-page, double space, executive summary is given at beginning Summarizes the whole document CLEARLY AND CONCISELY MKT304 – Prof. Sean Keyani Last Revised: 9/13/18 SA Checklist: Page 1 of 3 SITUATION ANALYSIS CHECK LIST FORMAT OF THE PAPER Does not exceed the page limits (Max 16 pages excluding cover page, table of contents, references pages and appendixes) Pages have numbers (Page X of Y format) Appropriate 12 point font size, double-spaced, one-inch margins MUST CITE ALL INFORMATION (otherwise = plagiarism = F) - Style= APA Provide a reference section at the end of the paper in correct style/format - Style= APA Edit/proofread and use correct Spelling and Grammar Use tables/charts/graphs effectively to present information (SWOT tables must be in the body of the paper; the rest of the tables/charts/graphs could be included in the appendixes) Use an appropriate tone and write clearly Be consistent with your in-text citations and your references page (APA style). I would highly recommend using the automatic “References\Citations and Bibliography – \Table of Contents” in MS Word (“Reference tools” for Macintosh computers). For web reference guidance for APA format, you may look to: http://owl.english.purdue.edu/ For library resources; please use the following links: http://library.calstate.edu/northridge/databases/subject/business-economics http://library.csun.edu/ResearchAssistance/AskUs When using web sources, remember to reference the actual source of your data or information, not the search engine you used to get to the source. GOOGLE, for instance, is NOT a source, nor is library.csun.edu. They are the vehicles you used to find your source. Any web citations should include the full URL address as well as the date you received information from that URL address. Sources should also be CREDIBLE. For instance, Wikipedia should not be used as a source in your paper – it is not a credible source for information (this doesn’t mean that you can’t use it, you just need to go to the direct source to find the credible information). MKT304 – Prof. Sean Keyani Last Revised: 9/13/18 SA Checklist: Page 2 of 3 SITUATION ANALYSIS CHECK LIST Important Reminders: • Be sure to cover all the items on the SA checklist. You may want to use items of the checklist as a headings/sub-headings in your paper. • Refrain from adding definitions from your textbook to “fill” the paper. Also, DO NOT include random information in the appendixes (e.g. general financial/stock information that are unrelated to topics discussed in the paper) • Your feelings, perceptions and experiences as a consumer are not necessarily facts. This is a research-based paper so, it cannot be based on what you feel or assume is true. It MUST be based on research and facts. In other words, DO NOT ASSUME because you and/or your team have a certain perception about a product, market, company, etc. all consumers will have the same perceptions as you do. • Your paper MUST have in-text citations throughout the paper and a reference page at the end of the paper. • Be sure to follow the formatting guidelines listed on page 2 of the SA checklist. • Be sure NOT to copy and paste material from internet or other teams' work(s) into your paper. Please note that you will submit this paper on Turnitin too and note that “plagiarism=F" • Your paper does not have to be 16 pages, 16 is the maximum number of pages allowed for this paper. • If you have problems within your team, I expect you to be able to resolve any conflict as adults. It is important that you focus on the goal, work together and complete the paper in time. All students in this class will have a chance to review their teammates and provide a peer evaluation to me at the end of the semester. I take peer evaluations very seriously. • Tone of the paper: you may want to assume that your group is a consulting firm creating this SA for the CEO of company you're working on. DO NOT attempt to market your hypothetical marketing firm, be sure to focus on the topics you need to cover according to the checklist. • Please refer to syllabus for important information regarding late submissions. • Each team needs to submit ONE copy of the SA paper on Turnitin and ONE copy of the paper for grading. There are two separate links for these two on Canvas and their deadlines are different. Only ONE person per team will upload the two copies of the paper into Canvas. • Files MUST be in .pdf format. • First upload, into Turnitin, must to be done by 11:00 p.m. the day before due date. • Second upload, for grading, must be done by on the due date (Please refer to syllabus for due dates) MKT304 – Prof. Sean Keyani Last Revised: 9/13/18 SA Checklist: Page 3 of 3 Running head: MIDTERM REPORT: KIMBERLY-CLARK CORPORATION Midterm Report Kimberly-Clark Corporation University of Houston – Victoria MGMT 4309 – 27448 Dr. Ehsan Fakharizadi October 15, 2017 1 MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 2 Table of Contents 2. History of Kimberly-Clark Corporation ……………..…………………………………. 5,6,7,8 2.0.1. Kimberly-Clark Ticker ………………………………………………………….... 7 2.1 Kimberly-Clark Co. Background ………………………………………………... 9, 10 2.2 Purpose of Kimberly-Clark Study ………………………………………………..... 10 3. External Analysis ………………………………………………………………………......... 11 3.1 General Environmental Analysis …........................................................................... 11 3.1.1. Depiction of Demographic Segment …………….…………………... 11, 12 3.1.2. Economic Segment ………………………………………………...... 12, 13 3.1.3. Political/Legal Segment ………………………………………........... 13, 15 3.1.4. Socio-Cultural Segment …………………..………………………… 15, 16 3.1.5. Technological Segment ……………………………………………...….. 16 3.1.6. Physical Segment ……………………………………………………….. 17 3.1.7. Driving Forces ………………………………...…………………….. 17, 18 3.2. Industry Analysis …………………………………………………………….………….... 18 3.2.1. Description of the Industry …….….……………………...…………………. 18, 19 3.2.2. Industry Dominant Economic Features ………………….………………….. 19, 20 3.2.3. Market Size and Growth …………………………………………………..... 20, 21 MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 3 3.2.4. Industry Trends ……………………………………...………………………. 21, 22 3.2.5. Depiction of Five Forces Analysis …………………..….…………………….… 23 3.2.5.1. Threat of New Entrants ……………………………………………. 23, 24 3.2.5.2. Power of Substitute Products ……………………………… 24, 25, 26, 27 3.2.5.3. Power of Buyers …………………………………………………… 27, 28 3.2.5.4. Power of Suppliers ……………………………..……………………… 28 3.2.5.5. Intensity of Rivalry3.3. Competition Analysis ……………………. 28, 29 3.3.1. Industry Competitors ………………………… .……………………….. 30, 31, 32 3.3.2. Rivals Anticipated Strategic Moves ……………………………..……… 32, 33, 34 3.3.3. Key Success Factors ………………………………………………………… 34, 35 3.4. Summary of Opportunities and Threat …………………………………………….….. 35, 36 MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 4 Table of Appendices Figure 1: Unemployment Rate ……………………………………………………………...… 13 Figure 2: Gross Domestic Product 2007-2016 ………………………………………………... 14 Figure 3: Production Volume Paper & Cardboard ……………………………………………. 21 Figure 4: Nonwovens vs Wovens ……………………………………………………….…….. 26 Figure 5: Competition Comparison Table …………………………………………………….. 31 MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 5 2. History of Kimberly-Clark Corporation Kimberly-Clark Corporation originated in 1872 as Kimberly, Clark and Company in Neenah, Wisconsin. Research conducted revealed formation occurred as a result of partnership, capital generation, and construction. The partnership transpired amid four men John A. Kimberly, Charles B. Clark, Havilah Babcock and Franklyn C. Shattuck of the four it appeared that the latter two investors were associated with Atlas Paper Co (Kimberly-Clark, 2017). It portrayed the four partners were able to establish Kimberly, Clark and Co. through capital generation of roughly $30,000.00 which steered them to embark on the construction of Globe Mill with production underway on October 22, 1872 (Kimberly-Clark, 2017). The early to mid-19th century research revealed company movement toward diversification. The Global Mill was significant for both Kimberly, Clark and Co. and Wisconsin for four main reasons: (1) the manufacture of newsprint out of rags of linen and cotton, (2) it was first within the state to use ground and mechanic pulp for paper in operations to produce paper, (3) led to the development of wrapping paper, (4) it increased their reputation for new and innovative products and processes (Kimberly-Clark, 2017). Next it illustrated an alliance formed with Scott Paper Company a Pennsylvania based firm in 1874 yet it was not signed until 1879, followed by an 1880 name change emerging Kimberly & Clark Company (Kimberly-Clark, 2017). During this period they had become “leading Midwest paper producer building Kimberly Mill” which inspired the establishment of the town “Kimberly, Wisconsin” (Kimberly-Clark, 2017). From 1881 to 1886 transformation was revealed as well as a joint venture with the Atlas Paper Mill for the production of book paper. Next it eluded Kimberly & Cark Company paper production had “nearly a 70-ton capacity where about 35-tons went to newsprint, about 21-tons went to wrapping paper, and leaving the remainder available for book paper” (Kimberly-Clark, 2017). MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 6 The latter part of the 19th century and the early part of the 20th century implied that expansion continued amidst tragedies endured by Kimberly & Cark Company. First due to the 1888 Atlas Mill which burned only to be resurrected in less than six months; when the mill burned it impacted their wrapping paper business and thus revenue generation (Kimberly-Clark, 2017). In 1891, the death of Charles B. Clark indicated he’s idea “sparked the creation” which implied the company experienced loss of knowledge with his passing (Kimberly-Clark, 2017). Loss struck again in the early 20th century when Kimberly Mill burned disrupting capacity of supply for newsprint this event spurred ingenuity as the company converted production of Niagara Mill which originally produced wrapping paper transforming it to produce newsprint a month later to meet newsprint demand (Kimberly-Clark, 2017). In addition, in 1901 and 1905 two more founders Frank C. Shattuck and Havilah Babcock died leaving John A. Kimberly as the only surviving founder (Kimberly-Clark, 2017). Next it clarified that “changing condition in ownership by deaths of three of the founders” would be a factor in the immediate years that followed by indicating that Kimberly & Clark Co. was “reorganized and incorporated as Kimberly-Clark Corporation in 1906” shadowed by the 1907 company withdrawal of the living founder at that time John A. Kimberly passing the helm to Frank J. Sensenbrenner (Kimberly-Clark, 2017). The subsequent years, depicted an era of remarkable transformation for Kimberly-Clark as the restructure appeared to influence the company’s creativity, innovation, as well as advance their manufacturing and product development. It indicated that the company hired scientist Ernest Malhler to “establish a research, technical and engineering department” (Kimberly-Clark, 2017). It appeared that Malhler and with James C. Kimberly son of founder John A. Kimberly traveled abroad to Europe preceding WWI while on the trip it was described the two “learned about two new products that will have profound impact on company’s growth” as a result one product that MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 7 may have transpired was “rotogravure book paper produced from bleached groundwood pulp, for use in newspaper supplements, magazines, and other mass-produced printing” (Kimberly-Clark, 2017). During WWI many manufacturing facilities throughout the United States underwent transformation to assist the war effort. Kimberly-Clark was no different it was noted that in 1918 Badger-Global mill manufactured “Cellucotton as filter for army gas masks, but the war ends” the war effort of making a filter for gas masks is noted for the development and introduction of Kleenex tissue a name brand product (Kimberly-Clark, 2017). In addition, in 1913 Kimberly-Cark advanced by manufacturing “creped cellulose waddling named Cellucotton” which was a substitute for cotton (Kimberly-Clark, 2017). It look as if the 1920s or roaring 20s had two major occurrences for Kimberly-Clark first was the promotional advertisement kicking off second was becoming a public stock “Listed on New York stock Exchange May 8, 1929” (Kimberly-Clark, 2017). (KMB) is Kimberly-Clark’s ticker (Kimberly-Clark, 2017). The 1950s were a “decade of major international expansion” as result of the mergers and/or acquisitions of the company’s “first non-North American facilities” (Kimberly-Clark, 2017). The 1970s were the signals of divesting occurred; by showing the company withdrawal form “coated and commodity printing papers market” which led to “the sale of mills at Niagara Falls, New York, Anderson California; West Carrolton, Ohio; and Niagara and Kimberly, Wisconsin” (Kimberly-Clark, 2017) The 1980s exposed restructure as the company underwent “changes to its organizational structure” which “establishes a Chairman’s office” as well as “new operating sectors” in addition MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 8 to a move of Kimberly-Clark’s “World Headquarters” to Irving, Texas where it resides today (Kimberly-Clark, 2017). The last decade of the 19th century observed implied Kimberly-Clark underwent transformation, product innovation, as well as divesting and restructuring efforts while simultaneously seeking revenues. Kimberly-Clark and Scott Paper merge through a $9.4 billion deal effective 1995 (Kimberly-Clark, 2017). During this time “ABSORB–LOC Plus (super absorbent material)” in the incontinence care product “Depends” and “Poise Pads to combat light loss of bladder control” was introduced to market (Kimberly-Clark, 2017). Next it depicted the company tackled its sustainable growth formulation strategy by “building strengths: core technologies, well-known trademarks and consumer product franchise” in addition to outsourcing or “divestures of non-core businesses and global acquisitions of consumer product business” which represented restructure and may have propelled the company forward as they logged record income level which reported “earnings from operations” which totaled “$1.34 billion, or $2.37 per share” (Kimberly-Clark, 2017). Research of the 21st century revealed Kimberly-Clark by illustrating change is likely to continue as the company moves forward due to changes of market conditions in which they operate and compete. Review of IBISWorld and MarketLine reports as well as the Kimberly-Clark Corporation website (2017) it was determined that the company participates in a dynamic external and internal marketplace. In recent years their portfolio revealed a 2011-2012 restructuring of tissue and pulp, 2012-2014 changes to the European strategy, as well as the 2014 creation of Halyard Health, Inc. (Kimberly-Clark.com, 2015, p. 20). A restructure was announced October of 2014 (Kimberly-Clark, 2017). The 2014 restructure appeared to target overhead costs, discipline cost, and inefficiencies as a result of Halyard, Inc. with a projected after tax cost saving of $130- MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 9 $160 million by 2016 yearend which was noted as on “track” (Kimberly-Clark, 2017, p. 21). The 2014 restructure appeared to target overhead costs, discipline cost, and inefficiencies with a projected after-tax cost saving of $130-$160 million by 2016 (Kimberly-Clark, 2017, p. 21). The 2014 restructure was completed on December 2016 with total after-tax cost of $164 million dollars and a cumulative annualized savings of $140 million realized in 2016 (Kimberly-Clark, 2017, p. 19). Kimberly-Clark had 2016 end result of sales of $18.2 billion (Kimberly-Clark, 2017 ). 2.1 Kimberly-Clark Co. Background Kimberly-Clark is internationally recognized with brands/products sold in 175 countries, with operations in 35 countries, and roughly 42,000 global employees (Kimberly-Clark, 2017 ). An article implied that Kimberly-Clark is an industry leader of the household & personal products sector as well as in the consumer product staples industry (BloombergL.P., 2017). Research exposed that Kimberly-Clark Corporation is a United States based company with their world headquarters located in Irving, Texas with a deep seeded history in the pulp and paper mills industry which originated back at formation of Kimberly, Clark and Company in Neenah, Wisconsin. It looks as if the partnership of four members, capital investment of roughly $30,000, as well as the construction of Globe mill in 1872 to make newsprint from rags of linen and cotton marked the start of the journey (Kimberly-Clark, 2017). Kimberly-Clark Corporation’s formation was the embarking of a journey which has continually propelled them forward with nearly a 150 years of history they have endured only a few name changes, yielded numerous partnerships, expansions, mergers and acquisitions, as well as divesting and restructuring with a continued focus on revenues in effort to attain a competitive advantage within their business environment. The examination of the external condition revealed they partake in the pulp and paper mills industry which is a competitive market with intense rivals competing within three major product groups: MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 10 (1) Pulp, (2) Paper, (3) Paperboard and packaging paper. Whereas the internal situation exposed the company has been structured into four business units: (1) personal care, (2) consumer tissue, (3) K-C professional, (4) Developing and Emerging Markets (D&E) and three global business sectors: (1) personal care, (2) consumer tissue, (3) K-C professional or (KCP) paper products impact each segment (Kimberly-Clark.com, 2015). 2.2 Purpose of Kimberly-Clark Corporation Study For the purpose of Kimberly-Clark Corporation study, the strategic management process will be utilized to design and produce a written report which captures raw data on both the industrial factors and company’s position. Performing analysis of macro-environmental influences in which the company operates and competes to deliver recommendations which are strategically relevant for the company. The report will utilize research and analysis to introduce knowledge obtained to evaluate, identify, and explain external trends, competitive nature of competition, driving forces, and summarize threats and opportunity of the industry to determine their impact. The internal analysis will capture the history of the company and reveal current conditions which influence the competitive environment of the company as well as strategic approaches deployed. The report will then focus on recommendations of action that should occur within the next 6 to 24 months which may affect market strategy and business structuring moving forward. MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 11 3. External Analysis This report will study the paper product manufacturing industry’s external factors from a macro level. The external analysis will examine the company’s general environment, industry, and competition. The external environment consists of multiple segments that play a role in shaping a company’s conclusions. The information gained by conducting an external analysis of the company will help to influence strategic decisions. It will also bring light to potential opportunities and threats to the organization. 3.1. General Environmental Analysis In today’s world, there are many uncertainties regardless of which industry you review. For this reason, the general environmental analysis is a highly-respected tool and is considered valuable when studying an industry. It is a review of the various segments that cannot be controlled by the internal operations of a single company. In this analysis, we will review six major segments which includes demographic, economic, political/legal, socio-cultural, technological, and physical. In addition, each segment’s overview reveals the outside factors that allow companies within the industry to flourish as well as the many shortcomings that are possible. 3.1.1. Demographic Segment The review of industry demographic segments revealed that population, unemployment, as well as age distribution, in terms of birth rate and 65 plus adults are determinants that directly impact industrial segments of demand throughout the pulp and paper mill industry. The demographic segment research indicated population trends such as unemployment rates and consumer sentiment correlate directly to demand of discretionary paper a product that in turn affects paper product industry. Unemployment impacts the disposable incomes of the population which impacts consumer attitude toward purchases. It then turned focus to enrollment MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 12 of students grades K-12 as well as birth rates implying that birth rates have a positive correlation to both educational enrollment and demand for sanitary paper products and paper stationary due to paper being a necessity of education (IBISWorld Inc. , 2017, p. 13) In addition, factors of demographics depicted fluctuation of age distribution in terms of birth and populations age 65 plus as being significant factors that directly impact the paper product industry. As a result the industrial segments which encompass both diapers and/or training pants for infants and children as well as the incontinence care products geared toward adults who face light, moderate, or sever loss of bladder control will be impacted through demand. However research revealed birthrates and adult 65 plus information for the five years to 2017, it showed birthrates as rising at an annualized rate of 0.6% and 0.7% for 2017 and it also exposed an increase in 65 plus adults for an annualized rate of 3.1% which could have a positive correlation to demand of these segments (IBISWorld, 2017, p. 9). 3.1.2. Economic Segment The economic segment is used to assess the economic health of the general economy as well as the industry. Knowing the potential profitability of an industry is always beneficial. In the paper product manufacturing industry, there are many economic factors to consider. Some of the major subjects to consider are inflation, interest rates, unemployment, gross domestic product, saving rates, trading, and exchange rates. Knowing the economic conditions of the industry or the general economy is a crucial tool in developing a strategy that will ensure success. Like any industry, the state of the economy is vital and a major segment affecting the paper product manufacturing industry is the unemployment rate. This aspect is important because when individuals are out of work, it not only effects their families but it also effects the economy entirely. The workers and their families lose wages, less goods or services are produced due to less workers, MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 13 and the former workers lose purchasing power. These situations are significant because it can lead to more unemployment as a result of less spending and therefore less revenue received by a company. The graph below shows the unemployment rates from 2007 to 2016. You will notice that after 2009 the unemployment rate has been on a steady decline, which is a positive sign for industries reliant on consumer spending. Figure 1: Unemployment Rate Unemployment Rate 2007-2016 % of Unemployed 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Years Another assessment tool important to the economic segment is Gross Domestic Product or GDP. GDP is used as gauge for the health of the economy. It signifies the entire value of the all goods and services manufactured over a period of time. When GDP is increasing, this indicates that the economy is in good shape and growing healthier. When GDP is decreasing, this serves as notice that unemployment rates may rise and consumer spending will decrease. The graph below shows the GDP trend for the last 10 years. The trendline shows that GDP is increasing consistently, thus lowering the unemployment rate each year and increasing the buying power of the nation. Figure 2: Gross Domestic Product 2007-2016 MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 14 Billions of Dollars Gross Domestic Product 20072016 20000.0 18000.0 16000.0 14000.0 12000.0 10000.0 8000.0 6000.0 4000.0 2000.0 0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Years 3.1.3. Political/Legal Segment The political and law segment of the general environment looks at the laws, policies, and regulations of the industry. The paper product manufacturing industry is considered to have medium level regulations. These regulations are the typical regulations of most industries regulated by the Environmental Protection Agency, such as the Clean Water Act, Solid Waste Disposal Act, and the Clean Air Act. The Clean Water Act is regulatory of water pollutants, quality standards and sewage plants. The Solid Waste Disposal Act is put in place to decrease waste and provide protection for human beings and the wellbeing of the environment. The Clean Air Act is used to limit and regulate the levels of air pollutants. In addition to the basic regulations, many manufacturers that also operate paper mills might produce a variety of other waste routes that are open to guidelines of the Resource Conservation and Recovery Act. This act sets guidelines for “identification, treatment, storage and disposal of hazardous wastes.” Another regulation arose in the year 1980 when the government was informed that Toxic Shock Syndrome, or TSS, was associated with the use of tampons. With this MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 15 information, the Food and Drug administration imposed a new warning regulation which requires that “manufacturers warn customers about tampons' association with TSS and advise tampon users to reduce their risk by minimizing use.” It is these items that outline the regulator aspect of the paper product manufacturing industry. Overall these laws and guidelines are in place as protection for the consumers and the producers. It provides safety precautions that protects a company, should they abide by all the laws, and still have unfortunate issues, as well as protects the consumer should a company be negligent disobey a guideline. 3.1.4. Socio-Cultural Segment The socio-cultural segment studies the developments of the demographic segment. It explores the population, age, ethnic backgrounds, and the various cultural trends within. A perfect example of a socio-cultural trend currently existing in our society is the vegan lifestyle. With obesity numbers at a historical high, fitness and diet are the primary cure, but going vegan is what many consider a lifesaving diet. This is a major indicator that fitness gear, equipment, gym memberships, and non-animal composed products will rise in demand. These types of fads help to speculate the value of products introduced into the market. In the paper product manufacturing industry, there are many lucrative trends for companies to take heed of. One trend is the vast amount of elderly people with bladder issues. This is an indicator that the amount of disposable diapers purchased within the incontinence product segment will increase. This is significant because the baby diaper industry has thrived for the past few decades and now adult diapers are on the same path. Like the growing bladder issues, the sanitation fad is constantly developing. In the past 10 years, the United States has grown in the number of individuals claiming to suffer from OCD, or the fear of germs. This trend has played an extensive role in the purchasing of sanitation wipes. Individuals are purchasing these wipes for their home, MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 16 car and personal carriers such as purses. This alone has caused consumers to spend over a billion dollars a year in the paper product industry. By creating products that are environmentally friendly, discreet, and sanitary, the paper product manufacturing industry is targeting a large share of the consumers that are following these trends. 3.1.5. Technological Segment The technological segment discusses the advancement and innovation of the paper product manufacturing industry. These factors include research, machinery, automation, and new product development. The most significant technology used in paper product manufacturing is the ability to used recycled pulp. This procedure makes the processing of pulp more energy efficient being that it uses less gigajoules than mechanical pulp processing. It also has an average savings of about $75 per ton of recycled pulp produced. One of the most recent changes in the industry’s technology is the replacement of pneumatic conveyors with belt conveyors. Though both of these conveyors are used to transport chips from one destination to the next, the belt conveyor reduces chip loss and saves energy. In a study conducted by the National Council for Air and Stream Improvement or NCASI, a belt conveyor used 17.2 kilowatts less than a pneumatic belt. From these technological advancement it indicates that the industry is growing in financial efficiency and environmental health, thus giving more ability to target the environmentally friendly consumer group. 3.1.6. Physical Segment The physical segment is comprised of the ecological and environmental forces. It accounts for physical conditions such weather and pollution. These conditions play an intricate part in any industry because they effect the well-being of humanity. The concerns about today’s environment are generalized around the constant climate change over the past few years. A perfect example of MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 17 this trend is the increased growth of companies either selling or using solar energy. This route is typically chosen to show that an entity is using an environmentally safe practice. The paper product manufacturing industry typically uses the “Three R” method which is reduce, reuse, and recycle. This is displayed by the numerous products that are composed of recycled goods, the machinery being energy efficient, and proper disposal practices. It is important to use the best practices for environmental health and consumer support. The physical segment is significant in seeing if an industry is working to keep the environment safe for the living. 3.1.7. Driving Forces Driving forces are the major underlying causes of change in industry and competitive conditions. (Gamble, Peteraf, & Thompson, Jr., 2015) Many factors contribute to changes in the Global paper industry, which could have a positive or negative effect on the market. • Demographic segment includes critical global markets and newly industrialized countries. Expanding utilization of customer goods and paper products from the BRIC countries is one of the essential development drivers for the industry. The direct correlation between birth rates and need for sanitary paper items indicates a protentional opportunity due to an annual rise in birth rates. Also, the annual increase in persons 65+ creates a need for incontinence products such as adult diapers. • Economic segment includes the cost of materials needed. Industry income depends largely on the cost of wood pulp. A rise in the cost of wood pulp results in higher paper product costs. Thus, industry revenue is positively influenced by cost of wood pulp. Another driver within this segment is the purchasing power of consumers to afford disposable products. Technological segment includes product innovations and manufacturing process improvements that impact the paper product manufacturing industry. Cutting manufacturing costs will increase MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 18 the profit received per paper product sold and allow companies to sell their products cheaper. The ability to use recycled pulp is a huge improvement as well since it saves energy and helps sustain the environment. 3.2. Industry Analysis The industry analysis will examine the complexities of the paper product manufacturing industry. This analysis will review the dominant economic features, market size and growth, industry trends, as well as the Five Forces Analysis. The Five Forces Analysis details threat to new entrants, power of substitute products, power of buyers, power of suppliers, and the intensity of rivalry. In the conclusion, major factors that influence the industry will be explained. 3.2.1. Description of the Industry The paper products manufacturing industry is a user of a variety of resources utilizing not only raw materials all over the world but also artificial fibers and recycled paper. Raw materials consist of trees, wood chips, wood fibers, pulp, clay, lime dyes, chemical resins, bleaches, as well as significant amounts of water. The products that we will focus on in this report are paperboard, consumer product packaging paper, pulp, and paper. There are multiple players in the industry including recycling companies, household products, forestry companies, and pulp mills. The distribution channels used by various producers are dependent, in many cases on the resource being utilized, and the product being produced. For example, paper made from trees typically have plants located relatively close to the raw material (e.g. forests in the northwest due to the high cost of transporting the primary raw material). Although, this not a purely competitive market, very few if any markets are purely competitive, it is neither monopolistic or oligarchic. The industry is mature and, as we will discuss in a moment is growing at a very moderate rate. Historically the industry like many other industries is impacted MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 19 by economic conditions, not only in the U.S., but worldwide. The profitability of this industry is, like many other industries, dependent upon demand and supply, pricing, and expenses (e.g. raw materials, energy). 3.2.2. Industry Dominant Economic Features The dominant economic environment assists participants of the industry which allows them to gain knowledge of strategic moves other participant members may deploy. This can result due to characteristics the economic explores such as the market size, demand and supply conditions, segmentation of markets, and pace of technology (Gamble, Peteraf, & Thompson, Jr, 2013). When conducting research it was exposed that the pulp and paper mill life cycle has matured and participants who compete may have experiences stagnation as a result of factors of the macro-level determinates revealed unemployment rate as one factor (IBISWorld Inc. , 2017). As a result, unemployment impacts the disposable incomes of the population affected as well as impacts consumer attitude toward purchases. Thus, geographic locations experience high levels of unemployment may note a decline of per say name brand products as consumers’ attitude changes. Section 3.1.2 reveals unemployment in the United States from 2007-2016. Another factor which contributed to stagnation has been the advancement of technology in the form intranet/internet communications which has allowed users of computers, smartphones, and other digital products to move from the era of newspapers, digital textbooks, and electronic exchange of information by increasing speed of communication while decreasing the use of printed material as well as the use of paper and pencil. The move toward digital media platforms have decreased demand, capacity, and profitability of some competitors (IBISWorld Inc. , 2017) MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 20 The final factor this report will explore revealed birthrates and adult 65 plus information for the five years to 2017, it showed birthrates as rising at an annualized rate of 0.6% and 0.7% for 2017 and it also exposed an increase in 65 plus adults for an annualized rate of 3.1% which could have a positive correlation to future demand of the industry (IBISWorld, 2017, p. 9). 3.2.3. Market Size and Growth The U.S and the word have reached an era of technology and digitalization that has made the paper products manufacturing industry vulnerable to decline. However, even in this close to paperless age the global industry has remained stable due in great part to the growth in consumerpackaged products. The global production of paper stood at “approximately 407 million metric tons in 2014.” Looking at the different segments within the industry, as of 2017 major market segmentation of the industry shows that packaging manufacturers accounts for 55.9% of the market. While publishers, stationery manufacturers, sanitary and household product manufacturers, along with other encompass the rest. The following graph depicts the overall market changes to the paper products manufacturing industry from 2006 to 2015. The growth rate from 2011 (399.2 million metric tons) to 2015 (407.6 million metric tons) is 2.1% during that period. Figure 3: Production Volume Paper & Cardboard MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 21 Production Volume of Paper & Cardboard Worlwide 2006 to 2015 (in million metric tons) 420 410 400 390 380 393.7 399.2 399.3 2011 2012 402.6 406.5 407.6 2014 2015 394.1 391.2 382.6 370 370.5 360 350 2006 2007 2008 2009 2010 2013 Years Source: Statistica, n.d. Looking to the future, this is a mature industry which is very competitive and capital-intensive with many environmental hurdles that would need to be addressed by a company wanting to enter this industry. With these factors in mind, we do not see any significant change in either the demand or supply in this industry. Therefore, we project the growth in the industry, based on its recent historical trends, will continue at approximately 2% per year. 3.2.4. Industry Trends There are three major trends that can be identified in the paper products manufacturing industry. The first industry trend involves environmental awareness which includes making more products made with sustainable wood fiber, innovative ways in which to recycle paper products, and innovative and creative ways to protect the environment (e.g., reducing the demand for trees by improving manufacturing efficiency). Another global trend involves the increase in competition. According it IBISWorld, consumers illustrate a large amount of loyalty to specific brands (2017). This causes companies within the MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 22 paper product manufacturing industry to launch intense marketing tactics to win over the consumer. In addition, product quality plays a huge factor within the competition. The overarching goal is to maintain a customer base that buys the company’s brand repeatedly. Competition within this industry is high and expected to continue increasing. A third trend impacts the paper products sector of the industry. The world has entered an era of digital technology and this has reduced the demand for paper products. For example, personal and business correspondence that used to be completed and memorialized on paper is now completed and memorialized digitally. Tweets, text messages, and emails have replaced, in many cases, communications that used to be done by written or typed notes, letters, contracts, etc. India and Australia are two good examples of the ground-breaking ways to keep the industry growing. For example, India has been addressing the issue of refraining from using the nations forests by utilizing Argo based methods. This means that they are planting trees specifically for paper products use. While Australia is acting to reduce costs of energy. Some of these methods include, upgrading equipment, taking advantage of atomization, and utilizing renewable resources. The efforts that Australia and India are making are just two examples of how the world is adapting to the new era in the paper products manufacturing industry. We will analyze in further sections the expected growth that these trends are expected to have on the market in future. These trends combined have caused the paper products manufacturing industry to become innovative globally on overcoming these challenges. 3.2.5. Five Forces Analysis The Five Forces analysis will utilize the Five-Force Model of Competition the model is based on Michael E. Porter’s “The Five Competitive Forces That Shape Strategy” (Gamble, Peteraf, & Thompson, Jr, 2013, p. 43) . The model depicts competitive pressures which arise within the MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 23 industrial marketplace amidst competitive seller and/or buyers whom interact within the paper product industry. Influences such as strength of buyer bargaining power, product substitute competition, strength of supplier bargaining power, as well as new entrants can then be analyzed to determine the strength or weakness of industrial rivals’ situation (Gamble, Peteraf, & Thompson, Jr, 2013) 3.2.5.1. Threat of New Entrants Threat of new entrants alludes the threat of new competitors to existing rivals in an industry. A lucrative industry will draw in more competitors hoping to attain profits. If these new entrants can enter market the market easily, it could potentially be a threat to firms that are already competing in the market. A few factors that come into play in this area include the size of the economies, cost and resource advantage, and strong brand preference. The economies of scale are the cost advantages that companies receive because of size, output, or size of operation. The paper product manufacturing industry has medium barriers to entry because of the sizeable start-up capital required. Despite the 0.6% decline in market value in 2016, competition remains high due to the demand for paper products (MarketLine, 2017). The global parent industry of the paper product manufacturing industry including printing and packaging paper, reached a market value of $180.6 billion in 2016 (MarketLine, 2017). KimberlyClark generated a revenue of $18.2 billion in 2016 with an estimated market share of 4.3% (IBIS, 2017). Even though the parent industry including printing and packaging paper has high barriers to entry, the paper and product manufacturing industry has medium barriers to entry. This does not prevent companies from entering the paper product manufacturing industry since profits are known to be lucrative. MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 24 Cost and resource advantages are common within companies that are already in the industry such as propriety technology, creating relationships with key suppliers, low fixed cost, and the knowledge of being experienced in the industry. During recent decades, paper manufacturing has turned out to be amongst the most capital-concentrated industries globally. The industry commits an obscene amount of money to research, innovation, and to create and preserve progressively efficient equipment and procedures that dispense the requirement for human capital and the potential for employee errors. Brand preferences are key to keeping customers and attracting new ones. When customers feel attached to established brands within a market, it makes it that much more difficult for new companies entering the market to win them over. Kimberly-Clark Corp. is associated with brands such as Kleenex, Huggies, Kotex, Depend, Scott, VIVA, and Cottonelle. 3.2.5.2. Power of Substitute Products The threat of substitutes involves the ability to purchase a similar product from companies in a different industry that offers the same benefits. Substitutes for this industry within the paper product segment include reusable items found in the textile industry, such as cloth diapers, woven towels, handkerchiefs, and menstrual cups. One major underlying factor of this force is whether substitutes are quickly available and priced to attract consumers. Half of the textile substitute products are quickly available via stores and suppliers nationwide. For instance, woven towels and cloth diapers are available and easy to purchase across the globe, while menstrual cups and handkerchiefs are far less common and unavailable for purchase. Typically, the initial price of textile items is higher than the disposable paper product counterparts. For example, a package of forty-four basic Huggies brand diapers is currently around $8.00 using Walmart’s e-commerce store, while a package of three Gerbers brand cloth diapers are close to $10.00. The general MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 25 affordability of disposable products in comparison to the more expensively priced textile substitute continues to be appealing to customers in the US (Cohen, 2017). Therefore, certain items are readily available and easy to purchase while the initial price of these substitutes is more expensive. Another factor is whether buyers believe the substitute is comparable or better regarding quality and performance. The convenience of disposable paper products saves time and effort because the consumer will throw away after the initial use. Disposable products also eliminate the possibility of utilizing previously used items that have not been properly sanitized. However, disposable items need to be continually restocked and repurchased. In contrast, a textile-based material can be washed or sanitized and reused many times. According to Smithers Pira, two years of disposable diaper use costs around $2,000 - $3,000; however, reusable cloth diapers cost $800 - $1,000 within the same time frame (2016). This indicates that the cost of cloth diapers is cheaper on a long-term basis, assuming a laundering service is not used. In addition, emerging economies typically use cloth diapers when faced with lower incomes while in developed markets only a small percentage prefer textile diapers (Smithers Pira, 2016). In the long run, cloth items save money due to the ability to sterilize and reuse, so customers must have a certain level of income to maintain the continued purchase of disposable items. The chart below illustrates global nonwoven (disposable) product use compared to woven (cloth). MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 26 Figure 4: Nonwovens vs Wovens. Nonwovens vs Wovens Consumption, 2016 ('000 tonnes) 3000 2500 2000 1500 1000 500 0 Traditional Hygiene Medical Nonwovens Wipes/other Wovens Source: Smithers Pira, 2016 According to global use, substitute products for sanitary paper products are not viewed as better in terms of quality, performance, and convenience. This is mainly based off the ability to continually afford disposable paper products. A third factor is if the costs incurred to switching the substitute are high or low. One cost of switching to textile items is the inconvenience involved with the time and labor that will need to be allocated to sanitize the items. Individual consumers will need to make the effort to wash and dry the items, which will take more time, water, energy, and soap. One exclusion is if the consumer utilizes a laundering service for cloth diapers. According to Smithers Pira, the overall cost is equivalent to disposable diapers when this service is added (2016). In addition, a company switching from disposable products to reusable will need to assign additional funds for a laundering service or purchase a commercial grade washer and dryer. Another cost is the monetary price of the more expensive initial cost of the woven items. Since the main cost of this switch is related to convenience, the overall cost of switching is low for most individual users. However, MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 27 for companies or individuals using laundering services, the cost of switching is moderate since further purchases will be necessary. The power of substitute products in this industry is weak in relation to sanitary paper items. Due to the general affordability and overall convenience of disposable paper products, substitute textile products are not estimated to be a threat in the current global economy. The threat of substitutes is not likely to decrease profitability of the paper product segment within the paper and pulp mill industry within the personal and household sanitary product segment. The related opportunity is the global trend towards disposable products. One threat is the potential occurrence of an economic crisis that could lower the purchasing power of consumers for this industry’s major geographical markets, specifically in developed economies. This possible event will harm the consumers’ ability to afford the continuous cost of purchasing disposable items and will lead them to seek substitute products that can be reused. 3.2.5.3. Power of Buyers Buyer bargaining power alludes to the obligation customers can force on companies to motivate them to produce higher quality products, and better customer service at lower costs. When examining the bargaining power of buyers, the industry is being directed from the aspect of the merchant. The largest segment of paper and paperboard created globally is utilized for packaging and the second largest market for paper is printing and writing. The segment KimberlyClark is involved in is the smallest segment, which is paper products made from pulp. Buyers differ in size from individual customers to multi-national companies. This circumstance implies that market players can sell to a various number of buyers. Low switching costs for buyers fortifies buyer power in this market. This is an outcome of the high capital expense required for paper mills. It is conceivable to separate paper and paperboard items to a moderately high degree as paper MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 28 might be manufactured with a wide assortment of properties, contingent upon its deliberate use. Inside individual market sectors, for example, printing paper of a specific grade, buyers tend to see paper and paperboard products as a commodity (MarketLine, 2017). However, pulp used to make paper products is not typically separated by grade. Market players must compete with cost and increased choice for buyers, which in return fortifies buyer power in this market. Buyer power is evaluated as average in this market. 3.2.5.4. Power of Suppliers Supplier power alludes to the strain suppliers can apply on companies by raising costs, lowering quality, or lessening accessibility of their products. While examining supplier power, the industry is being led from the point of view of buyers. Bargaining power of suppliers, is a key factor that helps shape the structure of an industry. The electricity market is dominated by relatively large companies like Electricité de France, E.ON, Korea Electric Power and RWE. (MarketLine, 2017) The most critical raw material used to produce paper and paperboard is wood pulp. It is hard to distinguish wood pulp, in return market players have a generally wide selection of suppliers to choose from. Low switching costs additionally supplier power in this market. Around 90% of virgin paper is produced using wood pulp, market players are genuinely dependent on wood pulp suppliers, and this fortifies supplier power to a degree. (MarketLine, 2017) Some companies chose to operate and manage their own pulp mills. Supplier power is evaluated as average. 3.2.5.5. Intensity of Rivalry The intensity of rivalry among competitors in an industry alludes to the degree to which firms inside an industry put stress on each other and restraint each other's profit capabilities. Rivalry is intense in the paper product manufacturing industry since it is mainly consumer based and a large MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 29 portion of products are sold via retailers such as grocery stores. When competing in a market that has plenty of options for the consumer to choose from, such as brand of diapers and feminine products, companies must attempt to distinguish themselves from one another. When rivalry is aggressive, contenders are endeavoring to seize profits and market share from each other. • Differentiated products • Firms in industry are equal in size • Competitors may own patents, copyrights, and trademarks related to their products • Switching costs A few companies produce custom products and it serves to diminish competition inside individual areas of the market. For a given product, market players are genuinely comparable in size and business structure. Some functioning companies, for example, endeavor to ease rivalry by owning patents, copyrights, and competitive advantages that identify with their products and also by offering their products under established trademarks. The presence of agreements between market players and a buyers, and the related switching costs, likewise debilitates competition in this market. Insignificant decrease serves to expand competition in this market. Rivalry is evaluated as strong (MarketLine, 2017). 3.3. Competition Analysis The competition analysis provides an in-depth review of the competitive factors and environment faced within the paper product manufacturing segment of the paper and pulp industry. This section compares industry competitors and identifies direct competitors along with their potential strategies that may create opportunities and threats for Kimberly-Clark Corporation. In MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 30 addition, this analysis locates key success factors that all firms within the industry must obtain to secure future competitive victory. 3.3.1. Industry Competitors There are many rivals in the paper product manufacturing area of the paper and pulp industry. Some factors that distinguish these competitors include product segments, company size, annual revenue, geographic coverage, product-line breadth and distribution channels. The table below illustrates a comparison of several active competitors within the industry. MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 31 Figure 5: Competition Comparison Table Company KimberlyClark Co. Svenska Cellulosa Aktiebolaget No. Re ve nue Employe e s 42k 44k GeorgiaPacific LLC 46k The Procter & Gamble Company 105k Suominen Oyj 646 Dsg International Limited 20 Edgewell Personal Care Company 6k Nice-Pak Products, Inc. 1k Main Products Ge ographic Cove rage Paper product manufacturer: personal care such as diapers, feminine and US, Canada, incontinence care, Europe, 18.2 Bil consumer tissue such Asia, Latin as facial and bath, America paper towels, wipes, and K-C professional (medical) 17 Bil Forest product manufacturer: Europe, Personal care including North diapers, incontinence America, and feminine care, South tissue such as facial Africa, and and bath, and forest Japan products Forest product manufacturer: tissue products such as facial and bathroom tissue, 17 Bil US paper towels, lumber, fertilizer, cardboard packaging, recyled paper Consumer goods product manufacturer: North 1)baby, feminine, and America, family care including 65 Bil Latin diapers and wipes America, 2)beauty 3)fabric and Asia, Europe home care 4)heath and grooming North Nonwoven wiping America, 535 Mil fabrics: wet wipes & Europe, nonwoven fabric rolls Brazil 2.3 Mil Disposable baby diapers, private-label diapers, sanitary napkins, incontinence care and training pants US, Southeast Asia, China ProductLine Bre adth Dis tribution Channe ls Wide Multiple Wide Multiple Wide Multiple Very Wide Multiple Narrow 1)Retailers 2)Product makers Narrow Retailers North Personal care America, household products Asia Pacific, 2.3 Bil Very Wide including feminine care Latin and wipes America, Europe Design, manufacture, and distribution of Germany, 438 Mil Very Narrow branded and privateUK, US label wet wipes Source: D&B Hoovers Database, 2017 Multiple Retailers MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 32 The three direct competitors of Kimberly-Clark Corp. according to the data above are Essity Aktiebolag, Georgia-Pacific LLC, and Procter & Gamble Company. Essity Aktiebolag is a subsidiary of parent company Svenska Cellulosa Aktiebolaget, which is a foresting company that grows and maintains forests along with producing and manufacturing forest products. KimberlyClark also manages forests; however, this firm focuses on sustainability by making efforts to reduce fibers obtained from natural forests and increasing the utilization of environmentally preferred fibers such as recycled materials to manufacture their products. Georgia-Pacific LLC has a much wider product base than the previous two firms; however, they are limited in their geographic reach to US locations. Neither Procter & Gamble Company or Georgia-Pacific LLC manage their own forests. The Procter & Gamble Company is the largest and most diverse company of all four direct competitors. All four direct competitors have ownership of well-known household brands. 3.3.2. Rivals Anticipated Strategic Moves Svenska Cellulosa Aktiebolaget (SCA) discontinued their Essity operation this year and decided to split the company into two – thus creating Essity Aktiebolag as a separately listed company on June 15th 2017. SCA will continue to focus on foresting operations while Essity is a hygiene and health care company. Also, Essity acquired BSN, a medical product company, in April to keep in line with their strategy to offer health care products. Essity concluded that the US market remains highly prioritized. Another announcement per Essity is the plan to partner with Microsoft by obtaining an online cloud-based platform to analyze data, create evidence-based reports, and execute action plans. Essity can be expected to utilize these new tools in the US market. Since North America is also a large market for Kimberly-Clark, Essity’s strategy to focus on selling hygiene and health items in the US market is a threat for Kimberly-Clark. In addition, Essity’s MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 33 plan to implement an online based platform is also a threat for Kimberly-Clark since a direct competitor’s data will be more efficiently consolidated and analyzed for planning purposes. US based Georgia-Pacific LLC’s ventures this year include a new lumber facility in Alabama, acquisition of PAX Corrugated Products within the packaging paper segment, and a $400 million investment installing technological equipment in a Florida mill within the paper tissue and towel segment. The new equipment is expected to increase production capacity to grow private-label paper towel brands along with the company’s high quality Brawny paper towel brand. Georgia-Pacific also managed to improve their supply chain system costs of transporting tissue by implementing changes in the way they load their supply trucks. This change allowed them to increase the amount of tissue per truckload. Another note about Georgia-Pacific is their involvement within the US community including charitable donations to Louisiana and Texas flood victims this year. Georgia-Pacific’s strategies include implementing a management system that allows the organizations within their many product segments the ability to successfully handle change and push towards growth. This firm can be expected to continue improving production processes and operating with a customer-based focus. These actions could increase consumer product loyalty within the paper product industry segment of the paper and pulp industry US market, which will have a negative effect on Kimberly-Clark. The Procter & Gamble Company’s (P&G) current strategy involves decreasing the number of brands offered and focusing on a smaller number of product segments. In 2013, P&G offered 170 different products within 16 different segments. Now P&G only offers 65 products within 10 different segments. This plan involves running each segment per category, giving the category leaders control over the related category. P&G also is known for consistent innovation by creating new brands and products. A few products that fall in the paper product manufacturing segment of MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 34 the paper and pulp industry are new brands created in P&G’s feminine care segment this year. P&G is also implementing and improving online platforms such as e-commerce partnerships with Amazon.com, Target e-commerce and Wal-Mart e-commerce along with online software applications such as Pampers Rewards App. P&G can be expected to continue online integration and product innovation to follow their strategy to produce superior and “irresistible” products. The fact that P&G is targeting millennials by the integration of online platforms will threaten Kimberly-Clark’s ability to remain competitive in the future within the markets of developed economies. This could hurt Kimberly-Clark’s currently large e-commerce sales within the Asia market. 3.3.3. Key Success Factors Key success factors are features and issues within an industry that have a large impact on a firm’s ability to be competitive in the marketplace. One key factor in the paper product manufacturing area of the paper and pulp industry is the ability to invest in the latest technology. This will create a more efficient manufacturing process and will allow companies to reduce manufacturing costs which will in turn allow them to sell their product for a lower price. According to Euromonitor, future product use depends on a massive lower-level income consumer base (2017). Since disposable tissue and hygiene care are common household items, the ability to sell for a lower price than other brands will appeal to these consumers. Another key factor is the establishment of a brand name. According to Business Insights: Global (2017), indirect distribution networks are expected to hold 3/4 of the tissue and hygiene care industry’s market share by 2025. This means approximately 75% of the market share will belong to retailers like grocery stores, convenient stores, e-commerce, etc. Since the consumer has many choices of brands to choose from when selecting products that offer the same benefits, a firm must be able to MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 35 distinguish their products from the others by means of advertisements. This is especially true for firms offering premium and high-quality items. A third key factor is the ability to innovate new products and modify existing items to stay in line with changing marketplace circumstances. Business Insights: Global confirmed that although North America is currently the largest marketplace for tissue and hygiene paper products, Asia Pacific is expected to increase revenue enough to become the largest marketplace within seven years (2017). This shift will create the need to invent and modify products to satisfy this market’s consumer preferences. 3.4. Summary of Opportunities and Threats Opportunities: • Global trend towards disposable products – generates the opportunity to improve and innovate within current product segments to generate sales • Global trend towards online platforms – creates opportunity to reach more consumers within developed economies by improving e-commerce sales and other communications via online outlets • Asia Pacific market expected to be largest marketplace by 2025 – opportunity to produce products that cater to this marketplace and increase revenue • Global annual 0.6% rise in birthrates presents opportunity for increased sales due to positive correlation between birth rates and need for sanitary paper products • Global annual 3.5% rise in 65+ individuals presents opportunity for increased sales due to increased need for incontinence products. • Global trend towards increased GDP heightens purchasing power of consumers and presents opportunity to increase sales Threats: MIDTERM REPORT: KIMBERLY-CLARK CORPORATION • 36 The potential event of an economic downturn would lower ability to maintain the continuing expense of disposable items and lead consumers to seek substitutes • Essity Aktiebolaget’s partnership with Microsoft – online integration allows a direct competitor to organize and analyze data more efficiently • Essity Aktiebolaget, The Procter & Gamble Company, and Georgia-Pacific LLC’s rivalry within US market – direct competitors focusing on current largest marketplace • The Procter & Gamble Company’s innovation and e-commerce skills threaten ability to remain competitive in quickly developing economies such as Asia • Trend of increased competition- company will need to work harder to maintain customer loyalty MIDTERM REPORT: KIMBERLY-CLARK CORPORATION 37 References Bloomberg L.P. 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