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Dramatic departure from the status quo.

Dramatic Departure From the Status Quo

Just as different animals use different strategies to survive in the food chain, companies wishing to compete successfully on the global playing field must be adaptable and quick to respond to the need for strategic change. At Benckiser in the early 1980s, we had little choice but to develop some talent for adaptability and managing strategic change. Our survival at that time was certainly not a given.

Our markets were dominated by big multinationals with whom we could not compete, given our size, structure, and approach. Our original business strategy - using the same raw material as a base for various products - was becoming increasingly obsolete and, in some cases, a liability. Our origins as a German company were preventing us from developing and competing internationally. And our corporate organization was taking us nowhere fast, promoting bureaucracy instead of entrepreneurial energy, and rigidity instead of flexibility.

It was clear that, as a company, we had to cultivate a new mind-set and develop a set of qualities that would prompt us to think and behave like an international organization on the move, close to its markets, and ready for new challenges. It was equally clear that we had to do it fast.

Fortunately, despite our problems, we had two important things going for us. The first is that the Benckiser family has always been steadfast in its support of nonfamily management. The second is that we had a small group of managers, including my predecessor and me, who were fiercely committed to protecting the company's independence. These two factors proved invaluable in helping us stick to our guns as we launched and navigated an adventurous departure from the status quo.

At the time, the principles and courses of action we embraced seemed drastic, but entirely essential. We were talking about emotional decisions that would virtually remake Benckiser out of whole cloth.

The first major decision was to embrace the principle of capitalism. This meant that we would invest exclusively in activities that would produce the highest profit in the long run. As straightforward as this sounds, at the time, it ran counter to our greater concern for process rather than for the bottom line. We ceased unproductive activities, regardless of whether or not they were part of cherished company tradition, and jettisoned excess baggage. This included our industrial acids business which had been the company's primary focus for 100 years, and a number of small, low-margin businesses in industrial cleaning, chemicals, water treatment, and ship cleaning. We even sold the real estate and buildings that had served as Benckiser's corporate headquarters for over 130 years.

But we did much more than just sell things. We invested the proceeds from the sales in building our consumer household products business. Between 1983 and 1989, we bought 16 small-to-medium-sized companies at reasonable prices. By working to our own carefully constructed formulas for return on investment, we avoided expensive bidding wars which inflated the costs of many a potential acquisition. We were also able to realize value from our acquisitions by integrating them quickly into our operations. This eliminated much of the uncertainty that often plagues acquisitions and undermines profitability. Today, while Benckiser is not the biggest player in the sector, we have a healthy and profitable consumer products business, which alone is 10 times larger than the entire company was in the early 1980s.

The second major issue for us was to free ourselves from the constraints of our traditional German ties. For years, we had been developing an organization top-heavy with chiefs and would-be chiefs whose primary claim to fame was their proficiency in the German language. In an age in which we had to become more international to compete, we were actually becoming more German!

To set us on the right track, we adopted English as our corporate language and our headquarters in Ludwigshafen, Germany, became a headquarters in name only. Our senior corporate officers, each with corporate and operating unit responsibilities, were stationed around the globe. As further evidence of our commitment to decentralization, we ceded a tremendous amount of responsibility and authority to local managers. We firmly believe that "all business is local," and local managers are best qualified to make decisions in their local markets.

We have by design and necessity become more open-minded and flexible in our approach to business across geographic lines. Today, we operate some 70 companies in 20 countries. Although we are still 100% German-owned, non-Germans account for about 80% of Benckiser's upper management.

In becoming more international, we gained critical insight into the fashion of building European and global brands. In the 1980s, many large companies and respected marketing gurus were predicting that consumer behavior would become increasingly similar worldwide and eventually lead to domination by global giants such as Marlboro, Coca-Cola, and McDonald's. Accordingly, many companies began to rethink their focus on national markets and move toward global branding.

At Benckiser, we, too, were impressed by the "globalization" theories and decided to test them against our own experience and research. We found, to our surprise, that our customers' tastes were not converging but were, in fact, clearly differentiated by country. Our strategy has been, therefore, to "stay local" on all levels, including branding, marketing, production, sales, and administration.

We applied the same approach to acquisitions by purchasing large national companies to gain attractive national market positions. We also branched out into the personal care, cosmetics, and fragrance industries, with the purchase in 1990 of the Astor/Lancaster Group, and Quintessence Holdings Inc. in 1991. So far, our approach has worked extremely well and we expect these businesses to be engines of growth for Benckiser well into the future.

Reshaped by a decade of persistence, flexibility, open-mindedness, and willingness to pursue opportunities anywhere in the world, Benckiser has experienced more growth in the past 10 years than in the previous 160, increasing annual sales from $300 million to nearly $2.5 billion. Predictably, our metamorphosis has not gone unnoticed by larger competitors, and we will have to rely more than ever on our adaptability to remain competitive.

Looking ahead to the year 2000, we see the familiar dynamics of competitive consolidation at work in our industries. Recent events, such as Procter & Gamble's purchase of Revlon's cosmetics units and Unilever's acquisition of Faberge and Elizabeth Arden, suggest that a company's growth will be achieved increasingly at a competitor's expense and by seeking opportunities in related markets. As we approach a new century, it is clear that global corporate leaders cannot afford to ignore such compelling signals if they are to adapt to an ever-changing environment.

We predict, based on our own experiences, that success in meeting this challenge will depend more than ever on the ability of a company's leadership to create an organization that can deal effectively with strategic change amid the multicultural realities with which we live.
COPYRIGHT 1991 Directors and Boards
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Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Special Section: Being a Global Leader; views of Peter Harf, Chairman and CEO of Benckiser Group
Publication:Directors & Boards
Date:Sep 22, 1991
Words:1149
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