Loctite Corporation International Distribution

Loctite Corporation – International Distribution

Background

1. Loctite Corporation was founded in 1956; Headquartered in Hartford, Connecticut. It had grown to become the global leading manufacturer and marketer of adhesives, sealants, and relative products, especially the impressive growth during the 1980s. It had achieved Fortune 500 status in 1990,and in 1991 was ranked 477 in revenue, 190 in profits, 24 in profit as a percentage of sales, and 18 in per share annual growth over the previous decade. By 1992, the company’s worldwide market share in industrial adhesives was estimated to be at 70%-80%.

2. Its growth had been based on the strategy of promotion diversity in end of use markets and geographies for their core business; this core business remained the sale of adhesives to industrial users who had previously used other ways of mechanical fasteners and industrial adhesives include sealants accounted for 50% of corporation revenues in 1992. From this base Loctite had expanded into related industrial markets, such as the automotive aftermarket, an entry built on acquisition of Permatex. In the mid-1970s and more recently Loctite successively entered consumer adhesives market by acquisitions of Woodhill Chemicals; expanded its technology base through acquisitions of silicone & polyurethane companies, and acquired a U.S. company selling hand-cleaning products as a complement to adhesives and sealants.

3. It had begun early in its history to get geographical expansion; by 1992 Loctite had operated with equity positions in 33 countries besides U.S., and with third party distributors in other countries. Its almost 60% of sales and 70% of earnings derived from operations outside the U.S.

4. Loctite was organized into four regional groups and the structures varied by region. Regions organized the operations to three business groups: industrial market; retail & consumer market and automotive aftermarket. The corporation was run in a decentralized fashion.

5. For its product strategy it was to offer a full range of adhesives and sealants to meet the different needs of a broad of consumers based on its technical leadership in product development (KSF), and Loctite sought derive a minimize of 25% of its annual revenues from products launched within the previous 5 yrs.

6. The sales mixing of its products varied in different countries and also broadly based in terms of customers. More training and education to distributors and end users were very important to improve its limited penetration in available market. On the other hand few direct competitors had so full products to compete Loctite.

7. Loctite started its experiences of distribution developing from North America to other global regions. It has a mixed distribution system with 3 key different models:

-Wholly owned subsidiaries

-Joint Ventures with local partners, in which Loctite has controlling share

-Independent distributors

And the normal pattern of the evolution of Lactite’s distribution system:

-Begins with a relationship with a distributor

-Followed by an increasing stake in the business

-Finally Loctite’s wholly owned distribution subsidiaries

This method has been proved to be successful in the past

The DMP & DMU Analysis

The initiator, influencer and user could be the engineer; the decider could be management; the purchaser could be the purchasing department. The awareness, category and brand preference upon engineer and management are critical to the success of Loctite.

So, the outputs required education on product knowledge; satisfaction demand for better fasteners and enlarge the category via switching mechanical fasteners; and physical distribution—easy access & convenience to customers

The problem to Loctite with distribution

Loctite is not happy with its independent distributor in HK for 2 major reasons:

-Its unwillingness to invest more to expand Loctite’s business

-Its unwillingness to cooperate more closely with Loctite on business plan, sales management, etc.In other words, Loctite feels that it can not control the distribution. Loctite is considering some ways to boost sales growth in Hong Kong and other markets; bellows are some options regarding the operation in Hong Kong:

1. Buy 51% or more of the existing Hong Kong distributorship,