Restructuring, as constant restructuring develops a negative impact on shareholders. Study of external and internal environment, considering all possible factors will make it easier to implement Global Business Policy and avoid its failure. Kimberly Clark should maximize their knowledge from experienced Scott managers as this will help in understanding the local market. It also allows the company to understand the organisation work culture and vivid methods of operation from Scott. Kimberly Clark did not have proper knowledge of Scott inventory and the impact of extreme downsizing of the organisation.
This hindered them to solve the emerging problem quickly. History Kimberly Clark and company was founded in Neenah, Wisconsin in 1872, in a partnership between John A. Kimberly, Charles B. Clark, Frank . C. Shattuck and Havilah Babcock. The company was initially launched their business as paper mills. Further through various mergers, acquisition and innovation they have become one of the leading brands in paper based products, all over the world (Thomson Corporation, 1997). The company has established its position by the development of new marketing programmes and technological advances (Glowacki, 1995).
They have worked through, to become one of the 100 best companies in USA by focussing on health, hygiene and well being of the consumer introducing popular brands like Kleenex, Scott, huggies, pull ups and kotex(Kimberly clark , 2003). Global Expansion In order to incorporate the Global Expansion Strategy, Kimberly Clark decided to have a merger with Europe’s leading brand company Scott Corporation. This merger had a positive impact on Kimberly Clark as it lead the company to increase its market share in the consumer market, as well as it gave the company a great product mix ProQuest Information and Learning Company, 1995).
This merger allowed expense reduction, along with operational synergies in the company and brought high end products as well as low end alternatives eliminating mid range segment. It strengthened Kimberly Clark Corporation’s position in the European market, by holding almost 58% of the Market share in Europe (Collins, 1995). Organisation Environments External Environment Political and Legal The merger between Kimberly Clark and Scott became a major legal and political issue in the market as Kimberly Clark had a control of 58% of the market share. This merged as a domestic antitrust problem in the consumer mind in Europe (Collins, 1995).
The direct target competition among them was bringing the consumers a lower price and also benefits from frequent promotions, couponing and other marketing strategies (United States District Court Northern District of Texas Dallas Division, 1995). Due to the reasons mentioned above, there was increased political pressure on Kimberly Clark which lead them to sell SCA (Kleenex plant in Britan). This plant used to help thier tissue brand Kleenex to be more improved and advanced. Later, SCA began competing with Kimberly Clark leading to a fall in the hare of Kimberly Clark by about 3% and gain in the share of SCA by 6% (Forest & Dawley, 1998).
Economical The merger between Scott and Kimberly Clark brought Kimberly Clark a major restructuring cost falling in between $675 million and $775 million. This cost pressurized Kimberly Clark to shut down 20 plants and also reduce their work-force by 10%, keeping the organisation cost down( Decision News Media SAS, 2005). During this period, the price of all their products fell by 2 percent. This cost difference ultimately started reflecting on the price of the products for the customers in US and Europe. As a result, the company faced a 17 percent fall in fourth quarter of their net income (Pitman, 2006).
It was a result of Kimberly Clarks poor planning and prediction about the positive outcomes in global growth and operational synergies, neglecting high cost involvement. Further increases in operating cost lead to repetitive restructuring of the organisation to achieve efficient cost structure (Forest & Dawley, 1998). Technological The merger between Kimberly Clark and Scott strengthened the distribution channel for both the companies and their operating margins. It helped Kimberly Clark to put side the expenditure on building up an International business as well as they could increase the manufacturing efficiency of the company.