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Ansell SWOT & PESTLE Analysis

Last Updated : 29 Jun, 2017

OVERVIEW

Name of the Company: Ansell Ltd.

Business Sector: Health

Operating Geography: North America, Global

About the Company: Ansell Ltd. is an Australian company was originally founded under the name of Dunlop Pneumatic Tyre Company of Australasia Ltd in the year 1899. Following multiple mergers, especially that with Ansell Rubber Company in 1969, the company took on its current name in 2002. The change of name was effected after decision was made to concentrate on the healthcare range of its Ansell subsidiary.

Revenue: $1.57bn for 2016

SWOT & PESTLE Analysis

The SWOT analysis for Ansell is presented below:
Strengths
Weaknesses
1. Well established market leading brands and products
2. Industry leading material science research and manufacturing capability
3. Stellar financials: Increasing revenue, expanding margins, investment grade balance sheet
4. Patented Guardian technology strengthen relation with end users
1. Dependent on third parties for raw material sourcing
2. Glitches in manufacturing strategy reflective of forecasting and planning shortcomings
Opportunities
Threats
1. Expansion in emerging markets
2. Strengthening market position via strategic, disciplined M&A
3. Strengthening channel partnerships
4. Innovating and marketing new and improved products
5. Backward integration to reduce supplier dependence
1. Global markets instability
2. Foreign exchange risk
3. Technology obsolescence and other competitive pressures
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Strengths

1. Well established market leading brands: The firm is a market leader in industrial and single use gloves, and ranks second in the sexual wellness and medical gloves categories. It has an impressive brand portfolio which includes several key brands- Industrial: Hyflex, Solvex, Edge, AlphaTec, ActivaRmr, Microgard; Medical: Encore, Sandel, Gammex, Medigrip, Microflex; Single Use: Microflex, TouchNTuff; Sexual wellness: Skyn, Kamasutra, Lifestyles, Bloxtex, Mando.

2. Industry leading material science capabilities: The firm’s unique material science capability allows it to combine the dual needs of protection and comfort. In FY16, Ansell operated 21 state-of-the-art manufacturing sites throughout Asia, the Americas and Europe. Through steady investments in R&D capabilities, the firm has maintained its market leadership in its key GBUs.

3. Stellar financials: The company has maintained an investment grade balance sheet while continuing to grow its revenues as well as its margins. A slight decline in revenue this year was primarily due to muted growth in its key markets (EMEA and Americas).

4. Patented Guardian Technology: The Guardian technology includes tools that provide comprehensive advice to end users on the right products to use for optimal safety and productivity and have been instrumental in strengthening the relationship of the firm with its end user base

Weaknesses

1. Raw material sourcing and quality: Ansell depends on third party supplier for many of its key raw materials. The inability of ay supplier to deliver the goods, or lack of quality standards met in terms of raw materials can severely hinder business activities and is thus a significant weakness for the firm.

2. Glitches in manufacturing strategy: Ansell faced significant supply side constraints in the medical GBU this year primarily due to shutting down one of its three plants and the inability of its other two plants to compensate for the differential. Such glitches in the manufacturing strategy of a global player like Ansell are indicative of a serious weakness on the forecasting and strategy side.

Opportunities

1. Increasing contribution from emerging markets: The firm’s contribution from emerging markets has gone up from 18% in 2010 to 24% in 2016. With a lot of the emerging market countries looking at high single digit growth, there is significant headroom to expand in these markets especially in the sexual wellness category.

2. Strengthening market position via strategic, disciplined M&A: Both the Barriersafe and Microgard have turned out to be successful investments for Ansell, with returns well in excess of the WACC. Going forward, Ansell can use the M&A route to strengthen core market position, increase ability to differentiate in material sciences and added near adjacent product portfolios in line with strategic vision

3. Strengthening channel partnerships: GBUs with strong channel partnerships (industrial and single use) have reaped extremely high return with the single use segment commanding a 21% EBIT margin. Going forward, strengthen channel partnerships for its medical and sexual wellness GBUs could lead to stronger margins for the overall firm, and a stronger market position.

4. Innovating and marketing new and improved products: The firm has had steady improvements in its products, especially in the industrial segment with Hyflex (Intercept technology.) Continued focus on innovation and new product development will be the key to the firm’s growth going forward.

5. Backward integration to reduce supplier dependence: The firm is currently dependent on external suppliers for most of its key raw materials. Active backward integration, either organically or inorganically can lead to significant benefits for the firm or lead to better control over both costs and quality.

Threats

1. Global market instability: The Group’s presence in over 30 countries globally and its growing presence in emerging markets exposes the Company to geopolitical, regulatory and other factors beyond the Group’s control. The groups diversification across geographies mitigates risk to a certain extent.

2. Foreign exchange risk: Since a major portion of the firm’s revenue comes from non-USD based currencies [FY16 revenue split: US (US$672mm), Latam (US$92mm), Asia Pac (US$284mm), EMEA (US$585mm)], the firm faces significant forex risk, especially in the current rate environment. The firm however has taken significant measures to protect itself from any adverse price movements by hedging up to 90 per cent of its estimated foreign currency exposure in respect of forecast purchases and sales.

3. Technology obsolescence and other competitive pressures: The area is one with high R&D expense which has a direct bearing on product quality and can be a major driver of demand. With strong competition in the industrial and medical space, technological obsolescence due to a competitor’s R&D is a key threat. However, the firm continues to invest in R&D to maintain market leadership.

To get the complete detailed SWOT report on Ansell please mail us at: support@swotandpestle.com. or contact us here.

Ansell SWOT analysis has been conducted by Ganesh Nagarsekar and reviewed by senior analysts from Barakaat Consulting.

References

1. Annual report- http://www.ansell.com/-/media/Corporate/MainWebsite/About/Investor-Center/Annual-Report-2016/Annual-Report-to-Shareholders-2016.ashx?la=en

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The PESTLE analysis for Ansell is presented below:
Political
Economical
1. Emerging economies cutting down healthcare spending
2. Growing protectionist tendencies in world leadership
3. Continuation of Global slowdown due to inaction
4. Increase in regulations for industrial and medical safety
1. Global market instability
2. Foreign exchange risk
3. Muted growth in key markets
Social
Technological
1. Young and urban population in emerging markets to drive sexual wellness growth
2. Increasing trends towards workers and medical professional’s safety worldwide to aid growth
1. IT platform interruptions
2. R&D expertise improvements
Legal
Environmental
1. Anti-trust cases following acquisitions
2. Legal disputes concerning key patents
3. Legal disputes due to product quality or customer disputes
1. Environmental pressure affecting single use product sales
2. Pollution related regulatory issues in any of its manufacturing facilities
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Political

1. Emerging economies cutting down healthcare spend: With c. 24% of total sales coming from emerging economies, Ansell’s dependence on emerging economies is steadily increasing. Ansell recognizes the governments in emerging countries as major drivers of overall medical expenditure, and hence key players for the firm’s medical GBU sales. Adverse budget cuts in these geographies can adversely affect the firm.

2. Growing protectionist tendencies in world leadership: Protectionist policies by some of the world leaders in key geographies that Ansell operates in including the USA, can adversely affect Ansell’s prospects going forward.

3. Continuation of global slowdown due to political inaction: EMEA is a key geography for Ansell contributing nearly 30% of its top-line. Reduction of bailouts and other positive action in the Eurozone could lead to muted growth of the industrial and healthcare segments in these regions and have a negative impact on Ansell.

4. Increase in regulations for industrial and medical safety: An increase in safety related regulations and increase the use of the firm’s industrial and medical products, thereby improving the firm’s future prospects.

Economic

1. Global market instability: The Group’s presence in over 30 countries globally and its growing presence in emerging markets exposes the Company to geopolitical, regulatory and other factors beyond the Group’s control. In FY16 the inflationary environment in Brazil and volatility in Russia and Southeast Asia impacted the demand and consequently performance on Ansell in these geographies.

2. Foreign exchange risk: The firm’s presence across geographies exposes it to a variety of foreign exchange based risks. [FY16 revenue split: US (US$672mm), Latam (US$92mm), Asia Pac (US$284mm), EMEA (US$585mm)]. The firm however has taken significant measures to protect itself from any adverse price movements by hedging up to 90 per cent of its estimated foreign currency exposure in respect of forecast purchases and sales.

3. Muted growth in key markets: The growth in the US and EMEA markets have been extremely muted in the recent past, leading to a consequent negative impact on the firm’s performance in these geographies. The future growth of the company is contingent to a certain extent on the performance of these geographies.

Social

1. Young and urban population in emerging markets to drive sexual wellness growth: The company’s sexual wellness GBU recorded a 26% y-o-y growth in China and 11% y-o-y growth in India. With a growing urban population with increasing disposable income, this group could be a major growth driver for the firm’s sexual wellness GBU in the coming years as well.

2. Increasing trends towards workers and medical professional’s safety worldwide to aid growth: The firm’s industrial products and medical products GBU are benefiting greatly from the global consensus towards increasing levels of safety for industrial and medical professionals. An increase of the same trend in emerging markets can help these GBUs take off in large markets like China and India as well.

Technological

1. IT platform interruptions: As a modern business Ansell relies on Information Technology (IT) platforms. Interruption, compromise to or failure of these platforms could affect Ansell's ability to service its customers effectively. To deal with this issue, the firm has deployed modern ERP systems in North America and EMEA regions. The firm is also trying to deploy the same system in other geographies that it operates in.

2. R&D performance improvements: The firm has made R&D core to its growth process, focussing on creating more durable and comfortable products for its end customers. Historically the performance of this division has helped the firm retail its market leadership in key GBUs, but continued performance would be necessary to retain this position.

Legal

1. Anti-trust cases following acquisitions: The firm has maintained a policy of acquiring firms to strengthen market position. Given its current leadership in a lot of the key GBUs it operates in, further acquisitions may make it susceptible to Anti-trust cases, as well as regulatory blocks in the deal stage.

2. Legal disputes concerning key patents: Being a strong product driven firm, Ansell has numerous patents. There can be legal disputes regarding the same.

3. Legal disputes due to product quality or customer disputes: Due to the nature of the business the firm operates in, quality is key, and any shortcoming in this regard could make the firm susceptible to legal action from clients. The firm currently has one pending case (Accufix Pacing Lead)

Environmental

1. Environmental pressure affecting single use product sales: With an increasing focus on recycling and reducing carbon footprint, the growth of the single use segment can come under pressure affecting the firm’s overall growth.

2. Pollution related regulatory issues in any of its manufacturing facilities: Ansell operates 21 state-of-the-art manufacturing facilities across geographies (US, EMEA, Asia Pacific). Any change in pollution related regulations in these geographies can impact the operations of these plants, thus impacting supply and overall operations of the firm.

To get the complete detailed PESTLE report on Ansell please mail us at: support@swotandpestle.com. or contact us here.

Ansell PESTLE analysis has been conducted by Ganesh Nagarsekar and reviewed by senior analysts from Barakaat Consulting.

References

1. Annual report- http://www.ansell.com/-/media/Corporate/MainWebsite/About/Investor-Center/Annual-Report-2016/Annual-Report-to-Shareholders-2016.ashx?la=en

Download Analysis Report




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