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The Clorox Company SWOT & PESTLE Analysis

Last Updated : 21 Jun, 2017

OVERVIEW

Name of the Company: The Clorox Company

Business Sector: Consumer and Professional Products – Cleaning, Food

Operating Geography: Global

About the Company: The Clorox Company is a leading manufacturer and marketer of consumer and professional products. The company is headquartered in Oakland, California. It has around 8000 employees worldwide. It has 2 R & D centres, one in USA and another in Argentina. The company ranked 455 on Fortune’s 500 ranking (2016).

Revenue: US$5.8 Billion (FY ending June, 2016)

SWOT & PESTLE Analysis

The SWOT analysis for The Clorox Company is presented below:
Strengths
Weaknesses
1. Strong financial performance
2. Strong product portfolio
3. Diversity at work place and engaged employees
4. Corporate Social Responsibility
5. Strong R&D
1. Limited geographic presence
2. Decline in free cash flow in 2016 compared to 2015
3. Dependence on retailers.
Opportunities
Threats
1. Exploring new markets
2. Fuel growth by reducing waste
3. Expansion of brands
1. Intense competition from its competitors
2. Criticism of advertising message
3. Government regulations
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Strengths

1. Strong financial performance: Clorox's sales grew 2 percent from US$ 5655 million in 2015 to US$ 5761 million. Its gross margin expanded by 150 basis points to 45.1 percent. Its diluted net earnings per share from continuing operations grew 8 percent from US$4.57 million in 2015 to US$4.92 million in 2016.

2. Strong product portfolio: The product portfolio includes cleaners, homecare, healthcare, plastic bags, water filtration products etc. Nearly 80 percent of its global brands rank as the No. 1 or No. 2 market-share leaders in their respective categories.

3. Diversity at workplace and engaged employees: Clorox has 30% female independent board members vs. 20% Fortune 500 average. In the workforce, the company has 25% and 31% ethnic minorities among U.S. non-production managers and employees respectively. The Diversity MBA has ranked The Clorox Company among the top three “Best Places for Women & Diverse Managers to Work.”The company’s current employee engagement score stands at 87%, 8% higher than the FMCG industry norm. Clorox posted a recordable incident rate of 0.61 squares in the workplace.

4. Corporate Social Responsibility: Clorox expanded its CSR activity a step further by becoming a signatory of THE UNITED NATIONS GLOBAL COMPACT in 2015. Clorox continued to drive its eco strategy, making sustainability improvements to 31 percent of its product portfolio since the baseline calendar year of 2011. Clorox supports its global communities through Be Healthy, Be Smart and Be Safe initiatives. The company’s total community impact in the fiscal year 2016 was US$ 16.9 million.

5. Strong R&D: Clorox invested US$141 million in 2016 for its R&D projects. In 2015, it invested US$136 millions. The company’s recent launch of Hidden Valley Ranch With helped strengthen its leadership position in dressings and sauces.

Weaknesses

1. Limited Geographic Presence: Clorox generated 83% of its revenue from U.S. markets. Clorox could derive only 17% revenue from International market. This high dependence on U.S. market may adversely impact the company’s sales growth objective. The company may think of starting its manufacturing facility in India as soon as possible.

2. Decline in free cash flow in 2016: The Clorox Company’s free cash flow declined from US$733 million in 2015 to US$596 million in 2016. The company must try to increase its free cash flow as this will be useful for business expansion and acquisition of other brands.

3. Dependence on retailers: Dependence on large-format retailers such as Walmart (WMT), Target (TGT), and Costco (COST), which have greater bargaining strength, can be a weakness for Clorox. These retailers demand higher discounts, slot fees or reduction in shelf space for private label. This might reduce sales of Clorox brands.

Opportunities

1. Exploring new markets: Clorox should expand its business in emerging markets like India and China. Although they have plant in China, but they must expand its operation to gain the advantage of large consumers. In India Clorox has a great opportunity because of the population size and consumer’s increasing purchasing power capability.

2. Fuel growth by reducing waste: Enterprise wide initiatives, including light weighting of charcoal briquettes, renegotiated international ocean freight rates and a number of other administrative improvements, contributed to $109 million in cost savings.

3. Expansion of brands: Clorox acquired Renew Life and evolve its portfolio into the digestive health space, a $10 billion category expected to grow 7 percent annually. Clorox must explore other leading which they should consider for acquisition.

Threats

1. Intense competition from its competitors: Clorox faces stiff competition in terms of pricing decisions, product development, and innovation. Clorox company’s main competitors are Unilever, P&G, and Colgate-Palmolive etc. Their advertising and promotional events and strong financial condition poses a threat to Clorox. .

2. Criticism of advertising message: The National Advertising Division asked Clorox to either discontinue or modify its advertisements for Green Works on the grounds that the cleaners do not work as per the claim by Clorox.

3. Government regulations: Clorox had to exit from Venezuela in 2015 due to stringent government regulation on price increase of its products. Clorox reported a loss of US$23 million before interest and taxes.

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

The Clorox CompanySWOT analysis has been conducted by Saswata Banik and reviewed by senior analysts from Barakaat Consulting.

References

1. The Clorox Company- Who We Are -https://www.thecloroxcompany.com/who-we-are/

2. Integrated Report- https://s21.q4cdn.com/507168367/files/doc_financials/annuals/2016/CLX-2016-Integrated-Report_Finalv2.pdf

3. Benchmarks by Company-http://www.theacsi.org/index.php?option=com_content&view=article&id=149&catid=&Itemid=214&c=Clorox

4. Diversity MBA: Clorox No. 3 Place to Work- https://www.thecloroxcompany.com/blog/diversity-mba-clorox-no-3-place-to-work/

5. Hurdles in Clorox’s Growth: Weaknesses and Threats-http://marketrealist.com/2015/11/hurdles-cloroxs-growth-weaknesses-threats/

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The PESTLE analysis for The Clorox Company is presented below:
Political
Economical
1. Political stability of most countries generates business opportunity.
2. Political issues in the European Union and BREXIT will impact the company’s business and operation there.
3. Growing free trade relations will open the door for Clorox Company’s global growth.
1. Government regulations can impact the business of consumer products.
2. Currency devaluation
Social
Technological
1. Rising health consciousness of consumers.
2. Rising environmentalist behaviour open opportunities for companies to reduce its greenhouse gas emissions and water usage.
1. Rising business automation.
2. Rising R&D investments helps Clorox to manufacture innovative and environment friendly products.
Legal
Environmental
1. Clorox has to comply with different national legislations on personal products, process of production, and business operations. 1. Rising environmental concerns.
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Political

1. Political stability of most countries generates business opportunity: The political stability of most countries presents opportunity for Clorox to grow in these markets. For example, the political stability of the United States helps minimize challenges in the company’s strategic implementations in the country. Also, Clorox generates more than 80% of its revenue from USA.

2. Political issues in the European Union and BREXIT will impact the company’s business and operation there: The political issues in the European Union are a potential threat against Clorox company’s operations in the region’s consumer goods market. Recent BREXIT will impact its business they have to follow different tax policies one in Britain and other in EU zone. Clorox will need to follow different regulations in Europe, one for Britain and another for EU zone countries.

3. Growing free trade relations will open the door for Clorox Company’s global growth: The Company has opportunity for global growth based on the expanding free trade relations, especially those involving developing countries like India and China. This is the key to Clorox as it generates only 17% revenue from International market other than USA. Clorox needs to focus in emerging markets like India and China. Also, based on the political external factors, there are opportunities generally available in the market, although Clorox must address the challenges linked to the political condition of the European Union. Nevertheless, Clorox needs to adopt competitive pricing in these countries due to price wars.

Economic

1. Government regulations can impact the business of consumer products: Clorox had to exit from Venezuela in 2015 due to stringent government regulation on price increase of its products. The Venezuela government agreed to price hike but it was too less to run its operation in Venezuela. Clorox could not meet Venezuela governments recommended pricing of its products and was therefore forced to report a loss of US$23 million before interest and taxes.

2. Currency devaluation: Economic conditions have the highest influence on a business, regardless of what trade it is in. Recently in December, 2015 Argentine Peso devaluation also hit Clorox sales and profits in 2016. Similar Peso devaluation costs companies like P&G and Clorex too in Venezuela. Clorox had to exit its operation from Venezuela due to same Peso devaluation in Venezuela.

Social

1. Rising health consciousness of consumers: Rising health consciousness of the consumers drive companies to innovate and manufacture products in green line and environment friendly products. The greatest obstacle in this path was the scepticism of consumers who believe that products labelled as green, sustainable, or natural often were less effective and cost significantly more than their traditional counterparts. The Clorox Company launched its innovative Green Works line of natural household cleaning products in early 2008. It was the first company to launch in consumer packaged products.

2. Rising environmentalist behaviour open opportunities for companies to reduce its greenhouse gas emissions and water usage: Rising environmentalist behaviour presents an opportunity for the company to attract more consumers by improving its environmental impact. For example, Clorox can minimize its energy consumption by adopting new and more energy-efficient technologies. Clorox lowered its greenhouse gas emissions by 17 percent, water usage by 14 percent, energy usage by 14 percent and waste-to-landfill by 25 percent, cumulatively, since 2011.

Technological

1. Rising business automation: Rising business automation is the key to Clorox for survive in this consumer product industry and increase operational efficiency. Its competitors, including P&G and Colgate Palmolive, have greater technical expertise because of which they are able to manufacture and market products in India and China at much cheaper rates. Introducing technological advancement will help in reducing price cuts and reduce operating costs. This is supported by the fact that due to this Clorox saved US$ 109 million in the fiscal year 2016.

2. Rising R&D investments helps Clorox to manufacture innovative and environment friendly products: IT helps in increasing the competitive advantage of the company over its competitors. Clorox invested US$ 141 million in 2016 for its R&D projects. In 2015 it invested US$136 millions. The company’s recent launch of Hidden Valley Ranch With helped strengthen its leadership position in dressings and sauces.

Legal

1. Clorox has to comply with different national legislations on personal products, process of production, and business operations: With operations in more than twenty-five countries, Clorox must deal with distinctive political patterns influencing its business operations. Department of Pesticide Regulator (DPR) approves and regulates all its products in California. Clorox was named a recipient of the Environment Protection Agency(EPA) Safer Choice Partner of the Year 2016. Clorox manufactures food products and consumer products. Its food brands are Hidden Valley, KC Masterpiece Sauce etc. Since Clorox entered in the food sector, therefore it is regulated by the FDA. So, they’re supposed to maintain a firm standard of the laws set out by the FDA with consistency. Its other products are also regulated by FDA.

Environmental

1. Rising environmental concerns: The rising interest in business environmentalism is an opportunity for Clorox to improve its environmental programs to attract consumers concerned about the environment. The Clorox Company must consider product innovation and internal business processes to further reduce business environmental impact. These efforts should also support the company’s ability to satisfy increasingly complex environmental programs. Such external factor is an opportunity for the company to improve its competitive advantage through CSR.

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

The Clorox Company PESTLE analysis has been conducted by Saswata Banik and reviewed by senior analysts from Barakaat Consulting.

References

1. Clorox exits Venezuela citing govt restrictions- http://www.sandiegouniontribune.com/sdut-clorox-exits-venezuela-citing-govt-restrictions-2014sep22-story.html

2. Clorox Announces Exit From Venezuela and Confirms FY15 Outlook for Sales and EPS From Continuing Operations- https://investors.thecloroxcompany.com/investors/news-and-events/press-releases/press-release-details/2014/Clorox-Announces-Exit-From-Venezuela-and-Confirms-FY15-Outlook-for-Sales-and-EPS-From-Continuing-Operations/default.aspx

3. Making a Safer Choice-https://www.thecloroxcompany.com/blog/making-a-safer-choice/

4. Research and development expenditure of The Clorox Company worldwide from 2011 to 2016 (in million U.S. dollars)-https://www.statista.com/statistics/298706/randd-spending-of-the-clorox-company-worldwide/

5. Integrated Report-https://s21.q4cdn.com/507168367/files/doc_financials/annuals/2016/CLX-2016-Integrated-Report_Finalv2.pdf

6. The Clorox Company-https://www.thecloroxcompany.com/

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