Business / Sherwin-Williams Industry Analysis

Sherwin-Williams Industry Analysis

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Autor:  anton  04 November 2010
Tags:  Sherwin,  williams,  Industry,  Analysis
Words: 957   |   Pages: 4
Views: 396

Introduction to Sherwin-Williams

Two young entrepreneurs and a lot of dedication and drive. That’s how it all began. Henry Sherwin, a native of Cleveland OH and graduate of Western Reserve College, weighed all of his career options and decided to go into business for himself. He pulled all of his resources and bought a stake in Truman, Dunham and Co, a firm that sold painter’s pigments, linseed oil, colors, brushes and other finishing and decorating products. Although this was not high on his list of choices, he saw potential in the industry. It was the post civil war era and Cleveland was experiencing an economic boom. His plan was to develop the market for paint and coatings to not only corporate America, but to the untapped consumer market as well. He was looking for the now called “Do It Yourselfer” who wanted to have a part of their own home improvement with a quality product. Edward P. Williams joined Sherwin in the late 1860’s after ending his partnership with a glass company in Kent, OH. The two men never could have dreamed where their investment would lead them.

Today, Sherwin-Williams has more than 2600 company owned stores in 50 states, Canada and Mexico. They are the US market leader in distribution and sales of coatings (paints, lacquers, varnishes, etc) and coating related products. Their annual revenues exceed $5 million and they are ranked in the Fortune Top 400 companies. They are one of the world’s leading companies involved in the manufacture, distribution, and sale of coatings and other products in the professional, industrial, commercial and retail customer. They manufacture and sell under the name Dutch BoyТ, Pratt and LambertТ, Martin-SenourТ, Dupli-ColorТ, KrylonТ, Thompson’sТ, and MinwaxТ.

Through all of this, Cleveland based Sherwin-Williams has remained committed to customer service and production of a quality product. They have a strong commitment to everyone involved in their company – customer, vendor, shareholder and employee alike. As stated in their business ethics policy, they are committed to conducting business in an ethical and legal manner throughout the world with the highest standards of integrity. They are committed to protecting the environment, health and safety of employees, customers and the public and they are an example for any company out there of how a successful company conducts business. (www.sherwinwilliams.com)

Economic Environment

Sherwin-Williams and its subsidiaries are broken up into four different divisions including: Paint Stores, Consumer, Automotive Finishes, and International Coatings. Sherwin-Williams surpassed the $6 billion in sales for the first time in history. Three of their four operating segments grew their sales and operating profits. Sherwin-Williams faced rising raw material costs but still declared a 20 percent increase in quarterly dividends payable to shareholders in 2004. In 2004, annualized yearly raw material costs for the industry increased more than any time in the last decade. This resulted in pressure on their consolidated gross margin. Sherwin-Williams has put forth efforts to offset raw material cost increases through manufacturing efficiencies, higher fixed cost absorption, alternative technologies, tight expense control, and measured price increases.

There were an increased number of contractor sales and architectural paints along with related supplies. An increase in Do-It-Yourself customers has also helped with strong sales growth. The increase in the Do-It-Yourself market resulted in higher sales of paints, wood care products and aerosol products. The services of professional painting contractors were in high demand, and those customers shop at Sherwin-Williams paint stores. These customers continue to shop at the paint stores because of Sherwin-Williams' quality products and services which have made their business more successful. Net sales for their Paint Stores segment increased by 14.6 percent over the past year; comparable store sales improved by 10.1 percent over the prior year.

External net sales in the Consumer Segment increased 9% to $1.3 billion in 2004. Acquisitions and introduction of new product programs helped in this increase. Net sales in their International Coatings Segment increased 11.7%. The segment sales benefited from favorable currency exchange and sales in local currency that continued to build during each quarter of 2004.

Internationally, Sherwin-Williams is looking forward to the improving economic conditions in South America, and have launched a concept store in Argentina based on the Sherwin-Williams paint store model of merchandising paint, but adapted to fit their local market. Sherwin-Williams currently has 198 automotive outlet stores supplying interior and exterior services. The company saw an increase of around 1% in sales. This increase in sales was largely due to a Brazilian subsidiary changing their fiscal year to a calendar year basis.

Sherwin-Williams keeps expanding its market. In September 2004, Sherwin-Williams completed the acquisition of Duron, Inc., which is one of the nation’s top five operators of specialty paint stores in the US. The acquisition of Duron added approximately 3.5 percent to the paint stores segment’s full year net sales. They added a total of 295 new stores through expansion and acquisitions. The introduction of new and innovative products designed to improve performance and productivity is store strength.

Factors affecting the future include the expectation of the domestic and international economies, which will continue to strengthen in 2005 and have a favorable impact on sales volume in all segments. They will continue to add more stores and expect to open its 3,000th store during the first half of 2005. Their ability to generate significant net operating cash enables them to continue to invest in product innovation, new technology, and the ability to strengthen its leadership in the industry.



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