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Profiles in Doing Both: Clorox Has a New Formula for Cleaning Up in Emerging Markets

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For nearly 100 years, the name "Clorox" has been synonymous with the words "clean" and "sanitary" in the United Sates. But not in many parts of the emerging world, where its products can help in a myriad of ways.

Though the company does business in more than 100 countries, nearly 80 percent of sales come from North America. Company leaders are eager to change this. Brimming with confidence over success achieved recently in Latin America, they believe they can double the amount of business Clorox does outside North America.

What makes them so sure? This time, they believe they have the right business formula for growing in established countries and in emerging markets.

Here's some background.

Founded in 1913 by a group of California entrepreneurs, Clorox is a Fortune 500 consumer products giant. In addition to its namesake bleach, Clorox makes Hidden Valley Ranch salad dressing, Fresh Step cat litter, Glad trash bags and a host of other products. In fiscal 2010, sales totaled $5.5 billion.

Sensing the company was missing some opportunities, company leaders went on a buying spree in the 1990s to jump start international sales. In all, Clorox spent more than $1 billion acquiring overseas companies. They spent the bulk of their money in Latin American. The acquisitions provided Clorox a toehold in key markets, but did not lead to the creation of a true, global strategy. For many years, there was limited coordination between field managers and executives at headquarters, and scant knowledge sharing between different geographies.

Then in 2006, incoming CEO Donald Knauss vowed to change the company's revenue profile. In particular, he wanted to increase the amount of business Clorox did outside the U.S. and Canada. The former president of Coca-Cola North America, he believed Clorox was missing a huge opportunity to sell health and wellness products in geographies where economic growth was creating significant consumer demand.

Knauss tasked his lieutenants to create a comprehensive plan for expanding overseas. Unlike previous strategies that relied on acquisitions and partnerships, he wanted Clorox to grow its business in a more holistic manner. That meant judicious acquisitions in specific places, and organic growth in others. In addition, he thought the company could gain from leveraging best practices developed in the U.S. and replicating successes achieved in emerging countries where Clorox had established a leadership position. Doing both would help Clorox reach its full potential, company officials believed.

You can see evidence of the strategy at work in many places around the world today. Take the work the company is doing in Peru around disease prevention. Clorox makes a number of surface disinfectants that are ideal for the market. But sales weren't as high as local companies officials hoped. After some analysis, Clorox managers realized that consumers weren't fully aware of all the ways germs could spread in a household. So they launched a major consumer education campaign that led to a 60 percent increase in bleach sales between 2007 and 2009. Now the company hopes to replicate this success elsewhere.

The same is true of best practices that Clorox first developed in the U.S. that are now being exported to Latin America and Asia. This includes the work done by the company's Category Advisory Services (CAS) team, which helps retailers leverage consumer data to drive higher-margin sales. CAS has been a big hit with U.S. retailers and is now winning new fans in emerging markets. In one Latin American country where a major retailer teamed with CAS, sales growth significantly outpaced the rest of the market thanks the strategies for shelving and assortment Clorox provided.

In a recent interview with McKinsey Quarterly, Clorox Executive Vice President Beth Springer said the company will continue to "apply our functional practices more globally." This has led to a deeper analysis of local markets and product profitability in individual categories. Armed with this knowledge, Clorox believes it can grow market share, expand into adjacent segments and enter new geographies.

To Springer, the company's game plan is "clearer than it has been in years." Instead of developing one strategy for domestic markets and another for international ones, Clorox is moving closer to developing a holistic, global strategy that encourages ideas and innovations to flow freely from the established world to the emerging one, and then back again. Each time this occurs, Clorox cross-leverages success achieved in one part of the world with milestones attained in another.

Take its three-step Desire, Decide and Delight program. Launched in North America, the initiative aims to increase customer satisfaction during the pre-sales, point-of-sales and post sales experience. After expanding the program to Latin America, the company's market share grew by 1.8 percent in 2009. That translated into millions of dollars of new business. In another example, Clorox was able to transfer market insights on packaging gleaned in Latin America during the H1N1 flu epidemic back the U.S. where its been put to use to help design more convenient consumables.

By increasing its involvement in the emerging world, Clorox is better positioning itself in the established one. Doing both is making the already potent company stronger than before.

Inder Sidhu is the Senior Vice President of Strategy & Planning for Worldwide Operations at Cisco, and the author of Doing Both: How Cisco Captures Today's Profits and Drives Tomorrow's Growth. Follow Inder on Twitter at @indersidhu.