Shaklee Corporation Corporate Social Responsibility Case Solution

2. Problem Statement

With the rising demand for customer health and wellness products, Shaklee is a good contender for this market. A study conducted by the Global Wellness Institute in 2014 placed the industry value at over 3.4 billion US $ worldwide. Nutrition, healthy eating and weight loss industry growth has been 108%, preventive health grew by 78%, alternative medicine by 65% and anti-aging and beauty industry grew by 51%. The chairman of the Global Wellness Institute stated that:

“We are at a pivotal movement where people worldwide are taking steps to change the way they live, work, and play, while at the same time governments are finally recognizing the value of investing in prevention to lower healthcare cost” (Global Wellness Institute, 2014, p. 1)

Shaklee Corporation has a focus towards the malnutrition problem facing the populations of Africa, South Asia and Latin America. However, it is considering how it will enter these markets and creates an opportunity that not only provides the nutritional value needed but also offers a source of income to these economies. With falling sales and profits (Wall Street Journal, 2018b), Shaklee is at a point where it needs to enter new markets: markets where its products have not been tried and where there is a huge need for health and wellness products due to declining health in the general public. Shaklee has a distribution system that involves independent distributors that use “social marketing” to sell their products in the communities around them which makes it difficult for them to accurately forecast what the needs for end products are and how they can be managed. With such a distribution model, Shaklee faces an uncertain future and many challenges to entering new developing and underdeveloped markets around the world (Marquis, Kasturirangan, & Comings, 2009).    

3. Situation Analysis

Analysis of Shaklee can be conducted on many different levels using various analytical methods:

i. SWOT Analysis

• Strengths

Shaklee has the business experience necessary for nontraditional or social marketing as it is called: its entire business chain is based on individual distributors that sell products to their communities and hire others to do the same (Shaklee, 2017). Shaklee has a strong financial backing: it has over 3 billion yen in assets and goodwill of over 4 billion yen (Wall Street Journal, 2018a). One of the strongest points that Shaklee has in its portfolio is its strong workforce: it has a capable workforce in 7 countries that are using online platforms as well as word of mouth to sell products and recruit people for additional or main income. The workforce of Shaklee comprises of nearly 750,000 employees (Marquis, Kasturirangan, & Comings, 2009) out of which only 500 work in the corporate office (Hoovers, 2017); the rest are employees or distributors that do not come into an office daily; however they go out and engage with the community to make their sales, to inform the community of how to live healthier and greener and to recruit and grow their teams. Shaklee also pays its employees via a multi-tiered structure: profit from sales, bonus through the gold ambassador program, personal team bonus, business group bonus and Vivex sales bonuses (Marquis, Kasturirangan, & Comings, 2009). Shaklee also has environmentally friendly products that have caught the eyes of the likes of celebrities such as Oprah Winfrey (Marquis, Kasturirangan, & Comings, 2009).

On an industrial level, the industry for alternate health and wellness is on the rise: the growth in nutrition, healthy eating and weight loss has been 108%. This industry is a global phenomenon: it is irrespective of time and place, even developing economies are developing an interest in healthier eating and nutrition filled products. Since this is a new industry the future is positive which can be translated into a goof future forecast for Shaklee. The economy for health and well-being products is more robust compared to other economies because this is something customers are investing in irrespective to their incomes and locations or SSC classifications (Global Wellness Institute, 2014).

• Weaknesses    

The weaknesses of Shaklee include a diversion from a focus on the development of distribution channel: when the Japanese ran the business, they shifted focus from development of distribution channels to product development (Marquis, Kasturirangan, & Comings, 2009). The distribution scheme of Shaklee is based with people in their homes which makes it a challenge to develop a mixed delivery line as compared to regular retail stores and businesses (Marquis, Kasturirangan, & Comings, 2009). The future growth markets of Shaklee are heavily dependent on recruitment by distributors and leaders: it cannot simply open a shop and start selling. Shaklee has faced a very bad year in 2017 with profits falling nearly 5000% from 2016 levels: this causes severe cash flow problems for Shaklee (Wall Street Journal, 2018b).

Industry-wise, Shaklee has limitations as the cost and profits structure for them is critical in gaining market dominance. Due to very competitive market structure, Shaklee and even competitors have to fight tooth and nail to get to a point where they can make justifiable profits as well as have the largest market shares: with social media and the internet it is the era of the informed consumers, they review every option available to them to select the best one for themselves (Global Wellness Institute, 2014).

Shaklee’s profitability is in question: with its percentage of sales philosophy, Shaklee gives away most of its sale price to its distributors as “bonus” (The Finance Guy, 2016). So where does the company make money? Based on volumes? Is this something that Shaklee has managed to do effectively (Wall Street Journal, 2018b)?

• Opportunities

With its highly nutritional products and relatively competitive pricing, Shaklee can join the global fight against malnutrition and help the developing and underdeveloped countries in a multifold way: by fighting malnutrition and by providing earning opportunities for people without the requirements of formal education and minimal investment. A business that can be set up out of your living room will allow people not in the workforce due to any reason: health, house work, kids, retirement or even unemployment to join up and earn some money (Shaklee, 2017).

On a global scale, Shaklee has the opportunity of a lifetime: it can enter new markets where the need for its products is not cosmetic but rather critical: if it can provide the nutritional benefits it promised to underdeveloped countries, not only will the consumers themselves purchase these products but also NGO's and reform agents in these locations will become customers. With new trends such as Vegan and Keto taking over the market, if Shaklee can cater to these faster and efficiently, they can ensure that they gain a huge section of the influencers market: with will not only lead to sales but also to the most important aspect of social marketing: word of mouth sales (Global Wellness Institute, 2014).

• Threats

Threats facing Shaklee include a lower conversion rate of distributors (Marquis, Kasturirangan, & Comings, 2009), lowering sales (Wall Street Journal, 2018b) and a growing discerning in the market that Shaklee is simply a multi-level marketing company that is built on the backs of its distributors and is not really beneficial for anyone below certain levels of marketing plans (The Finance Guy, 2016). Another major threat to Shaklee is the growing competition in the multi-level marketing companies such as Forever Living and from health and wellness companies operating retail stores such as GNC (WBOC, 2018).

The costs associated with producing good quality health and wellness products are high, and consumers are fickle: they want to have the best quality regardless of pricing. In such cases, the companies like Shaklee need to ensure that their costs are maintained, and a percentage based sale sharing structure can end up causing the company a lot of profits (The Finance Guy, 2016).

4. Porter’s Five Forces Analysis

i. Ease of Entry

New entrants cannot easily enter the market due to the need for heavy finances to provide and develop such a vast portfolio of products. Even if they do enter, building an impactful distribution chain will take a lot of time and effort as well as consumer adoption of products (PwC, 2013).

ii. Power of Suppliers

Suppliers have a strong power as they can stop production and supply of raw materials which will lead to Shaklee’s production stopping. With the emphasis on a sustainable supply chain, the pressures on suppliers are also high leading to a moderate level of power of suppliers (Zailani, Jeyaraman, Vengadasan, & Premkumar, 2012).

iii. Power of Buyers

The buyers of today want to see the results promised. With Shaklee’s focus on the greener healthier you, if results are not seen as promised customers can switch products and even cause legal trouble making the power of buyers very high.

iv. Availability of Substitutes

There are many substitutes available in place of Shaklee products which include differentiated products as well. Products that are available in lifestyle stores as well as through competing for MLM schemes pose a very high threat of substitution to Shaklee (WBOC, 2018).