Kim Woods___Strategic Plan
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example_strategic_plan_-_sherwin_williams.pdf
Running Head: STRATEGIC PLAN: SHERWIN WILLIAMS 1
Strategic Plan
The Sherwin-Williams Company
Developed by Student Name
BUSN620 Strategic Management
American Military University
STRATEGIC PLAN: SHERWIN WILLIAMS 2
Table of Contents
Disclaimer ....................................................................................................................................... 3
Company Overview ........................................................................................................................ 4
Vision .............................................................................................................................................. 4
Mission ............................................................................................................................................ 5
Corporate Values ............................................................................................................................ 5
Business Objectives ........................................................................................................................ 6
Financial Data ................................................................................................................................. 8
SWOT Analysis .............................................................................................................................. 9
Strengths ..................................................................................................................................... 9
Weaknesses ............................................................................................................................... 10
Opportunities............................................................................................................................. 10
Threats....................................................................................................................................... 11
Key Strategies ............................................................................................................................... 11
Strategic Plan Implementation ...................................................................................................... 12
Expansion and Growth .............................................................................................................. 12
North America. ..................................................................................................................... 12
Europe and Asia. ................................................................................................................... 14
Product Development................................................................................................................ 15
Evaluation and Control ................................................................................................................. 16
References ..................................................................................................................................... 18
STRATEGIC PLAN: SHERWIN WILLIAMS 3
Disclaimer
This document and all of its contents are solely intended to meet study requirements for
MBA course BUSN 620 for American Military University. All future plans outlined herein are
the invention of the author and do not reflect future plans of the Sherwin-Williams Company.
Sherwin Williams owns the rights to all photos and financial documents used in this document.
All Sherwin Williams financial documents are sourced from the 2012 Annual Report. A list of
all references will be included on the page of this document. For more investor information,
please visit www.sherwinwilliams.com.
STRATEGIC PLAN: SHERWIN WILLIAMS 4
Company Overview
Founded in 1866 by Henry Sherwin and Edward Williams, the Sherwin-Williams
Company is a “global leader in the manufacture, development, distribution, and sale of coatings
and related products to professional, industrial, commercial, and retail customers”
(www.sherwin-williams.com). The company is comprised of four segments:
Paint Stores Group: comprised of over 4,000 stores and facilities that exclusively sell
Sherwin-Williams branded coatings and supplies; accounts for 56.7% of total sales.
Consumer Group: diversified brands such as Dutch Boy®, Minwax®, and Krylon®
are sold through retailers in North America and Europe; accounts for 13.9% of total
sales.
Global Finishes Group: serves 120 countries by providing product finishes and
industrial coatings; accounts for 20.6% of total sales.
Latin American Coatings Group: over 300 stores and facilities that handle the
production and distribution of paints, coatings, and supplies in Mexico, Brazil, Chile,
Ecuador, Uruguay, and Colombia; accounts for 8.8% of total sales.
These four distinct groups have made the Sherwin-Williams Company the largest
coatings manufacturer in the United States and the third-largest manufacturer worldwide.
Vision
The Sherwin-Williams Company strives to meet the painting needs of individuals
worldwide by providing a broad range of paints, stains, and associated products and applicators.
In addition to a wide product mix, Sherwin Williams hires and develops knowledgeable
employees to staff its numerous store locations. Because the convenience of those stores is
integral to the company’s success, Sherwin Williams is proud to state that over 90% of the
STRATEGIC PLAN: SHERWIN WILLIAMS 5
American population lives within 50 miles of a Sherwin Williams store. The company’s vision
for the future is that “no matter where you are in the world or what surfaces you’re coating,
Sherwin-Williams [can provide] innovative solutions that ensure your success” (www.sherwin-
williams.com).
Mission
The Sherwin Williams mission to “Cover the Earth” is deeply rooted in its
responsibilities to:
Customers: As an industry leader, the development of high quality products
that meet the changing demands of the market is essential. In addition to
continuous product innovation, Sherwin Williams emphasizes the training and
development of employees to ensure customer satisfaction.
Shareholders: Sherwin Williams aims to improve shareholder value and
financial performance by growing and leveraging brand equity.
Community: Through Corporate Social Responsibility (CSR) reports, Sherwin
Williams shares its progress in reducing environmental impact as well as
fostering a safe and diverse working environment. (www.sherwin-
williams.com)
Corporate Values
The values that guide the Sherwin Williams Company in its pursuit of excellence are as
follows:
Integrity is ingrained in the company’s people, products, and practices.
Sherwin Williams espouses integrity through their financial ethics and internal
financial controls.
STRATEGIC PLAN: SHERWIN WILLIAMS 6
People, the Sherwin Williams workforce, are what drive the company
forward. Therefore, it is the company’s responsibility to give its employees a
safe working environment as well as opportunities for skill development and
recognition. Sherwin Williams also fosters a diverse corporate culture.
Service is what gives customers confidence in the Sherwin Williams brand.
Therefore, it is imperative to provide professional service coupled with strong
product knowledge.
Quality is reflected in Sherwin Williams’ products and practices and the
continuous improvement of both.
Performance is cultivated in Sherwin Williams’ results-oriented culture. Not
only does the company set standards of excellence, it also ensures that
performance is measured and rewarded accordingly.
Innovation is driven by collaboration and imagination. A pioneering spirit in
the development of new technologies, products, and practices can add value to
the Sherwin Williams brand.
Growth in size and in knowledge is a pillar of Sherwin Williams’ success.
The company strives for growth that is both environmentally sustainable and
profitable for shareholders and employees. (www.sherwin-williams.com)
Business Objectives
Key business objectives for Sherwin Williams are as follows. First and foremost is the
goal to develop, manufacture, and distribute a wide variety of coatings for the commercial,
industrial, professional, and retail customers. Similarly, the distribution and sales of associated
products is also key to the Sherwin Williams business. In keeping with the “Cover the Earth”
STRATEGIC PLAN: SHERWIN WILLIAMS 7
motto, another objective is to continually increase the number of stores and facilities that sell
Sherwin Williams products. This expansion goes well beyond North America, as the company
seeks to increase its presence in the South American, Latin American, and Asian markets. As the
company grows, it is vital to the organization to uphold its reputation of having a skilled and
knowledgeable workforce that function as valuable resources for professional and retail
customers alike.
STRATEGIC PLAN: SHERWIN WILLIAMS 8
Financial Data
2010 2011 2012
Net sales (thousands)
Net income (thousands)
Per common share
$ 9,534,462 $ 8,765,699 $ 7,776,424
$ 631,034 $ 441,860 $ 462,485
Net income $ 6.15 $ 4.22 $ 4.28
Cash dividends $ 1.56 $ 1.46 $ 1.44
Book value
Average common shares
outstanding (thousands)
$ 17.35 $ 14.61 $ 15.04
101,715 103,471 107,022
Return on sales 6.6% 5.0% 5.9%
Return on assets 10.1% 8.4% 8.9%
Return on beginning
shareholders’ equity
41.6% 27.5% 31.0%
Total debt to capitalization 48.8% 39.6% 39.4%
Interest coverage 22.2x 18.4x 10.6x
Source: Sherwin Williams Company Annual Report, 2012
STRATEGIC PLAN: SHERWIN WILLIAMS 9
SWOT Analysis
Strengths
Proven leadership: Chris Connor, CEO since 1999, has a strong and consistent
track record of growth and financial success with Sherwin Williams.
Sound financial performance: Over the past three years, Sherwin Williams has
enjoyed strong financial gains, with net sales increasing by an average of $1
billion dollars per year and net income improving from $442 million in 2012
to $631 million in 2013.
Award-winning technology: Sherwin Williams has a team dedicated to the
research and development of paints to suit the growing needs of the industry.
In 2011, the U.S. Environmental Protection Agency (EPA) recognized the
company for its “innovative new paint formulation, utilizing soybean oil and
recycled plastic bottles (PET) in the substantial reduction of Volatile Organic
Compounds (VOC)” (www.prnewswire.com).
Positive brand image: By collaborating with marketing agency McKinney,
Sherwin Williams has utilized its colorful and effective “Color Chips” ad
campaign since 2010 to build its brand image in the retail market (Levy,
2011).
Control of sales channels and distribution: Sherwin Williams operates over
thirty manufacturing and distribution facilities across North America. In
addition to over 3,500 Sherwin Williams stores, its diversified brands are sold
at multiple retailers in North America and Europe.
STRATEGIC PLAN: SHERWIN WILLIAMS 10
Weaknesses
Saturated market: As of 2012, Sherwin Williams holds the 3rd largest share of
the market, with $7.94 billion in sales. It stands well behind AkzoNobel, with
$18.29 billion in sales, and PPG, with $14.83 billion in sales. Competition – in
the form of Dupont ($5.35 billion), BASF ($4.99 billion), and RPM Inc.
($4.08 billion) – follows closely behind Sherwin Williams (Moore & Cramer,
2013).
Legal issues: Sherwin Williams has faced litigation that has only recently
been settled. First is a settlement deal with the U.S. Department of Labor
regarding its stock ownership plan. This suit, which was settled in February
2013, resulted in the company paying “$80 million to current and former
participants in the plan as well as to their beneficiaries” (“Sherwin-williams
pays $80,” 2013).
Price sensitivity: In the $90 billion coatings industry, a number of paint
companies compete through low prices. Because Sherwin Williams has
strategically positioned itself as a high-quality paint manufacturer that
provides a high level of service to match, price sensitivity is an obstacle that is
difficult to overcome.
Opportunities
Expansion: With the company’s recent acquisition of Comex, Mexico’s largest paint
manufacturer, Sherwin Williams will absorb nearly 5,000 paint stores in North
America. This expansion opportunity not only strengthens Sherwin Williams’
STRATEGIC PLAN: SHERWIN WILLIAMS 11
foothold in Latin and South America, it brings the organization closer to its goals for
geographical growth (Kaskey & Case, 2012).
Research and development (R&D): Consumer demand for environmentally friendly
coatings continues to increase. An R&D investment in environmentally friendly
products to add to its extensive product lineup can bring increased sales for Sherwin
Williams in both the retail and commercial markets (Shingler, 2010).
Threats
Supplier power: Sherwin Williams’ financial performance is rather closely tied to the
prices of raw materials such as titanium dioxide, acrylic latex, and propylene, which
are key ingredients necessary to produce high-quality coatings. Increases in raw
materials prices have forced the company to raise prices of its products to offset rising
costs. However, financial forecasters predict that the costs of raw materials are
trending downwards (Abbas, 2013), which could prove positive for the company.
Environmental regulations: Government regulations regarding the environmental
impact of paints are becoming more and more stringent. Both Sherwin Williams and
top competitor PPG recently settled a case with the Federal Trade Commission
regarding misleading claims that certain products contained zero volatile organic
compounds (VOCs) (Kim, 2012).
Key Strategies
Key strategies for the next five years will primarily address even further growth and
expansion, both domestically and abroad. The first key strategy will be to expand Sherwin
Williams’ presence in North America. The company must leverage its over 3,500 store locations
STRATEGIC PLAN: SHERWIN WILLIAMS 12
in North America, combined with 3,300 store locations acquired with the Comex Group, to
increase market share, particularly in the booming retail segment (Kaskey & Case, 2012).
Secondly, Sherwin Williams must increase its presence in regions outside of North
America. While the company already operates over 300 stores in South America, there is still
opportunity to grow the Latin America Coatings Group. Meanwhile, Sherwin Williams has yet to
successfully crack into the Asian and European markets. Stiff competition in Europe – where
AkzoNobel has a strong foothold – and cultural barriers in Asia need to be viewed as
opportunities to gradually grow.
Another key move for Sherwin Williams will be to continue to push product
development. Not only must the company invest in R&D for new innovations, it is also
imperative to improve current product lines, especially to meet changing environmental
regulations.
Strategic Plan Implementation
Expansion and Growth
North America.
The acquisition of Comex in late 2012 will have great impact on Sherwin Williams’
strategy of continued growth in upcoming years. Absorbing Comex’s existing stores and
holdings will result in expansion not only in Mexico and Latin America, but in the United States
and Canada as well (Thurston, 2012).
Comex has exclusive rights to over 3,300 stores in Mexico alone. Over the next five
years, Sherwin Williams must begin the process of rebranding Comex and its holdings in order
to ensure a unified brand image. Following the model already set by the company’s Latin
America Coatings Group, Sherwin Williams must gradually re-label all Comex products in
STRATEGIC PLAN: SHERWIN WILLIAMS 13
distribution in Mexico with the existing Sherwin Williams logo. Minimal changes need to be
made to current product labeling; the Sherwin Williams logo must simply replace the Comex
one. This process should be completed within a year.
Within two years, Sherwin Williams must begin to integrate its own product lines into the
Mexico market. The knowledge and experience of regional managers will be integral to deciding
which Sherwin Williams products will meet the specific needs of the area. Within three years of
the Comex acquisition, the company must begin discontinuing Comex product lines that have
similar features to Sherwin Williams’ products that have been introduced into the Mexico
market. This move will eliminate cannibalism between the two merged brands. Sherwin
Williams must also integrate products from its own industrial and marine coatings line into
Comex’s stores in Mexico. While Comex primarily serviced the new residential and residential
repaint markets, the company did have strong ties to national oil company Pemex. However,
Comex had few industrial products to offer, and only about 15% of the company’s sales were
from industrial coatings (Thurston, 2012). The company can capitalize on Comex’s existing
relationship with Pemex to grow sales with Sherwin Williams’ high-performance industrial and
marine product line.
Meanwhile, changes must also be made to Comex stores to guarantee that the appearance
of these facilities is in keeping with the Sherwin Williams brand and corporate image. Within the
five-year period, all existing store locations in the region must share the Latin America Paint
Group’s appearance, which includes a uniform color scheme, store layout, and store plan-o-
gram.
Comex’s holdings go beyond Mexico and Latin America. The company also sold its
wares in over 1,500 stores in Canada and 250 in the United States (Kaskey & Case, 2012). The
STRATEGIC PLAN: SHERWIN WILLIAMS 14
geographic location of these stores will benefit Sherwin Williams, which has low presence in
Canada and the west coast of the U.S. Because these former Comex stores will be absorbed by
the Paint Stores Group, the stores’ appearance and inventory must match those of existing
Sherwin Williams stores. Modifications should be gradually implemented over the span of three
years. These stores should also be given sales and margin bonus incentives similar to those of
new Sherwin Williams stores to encourage full assimilation of Sherwin Williams products in
these former Comex stores.
Europe and Asia.
Sherwin Williams must also push for growth in Europe and in Asia. The optimal focus
for growth in those regions is through the company’s Global Finishes Group, which
“manufactures and sells a wide range of OEM product finishes, protective and marine coatings,
and automotive finishes” (www.sherwin-williams.com). Between 2008 and 2012, the Global
Finishes Group has grown from two plant branches in Europe to twelve wholly-owned facilities
and sixteen plant branches that distribute products to a number of independent retailers and
dealers. In the same time period, the division has grown from one plant branch in China to
include eight distribution facilities.
Over the next five years, Sherwin Williams must continue its growth strategy of
acquiring small competitors in these regions to increase the company’s holdings and distribution
channels. These small acquisitions will gradually give Sherwin Williams an arsenal of innovative
OEM products that must then be consolidated to a manageable line of products specifically
tailored to the needs of the region (Heath, 2012). For example, China’s passenger car sales
reached nearly 15 million units in 2012 (Rapoza, 2013). Therefore, Global Finishes Group must
place more emphasis on automotive finishes as part of the Chinese product mix.
STRATEGIC PLAN: SHERWIN WILLIAMS 15
As Global Finishes Group gains a better understanding of the social and political
environments abroad, these experiences can be applied to growing the architectural product
market in the future. Sherwin Williams must exercise caution in order to avoid following in the
footsteps of Home Depot, which acquired twelve store locations in China in 2006, only to close
all twelve stores within six years (Burkitt, 2012). The company cited a misstep in forecasting
market trends and inability to adapt the company’s business model to Chinese culture as the
reason for its failure in the region. Home Depot did learn, however, that Chinese citizens are not
as enthusiastic about “do-it-yourself” projects as those in the United States or even Europe. This
presents a long-term opportunity for Sherwin Williams to target commercial and residential
contractors, builders, and tradesmen rather than retail customers.
Product Development
Sherwin Williams houses the majority of its research and development (R&D) team of
over 300 engineers and scientists in the Breen Technology Center in Cleveland, Ohio. While
over half of the company’s researchers work at Breen, Sherwin Williams also has about forty
smaller research facilities across the United States. The company spends around 1.5% of sales on
R&D, a greater investment than most of its competitors. As a result, Sherwin Williams files for
an average of thirty patents per year (Shingler, 2010).
The purpose of Sherwin Williams’ R&D team is primarily to develop innovative new
products that have unique features or perform well under specific circumstances. For instance,
the company has developed several exterior paints that can be applied in temperatures as low as
35°F, as well as marine coatings that can be “applied directly to wet and rusty” metal substrates
(Shingler, 2010). The company must continue to create products that meet specific needs that
STRATEGIC PLAN: SHERWIN WILLIAMS 16
provide value to commercial customers. These innovations can usually be applied to consumer
products as well, increasing sales potential in the retail market
The growing demand for environmentally products continues to be a prime opportunity
for development. Recently, Sherwin Williams has expanded its low-VOC (volatile organic
compounds) and zero-VOC product offering to include both interior and exterior architectural
coatings. The company can continue to refine these existing products to ensure that performance
is not compromised due to more sustainable raw materials. In addition, Sherwin Williams can
begin to explore the possibility of low VOC products in its industrial and marine coatings.
Evaluation and Control
In order to achieve the strategic action plan, short-term objectives must be implemented
and completed within one year. These include the following:
Research and development team must meet a quota of at least twenty new or
improved products each year. The R&D team’s quarterly objective is to develop at
least four new or improved products.
At least 30% of Comex stores acquired in the United States and Canada must be
compliant with Sherwin Williams Paint Stores Group plan-o-gram. These stores will
utilize a dedicated team of Sherwin Williams employees whose job functions are
specifically for the set-up of new store locations.
Comex relabeling to the Sherwin Williams logo must be 100% completed in the
United States, Canada, and Mexico store locations.
Net sales in the Global Finishes Group must meet or exceed a 5% increase over 2012
figures.
STRATEGIC PLAN: SHERWIN WILLIAMS 17
To ensure that short- and long-term objectives are met, goals must be evaluated
periodically and modified accordingly. Expansion into Mexico and Latin America are a primary
concern for Sherwin Williams. Therefore, planning meetings will be conducted semi-annually
and will include executives from the Latin America Coatings Group and Sherwin Williams’
Corporate Planning office. Annual progress reports with the company’s executive officers,
including Chief Executive Officer Chris Connor, must be held to discuss and refine the strategic
action plan. Furthermore, evaluations regarding the company’s growth strategy for Europe and
Asia will take place annually.
Paint Stores Group operations in the United States and Canada, particularly new stores
acquired through Comex, are subject to quarterly evaluations by district managers and semi-
annual evaluations by division executives. Each store will conduct an inventory count at least
once per year, and twice if necessary. Each store will also be internally audited once per year.
Sales representatives, managers, and assistant managers will be appraised annually to ensure that
budget and sales goals are satisfactorily achieved.
Sherwin Williams relies on continued innovation in its product offering. Therefore,
research and development projects will be evaluated semi-annually to gauge progress and
viability. Market testing and consumer research must also be accomplished prior to introduction
of new products.
These measures will ensure that the strategic plan will be carried out successfully,
bringing Sherwin Williams closer to its goal to “cover the earth” in premium coatings.
STRATEGIC PLAN: SHERWIN WILLIAMS 18
References
(2011). Sherwin-williams innovative paint technology wins epa presidential green chemistry
challenge award.PR Newswire, Retrieved from http://www.prnewswire.com/news-
releases/sherwin-williams-innovative-paint-technology-wins-epa-presidential-green-
chemistry-challenge-award-124170444.html
Abbas, M. (2013, 1 4). [Web log message]. Retrieved from
http://beta.fool.com/analystx/2013/01/04/jim-cramer-right-calling-terrific-stock/20597/
Burkitt, L. (2012, 9 14). Home depot learns chinese prefer 'do-it-for-me'. The wall street journal.
Retrieved from
http://online.wsj.com/article/SB10000872396390444433504577651072911154602.html
Heath, G. (2012, 5). Global finishes. Financial community presentation. Retrieved from
http://investors.sherwin-williams.com/pdf/company-presentations/2012/financial-
community-presentation/Global_Finishes.pdf
Kaskey, J. & Case, B. (2012, 11 12). Sherwin-williams to buy paint maker comex for $2.34
billion.Bloomberg, Retrieved from http://www.bloomberg.com/news/2012-11-
12/sherwin-williams-to-buy-paint-maker-comex-for-2-34-billion-1-.html
Kim, L. Federal Trade Commission, Bureau of Consumer Protection. (2012). Sherwin-williams
and ppg settle ftc charges that they misled consumers to believe their paints were free of
potentially harmful volatile organic compounds (112-3198). Retrieved from website:
http://ftc.gov/opa/2012/10/sherwinwilliams.shtm
Levy, K. (2011, 11 8). Sherwin-williams is painting a new picture of marketing. Forbes,
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painting-a-new-picture-of-marketing/
STRATEGIC PLAN: SHERWIN WILLIAMS 19
Moore, E., & Cramer, J. (2013, 1 5). World's top ten paint companies 2012 annual report.
Retrieved from http://www.wpcia.org/News/2012report.html
Rapoza, K. (2013, 1 13). China vehicle sales beat europe and u.s. again. Forbes, Retrieved from
http://www.forbes.com/sites/kenrapoza/2013/01/10/china-vehicle-sales-beat-europe-and-
u-s-again/
Sherwin-williams pays $80 million to settle u.s. labor department probe. (2013, 2 20). Reuters.
Retrieved from http://www.reuters.com/article/2013/02/21/us-sherwinwilliams-probe-
idUSBRE91K01D20130221
Shingler, D. (2010, 5 10). Sherwin-williams' technology patently unique. Crain's Cleveland
Business. Retrieved from
http://www.crainscleveland.com/article/20100510/FREE/305109954
Thurston, C. (2012, 12 20). Sherwin-williams to double in latin america via comex. Coatings
World, Retrieved from http://www.coatingsworld.com/issues/2012-12/view_latin-
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