Ecolab, Inc.
The Strategic Human Capital Case Study
Ecolab, Inc.
The Johns Hopkins University Carey Business School
Case Study --- Ecolab, Inc.
Question 1: How does Ecolab make money? What is Ecolab’s competitive advantage?
There are several reasons that Ecolab makes money. Firstly, from 1985, Ecolab implemented a new strategy called “Circle the customer, circle the globe”. That was a strategy that providing to Ecolab’s principal customers total solutions – both products and services – in cleaning, sanitizing, and maintenance. This strategy made the Ecolab breakthrough the limitation of being only an industrial volume soap company; it expanded Ecolab’s scope of products and services. After this strategy, Ecolab provides products and services ranges from specialized kitchen and laundry cleaning equipment and dispensers for its soap, to training and support to the customer’ staff, and regular quality checks and servicing of their equipment. The wide range of products and services brings about more choices to Ecolab’s customers and makes the company suit to different market segments. Additionally, more products and services enhance the branding awareness, and are profitable for winning the market share. Secondly, accurately grasp of the market structure also makes Ecolab be profitable. The Institutional Division had become Ecolab’s core business, and in 1992, one-half of the company’s revenue and over three-fourth of its operating profit came from institutional division customers. Thirdly, the failure of the competitor also gave Ecolab a great opportunity to be successful. The market for national accounts was essentially a duopoly, dominated by Ecolab and Diversey. When Diversey acquired DuBois, some Dubois employees migrated to Ecolab, in this case, Ecolab acquired a fleet of experienced and skillful employees, and this gave rise to advantages of human capital to Ecolab.
From above, we can get that the competitive advantage of Ecolab includes
Ecolab, Inc.
The Johns Hopkins University Carey Business School
Case Study --- Ecolab, Inc.
Question 1: How does Ecolab make money? What is Ecolab’s competitive advantage?
There are several reasons that Ecolab makes money. Firstly, from 1985, Ecolab implemented a new strategy called “Circle the customer, circle the globe”. That was a strategy that providing to Ecolab’s principal customers total solutions – both products and services – in cleaning, sanitizing, and maintenance. This strategy made the Ecolab breakthrough the limitation of being only an industrial volume soap company; it expanded Ecolab’s scope of products and services. After this strategy, Ecolab provides products and services ranges from specialized kitchen and laundry cleaning equipment and dispensers for its soap, to training and support to the customer’ staff, and regular quality checks and servicing of their equipment. The wide range of products and services brings about more choices to Ecolab’s customers and makes the company suit to different market segments. Additionally, more products and services enhance the branding awareness, and are profitable for winning the market share. Secondly, accurately grasp of the market structure also makes Ecolab be profitable. The Institutional Division had become Ecolab’s core business, and in 1992, one-half of the company’s revenue and over three-fourth of its operating profit came from institutional division customers. Thirdly, the failure of the competitor also gave Ecolab a great opportunity to be successful. The market for national accounts was essentially a duopoly, dominated by Ecolab and Diversey. When Diversey acquired DuBois, some Dubois employees migrated to Ecolab, in this case, Ecolab acquired a fleet of experienced and skillful employees, and this gave rise to advantages of human capital to Ecolab.
From above, we can get that the competitive advantage of Ecolab includes
References: Stephen Redding (1996). The Low-skill, low-quality trap: Strategic complementarities between human capital and R & D, The Economic Journal, 106(3) 458-470 Patrick M. Wright, Gary C. McMahan (1992), Theoretical Perspectives for Strategic Human Resource Management, Journal of Management, 18(2) 295-320 Edward E. Lawler III, John W. Boudreau (2012), Creating an Effective Human Capital Strategy, HR Magazine, 57(8) 135-147