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Environmental Analysis: Sherwin Williams

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Running head: ENVIRONMENTAL ANALYSIS: SHERWIN WILLIAMS

Environmental Analysis: Sherwin Williams

MBA580

University of Phoenix

Executive Summary

An important step in developing an effective strategic plan for Sherwin Williams Paints is to scan the organization’s external environment in order to identify opportunities for strengthening the company and threats against the current and future successes over the next three to five years. In addition to scanning the external environment, the company’s internal environment was studied to establish strengths and weaknesses of the organization.

The external environment produced many threats including potential political changes due to the upcoming elections that could see a swing to more government control over regulation of emissions from coatings. If this is to happen paint makers will need to invest more into developing products that meet tougher standards. Currently government regulations exist at the federal, state, and even the local level and this presents challenges to paint retailers since each location must be an expert in all applicable laws concerning sale and use of these products. Related to these concerns is the push for more environmentally friendly products and these demands put financial strains on paint manufacturers due to the high cost of researching and developing these products that comply with the new regulations.

Some economic threats include inflationary pressure, consumer purchasing habits, and the most significant of all would be the decline in the housing market. This has drastically changed which segment of customers purchase paint as the shift moves from painting contractors purchasing to DIY consumers who will paint their properties themselves. Other threats to be aware of include the flat predicted growth rate in labor, pending lead paint litigation that could severely impact the paint industry and Sherwin Williams in particular, and the threat of substitute products such as composite wood that is being marketed as a product that never needs to be painted.

The opportunities that exist after looking at this scan include taking advantage of the company’s economies of scale when it comes to purchasing from suppliers. Since Sherwin Williams is the second largest maker of paint in the world, the organization enjoys the benefit of receiving the best prices possible on raw material purchases and distribution costs. Another important opportunity was previously stated as a threat in society’s demand for more environmentally safe products. Although still true that these new products are expensive to research, develop, manufacture, and market, many competitors to not have the resources to accomplish this important task and are falling behind the larger companies.

Sherwin Williams is currently positioned well to take advantage of these opportunities and the shift mentioned above to safer products creates a significant competitive advantage for Sherwin Williams leading to the opportunity to capture more market share. The most significant threat of pending lead paint litigation is hard to prepare completely for since this could lead to nothing out of the company’s pocket all the way to a billion dollars worth of clean up costs if this litigation is upheld.

Analysis of the Remote Environments

Political Changes

Under the current administration rules and regulations on solvent-based products that could be harmful to people and the environment have not been as strict as they possibly could be very soon. “Some of the Bush administration's regulatory moves -- such as easing pollution control requirements for agriculture and smokestack industries under clean air and water laws -- have followed lobbying from business groups, which feared stricter rules if a Democrat is elected president” (Williamson, 2008, p.1). With a possible shift from a republican administration to a democratic one, Sherwin Williams must be prepared for a closer eye being placed on products that could be classified as harmful and eventually outlawed.

Government Regulations

When policies do shift to more government regulation on harmful products, companies need to adjust accordingly or face stiff penalties. History has shown plenty of government involvement within the paint industry dating back many decades. “The federal government outlawed the use of lead in paint in 1978, citing health concerns related to the ingestion or inhalation of lead paint chips. The paint industry

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