Loctite´s new position in the Henkel Holding (see attachment VIII). More than 120 years of Henkel tradition, The Beginnings. The Company founder, Fritz Henkel, around 1880. On September 26, 1876, the Hessian merchant Fritz Henkel (1848 - 1930) set up the company Henkel & Cie in Aachen. In 1878, he moved his plant to Düsseldorf because of more favorable transport conditions. A former soap factory rented on Schützenstrasse soon became too small for the Company's expanding production. In 1880, a new building was erected on Gerresheimer Strasse. This site could, however, not be enlarged as the Company expanded; it moreover lacked a railroad connection. The suburb of Holthausen offered a more favorable location: a large site which could be further expanded, the Rhine and the railroad as transport routes. In 1899, new production and administration buildings were constructed at this location. The Company's site has grown from originally 600,000 s.f. to 16,156,000 s.f. today. The first factory in Düsseldorf, Schützenstraße, 1878 – 1880: Production plant for APG The first factory in Düsseldorf, Schützenstraße, 1878 – 1880: The new production plant for APG in Düsseldorf-Holthausen. From 1904, the Company took the legal form of a general partnership (OHG); in 1922, it was transformed into Henkel & Cie GmbH (a manufacturing business) and Henkel & Cie AG (a selling organization). In 1950, Henkel & Cie GmbH became Persil GmbH (Henkel GmbH in 1969, Henkel KGaA in 1975) while Henkel & Cie AG changed its name to Henkel & Cie GmbH. Following the early establishment of selling centers in adjoining countries, the first subsidiary was founded in 1913. In 1939, the Group comprised 15 European operations besides the Düsseldorf plant. In 1998, the Henkel Group had more than 330 consolidated companies in more than 60 countries. The major business activities of Henkel in Europe are in the countries of the European Community; its most important overseas markets are the U.S.A., Brazil, Mexico and Asia/Pacific. Today, over 70 percent of the Group's world sales are realized in foreign countries. Since January 1, 1975, Henkel Kommanditgesellschaft auf Aktien (KGaA) has been the holding company of the Henkel Group. In 1985 Henkel preference shares were introduced on the stock exchange. Albrecht Woeste, a great-grandson of the Company founder, is Chairman of the Supervisory Board, and Dr. Hans-Dietrich Winkhaus is President and Chief Executive Officer. The parent company in Düsseldorf is the most important company of the Henkel Group; it handles most of the Henkel business in Germany.

Production
- Henkel's Bleaching Soda of 1878, Persil, invented in 1907, The Company's first product was a "Universal Detergent", which was replaced after a short while by "Henkel's Bleaching Soda" (a powdered mixture of soda and water glass). To reduce costs and achieve the highest possible quality, Henkel began to produce its own chemical raw materials in 1884: Rheinische Wasserglasfabrik of Herzogenrath was acquired and partly rebuilt at the Düsseldorf plant. Today, Henkel operates the largest water glass factory in Europe. In 1907, Henkel came out with the first self-acting detergent in the world, named "Persil" from two important components, perborate and silicate. This novel type of product made laundering less of a chore to housewives and rendered grass bleaching superfluous. Persil brought Henkel rapid growth and international credit. Henkel products were among the first German consumer brands. They were of unvarying quality, uniformly packaged, and available everywhere. The "Henkel" brand, which guaranteed consistently good quality, won the consumer's confidence. In its advertising, Henkel opened up new paths by imparting technical information on its articles rather than boasting them. An extensive sale organization was set up; in 1914, Henkel already had a sales force of 120 salesmen. In 1908, Henkel constructed its own soap factory for detergent production. From 1909, fatty acids, from which soap is made, were produced in the Company's own fat splitting plant. The crude glycerol ("sweet water") obtained from splitting operations was further processed in a glycerol factory built in 1910. For more than 40 years, the Company's sole purpose had been the production of washing and cleaning agents. When adhesives - used, among other things, for sealing detergent packages were scarce in postwar 1923, Henkel started its own adhesives production. This was the beginning of an adhesives plant, which today manufactures the most comprehensive line of adhesives in the world. On the basis of new findings on the detergency of phosphates, Henkel developed new products and processes in 1929, which were collectively, named "P3". These were cleaners, degreasing agents and disinfectants designed for industrial and food applications. After the acquisition of Thompson-Werke in 1930, Henkel began to manufacture household care products. The further development of the Company was decisively influenced in 1932 and 1935, when Henkel acquired Deutsche Hydrierwerke of Rodleben and Böhme Fettchemie of Chemnitz, which had shortly before launched "Fewa", the world's first synthetic detergent. In 1946, the production of textile and leather auxiliaries began in Düsseldorf-Holthausen. In 1947, the Company started to manufacture and market cosmetics and personal care products. The Düsseldorf-Holthausen plant is the largest production site of the Henkel Group. After 1945, the production facilities of Böhme Fettchemie and Deutsche Hydrierwerke were rebuilt on its site. This concentration led to a considerable expansion of the oleochemical facilities. In this "oil quarter", fatty alcohols and fatty acids were, among other chemicals, produced on the basis of natural oils and fats, as well as a large number of derivatives for use in different industries. In April 1995, a new plant for the manufacture of alkyl polyglycosides came on stream. The APG plant produces extremely mild vegetable-based surfactants. The largest acquisitions in the Company history - Loctite and Novamax - were successfully integrated in 1997.

Employees
Many of the voluntary employee benefits instituted by the Henkel Company are today taken for granted in large-scale industries but were still unusual when introduced at Henkel at the beginning of this century. At that time, more and more employees settled in Holthausen. For this reason, the Company joined Baugesellschaft Reisholz in 1911. Partly in cooperation with this building cooperative, Henkel built a large number of dwellings. Employees of the Henkel Group in 1997 total 54,247 - Germany 15,676 foreign 38,571 approx. Lunch for the employees. As early as 1900, lunch was provided at no cost for all employees at the plant. In 1912, a first-aid unit was established. In 1940, the Medical Department was set up. The Company's pension plan dates back to the institution of a benevolent fund in 1915. Today, employees of the parent company in Holthausen receive their pension rights after only 10 years of service. Since 1927, a special Occupational Safety Department has been working successfully for accident prevention, using new methods. Henkel has operated a systematical vocational training since 1925. Today, the Company's training facilities have been centralized in a modern building erected in 1966. Technical and language courses, seminars and excursions, and the Company library, already established in 1910, offer vocational training and development to all employees.

Research
As the Company expanded, its research, development and application technology laboratories were extended, too. Laboratories around 1905. : Research in biotechnology Beginnings of systematically performed research: the first laboratories around 1905 Research in biotechnology today. After enlarging the laboratory set up at the turn of the century, the Company's first pilot plant, the Test Department, was established in 1920. It initially embraced process development functions in the field of inorganic chemistry, to which assignments in the fields of organic chemistry - especially oleochemistry - and macromolecular chemistry were added later on. In 1933, the new Main Laboratory was occupied, which today houses part of the detergent product development. Between 1937 and 1939, a research laboratory was constructed on the site of Deutsche Hydrierwerke in Rodleben near Dessau, to provide chemical and scientific research services in the entire field of activity of the Henkel Group. The Research Center in Düsseldorf-Holthausen, which was erected between 1959 and 1967 in several phases, today provides workplaces for the chemical staff, which is equipped with the latest instruments and appliances. In 1974, the new building for the Biological Institutes was completed. It serves as headquarters for research personnel who specialize primarily in environmental and consumer protection. A second research center was set up in Santa Rosa/California, USA, in 1986. In 1990, a new building which houses the Central Analysis was completed.

Financial Outlook
The company is optimistic for the entire year 1998, with all due caution. It is expected that the positive sales growth to continue and profit to increase at least at the same rate as last two years. (See attachment IX)

Research and Development
Application-oriented research and development is one of Henkel´s key strengths. Extensive know-how, creativity and imagination provide the basis for successful innovation, enabling us to better satisfy the requirements of our customers. Maximum product quality, optimum price/performance ratios, market orientation and superior environmental compatibility are the goals in all research projects. Innovative research and development accounts for a substantial portion of the Company’s added value. Consistent emphasis on customer orientation and substantial flexibility make a major contribution. The Company’s future is assured by maintaining the right balance between rapidly realizable product improvements and long-term technical innovations. This is implemented on a product-related basis and by interdisciplinary teams. Henkel also works toward increasing cooperation between its own research centers and those of external institutions and organizations. Approximately 3,600 employees work in research and development at Henkel worldwide. In 1997, the Company devoted US$ 247 million to R&D, with a further US$ 101 million being spent on technical services. A large portion of our research activities is concentrated at the Groups headquarters in Düsseldorf. Product development and application engineering activities, on the other hand, are performed on a more decentralized basis. (see attachment X)

Henkel KGaA Corporate Strategy Henkel Group
Henkel is committed to compete globally. To strive for a strong position and superior profitability in all market segments it serves. In each of these segments, the company wants to achieve ecological leadership. In its conduct, it will balance the interest of shareholders, customers, employees, and of society.

Business Portfolio
Product portfolio includes consumer products, products for industrial and trade applications, as well as service systems. Focus on branded products and high-value-added chemical specialties. The performance of its products and services meets the company customer’s requirements. The main activities are based on state-of-the-art knowledge in research and development, applications, production, and marketing. Founded on the company core competencies, the portfolio of Henkel optimizes growth, distribution of risk, and profitability. The core businesses are consumer products, service and systems, and raw material products businesses. Henkel manages and develops businesses through Strategic Business Units (SBUs) with worldwide responsibility. Their affiliate companies are responsible for the local execution of SBU strategies. The regional focus of the Company's activities are Europe, North America, and Asia-Pacific. In order to effectively exploit the development potential, expenditures for capital investment, acquisition and R&D compete for funding within a consolidated financial framework.
The requirements of emerging, innovative businesses for funding have to be balanced with mature businesses generating financial surpluses. Product lines or market segments that do not offer the potential for sustainable growth and profits for Henkel are to be discontinued.

Synergies within the Henkel Group
International size and scope as well as a balanced business structure provide Henkel with diverse synergies. International exchange of know-how in all areas assures that new findings, methods and processes are utilized effectively to improve business and profit development:
- Henkel's worldwide raw material network guarantees quality and steady supplies within the Group. The high captive use of raw materials for processing into derivatives leads to the secure base loading of capacities and is a key reason for the strategic competitive advantages for downstream activities.
- The synergies between branded products and chemicals result in cost-effective supplies and early access to new chemical specialties.
- Worldwide SBUs establish international product and marketing strategies; the SBUs are supported by regional centers of competence.
- Exchanging personnel between affiliated companies or business sectors and sharing processes and procedures contribute to Group-wide efficiency. These opportunities are pursued systematically.
- International computer and information systems and networks for distribution, logistics and corporate purchasing lead to economies of scale.
- The different business cycles of divisions and geographic regions stabilize corporate profit development. Balanced Group financing is the basis for growth in the business sectors.

Production/Technology
Henkel's production plants, equipment and processes are state-of-the-art. They comply with all environmental regulations and are designed to meet their purpose in the most economical way. Individual plant locations are optimized within a worldwide manufacturing system. Overall Group interests have priority over individual location interests. Cost-effective and efficient infrastructure and services secure the long-term viability of the Düsseldorf-Holthausen site.

Research and Development
Innovative application-oriented R&D is one of Henkel's core competencies. The group use the know-how developed at central research laboratories and at regional centers of competence, as well as know-how acquired from external sources. The goal of every R&D effort is the development of more efficient processes as well as marketable products. To continue to expedite the conversion of chemical and process engineering know-how into new products, processes and solutions to customers problems.
The most and unique competence in using renewable raw materials and it remains a strategic competitive advantage at Henkel and it will be reinforced.
Henkel will establish a leading position in environmental and consumer protection for its products and processes and use this leadership as a competitive advantage.

Employees/Management
Henkel wants to attract employees by creating an environment that encourages performance and by providing challenging assignments. This includes competitive compensation based on performance, continuous skill development and mutual trust. Create a corporate culture that encourages employees to identify with their job in the company. Employees receive the necessary training and authority to make quick and goal-oriented decisions, thereby becoming entrepreneurs capable of managing change. Relationships with employees and their representative committees are based on mutual trust and partnership. Employee communication is not only important for performance on the job, but also for motivation, personal self-esteem and identity. Henkel is committed to open and prompt communication meeting the needs of employees. The company will reinforce direct personal communication over hierarchical levels rather than remoteness. Decisions are made by those who have the best information and knowledge, taking into account overall corporate interests. The Management Guidelines are binding for superiors and employees. In the company they practice promotion from within. Strive for equal opportunity, regardless of nationality or gender. Qualifications required for leadership positions include international perspective and experience abroad, as well as the ability and willingness to adjust to other cultures.

Corporate Finance
To secure financial stability and flexibility of the Henkel Group, it will maintain adequate liquidity provisions and flexible internal financing. It will avoid being dependent on the lending policies of any country and/or financial institution. As an open family company, they maintain a high level of equity. Shareholders will achieve a competitive return on their invested capital at market price. Treasury and liquidity, as well as interest and currency risks are managed centrally for the total Company.

Partner Strategies
Relations with their partners will be maintained and expanded. They play an important role in risk diversification and profitability of the Henkel Group. Henkel seek management control in all joint ventures and alliances, and always seek licensing contracts for the use of Henkel know-how.

An analysis based on Porter’s Five Forces Model e. g. :

Porter's Competitive Forces Model
For Loctite, there is no a big rivalry present between comparable firms in this industry. The market establishes the prices so there are no price wars. The only thing or way a company can differentiate itself is through quality of the product and customer service.

Porter's Analysis
-The Risk of Entry by Potential Competitors is........................................................ LOW
The immense startup capital is a large deterrent to new firms entering the industry is Low Risk of Entry by Potential Competitors Because of the seasonal nature of the industry it is difficult for anyone to start a business like this. This factor coupled with the large capital investment of equipment makes this industry hard to enter. As far as the retail and service portions of the business the risks are slightly higher. This is due to the smaller capital investment needed for start up.
-The Power of Suppliers............................................................................................... LOW
The suppliers do not have a bargaining power over the products. Low Power of Suppliers. There are many suppliers of chemicals and equipment. If there were any problems with a particular supplier, changes could easily be made with others.
-Threat of Substitute Products.................................................................................... LOW
The are not that many specialized products to be a substitute. Substitute products in this industry are not a major threat. Such things as Innovation add value to products Loctite has a premium product in the mining industry.
-Rivalry among Established Firms............................................................................. LOW
There are not that many firms already established in the industry, which include the specialized type of products that Loctite offers. Low rivalry among established firms. There are few firms that cover all of the three categories of premium products & service that Loctite offers. Therefore rivalry is not a major issue.
-Bargaining Power of Buyer........................................................................................ LOW
The high quality and high positioning of the product make it to be a star in the market. Buyers have a low bargaining power because of the nature of the product. Those people in the mining sector will not want to save a dollar. Because they know they get a product worth the investment.

After reviewing the Strategy and Leadership concepts, It seems rather clear that, I would have had implemented immediately, on a daily base a working plan in the accomplishing strategies through action plan projects. In another words, here it does translate the important work of strategic planning into urgent work called Action Plans with goals and deadlines. Ideally, after a planning session, action plans replace work that no longer contributes to objectives. Remember that prior to the planning process, everyone had a full time job. Find time for action plans by dropping or delegating less important work. Be tough about this; human nature prefers stability and wants to persist in familiar tasks. Some action plans will succeed, some succeed partly, and some will fail. How can you improve the odds? Divide action plans into broad groups: simple action plans such as process changes or single person responsibilities can be accomplished readily. Action plans at risk are those that are large or span several departments. In the first place, complex action plan projects need two kinds of management: Champions and Project Managers. The Champion is a member of the Planning Team with responsibility for clearing away organizational politics and red tape. The Champions' champion is the CEO who must continue publicly committed to the plan. The Project Manager runs the project from start to finish delivering quality results on time and within budget. Project Managers are special people, sharply different from administrators in preferring one-time assignments managing a team doing things that were never done before. The nature of action plan projects makes them difficult to manage: Often they take place outside routine work, they always have deadlines, and they do things that have never been done before. Invariably, they are short of resources, cross-organizational boundaries (hence the need for a Champion) and recruit their team from a variety of departments. All this adds up to pressure and turmoil.
These steps could help project managers with action plan projects:
- Plan and Replan: Time spent planning is returned fourfold.
- Anticipate Major Problems: Problems are interesting but it’s cheaper to avoid them.
- Build the Team: Team building is much more than eating lunch together.
- Learn Management Skills: Especially negotiating.

Successfully implemented action plan projects needs a special management skills and lots of it. Each moves the strategic plan closer to its objectives one step at a time.

Culture & Values
Most organizations that have been around any length of time have a culture that has evolved over the years and, if not subscribed to by all, is usually clearly understood as "The way we do things around here". Similarly, the values of an organization are usually recognized within an organization even if not supported and sometimes are not even the values that top management would like to think the organization portrays to it's many publics. The values actually practiced by an organization e.g., the manner by which those values are reflected in "The way we do things around here" is the clearest expression of the real culture of any organization. Consistency between the culture and values espoused by the leadership of an organization and the balance of the organization is essential for continued success. A clash of culture and values often occurs when one organization acquires or merges with another. This clash or difference in culture and values is the primary reason for disappointment and failure in acquisitions and mergers. Successfully implemented action plan projects needs a special management skills and lots of it. Each moves the strategic plan closer to its objectives one step at a time.
"A good implementation will depend in a good implementation of Strategies"
Relations with their partners will be maintained and expanded. They play an important role in risk diversification and profitability of the Henkel Group. Henkel tries to seek management control in all joint ventures and alliances, and always seek licensing contracts for the use of Henkel know-how. M&As, in my personal opinion, and despite de fact that the merger as gone through it worst moments. As a Leader of Change, you need to help your employees, guide them and lead them demonstrating awareness of their feelings and reassuring them that changes will not devalue their past contributions. In this case and given to the fact that these is a large corporation there as been lack of communication, and most importantly uncertainty in the future. If you are or have the desire, be committed, responsible, and accountable. In the global aspect I believe that the CEO of Both companies have achieved that, but at the local level not. Furthermore, in terns of Implementation I recommend to open channels of communication, indicate what is happening to personnel, explain why it did occurred, ask questions, invite people to meetings be simple and transparent, create new things to innovated, involve people in decisions create policies of transition and most importantly create vision of future.

The conclusions about the future of M&As, not only for the case of Henkel and Loctite, but for many of Mergers & Acquisitions that will continue to go on in the future, rests in the hands of the future Leaders of Change. This will involve determining the rationales, and key organizational features. Finding "The perfect Fit", is it there or not? In Henkel and in Loctite, the companies understand that their success and the success of their customers are inseparable. In order to help customers succeed, the companies will continue to: develop products that meet their performance requirements and those of their customers; give the best technical support in the industry; strive to meet future market demands for innovative materials; invest in research and development to produce tomorrow's products; employ highly-trained and skilled personnel who sincerely care about customers' success; and deliver consistent quality in every product the companies produce. By keeping one foot in the lab and one foot in the marketplace, companies must continue to provide faster solutions and high-performance products, design-to-assembly technology, and fast, affordable, dependable systems for the dispensing and curing of adhesives, sealants, coatings and all the other products that Henkel and Loctite offers to the world. Both will continue to support customers with a service program that is unmatched by others in the industry. Finally but not the least, the most attractive factor to keep an eye in this company is given to the fact of the process of finding out the strengths and weaknesses, and advantages / disadvantages in both companies, this by means of learning how Henkel and Loctite operates and merge all together. Based on basic observation and finding out if the management has the characteristics of implementing what is being practiced in most parts and by most companies (Transnationals) in the world. In terms of how processes of improvements, selection, quality, capacity, layout, measurement methods, etc. are being implemented or not in the company. The right approaches are being implemented at the corporate level; at least in the United States and in Dusserdorf. (Where the largest markets are) The company practices most of the rules to keep the company gaining a competitive advantage. However, to distant places the philosophy is taking a slower time. Channels of information are starting to open. There is a clear understanding that Henkel KGaA is not structured in the same manner that Loctite is. Furthermore, It could be said that even both companies pursue the same objectives, both companies do apply the rules in the different manner. But in the other hand, they are slowly learning from each other. Most importantly, assuming that when all the people have a clear vision of the rules of the game. Growth by acquisitions will remain a key element in today's world globalization process, and as a matter of a fact, in order to manage a successfully a global company, leaders & managers must understand all the aspects that are associated with a company (internal/external factors). Companies should worry about business; both companies must cooperate to obtain the best results on behalf of the stockholders. Developing a future focus in an organization can mean different things to different people. To some, it might mean looking beyond the next quarter's results; to others it implies thinking of long term trends in the world around us; to some it may mean seeking ways to change the rules of competition in their industry. Whatever the individual meaning, it implies creating in the organization a culture which is forward thinking, is outward rather than inward looking, and is willing to accept change. Senior management must set the tone to create a forward thinking organization. It can do so by structuring processes which regularly expose people to such ideas, by communicating, by being receptive to outside points of view and by ensuring the accountabilities it enforces do not only have short term inward look and feel. It must go through the process and maintain a clear always a clear focus.
In my personal opinion, I recommend that as a leader you need to help your employees, guide them and lead them demonstrating awareness of their feelings and reassuring them changes will not devalue past contributions. In most M&As, the fact of uncertainty will remain constant in the future. Companies must be aware and keep in mind that The Basic Principles Strategy Management and The Basic Principles of Leadership Concepts will show you that, if you want to be successful in any endeavor. If you apply them, they should be successful in your implementation of any kind, by opening channels of communication, indicate what is happening to personnel, explain why it did occurred, ask questions, invite people to meetings, be simple and transparent, create new things to innovated, involve people in decisions, create policies of transition, and most importantly create vision of future.

Henkel & Loctite

1. Webpage, Loctite Corporation.
2. Webpage, Henkel KGaA
3. W. Edwards Deming, Quality Productivity, and Competitive Position (MIT, Cambridge,
Mass: Center for Advance Engineering Study,) 1982, pp.16-17.
4. Gross Robert & Kujawa Duane, International Business: Theory and Managerial
Applications, Third Edition
5. Five Keys for Strategic Management, Revista Gestion, June 1998 pp. 36-38
6. Robert M. Grant, Contemporary Strategy Analysis, Concept, Techniques, Applications,
2nd Ed.
6. Sanford Ehrlich, San Diego State University, UGM, Course Leadership Class notes
7. Kauzes, James M. & Posner, Barry Z., The Leadership Challenge: How to Get
Extraordinary Things Done in Organizations, San Francisco: Jossey-Bass Publishers, 1995
8. Jeffrey Kerr, University of Miami, Strategic Management Class notes
9. William B. Werther, University of Miami, Human Resources Class notes
10. Encyclopaedia Britannica, reference: Definition of Theory
11. Answer to Final Test of Professor Duane Kujawa. Transnational Management Course.
Asean Brown Bovery
12. Harvard Business School, Asean Brown Boveri Case Study n° 9-495-031
13 David M Scheder and Charles Goldwasser, Leader of Change Harvard DEUSTO Business Review.
14. Financial Times article, A Horizon of Mergers and Acquisitions, Oct.13.98.
15. Chief Executive of World Future, www.futureworld.co.za
16. Maital Shlomo, Managerial Economics, Class notes
17. Maital Shlomo, Executive Economics, Ten Essential Tools for Managers, Free Press 1994
For
Isidora de los Angeles, and Monserrat de la Piedad, my daughters, my family, with love
And guiding professors: Luis Escobar, for his patience and knowledge, Erik Haindl, Duane Kujawa, Jeffry Kerr, Sandford Ehrlich, for being excellent professors, and for Shlomo Maital, "Gran Maestro", for reviewing and advising this study, to all of those that supported me during the program Carmen Maturana, and Isabel Vergara. Finally, a special thanks to all the people that understood me.
Santiago de Chile, November 06, 1999
Bernardo Javalquinto Lagos