Unilever Business Strategy

Unilever Business StrategyJump to SWOT Analysis of Unilever Unilever BCG hyaloplasmUnilever PESTEL Unilever Financial Analysis Unilever CompetitorsThis is a case study on Unilever melodic phrase line strategy. It would seek to analyze the strategic position of the group with the help of SWOT, PEST and BCG hyaloplasm models. The paper would critically assess the competitive situation of the company in relation to other major harvesting based companies in the market and companys fiscal performance and key issues. In the end it would submit few recommendations.The case study is my first effort towards analyzing the business strategy of Unilever and its success in the market. Since Unilever is so famous and its products so widely used all over the world, it is of great interest for me to carry turn out a case study on its business strategy. The paper would greatly help me and the readers to under(a)stand some key issues concerning Unilever in todays business world.Introduction2. 1. About UnileverUnilever is a multi-national corporation, formed of Anglo-Dutch parentage that owns galore(postnominal) of the worlds consumer product soft touchs in foods, beverages, cleaning agents and personal care products. Unilever employs nearly 180,000 people and had worldwide revenue of almost 40 gazillion in 2005.Unilever is a dual-listed company consisting of Unilever NV in Rotterdam, boodleherlands and Unilever PLC in London, England. This arrangement is similar to that of Reed Elsevier and that of Royal Dutch Shell prior to their unified structure. Both Unilever companies have the same directors and effectively operate as a single business. The current non-executive Chairman of Unilever N.V. and PLC is Michael Treschow while P Mr Paul Polman is the Group Chief Executive. The company is widely listed on the worlds stock exchanges (About Unilever 2008).2.2. HistoryUnilever was founded in 1930 through merger by the British, Lever Brother and the Dutch, Margarine Unie n ow Unilever PLC in London, U.K and Unilever N.V in Rotterdam, Netherlands noteively. In 1872 before the merger, Jurgens and Van den Bergh, the Dutch, built pulverisation in Netherlands for the production of Margarine made from milk and fact. In 1927, they formed Margarine Unie (margarine Union) together with devil European Businesses, Centre and Schicht. Lever Co on the other hand was founded in 1884 by British William Hesketh Lever and his brother, James, and was producing soap Sunlight soap for people in England especially for women. William Lever wrote to make cleanliness pedestrian to lessen work for women to foster health and contribute to personal attr suppleness, that life may be more enjoyable and rewarding for the people who use our products. In 1890, Lever Co become limited company known as Lever Brothers (Uhomhoabhi, Fredrick Albert 2008)Unilever, Unilever N.V and Unilever PLC comprise Unilever group. Both companies have the same directors. Its annual turnover in 2005 was 39.672 billion and employs206, 000 employees around the world.1 Unilever brands consist of Food, Beverage, and Home and Personal Care. some of these products are Knorr, Breyers and Magnum, Lipton, Omo (detergent) etc. Knorr has the biggest sales of 2.3 billon in 2005.In May 2007 it became the first tea company to draw in to sourcing all its tea in a sustainable manner, asking the Rainforest Alliance, an international milieual NGO, to start certifying its tea estates in East Africa. It declared its header to have all Lipton Yellow Label and PG Tips tea bags sold in Western Europe certified by 2010, followed by all Lipton tea bags globally by 2015. Covalence, an ethical reputation ranking agency, placed Unilever at the top of its ranking based on positive versus negative peeleds coverage for 2007. In 2008 Unilever was honored at the 59th Annual engine room Engineering Emmy Awards for Outstanding Achievement in Advanced Media Technology for Creation and Distribution of Interactive Commercial advertizement Delivered through Digital Set Top Boxes for its program Axe.Strategic position of the companyThe strategic position of the company shall be analyzed through avocation techniques3.1. S.W.O.T AnalysisThe overall evaluation of a companys strengths, weaknesses, opportunities, and threats is called SWOT analysis. In general, a business unit has to monitor key macro environment forces (demographic-economic, technological, political-legal, and social-cultural) and significant microenvironment actors (customers, competitors, distributors, suppliers) that appropriate its index to earn profits. The business unit should set up a marketing intelligence system to track tends and important developments. For each trend or development, management needs to identify the associated opportunities and threats.(S)trengthsRecognized as a global company.Strong brand portfolio.Strong relationship with retailersEconomies of scale.Corporate social behavior variety show of products(W)eaknessesDual leadershipLimited costumer connectionInefficient management of brandsInability to maximize acquisitionsLack of control in the market rednessuced spend on RD(O)pportunitiesChanging consumer preferencesIncreasing need for healthy productsLow income consumersRapid increase in universe(T)hreatsDecrease in revenueStrong competition(PG)Tougher business climateExchange ratesEconomic crisisIncrease in production and labor cost3.2. BCG MatrixStars(High market growth share)LuxSunsilkWalls ice skimFair lovelyRafhanEnergileAXEVaslinePG tipsDogs(Low market growth share)Wheel detergentSupreme teaLifebuoy shampooCash cows(Low growth High share)Surf passPondsLiptonClose upBlue bandDove soapRexonaKnorrQuestion marks(High growth low share)Clear shampooRinComfortBen JerrysPersil3.3. PESTEL Analysis3.3.1. (P)olitical/Legal environmentUnilever, as a matter of policy, set a standard as to the way of tackling political issues. Unilever has its tactical way of handling political issues. First, in the 1960s, some countries began to nationalize foreign firms which in any case affected Unilever. This was a call for topical anaesthetic equity participation in foreign firms. Thus, so many companies were subject to local control on prices, imports, employment of expatriates and so on. As a result of the adverse effect of nationalization policy, in the 1970, many US companies e.g. IBM and coca locoweed left India. There was fear by foreign companies uncertain issues such as knowledge leakage, loss of trademark etc. this was also hazardous for Unilever as its control over operation in the market was reduced. For example UAC, a subsidiary of Unilever, whose operation was in many African countries (Cameroon, Ghana, Ivory Coast, Nigeria, etc.), was focused on as its profit margin and rate of easy remittance of profit to its Anglo-Dutch parent was enormous. Nationalizing UA Chambered Unilevers control over the market where UAC operates. However, Unilever uses its experience and goodwill to make contacts in many countries to bargain with government so as to modify their regulations. In central and south America, Unilever only engaged in lobbying rather than active politicking. In other words, Unilever never get involved in sponsoring political parties. Today, Unilever has gained political ground using its tactical strategy and experience. Unilever is a member of many organizations all over the world. The aim is to create favorable business environment, and also facilitate corporate reputation management.3.3.2. (E)conomic environmentUnilever market environment is becoming extremely competitive especially in the Western Europe. Procter Gamble (PG) is one of the major competitors in the European market. More so, in that respect are so many discounters in the European market resulting from EU free trade policy. This has had adverse effect on Unilevers profit potentials. Retailers are pressurizing FMCG producers to reduce prices of th eir products.Consumers on the other hand would not want to buy expensive product or brands due to current economic tide. Competition in EU has grown so strong that Unilever is facing difficulties in places like France, Netherlands. In the developing countries and the emerging economies (Asia and Africa), where there are political instability, Unilever has adopted its company strategy to ensure that its profitability drive is sustained. Some Products are packaged in small size for low or regular income earner, for affordability. In some developing countries, Nigeria to be precise, there was uncertainty astir(predicate) duties to be paid by companies due to inflation and fluctuation of currency. The effect on Unilever was a decrease in profit in 2005 compared to 2004, though there was increase in turnover.3.3.3. (S)ocio-cultural environmentUnilever has continued to maintain momentum in its socio-cultural environment in line with its sustainability drive. The company is working relen tlessly to bring meliorate hygiene and better nutrition to people in Asia, Africa and Latin America, especially the poor and obesity. Over 30% of Africa population lives on less than $1 per day. By this, Unilever strengthens it goodwill. However, the low literacy of consumers affects marketing vehicles such as advertisement in print media. This therefore requires employment of more resources, for instance to enhance face-to-face communication. Besides, Unilever employs about atomic number 6 nationalities. It ensures that diversity works for everybody both employees and consumer alike. In order to achieve and ensure that diversity works amongst employees, Unilever employed the strategy of so as to manage and leverage diversity. Unilever is focused on building an exclusive culture and embracing difference, which resulted in high demand of its products in the developing and emerging markets.3.3.4. (T)echnological environmentRight in the 1930s, Unilever continue to diversify. Business continue to boom in the1950s with new technology being invented to boast production and enhance quality products for consumer, competitors improving their products using new inventions. Unilever did not apply up its effort in RD. Since 2000, Unilever has been spending on ITto meliorate its business especially in the area of e-business so as to improve brands communication and market through internet, make transaction simple along chain.Today, Unilever is trying to minimize cost through IT efficiencies at global level. In addition, Unilever Technology Venture works in collaboration with Unilever RD group to help Unilever meet consumers needs. Area of concern is genomics, advanced bioscience, advanced materials science and nanotechnology. In 2003, Unilever installed and commissioned palette live storage system from Bitto Storage System Ltd. This was meant to store its frozen products. The facilities include pallet live storage systems, carton live storage systems, pallet racking, boltless shelving, plastic bins and containers, wide span and heavy load shelving, cantilever racking, and multi-tier shelving systems.3.3.5. (E)nvironmentIn recognition of local legislation and to keep its corporate responsibilities, Unilever designed management system. Unilever has respect for consumer health and safety. This policy is to ensure all Unilever operators establish a formal environmental management system. Training programs are being arranged in unlike regions/business groups to ensure compliance with the company Standard for Occupational Health and Safety Environmental Care (SHE). This framework is based on the ISO 14001 management standard. Unilever had also worked in conjunction with government of countries of its operation as regards waste management. For instance in Ghana, 2004, over 21 tones of wastes were supplied to small and medium size recycling businesses in Accra, Ghana, by Unilever to reduce the amount of plastic waste sent to landfill.Financial perform anceUnderlying sales growth of 7.4% was partly offset by movements in exchange rates (4.8%) and the net impact of disposals and acquisitions (1.4%). Including these effects, turnover was 40,523 million for the full year, increasing by 0.8%. Operating profit increased by 1,922 million to 7,167 million, including a higher(prenominal) level of profits on business disposals. These generated a pre-tax profit of 2,190 million in 2008, comparedwith 297 million in 2007. Net profit was 28% higher than last year, boosted by the profits on disposals. Earnings per share were 1.79, including a net gain of 0.36 fromRDIs. This compared with 1.35 last year, which included a net loss of 0.07 from RDIs. Net cash flow from operations at 3.9 billion was in line with last year. Total cash returns to shareholders in the year were 3.6 billion, made up of 2.1 billion of dividends and 1.5 billion of share buy-backs.4.4. Financial ObjectivesUnilevers ambition is to top Third Total Shareholder leave, over a 3 year rolling period out of peer group of 20 other companies. Its outlook for year 2010 isUn-geared free cash flow in the period 2005-2010 to be 25-30bn.Improvement in Return on Invested Capital.Underlying sales growth of 3-5% p.a.Operating margin of over 15% by 2010 after normal restructuring.Improved capital and tax efficiency. grocery store share and competition5.3. Category position in the marketStrategic IssuesFollowing are some of the key strategic issues which Unilever faces today6.1. LeadershipUnilever maintains two business entities i.e. Unilever PLC and Unilever N.V. Due to dual chairperson approach it faces following problems in their business strategyList stock separatelyShared board of directors regular(prenominal) management wear two, three hatsConflict in Board and Business responsibilitiesCompany remains fragmentedReduced effectivenessSlow decision making process( Bureaucracy)Unilever believer (believe in Unilever)Unilever should create a sense of belief amongst its consumers. It should try and focus on program that focuses on brand initiative to the consumers. Use denote that connects with consumer needsConsumers demand high quality products that are both convenient and deliciousConsumers look for new ways to use the productLarge population of single parent house holdMore females are working full-time jobsIncrease consumer focus on health and nutritionStrategy acknowledgment7.1. Recommendation 1Make an initiative to create an overall umbrella brand across all Unilevers brands that will eventually consolidate various businesses under one name.Unilever PlcUnilever NVOne UnileverProvides a greater clarity of leadership, responsibility, and accountabilityAllows Unilever to focus on the needs of their customers and consumers thus reigniting growth and increasing sales potentialProvides the ability to leverage scale of operationsCreate a strategic platform for brand managementRecommendation 2It should implement Unilever Believer product and brand extensions. The related example in this case is of Lipton tea. It should try and create an extension to this famous brand by focusing on energy drinks. Justifications are verve drinks jumped 56% in sales last yearMarket has exceed $100 million in the recent yearsMain Competitor Red BullPositioning Statement A Healthier Alternative to Energy DrinksUnilever should cash in this opportunity byTarget Market Young adults 18-32Uses pinch up all night and/or start a night outMain Ingredients Caffeine, Vitamin B, GuaranaAdvertisements Highlight healthier ingredients of the product while showcasing its ability to give energy and revitalize body