The Competitive Position of Unilever in the Global Market Place - Essay Example

Business Strategy Report Table of Contents Table of Contents 2 Introduction 5 Overview of the Organisation 5 Objective of the Report 6 Strategic Analysis 7 Industry Analysis 7 Bargaining Power of Supplier 8 Bargaining Power of Consumer 8 Competitive Rivalry 8 Threats of Substitute Products 9 Threats of New Entrance 9 Internal Analysis 11 Strengths 11 Weaknesses 12 Opportunities 12 Threats 13 13 External Analysis 14 Political 14 Economic 14 Social 15 Technology 15 Legal 15 Environment 16 Strategy Development 16 Strategy ‘Toolbox’ 16 Functional Level Strategies 17 Identify Strategic Options 18 Strategy Implementation 20 Conclusion 21 References 21 Bibliography 25 Introduction Overview of the Organisation Unilever is a public limited company, which is operating its business function in the consumer goods market. The organisation was established in the year 1929 in collaboration with Dutch organisation Lever Brothers. The organisation has become globally renowned due to exceptional brand image along with its end number of products. At the same time, Unilever has also gained goodwill from global market place due to its high quality products and services to its consumers throughout the world. Over the years, organisation has been operating its business operations in more than 190 countries. The organisation has also listed its name in the London Stock Exchange in ‘FTSE 100 Index’ constituent. At the same time, the organisation has also committed to ensure its sustainability and maintained competitive advantage in the global market through providing priority to its consumers and their changing demands. During the product development Unilever always keep its focus towards children and farmers for better profitability and operations. Likewise, organisation has also considered healthcare related aspects in order to establish a better future. According to the recently published report it has been recognized that approximately 174,000 employees are operating their operation with Unilever in the entire global market (1Unilever, 2014; Unilever, 2013). During the earlier days, Unilever operated its business operation especially in four segments such as refreshment products, food and beverages including ice cream, home care segment and personal care segment. However, during the mid-20th century, the organisation diversified its business and entered into extended consumer goods market zone. According to the observation it has been recognized that the organisation used few pertinent strategies to ensure a significant command on the global market through its products. Throughout the last century, Unilever has operated its marketing activities in a competitive global marketplace for long term sustainability and profitability. Apart from core segment including food and beverages, Unilever has faced competition from Nestle, Pepsi, Procter & Gamble and Coca-Cola among others. In order to ensure its consistency and leading position in the global market, the organisation has upheld quality as a prime factor in its offerings along with services (1Unilever, 2014; Unilever, 2013). Objective of the Report In this particular report, the objective is to identify the competitive position of Unilever in the global market place. In this regard, it is highly essential to identify the current strategies, which is being used by the organisation to face the growing competition. Thus, this particular paper will analyse the strategic viewpoint of Unilever through industry analysis. Moreover, it will elaborate and also analyse the internal and external factors of the organisation. At the same time, the study will also intend to identify the existing strategies, which is developed by the organisation. Additionally, the paper will also highlight how the organisation has implemented its proposed strategies for the long term sustainability. At the same time, it will also recommend appropriate strategies for the Unilever with the aim of enhancing the competitive advantage in the global market. Strategic Analysis Industry Analysis In order to determine the competitive position of the Unilever, it will be vital to apply ‘Porter’s Five Force Model’. In this regard, it can be asserted that the ‘Porter’s Five Force Model’ is highly effective framework through which it is possible to identify the competitive environment of an organisation. Moreover, through the assistance of this framework it can be possible to determine the market position, where the organisation is operating its business functions. At the same time, through the help of this framework it will be possible to identify the opportunities of the organisation in terms of its industry operations (AFS Action, 2013). The elements of this model are associated with the various factors, which are directly or indirectly related with Unilever those are described below. Figure 1: Porter’s Five Forces Model Source: (AFS Action, 2013) Bargaining Power of Supplier Unilever highly relies on its suppliers for the supply of materials in order to produce its products and services. In this regard, it has been recognised that the organisation has unique policy of collecting its required raw materials from the local marketplace. Thus, the organisation has established trade agreement with its suppliers with the aim of maintaining the flow of supply within a certain period. Through implementing this strategy, Unilever has ensured its competitive advantage by preventing the switching option of supplier. Moreover, the organisation has also traded fairly with its suppliers with the aim of enhancing its loyalty among the supplier. Thus, it can be asserted that the bargaining power of its supplier is moderate in this case (AFS Action, 2013; Department of Applied Economics, n.d.). Bargaining Power of Consumer In order to analyse the bargaining power of the Unilever consumers it has been recognised that large number of buyers are spread around the global market. It has been also recognised that the buyers does not have the potential of influencing the prices of Unilever products. Rather it has been revealed that the bargaining power of buyers is rising due to increasing number of competitors within the industry. It has been identified that present customers have become more price and quality sensitive and are constantly seeking for products offering with value for money (AFS Action, 2013; Department of Applied Economics, n.d.). Competitive Rivalry In order to identify the competitive rivalry, it has been observed that in the Fast Moving Consumer Goods (FMCG) business Unilever has witnessed higher threats regarding competitive rivalry. In this regard, it has been revealed that the rival organisations are offering almost equally attractive products and services, which has the potential of attracting and influencing consumers towards the substitute products. Thus, it has been revealed that Unilever has emphasised towards ensuring superior quality of its products in order to attain competitive advantage over its competitors (AFS Action, 2013; Department of Applied Economics, n.d.). Threats of Substitute Products Even in case of substitute products, the organisation has considered this factor more cautiously, as it has been revealed that large number of competitors of Unilever are considering towards new product research and development. In this regard, it can be claimed that due to the changing trend, most of the consumer and household prefer to try new and better things, which affects the product life cycle in the FMCG sector. Thus, Unilever has tried to fortify its strength through enhancing the customer loyalty in order to reduce the threat of substitute products. Thus, it can be evidently claimed that the threat of substitute product is very high due to the increasing innovation and changing trend of consumers (AFS Action, 2013; Department of Applied Economics, n.d.). Threats of New Entrance It has been observed that over the years Unilever has been operating its business in wide range of global market. In this regard, it can be claimed that the Unilever have a strong position in terms of its brand image. Thus, it is highly difficult for the new players to conduct or establish competition with Unilever in terms of its product and services. In this context, it can also be asserted that due to legal requirements and financial strength it is highly difficult for the new players to establish rivalry against Unilever. Moreover, Unilever being a well known company have a strong customer base hence the threat from new entrants is low. Thus, it can be claimed that the threat of new entrance is very low in case of Unilever (AFS Action, 2013; Department of Applied Economics, n.d.). Based on the above analysis, it has been perceived that Unilever has incorporated several strategies with the aim of enhancing its product quality in the global market. At the same time, the organisation has also emphasised on developing new products for its consumers with the aim of maintaining its competitive advantage (AFS Action, 2013; Department of Applied Economics, n.d.). A graphical representation is depicted below for better understanding the above stated analysis about Unilever. Fig. 2: Porter’s Five Forces Model for Unilever Source: (AFS Action, 2013) Internal Analysis In order to determine the internal factors, which are influencing Unilever, it will be vital to implement ‘SWOT’ analysis method for better understanding. According to the observation, it has been recognised that Unilever is one of the strongest players in the global market due to its wide range of personal care and beauty care products. In this regard, it can be asserted that the organisation has implemented several strategies with the aim of maintaining its leadership in the global market place. However, during the business operation the organisation has faced several challenges from its competitors. On the other hand, Unilever has also witnessed a range of opportunities during its operations for future development and more market share (Euromonitor, 2014; Ariyawansa, 2009). Those opportunities as well as challenges are critically reviewed hereunder: Strengths In order to analyse the strength of Unilever it has been identified that the market size is regarded as the actual strength of an organisation. Over the years, Unilever has captured 40-45% of the market share around the world, which has assisted the organisation to ensure its leadership position in the FMCG sector. In this regard, it can be asserted that only Procter & Gamble has been able to compete with the organisation in terms of its market share. At the same time, it has also been recognised that the organisation have gained high brand loyalty among the consumers due to its adequate brand awareness and quality products. In this regard, it can be asserted that maximum number of people at least one Unilever product in a day due to its wide range of product availability. Thus, the familiarity of Unilever can be also taken into consideration as a one of the prime strength of the organisation globally (Euromonitor, 2014; Ariyawansa, 2009). Weaknesses On the other hand, in order to identify the weakness of the organisation it can be asserted that due to its wide range of business operation, the organisation has faced several challenges in terms of its structure. Apart from this, it has also been recognised that out of 400 brands, some brands of Unilever is not able to satisfy the need of consumers. This aspect has hampered the reputation of the organisation to a considerable extent. Similarly, the organisation has faced several challenges due to the increasing market and coming of new entrants as competitors. In this regard, it has been witnessed that large number of competitors are developing offering with similar kind of product and services and thus increasing the threat from substitution (Euromonitor, 2014; Ariyawansa, 2009). Opportunities According to the observation, it has been recognised that with the advent of globalisation the organisation like Unilever has been benefited in a bigger way with the opportunity of open market operation in global marketplace. Moreover, it can be asserted that with the effect of globalisation, Unilever has been able to spread their business operation in the potential new markets, which has enhanced the opportunity for the organisation. Simultaneously, due to availability of maximum number of brand, the organisation has been able to establish a strong relation with maximum number of people in global market as a stakeholder, which also enhanced growing opportunity for Unilever (Euromonitor, 2014; Ariyawansa, 2009). Threats Effect of globalisation, popularity of social media, e-commerce facility and end number of competitors have become a larger threat for the organisation during the early 21st century. On the other hand, economic aspects such as inflation, high rate of interest and recession related factors have been initiating several difficulties for the organisation as well. As an effect, the impact can be directly observed on the sale of the Unilever products (Ariyawansa, 2009). A graphical representation is depicted below for better understanding the strength, weaknesses, opportunities and threats of Unilever. Fig. 3: SWOT Analysis of Unilever Source: (Ariyawansa, 2009) External Analysis In order to determine the external environment of Unilever, it is essential to apply ‘PESTLE’ analysis model for better understanding regarding the aspects of Unilever. PESTLE analysis is of importance in order to identify the external environment of the Unilever, and hence illustrated below: Political Unilever operates its business across diverse geographical regions around the world. Owing to its widespread operations, the company has faced several threats from the political environment, particularly in terms of instability associated with the political condition of the nation. In this regard, more precisely it can be asserted that the labour condition around the world is very poor, due to high rate of wages and unavailability of the skilled expertise labour force. At the same time, trade agreements are getting complicated due to high involvement of the political factors. Thus, in order to reduce those threats Unilever has been constantly involved in closely monitoring the political factors influencing its operations and sustainability (Koumparoulis, 2013; Ariyawansa, 2009). Economic The impact of economic downfall has affected the growth rate of not only Unilever but other companies as well. Simultaneously, inflation and high exchange rates have also affected the Purchasing Power Parity (PPP) of the global customers and have adversely affected the profitability of Unilever to an extent. Despite of the gloomy economic condition, the company has emphasised towards the favourable flow of capital and financial stability. Apart from this, the organization has cut down the cost of its production in order to stabilize the economical aspects in a competitive market to maintain its position (Koumparoulis, 2013; Ariyawansa, 2009). Social With respect to the social context, Unilever has incorporated social media as medium for enhancing the communication with its consumers and stakeholders. At the same time, the organisation through the help of Corporate Social Responsibility (CSR) activities, develop a better image in the society in order to attract customers. Moreover, through considering the social aspect the organisation has introduced environmental friendly products for its consumers with the aim of enhancing its competitiveness in the global market (Koumparoulis, 2013; Ariyawansa, 2009). Technology Technological advancement in the contemporary era has become a frequent trend. In this regard, Unilever is not an exception of this trend. The organisation has incorporated latest technologies to enhance their performance and product design efficiency. Simultaneously, Unilever has also considered safety related issues. On the other hand, the organisation through the help of technology offers quality products to become trustworthy among consumers (Koumparoulis, 2013; Ariyawansa, 2009). Legal Simultaneously, challenge related to the legal aspects has also become a matter of concern for Unilever. In this context, it has been revealed that corporate taxes have become higher during the recent days. At the same time, consumer protection legal framework has also become stringent during the modern era. In this regard, it can be claimed that Unilever has maintained legality, morality, and ethnicity to ensure a healthy relationship with its employees, stakeholders and consumers with the aim of enhancing its business performance around the global market (Koumparoulis, 2013; Ariyawansa, 2009). Environment In order to maintain the environmental protection, Unilever had concentrated on its financial stability and ecological environment. At the same time the organisation has also designed and developed environment friendly products in the global market. Unilever is taking consideration with regard to environment for its long term sustainability (Koumparoulis, 2013; Ariyawansa, 2009). Strategy Development Strategy ‘Toolbox’ Over the years, Unilever intended to establish a strong market base and tried to ensure its growth and profitably across the world more significantly. In this regard, the organisation incorporated several strategies to ensure its sustainability and profitability. In order to highlight those strategic involvements, it can be asserted that the country has expanded its strong geographical footprints around the entire world. More precisely, the country has established strong relationships with the potential countries for future growth. At the same time, Unilever has highly emphasised towards cost leverage and efficiency along with innovation and marketing investment with the aim of maintaining its sustainability in the competitive marketplace. In order to evaluate the strategy ‘toolbox’ it has been recognised that the organisation has applied ‘Cool Farm Tool’, through which the organisations has ensured its supply chain management. At the same time, through the assistance of this tool Unilever has ensured environmental sustainability in terms of balancing the greenhouse gas by reducing the carbon footprint (Unilever, 2014; Dhawan, & et. al., 2010). Functional Level Strategies On the other hand, in order to identify the business potential it has been revealed that the organisation has introduced various strategic business units. Moreover, the organisation has also applied several functional level strategies with the aim of enhancing its business performance and efficiency in the global market. In this regard, in order to reduce net profitability, the organisation has reduced the cost of media approximately around € 900 billion (Unilever Plc, 2013). Similarly, in order to expand the market share the organisation has emphasised towards innovative and product development as per the demand and changing needs of customers. At the same time, in order to ensure its product and services quality the organisation has applied adequate human resource strategies to develop skills and abilities of their workforce for better sustainability. On the other hand, in order to ensure the financial stability the organisation has captured the huge potential markets such as the UK, the USA, China and Australia among others. Moreover, in order to ensure productive quality, Unilever has concentrated on its research and development process. Additionally, in order to maintain the social responsibility the organisation has focused on its CSR activities (Unilever, 2011; Rose, 2007). Moreover, in order to identify the financial performance of the organisation, it has been revealed that during the year 2013 the overall turnover of Unilever was €49.8 billion, which is 3.0% less than that of the year 2012. Instead of this, it can be asserted that the trend of the overall turnover of Unilever denotes a positive trend. The effect has been observed in case of total dividend/share. According to the annual report of 2013, Unilever dividend/share has increased 10% with respect to the year 2012. A graphical representation is depicted below for better understanding of the above stated aspects (Unilever Plc, 2013; Unilever, 2011). Fig. 4: Financial Performance of Unilever Source: (Unilever Plc, 2013) Identify Strategic Options In accordance with the Association of Chartered Certified Accountants (2014), the Boston Growth Share matrix (BCG) is a tool through which the organisation evaluates its position in the market place in terms of its product portfolio and market share. Apart from this, the BCG matrix also helps an organisation to make further decisions making with regard to market share (Association of Chartered Certified Accountants, 2014). Figure: 5 Boston Growth Share Matrix Source: (FAM99 – Frameworks and Models, 2012) In case of BCG matrix, it has been observed that “Stars” denote high market share along with high growth rate. Similarly, “Question Marks” denotes low market share but high growth rate. On the contrary, “Cash Cows” denotes high market share but low growth rate. Simultaneously, “Dog” denotes low market share along with low growth rate (Association of Chartered Certified Accountants, 2014). In this regard, it can be recommended that in order to capture high market share and high growth rate Unilever needs to establish a strong brand portfolio through its innovation and exclusive qualities of product range and services. At the same time, in order to attain low market share but high growth rate Unilever will need to reduce the cost of its products. Attaining a strong market share and growth is important for Unilever to sustain in global market as a market leader with high profitability (Ariyawansa, 2009). Strategy Implementation In order to implement the recommended strategy Unilever will need to concentrate on few factors in order to ensure its effectiveness in the market. As a part of the strategic implementation, Unilever leaders should incorporate its vision and mission together for the organisation to perform its activity accurately. This signifies that leaders should give more priorities to their consumers and develop products as per the growing and changing trend of the consumers. At the same time, they should maintain the ethics during the business practices. Apart from this, in order ensure its long term sustainability and profitability the workforce of Unilever should have high attention towards the organisational goal. Moreover it will be highly essential to maintain the clarity of leadership along with responsibilities and accountability in the aim of enhancing the competitive advantage as per the acid test framework. The acid test framework refers to the aspect wherein the actual identity, communicated identity, ideal identity as well as desired identity of the corporate is focussed upon while implementing strategy. While implementing the recommended strategy the perception of the people towards the organisation is considered. Strategy regarding the positioning of the Unilever is also considered by evaluating the leadership potentials and innovation aspects of the products. The strategies implemented by Unilever should be aligned with the vision for better effectiveness, sustainability and profitability in the global arena. Moreover, the organisation will need to identify and understand the requirements of the consumers and according to that the organisation will need to develop new products, which will assist Unilever to gain high competitive advantage in the global market place (Cramm, 2008; Liu, 2003). On the hand, through improving the advertising and promotional activity the organisation can also spread its brand image in the global market along with its product features. At the same time, through adopting attractive packaging system Unilever can attract the attention of the consumers. Similarly, through offering certain benefits the organisation can influence the buying decisions of the consumers, which will enhance the overall sales turnover of the organisation. Furthermore, with proper strategic implementation considering the ideal identity Unilever can also enhance the competitive advantage in its operations (Cramm, 2008; Liu, 2003). Conclusion Based on the above analysis, it has been perceived that Unilever has been maintaining its competitive advantages in the global market through the assistance of its quality brand image and brand portfolio. At the same time, the organisation has also captured wide range of market area including most of the potential marketplace for profitability. On the other hand, the organisation has also ensured its quality of products through its innovation and high level commitment towards the consumer satisfaction. Moreover, Unilever has also practiced ethics during its business practices. After considering all the above stated facts, conclusively it can be claimed that through maintaining clarity of leadership and accountability the organisation can enhance the level of profitability and growth prospect for the future period. On the other hand, through developing new products and by fulfilling the need and expectation of the customers Unilever can ensure its competitive advantage in the global market place. References AFC Action, 2013. Research report: Indian FMCG Industry. Reports. 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