Business-Level and Corporate-Level Strategies - Unilever - Case Study Example

Business Level and Corporate Level Strategies Business Level and Corporate Level Strategies There are three different levels of strategies in hierarchy: Corporate level strategies Business level strategies Functional or departmental level strategies (Vance & Deacon, 1999) Unilever and Business Level Strategies Unilever is an MNC (multinational company) that is British-Dutch and produces FMCG (fast moving consumer goods). Specifically it produces beverages, food products, personal care items and cleaning products. After P&G and Nestle, it comes third in the list of the largest consumer goods companies according to their revenues in 2011. It is also the largest producer of ice cream in the world. Unilever is listed in the Netherlands under the name Unilever N.V. and in the United Kingdom under the name Unilever PLC. The number of brands that Unilever has is above four hundred and its best selling brands are Dove, Ben & Jerry’s, Lipton, Lux, Rexona, Toni & Guy, etc. In December 2011, Unilever was the 18th on the list of the London Stock Exchange and it had a capital of 27.3 billion pounds. NYSE is its second list and Unilever N.V has different listings as well. A business unit that strategizes can be a center that is independent from other units in the business, and it could even be a division of the company such as the two divisions of Unilever, or a product line such as the line of personal care products of Unilever (Unilever, 2011). Business level strategies deal more with developing and maintaining a competitive advantage in the market for the goods and services produced and not that much about coordination among different units in the company. The different levels and phases deal with: Positioning strategies of Unilever against its competitors. Foreseeing into the future for any changes in technology and demand patterns and making strategies to cater to these changes accordingly. Becoming an influence in the field of competition by strategic and political actions such as integration forward or backward and lobbying support. Other strategies that can be used to differentiate in positioning from competitors are the generic ones that Michael Porter has defined. These are differentiation, cost leadership and focus which are usually implemented on a business level to become competitive and to protect the company against the negative effects of Porter’s Five Force Model. Unilever also believes that it needs to have a correct balance between low cost and differentiation strategies to be competitive and hold a leadership post in the marketplace. Consumers are bombarded by choices in the FMCG industry. They have many brands to choose from and with Unilever and its twelve brands they cannot maintain leadership if their costs of products are higher than those of competitors. At the same time, if they do not differentiate their products, they will find it difficult to get brand loyal customers who would stay with their brands no matter what came up in the marketplace. Unilever places utmost importance on branding and differentiations, and therefore marketing, advertising and product development are extremely crucial in this industry (Unilever, 2010) This allows Unilever to hold the top positions in some of its food and personal care products, which it would be unable to do had it not differentiated its products from others. The resources of Unilever are for two main uses and they are divided accordingly as resources allocated for brands and their development, strategies for brands and their innovation. These are also concerned with brand categories. The second division is allocation of resources towards the management of business, customer development and delighting and deployment of customer profiles and brands. Unilever is also heavily inclined towards research and development which is displayed in the mission statement of the company “Add vitality to life,” and their purpose of the business unit as a whole is innovation continuously. The company’s resources need to be aligned with its strategy to have a competitive edge over others. Unilever is, thus, well positioned to take risk and have an edge in the market considering its costing strategy and its structure of the organization. Unilever is also a global corporation which has its presence in 150 countries with over 2,230,000 employees. Unilever has rooted itself according to different cultures all over the world, which allows it to have a pool of knowledge, and it labels itself proudly as a multi-cultural corporation that caters to its customers in every place. They believe that they need to get value across global markets by tapping into their differences and finding out their locations for resources, activities, launches, etc. This way they can adapt to different markets and find the optimum efficiency of their organization. In Latin America, Unilever focused on a Unilever Latin America movement which was based on excellence, innovation, leadership and brands as well as their health, and in some regions it is actually the market, e.g., in Philippines, India and South Africa. They emphasize good relationships with customers. Consumers are of utmost importance for the company and its main goal is to win them over. Unilever also focuses on emerging markets and niche development as well as developing economies and since it is also affordable, people are interested in this brand and it captures the market in developing nations. 35% of its revenue comes from these markets, from custom made products for people with different affordability and they have a good distribution that penetrates into these markets to gain advantage of them. In this way Unilever has ‘seamless global development’ where technology is taken advantage of and all data is automated and there is a wide system in which all information is integrated and it also consolidates the branding and marketing of its brands across the board on all levels locally as well as globally. Unilever still faces some threats from the market place and it needs to work on its value chain as well. It has also ventured into e-business and it captures its B2B market from this medium as well, which continues to evolve over time. It also has a system online which allows for buying and purchasing from its suppliers. This makes its distribution system even more effective. However, the company faces a threat from competitors because it has not differentiated on this playing field as its initiatives are not different from others in the industry and they can easily be copied. They have allied with Safeway and other companies in order to have newer and better technology. Unilever will further need to add better and newer technology in order to have a competitive advantage in terms of resources. The goods that Unilever produces cannot be understood unless the consumer tries them and therefore, they fall under the category of “experience goods.” Therefore, some of the savings that will be slashed and then added to Internet marketing and consumption may not work, or it may work well by lowering its overall cost base. The company also caters to some markets on the Internet. P & G and Unilever go neck to neck in the B2B marketplace and are even part of Transora that offers solutions which are cost-effective and which help users and the industry to get the most efficient database and synchronize their data from different products and different countries etc. Unilever also wanted to take an initiative with GDSN, which is to completely network their supply chain on the Internet, and this way they can also streamline their communication of information on products. Corporate Strategy Corporate strategies are those which are related to developing a competitive and coordinated portfolio of their business. They deal with: Contact which means that the competition of the corporation is catered locally. Reach which includes the total goals of the company as well as the businesses that Unilever should take part in and how their processes should be connected and integrated. Business relationships and management which is the synergy of strategies and staff and resource coordination as well as financial resources etc. Practices in the company, which are the decisions of governance in the organizations, whether it is centralized or decentralized. It also focuses on rewards and persuading consumers etc. and how to go about it. The corporation’s aim is to focus on value creation and in this way they have to manage a valuable portfolio and they need to ensure that they are successful in the long run and adaptable as well. This policy of Unilever seems to be long-run and visionary and something that will benefit them for years to come. Unilever focuses on the locations and areas it will cover, its employees and the vertical integration between processes in its corporate strategy as well. They also aim to have good customers anywhere they do business so that they can remain a multi-cultural MNC. In this way they have six categories of products, as aforementioned, which are available in more than 150 countries in the world. In Europe, it is losing out on its market, however. It is also suffering because this market is very fragmented and its competitors are also in the mature stage, so competition is tough from Nestle and P & G especially, with P& G focusing on value as opposed to Unilever’s focus on volume. Under-performing segments should be cut down in order to make way for more profitable ventures and where a volume driven mission is believed in. Brands in Unilever have been reduced from 1,200 to 400 over the years in order to keep the best performing brands. Unilever should not wait for too long before divesting its resources from Europe and frozen foods from there because they have not managed to capture the market there. This will help Unilever repay their debt and have sustained profitability. They can also venture into complimentary goods market and reject other products which have a potential low growth. This will help them have a sustained competitive advantage. Its major competitor is P & G. They focus on large scale operations and there are divided in a most organized manner, thus they are number one according to revenues of 2011. Their products, however, are not priced as low as Unilever’s, and cost efficiency and economies of scale are issues that Unilever faces on a lesser scale. For slow cycle markets, Unilever would have more difficulty in getting a competitive edge over competitors because it is difficult to penetrate and innovate, and competitors would also change. This is usually in the service sector such as mobile phones. However, FMCGs are focusing on fast cycle markets. (Unilever Companies, 2010) References Unilever. (2010). Unilever and economic development in the Third World. Unilever. (2011). Progress: the Unilever quarterly. Unilever companies: Hindustan Unilever, Hellmanns and Best Foods, Lever Brothers, Unilever. (2010). General Books. Vance, M., & Deacon, D. (1999). Raise the bar: Creative strategies to take your business & personal life to the next level. Read More