Final Project: Economy of the BRIC Countries - Coursework Example

The study will focus on one of the BRIC countries as their economy is predicted to be a strong economy in the coming years. It is assumed that several multinational corporations will seek to do business with the BRIC countries. Unilever is a multinational corporation and has huge operations in several countries. Hence, this company will be discussed in the study. Indian economy has been selected for the study as it has been predicted that the Indian economy will produce more economic impact than other countries of BRIC in the near future. Indian Economy The Indian economy is acknowledged as an emerging economy and has experienced exceptional intensity of economic growth along with Brazil, Russia and China. The economic structuring of the country with labour intensive technique and cost effective economy has been gaining benefit from outsourcing of work from developed nations, strong export and manufacturing oriented industrial framework. The country has been able to attract many foreign multinational companies due to the strong features of its economy (Economy Watch, 2010). Unilever Unilever was established in 1930 by amalgamation of Lever Brothers of Britain and Margarine Unie of Dutch. The company is a multinational company operating in several countries with different research laboratories at various locations. In India, Unilever is known as Hindustan Unilever Limited (HUL). A research study by Hewitt Associates with RBL Group and Fortune magazine, rated HUL among the top four companies globally (Unilever, 2010). 1 Assessment of the Progression of the Organisation India is a fast growing market and has observed over the years an influx of foreign investment through foreign companies entering into the Indian market. Unilever set up its subsidiary company Hindustan Lever Limited (HLL) and provided the freedom to manufacture products that best suited the taste and preference of the Indian consumers. Unilever exported their products to support the activities of HLL. The company offered differential products in multifarious categories at an affordable price. The products were designed and manufactured according to the culture and preferences of Indian people. The entry strategy in Indian market was with a low pricing strategy in the fast moving consumable goods category (FMCG). Unilever had started with the product Sunlight bar in the Indian market and soon the product was accepted by the consumers. After the success of the first product, Unilever introduced Lifebuoy in 1895 and other prominent brands like Lux, Vim and Pears in the market. They launched Dalda brand named Vanaspati that became popular in the Indian market (Unilever, 2010). After reaping success of different products in the Indian economy, they started to introduce brands and products in various categories. The image and the reputation of Unilever created an immense acceptance in other categories of brands and products towards consumers. Unilever has been able to capture the rural market of India through their products and pricing strategies that increased the market share of the company because rural market of India is greater in size than metro and urban markets. Till date the brands of Unilever touches major portion of Indian populace in different category of offerings by the company. 2 Analysis of Environment of the Emerging Market Unilever has been in the Indian market for a longer period of time and has gained success in the Indian economy. The success of the company was not too uncomplicated in the emerging market of India. They had to face different internal and external business environment problems that were barriers in the achievement of the Unilever’s objectives and visions. Unilever has a clear vision of achievement in the Indian economy. The vision of the company was based upon four pillars: “We work to create a better future every day We help people feel good, look good and get more out of life with brands and services that are good for them and good for others. We will inspire people to take small everyday actions that can add up to a big difference for the world. We will develop new ways of doing business with the aim of doubling the size of our company while reducing our environmental impact” (Unilever, 2010). In order to accomplish the visions of Unilever, the business environment barriers that the company had to face are discussed below: Political Factors The Indian economy during the entry stage of Unilever was not that favourable for foreign and multinational corporations. There were several political barriers that hindered the multinational corporations to operate in Indian economy independently. The corporation was required to do business with the agreement of partnership with the Indian company and had to face lots of problems. Unilever had their subsidiary business model and opened their subsidiary as Hindustan Lever Limited (HLL) and started the business operation. The political influence was present in the business operations of Unilever. The government had expressed doubt regarding the trustworthiness in the subsidiary company of Unilever. The reason behind this have been whether the Indian economy will be benefited in terms of resource, labours and many other factors utilised by HUL. There were trade unions that were supported by the political parties that affected the day-to-day operations in the manufacturing concern. The other issues were related to the export and import problems that were governed by the political decisions. Unilever exported its merchandises to HLL in order to support its activities. But the export and the import restriction up to certain level with huge taxation system affected the marketing policy of the company. Later, changes in the economic situation and open economic nature of India helped to turn unfavourable situation to favourable situation. Economical Factors The economy of India is an emerging economy. When Unilever started its operations in India there were certain difficulties prevalent the economy. The economy of country was in its developing phase and it had to encounter certain challenges. The challenges in the economy have a direct impact upon the business operations. With the development of the economy, stability of the company was established. The situation of inflation in the Indian economy was prevalent for a long period of time. Unilever being in the FMCG category had to face more problems due to the inflation that tends to raise the cost of raw materials. The company offered products at a reasonable price that were designed especially for the Indian consumers’ tastes and preferences. The changes created a huge impact upon the margin of Unilever. The company with its local resources managed with the inflation situation and developed more categories of products in the same product line and achieved success through consumer’s acceptance of their products. Unilever altered the marketing strategy with its pricing policy to the economical changes in the Indian economy in order to achieve success. Socio/ Cultural Factors Unilever keeping in mind the socio/ cultural factors of Indian market designed the products according to the Indian consumers. HUL back in 1888 launched its first product Sunlight bar that was available in several Indian stores and people accepted the product. Unilever developed many products and brands that matched with the cultural values of Indian market after getting its first product accepted. Recently HUL is, “India's largest fast-moving consumer goods company with a strong portfolio of foods, home and personal care products that touch the lives of 2 out of 3 Indians, everyday” (Unilever, 2010). Unilever with its six renowned brands has contributed to the business with more than £142616.83 GBP (Unilever, 2010). HUL has extended its brand in six different categories after the success of experimentation of the product in the early stage of business operations. They operate in food, home care, personal care, water, nutrition, health and hygiene and beauty brands (Unilever, 2010). The acceptance of the society has been immense towards the products of HUL. Significant proportions of Indians use the product of HUL in feeding the family, keeping the home clean and fresh those have been the part of every day’s life (Unilever, 2010). Technological Factors When Unilever entered the Indian economy the technologies for the manufacturing concerns were not that developed. The economy consisted more of labour force and government emphasised to apply labour intensive techniques in the manufacturing concerns. Unilever at the starting phase experienced huge problems in applying the techniques as the Indian economy was labour intensive rather than technology based. The technical advancement was not that developed in the Indian economy that forced the HUL to develop the products without the modern technical assistance. There were huge problems in designing the products and to make it accessible in the market. Due to the changing environment in the technology and the policies of the government, it became possible for HUL to get technical assistance from Unilever and machineries that were advanced for the manufacturing. This made HUL gain competitive advantage against the national companies and other foreign investors. The technical factors development helped HUL to develop the product lines and different brands that have been successful in touching every Indian lives. They have developed many brands and categories that increased the variety of choices and the level of competition with an increase in the margin too. Legal Factors The legal environment plays a vital role in deciding the product development and marketing strategy. The initial stage of the HUL has to face the legal challenges in terms of taxation system. There were heavy duty charges upon the merchandises as it was associated with Unilever. Being the subsidiary company of Unilever it also enjoyed certain benefits. There were problems in the operations regarding trade unions, raw materials and rural Indian legal policies (The Hindu, 2004). The raw materials were procured from rural India and faced the challenges of Agricultural Act or regulations. HUL did not have a clear idea about the restriction during the initial phase of operations. Due to the increment in growth rate of the industrialisation in the Indian economy, the government made certain changes in the regulations that ultimately benefited both the industrialists and the rural India. There were certain protection acts regarding the consumers, competition, health and safety and employment acts that were to be tackled by HUL. When the economy started to develop, the laws were also changed to suit the mutual benefit of the consumers and the company. Due to the changes and mutual benefit drafts of the law, HUL was able to maintain its growth in the Indian economy. Competition Factors The major competitors of HUL are P&G, Godrej India, Gillette India, Emami and Dabur India and Nestle in the Indian economy (Money Control, 2010). When Unilever entered the Indian market the level of competition was not that high. There were few competitors and multinational players in the FMCG category. The level of competition was with the national level competitors. The development in the Indian economy and the success of Unilever led other multinational corporations follow the success path of Unilever and enter the Indian market. By the time others entered the market in India the company had already captured major market shares. The increasing number of multinational corporations in the Indian economy increased the level of competition and affected the market share of HUL. But since HUL had captured the hearts of rural India through their innovative products, it was hard for the competitors to capture the rural market of India. The success of HUL was evident as the company captured the rural market of India that is huge in its size compared to urban market in India. HUL had lost certain market share but the company was able to detect the right moves in the Indian market. “The key to success for businesses in India is not market share but market development” was commented by the HUL's non-executive chairman Harish Manwani (Money Control, 2010). This is the reason why HUL is not concerned about the quarterly competition over the market share. Rather they are in force to develop the market of HUL. 3 Evaluation of Organisation’s Strategies International Entry The geographical direction and the product category were the key strategies of Unilever to be acknowledged in the global market. In different countries it had introduced various product categories that were in huge numbers and gave tough competition to the other multinational corporations. Unilever enters in other market with certain products that is designed according to the taste and preference of that market and once it gets accepted and renowned, it introduces its various brands and products. These strategies helped Unilever to achieve huge success in the international market (Jones & Khanna, 2004). Organising and Structuring Global Operations The operating model of Unilever has been designed to make decisions (Unilever, 2010). Unilever has two divisions in operating globally. They generally follow the geographic area and product division. For instance, in Indian market Unilever have decentralized the decision power of manufacturing the products according to the HUL. For effective operations in the global market, Unilever has divided its operations into two divisions- Food and Home and Personal Care (HPC). These operational changes were made to improve the Food and HPC performance globally and regionally. This will hasten up the decision making and implement the strategies through alignment of brand strategy with business operations. This reinforced the innovation capabilities through successful incorporation of research into the divisional structure and through the formation of global innovative centres (Unilever, 2010). Competitive Advantage Unilever gained competitive advantage in the global market in the FMCG category. The research setup of the company in the UK, the US and the Indian market generated innovative products that provided a benefit in developing the brands and more categories of products in the global market (Jones, 2005). The main competitive advantage that Unilever gained was through the effective acquisition strategy and engrossed the capabilities of the acquired company. This was possible only after 1980s. The acquisition of Brook Bond and Chesebrough–Pond’s were the successful ventures that provided Unilever a competitive advantage over others (Jones, 2005). Unilever through the recruitment and promotion policy established an effective and an efficient management team that helped in developing the achievements of the company nationally and globally. The company hired best accessible graduates in every age band that consisted of home and foreign economies. The managers were provided wide-range of training and their career progress was observed cautiously. There exists a strong corporate culture that subsists with several sub-cultures making the management stronger and the professional management added competitive advantage to the company (Jones, 2005). 4 Level of Success Achieved The Indian market is a big market and has a larger share of rural India more than the metro and urban markets. The biggest challenge in the Indian market was to deliver the merchandises to the consumers at the right time and at the right place. To overcome this problem, HUL developed a distribution system that was designed to supply the accurate quantity of goods to the consumers at exact time and place. Yet there were certain rural parts of Indian market that were left uncovered. To tackle the problem, HUL introduced Shakti Entrepreneurial Program that aids rural Indian to develop small business through the model of ‘direct-to-consumer retailers’. The program helps in developing business skills in women and creates new distribution channels and aims to reach 600 million consumers. This facilitates HUL in market development for their different brands and products (Unilever, 2010). The India’s Most Trusted Brands Survey in August 2010, has ranked HUL as one of the topmost brands. Six HUL brands that are Lux, Pond’s, Fair & Lovely, Clinic Plus, Lifebuoy and Pepsodent are attributed in the top 10 brands. According to this survey, ‘Hall of Fame’ was to be given to brands and it was judged from the inception. Out of ten brands chosen five were HUL brands. Ponds, Pepsodent, Lux, Lifebuoy and Fair & Lovely were the five brands to reap the success level. HUL brands have consistently performed in the Indian market and have been recognised as one of the most prominent brands of India. The survey was conducted by Nielsen Company for Brand Equity (Unilever, 2010). HUL has been able to create value for its shareholders for a longer period of time. HUL covers more than 6.3 billion outlets in Indian market that has paved the way for huge employment opportunities. This has increased the sales. There are many distributors that have been associated with HUL for a longer period of time and have provided better business to the company through the brand image and the product acceptability. The success of the brands of HUL has led to the development of the market. This has provided the opportunity for the product to get enhanced and introduce another product in the Indian market. The achievement level of the brands since its introduction phase has proved the success level of the business in the Indian market. The acceptance level and achievement that the products have gained by the Indian consumers towards HUL brands has been huge and generated market share for the company as well as for the shareholders. The company has been performing well in providing the stakeholders value addition in terms of return on investment and has been able perform as a wealth creation source for them. References Economy Watch, 2010. Indian Economy Overview. Finance Report. [Online] Available at: http://www.economywatch.com/indianeconomy/indian-economy-overview.html [Accessed December 18, 2010]. Jones, G. & Khanna., T., 2004. Bringing History to International Business. Harvard Business School. [Online] Available at: http://www.hbs.edu/research/facpubs/workingpapers/papers2/0405/05-013.pdf [Accessed December 18, 2010]. Jones, G., 2005. Unilever: Transformation and Tradition. 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[Online] Available at: http://www.hul.co.in/mediacentre/news/2010/HULbrandstopIndiaMostTrustedBrandSurvey.aspx [Accessed December 18, 2010]. Read More