The Environment of Unilever Company - Case Study Example

PART A The Environment of Unilever Company The environment for the Fast Moving Consumer Goods (FMCG) is changing rapidly, more especially, with the increasing popularity and brand leveraging in different line extensions within the industry. Consumers have been very critical in attaching themselves to a given brand, and thus, the FMCG manufacturers have constantly come up with best products that satisfy their needs. Unilever has been one of the leading FMCG companies in the world. This paper analyses the environment in which Unilever operates, and identifies the economic and social factors in the volatile business environment. It further explains on the possible impacts that these factors may have on the business strategy and operations of the organization. The international company of Unilever was founded in 1930 by merging two companies, lever brothers and margarine union. Their agreement was to work on the same structured board and their shareholders to be given equal profits. As a result of the merger, Unilever came into existence, and it consists of Unilever PLC in London, England and Unilever NV in Rotterdam, Netherlands. Both Unilever companies effectively operate as a single business and have the same directors. Unilever’s core business consists of foods, and home and personal care products. Some of the products under the foods division are Knorr, Skippy peanut butter, Hellmann's mayonnaise, Cornetto, Lipton, Bertolli, etc. In fact, it is number three in food business after Kraft and Nestle foods. On the other hand, the brands under the home and personal care category include surf, pepsils, cif, dove, comfort, lynx, lux, Vaseline, Omo (detergent), sure, sunsilk, timotei, and ponds among others (Unilever, 2011). In measuring the success of an organization, we consider the standards it sets on the environment under which it operates. Unilever’s mission is to add value not only to the life of its current customers, but also to its potential customers (Unilever, 2011). This mission can only be accomplished in a turbulent environment and not in a vacuum. Therefore, the business environment consists of economic, social, political and technological forces that influence the organization and can positively or negatively impact on the organization. These factors are basically outside the influence and control of the organization. With the rapid changes taking place in the world, developments in the range of these factors influence the ability of Unilever’s survival and prosperity (Thomson and Baden-Fuller, 20100. Political Environment In 1960s, the call for local equity partaking in foreign organizations led to the nationalization of the organizations by many countries. This nationalization policy also affected Unilever, and thus, it was subject to local control on imports, prices, and the employment of expatriates. This created a fear in information leakage and loss of trademark among others and at the long run, Unilever’s control over its market operations was reduced (Keller, 2010). For instance, the nationalization of UAC, a subsidiary of Unilever, hampered Unilever’s control in the market where UAC operated (Cameroon, Ivory Coast, Ghana, Nigeria, etc.). However, Unilever set standards on how it tackles political issues. From its experience and good will, Unilever made contacts in some of these countries such as in Central and South America, in attempts of bargaining with the governments for the modification of the regulations. This strategy and experience has enabled Unilever to gain a political ground and create a favourable business environment. Economic Environment The market environment for Unilever is highly competitive more especially in Western Europe, with the major competitor being Procter &Gamble (Bartlett and Ghoshal, 1989). Unilever is also facing difficulties in the Netherlands and France due to the strong competition in the European Union. In addition, the European Union free trade policy has resulted into many discounters within the European market. This has greatly affected Unilever’s profit potentials. Besides, retailers are pressurising FMCG manufactures to lower the prices of their products, and the consumers as well do not wish to buy expensive brands and products due to the present economic tide. For the emerging economies in the developing countries, (i.e. Asia and Africa) where there is political instability, Unilever has adopted a strategy that ensures the sustainment of their profitability drive. The strategy involves the packing of some of its products in small sizes for low income earners for affordability. The inflation and fluctuation of currency of currency led to uncertainties about duties paid by companies in some of the developing countries like Nigeria. This affected the turnover of Unilever and consequently a decrease in the profit (Bartlett and Ghoshal, 1989). Social Environment Unilever has relentlessly maintained the thrust in its socio-cultural environment in accordance to its sustainability drive. It has led to better hygiene and improved nutrition for the people of Asia, Latin America and Africa, especially the poor and the obese. Unilever has strengthened its goodwill by elevating the living standards of the poor, majority of those who live for less than a dollar per day (Unilever, 2011). The low literacy of the population in such nations affects the marketing advertisements, such as the print media, for the company. As a strategy for this, Unilever has employed more of its resources to enhance face-to-face communication. It has employed about 100 nationalities to ensure there is diversity for bot the employees and consumers as well. The company has engaged in the strategy of diversity toolkit in managing and leveraging diversity (Bartlett and Ghoshal, 1989). This has enhanced the working of diversity among the employees. In addition, Unilever has built an exclusive culture by embracing difference, and thus resulting into the high demand of its products in the emerging and developing markets. Technological Environment Since its establishment, Unilever has continually diversified its products with the invention of new technologies that boosts production and enhances the product quality (Unilever, 2011). However, its competitor’s have also made use of the new inventions. As a way of responding to this, Unilever has put relentless efforts by spending on Information Technology and thereby improving their business especially in the area of e-commerce. Currently, the company is minimizing its costs through the efficiencies of Information Technology at the global level. Their technological ventures are aimed at meeting the consumers’ needs. Among the areas of concern are advanced bioscience, genomics, nanotechnology and advanced materials science. PART B Change in Business Strategy in Responding to the Environmental Factors The 21st century business environment is characterized by strong competition among the key players in the same industry. This raises the question on what should be done to ensure that an organization survives this competition. It is a clear indication that Unilever, as one of the organizations faced with challenges of competition, has to seek for ways through which it can gain competitive advantage over the others in the same line of production. The company should acquire information and knowledge about the market trends as well as their competitive implications before laying down the appropriate strategies. Such an understanding will determine the suitable strategy, which will in turn dictate success if it is executed well. There is a stiff competition among the FMCG producers posing a great challenge for the sale of Unilever’s products. Therefore, Unilever should change its international strategy by focusing on priority portfolio and selling some of its business lines. According to Thomson and Baden-Fuller (2010), it should also focus and concentrate in the emerging and developing markets of Asia and Africa where it has a more competitive advantage than the other companies. Unilever should embark in all countries including those nations where it had experienced setbacks some years back such as Zambia. In a case like this, the company should provide both managerial and technical training to the staff to ensure that the company’s international standards are met. The competitive problem faced in Europe since 1990s has facilitated the investment of Unilever on R&D for the provision of goods that best satisfies the consumers’ needs at affordable prices. In addition to this, the company should connect and unite its business so as to promote cross border synergies. With a strategic common brand logo, the company can promote international synergies as well as create international brand awareness in the manufacturing and marketing industry. The centralization drive enables the recognition that a given brand and other units are an integral part of Unilever. Unilever should open up more international centres that serve as central sources of raw materials and this will ensure that the company competes favourably in the competitive environment. In addition, it should expand tremendously in various countries through joint venture and acquisition (Keller, 2010). The company should maintain its strong customer relationship and the good quality of products. The remarkable performance in brand development has also boosted the lives of people. For its further success, Unilever should be involved in corporate social responsibilities such as sponsoring TV programs, and thus, keeping people aware of the products of Unilever. Besides, it should promote its entrepreneurship through community assistance in areas of education, health and hygiene. In whatever activity that the company undertakes, Unilever should use the global integration and local responsiveness framework. According to Julius and Johnson (1995), the framework proposes a competition strategy where an organization conducts its operation by coordinating its activities across countries and taking an advantage of the similarities that occur across nations or by responding to the requirements by the host country. The company should evaluate and determine the appropriate approach between the two or even pick a combination of the two. The integration and responsiveness framework is determined by the environmental factors such as the nature of the local market or the society. To elaborate on the integration responsiveness framework strategies to be used by Unilever, one has to consider various environmental factors. For instance, moving towards a local approach, Unilever has to consider diversity. Therefore, it should use various brand names instead of its real name. The use of such a strategy enables the organization to capture and satisfy the various groups of consumers by making a choice from the available brands (Julius and Johnson, 1995). It should continuously modify its products to ensure that every country retains its local brand and even choose their logo. In doing so, the company will maintain its standards. The strong relationship that Unilever has with its customers from the diverse culture should be encouraged and maintained by retaining their high standard of corporate behaviour towards the customers and employees (Applegate and Johnsen, 2007). The legal factors such as the nationalization of firms can also facilitate the movement of the company towards a local approach. Such a drive for local autonomy, serve the best interest of Unilever. An example is the appointing of local managers to manage business in the local countries. This ensures effective management of the operations within the host country. According to Bartlett and Ghoshal (1989), Unilever could also move towards a global approach through the stimulation of opportunities. From the beginning, the company had enjoyed a booming business in the British colonies. Some of the countries in Asia and Africa were the opportunities for the investment of Unilever. To be more precise, Unilever developed a procurement centre in Shanghai China to boost its global business. Through extensive research and development, Unilever can develop new products as well as enter new market by carrying out environmental audits in different regions of operations in order to improve the environmental audits in resource allocation, and cost reduction. Further, they should apply new technologies in the efforts of trying to open new markets especially in the developing and emerging markets. Conclusion The analysis of the environment of Unilever indicates the competitive position it holds in the global market. The turbulent environment is, however, challenging due to the stiff competition from other companies such as Procter &Gamble. The company has already used various strategies in their headway toward actualization of the vision and dreams of the organization. Much should therefore be done in monitoring and quickly responding to the market changes so as to increase effectiveness, reduce overall the use of the suitable strategies that focus on the individual factors of the business environment. References Applegate, E and Johnsen A 2007 Cases in advertising and marketing management: Real situations for tomorrow's managers, Rowman & Littlefield, London. Bartlett, C and Ghoshal S 1989 Managing across borders, Harvard Business School Press, Boston. Julius, H and Johnson J 1995, “An empirical analysis of the integration-responsiveness framework: US construction equipment industry firms in global competition”, Palm Grave Macmillan Journals, 5 (2), 45-58. Keller C 2010 Procurement and inventory: Unilever’s procurement function & inventory requirements at a glance, GRIN Verlag, USA. Thomson, N. and Baden-Fuller C 2010 Basic strategy in context: European Text and Cases, John Wiley and Sons, New York. Unilever 2011 Unilever Inc. Retrieved February 17, 2011, from http://www.unilever.com/ Read More