Situation Audit and Timeline for Unilever Food Solutions - Report Example

Situation Audit and Timeline for Unilever Foodsolutions Introduction This report will present a PEST and SWOT analysis of Unilever, key strategic issues that they face, and project timeline. It will also offer a plan to market stock cubes. The purpose of this paper is to discuss each of these sections in detail in order to determine the current situation at Unilever Foodsolutions, as well as to determine what future directions that may choose to take. PEST Analysis Unilever operates worldwide in consumer products including pre-cooked foods. PEST stands of Political, Economical, Sociological and Technological situations. Francis J. Aguilar (1967) was the first academician to discuss business analysis through a tool he called ETPS (Economic, Technological, Political and Social factors). According to him these external environmental factor influenced business decisions. From then onwards this has changed names to PEST, PESTEL etc and used extensively as an external analytical tool. (Aguilar 1967). Politically conditions and policies for companies dealing with food, even pre-cooked food are favourable and there are few barriers posed except for stringent health concerns. Therefore worldwide there is acceptance for Unilever foods. The economic factors are favourable too as with globalization of trade and industry more work is being created and incomes, specially of the middle class that consumes most of the pre-cooked foods, is rising. This is creating new markets for such products. Speaking of social factors it must be said that with the advent of industrial and trading activity, people of all classes, from executives to workers, are more actively engaged with work and have less time for cooking at home. This makes pre-cooked food a preferred item for its ease and ready to serve capability and is also less expensive than eating out. Technology is also a great advantage as new preserving techniques and food preparation technologies are enabling companies to prepare market and distribute pre-cooked foods at affordable prices. SWOT Analysis Strengths Variety of meals on offer to consumers Labour-saving prepared products used Culinary expertise available to put into product development for customers High-quality food technology in use Guaranteed satisfaction with service provided to customers Operates in 65 countries throughout the world Weaknesses Competition from Fast Foods Weekday supper prices and specials from smaller players Opportunities In the U.S., more than half of every food dollar is spent outside the home. In Europe, this figure is as high as one-third and, in Hong Kong, 2.5 meals out of every three are eaten away from home Consumer expectations are lower because of the state of the economy Threats Higher price sensitivity than over the past 16 years Lowest consumer confidence in past 16 years People opt to buy cheaper or fast-food 5-Forces Value Chain Figure 1: Porter’s Five Forces Source: Sounds + Food & Retail, 2008, pg. 1 According to van Wylick (2007, pg. 1), Porters Five Forces model represents an ideal situational analysis of an industry. The central force is competitive rivalry that exists within the given industry. The other four forces that Unilever must deal with are the bargaining power of suppliers, the bargaining power of customers, the threat of new entrants, and the threat of substitute products. In this time of economic turmoil, suppliers can have quite a bit of bargaining power over Unilever. A good supply chain can offset this problem. The bargaining power of customers is also strong in this unstable economy and drives the pricing of the products. The threat of new entrants is unlikely since the market is fairly saturated and the economy does not favor new entrants unless they are able to offer extremely lower prices. Threat of substitute products, however, is relatively high. Generic Strategy Figure 2: Porter’s Generic Strategies Source: Mindtools, 2008, pg. 1 Porter has described three generic strategies; cost leadership, differentiation and focus that are the foundations of competitive advantage or difference. A cost leader lowers cost through different activities while a differentiator asks for a premium due to the unique features of its product or service. The two can combine to form another generic strategy that offers unique feature while remaining a cost leader. The third strategy of focus is aimed at serving a niche segment limiting to serve a segment with its needs giving up other opportunities. Cost leadership is very important for Unilever if they wish to maintain or gain market share in their industry. Core Competencies Figure 3: Core Competencies Model Source: Performance Ridge Consulting, 2008, pg. 1 Every firm has some internalisation that is developed on the basis of the abilities of its resources and is described as its core competency. A firm can have several competencies but they are all rare and have been accentuated to a degree that makes its product or service outstanding against rivals. These competencies are derived from specific material resources as well as the ability of its managers and skilled workers to utilise these resources for maximum benefit. Core competencies are described as those products or services that have four distinct characteristics. They must be rare, they are difficult to imitate, and they must have special value for the consumers. The most important competency is however the ability of the organisation to use its resources in creation and use of these core competencies. Key Strategic Issues The key issues that will affect Unilever in the near future deal directly with price. Firstly the economic situation is turning sour, which presents a major challenge for their marketing department and more consumers are eating at home. Secondly, there is higher price sensitivity now than there has been in 16 years. Thirdly, consumer confidence is lowest in the past 16 years. Fourthly, people are choosing to buy cheaper food products rather than higher-end or high-quality food items. In order to address all of these strategic issues, the company must find a way to pull price-conscious consumers into their doors. It all comes down to fiscal planning and marketing (Maddock and Fulton, 1996; Beckman and Davidson, 1967; and Jacobson and Mazur, 1995). Project Timeline The timeline for this project must be quick in order to meet the demands of the customers who are suffering from the current economic crisis, but it cannot be so soon that it puts the company in a real crunch or is unrealistic. Preparations should begin immediately for price adjustments and, over the next few months, commercials and marketing efforts should pour out that reflect the new strategies (West, Ford, and Ibrahim, 2006; Doyle and Sterm, 2006; and Wood, 2008). Marketing Strategy of Stock Cubes Although Unilever aims at marketing food that needs least preparation time in a competitive price range, the sale of stock cubes deserves a special mention. In all pre-cooked meals the distinguishing factor for customer satisfaction is taste. Normally in such preparations only pre-heating or frying is required to make food ready to serve and eat. However the taste is standard, as has been the practice by both Unilever as well as its rivals. Competitive advantage, as described by Porter (1996) will be gained by positioning itself uniquely. The stock cubes offer the customer addition of unique tastes and by adding this product to standard recopies Unilever will gain exceptional advantage. Therefore this product range must be projected as a unique proposition for adding taste as a value proposition to the meal. It is suggested that as initial promotional offering the stock cubes, in a variety of bases (chicken, meat and vegetables) be offered with pre-cooked meals so that it promotes the idea and the customer gets to experiment with different meal/stock combinations. They can also be offered easy recipes to enhance their experience. This will lead to development of preferential tastes and will induce customers to continue with them. This is positioning at its best (Mintzberg 1987). Later, say in a month the stock cubes can be sold separately at competitive prices and the company can recoup the earlier investment made through the promotional effort. In the current scenario where customer confidence has been shaken due to the current economic crisis, this marketing strategy will be both subtle as well as forceful since eating at home becomes fun-filled as well as akin to gourmet meals which cost several times more at a public eating place. Competition Unilever’s main rival in the food industry is Kraft Foods (Kraft Foods).This company operates worldwide and concentrates on food items alone and is therefore a rival that is focused on a singular service with the widest possible food range. Unilever is into foods as well as other consumer products which certainly divides it attention and since there are more than once source of revenues, the focus is divided too. As a result Kraft concentrates on food, nutrition, balanced diets and activity based food intake. In contrast Unilever is more generic and concentrates on general foods that are not so highly focused on to the areas mentioned above. While it professes to offer healthy food, its offerings are not as concentrated on the health of the customer. Rather they are based more on the convenience and cost advantage offered to the daily worker, the busy working woman and the executive who is on a daily rush to meet deadlines. They all need food that can be prepared fast, be palatable and reasonably priced. They however are not looking at junk food as sold by fast food outlets. Kraft’s segment of customers is common with Unilever but it promotes the idea of health for its customers as well as nourishment. In contrast the message conveyed by Unilever is ease of use less time consuming methods of serving reasonably good and tasty foods. Kraft’s niche segment is therefore those who are more health conscious and are willing to spend more time and money on such items. They are fussier as they are more conscious of health issues. The average Unilever consumer is on who is always short on time, yet looks for value for his/her money. Since there are more of such people today who are in the rat race for survival and competitive rivalry, Unilever ends up being the company with highest revenues from food sales. Conclusions Marketing is without doubt a difficult strategy at the best of times. In the consumer market the strategy for selling food is fraught with risks as customers are conscious of the fact that they must receive both value for money as well as food that satisfies their taste buds. While it is true that health is a concern but it is seen that such concerns are not shown by masses. The average person is so engrossed in the daily grind of career based life that health is often secondary. This is the reason why there is such an increase of health problems in the general population. While some effort is made by companies like Kraft to promote healthier foods, the largest share of this goes to companies like Unilever who offer foods that are less expensive than the healthier foods but far better than the junk variety. Therefore there is a large market for foods sold by Unilever that are easy and ready to serve and eat. The marketing strategy however has to be evolved around both taste and price. Rivalry is not really a problem but replacements and substitutions are a source of worry. Therefore enhancements through the likes of stock cubes are a certain way for retaining and gaining market share. References About Unilever Foodsolutions. (2008). Unilever. Retrieved October 19, 2008, from http://www.unileverfoodsolutions.us/company/about_us Beckman, T.N. and W.R. Davidson. (1967). Marketing. Ronald Press Co. Commercial restaurant summary—2007. (2007). Unilever. Retrieved October 19, 2008, from http://74.125.95.104/search?q=cache:xbh5mRV22w8J:www.unileverfoodsolutions.us/industry_trends/06_review+%22unilever+foodsolutions%22+weaknesses&hl=en&ct=clnk&cd=4&gl=us Commercial restaurants in the United States and the 2nd quarter of 2008…How did we do? (2008). Unilever. Retrieved October 19, 2008, from http://www.unileverfoodsolutions.us/industry_trends/2008_outlook/q2_08 Core competencies model. (2008). Performance Ridge Consulting. Retrieved October 19, 2008, from http://images.google.com/imgres?imgurl=http://www.performanceridge.com/images/chart_compentency.png&imgrefurl=http://www.performanceridge.com/service_overview.php&h=223&w=300&sz=8&hl=en&start=27&um=1&usg=__W9rF3CLQOIyKsqrnckoy0oAHz8A=&tbnid=76WhjEio8QT2hM:&tbnh=86&tbnw=116&prev=/images%3Fq%3Dcore%2Bcompetencies%2Bmodel%26start%3D20%26ndsp%3D20%26um%3D1%26hl%3Den%26sa%3DN Doyle, P., & Sterm, (2006)Marketing Management & Strategy, 4th ed. Harlow; Prentice Hall. Jacobson, M.F. and L.A. Mazur. (1995). Marketing madness: A survival guide for a consumer society. Westview Press. Kraft Foods available at: http://www.krafthealthyliving.co.uk/krafthealthyliving/page?siteid=krafthealthyliving-prd&locale=uken1&PagecRef=170 Maddock, R.C. and R.L. Fulton. (1996). Marketing to the mind: Right brain strategies for advertising and marketing. Quorum Books. Mintzberg, Henry., (1987) The Strategy Concept I: Five Ps For Strategy, California Management Review; Fall; 30, 1; ABI/INFORM Global Murray, W. (2007). SOA and the core competency model. SOA. Retrieved October 20, 2008 from http://searchsoa.techtarget.com/tip/0,289483,sid26_gci1250945,00.html# Porter M.E., (1996), What is Strategy, Harvard Business Review, Unilever annual report and accounts. (2004). Unilever. Retrieved October 19, 2008, from http://www.unilever.com/Images/2004%20Operating%20review_tcm13-11946.pdf Van Wylick, Vincent. (2007). Porter’s five forcers—how they work, 3 examples, and why it’s better to be a thief. Sounds + Food & Retail. Retrieved October 19, 2008, from http://images.google.com/imgres?imgurl=http://lh5.google.com/vincent.vanwylick/Rx8sydUk04I/AAAAAAAAAMM/koRN4F7a2Ww/Porters_five_forces.PNG%3Fimgmax%3D800&imgrefurl=http://foodandretail.blogspot.com/2007/10/porter-5-forces-how-they-work-3.html&h=600&w=800&sz=173&hl=en&start=2&usg=__XIRWh4HhxL6EhYtgHcR3DAXN3to=&tbnid=MrHYrmSFsBc_jM:&tbnh=107&tbnw=143&prev=/images%3Fq%3D5%2Bforces%2Bvalue%2Bchain%26gbv%3D2%26hl%3Den West,D.,Ford & Ibrahim (2006), Strategic Marketing. Creating Competitive Advantage. Oxford; Oxford University Press. Wood, Marian Burk, (2008) The Marketing Plan Handbook. 3rd. ed. Upper Saddle River, NJ: Pearson Prentice Hall Read More