Business Strategy Analysis
Table of Contents
The consumer goods represent products purchased by the typical customer for personal use. The consumer goods industry comprises of organizations and stocks involved in the production of commodities purchased by households and individuals (Attaran, and Gunasekaran, 2019 pp. 59-61). The firms involved in the industry strictly produce and sell commodities that are directly used by consumers for their satisfaction. The industry, through different companies, produces automobiles, clothing, food products, electronics, beverages, and packaged goods. These products are alternatively referred to as final goods, which are the result of production and manufacturing and represent the consumer commodities that the customer sees on store shelves. Primarily, raw materials like copper are not categorized as consumer products because they are yet to become finished usable products. In 1972, the US Congress drafted the Consumer Product Act meant to provide oversight on the sale of the most popular consumer products. The act established a Consumer Product Safety Commission consisting of five appointees to oversee the safety of consumer goods and recall goods that violate any safety standards dictated by the act.
Unilever produces and sells fast-moving commodities in personal care, nutrition, and hygiene product classifications. The company represents one of the leading consumer goods producers in the world with markets in over 190 countries for its 400 different brands. Unilever provides consumer goods in four different product segmentations including home care, refreshment, foods, and personal care. Although Unilever was officially founded in 1927, most the businesses that came together to form the overall brand were established in the late 19th century (Reader, 1980). Unilever’s head offices are located in Rotterdam, Netherlands. During the 19th century, the businesses that would join to become Unilever were among the most benevolent. The companies established projects that had an overall positive social impact while seeking to improve the living standards of their workers.
The home care segment involves the production and sale of commodities such as cleaning products, powders, liquids, soap bars, and laundry tablets. The refreshment segment produces and sells commodities like tea beverages, ice cream, weight-management products, and nutritional supplements. Refreshment goods are sold under the brand names, including Magnum, Walls, Cornetto, Carte D’or, and Solero, as well as Algida and Ola. Similarly, the food product segmentation involves the production and sale of sauces, salad, snacks, soups, bouillons, mayonnaise, margarine, salad dressings and spreads. Finally, the personal care category manufactures and sells deodorants, oral care commodities hair, and skincare products that sell under brands such as Rexona, Radox, Lux, Neutral, Clear, Lifebuoy, Suave, Duschdas, Vaseline, Dove, Sunsilk, Axe and Pond’s.
Unilever’s success can be attributed to significant events in the world like depression, changing customer lifestyles, world wars, economic boom and technological advancements (Jones, 2002 pp.435-478). The company has held a reputation to produce consumer goods that enable people to realize more value in their lives by reducing the time spent on household duties, enhancing nutrition, and enabling them to enjoy food. Additionally, the company has a significant influence on helping people to take care of their clothes, homes, and themselves by focusing on hygiene, personal care, and improved nutrition through incorporating essential vitamins to daily staple foods. Globally, Unilever had 316 holdings, and by 2008, the company had launched more 900 distinct brands.
Unilever’s corporate vision entails making sustainable living commonplace and belief that it is the most suitable long-term trajectory for its business growth. The statement mainly emphasizes consumer sustainability (Commonplace sustainable living), the most suitable long-term trajectory, and business growth. Consumer sustainability represents the fundamental element in the vision statement, and it displays Unilever’s efforts to make its products adopt any changes in current market trends. For instance, the company helps its consumers to incorporate sustainability in their daily activities through viable design for personal care and home care products. The vision statement also identifies that commonplace sustainable living as the most suitable long-term trajectory for the business. This means that Unilever comprehends the significance of sustainability and other market conditions that influence the industry. Noteworthy, the company’s vision statement recognizes that sustainability is essential for progressive business growth.
Unilever’s mission statement is” to add vitality to life. We meet everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good and get more out of life.” This statement highlights the company’s emphasis on customer satisfaction in different aspects of their daily living. Adding vitality to life, meeting everyday needs for nutrition, hygiene, and personal care as well as helping people to feel good, look good and get more out of life represents the core components of Unilever’s mission statement. Adding vitality to life generally indicates Unilever’s business strategy which is integrated into its corporate mission statement. Vitality refers to the value the company’s products present to its consumers.
Additionally, the mission statement stipulates where the company incorporates vitality in the consumers’ daily aspects of life. For instance, nutrition in Unilever’s food products addresses consumers’ vitality. Besides, Unilever’s products attract and help consumers to feel good, look good, and allows them to get more out of life.
Unilever’s business strategy entails the belief that cost-effective growth ought to be sustainable growth. This methodology lies at the core of Unilever’s business strategy with emphasis on sustainable living. The approach acts as Unilever’s business direction and the ideal strategy to ensure growth in consumer demand for all its brands that perform reliably in a world of limited resources. The business strategy starts with consumer awareness that provides the basis for brand innovation, often involving partnerships with the supply chain. These partnerships allow for the creation of products that get into the market informed by promotion and marketing across an assortment of distribution channels.
Unilever’s success in brand innovation is supported by a significant degree of promotion and advertising efforts with the use of several media platforms. Unilever’s business strategy identifies that there exist countless opportunities in the global market, but the propensity of threat equals the number of available opportunities (Boyle and Ottensmeyer, 2005). Robust market analysis, as well as research and development, represent significant factors that allow Unilever to differentiate and diversify its product line. Product differentiation and diversification makes the company appreciate its potential and decent market share in the global market. The company has a strong global presence in a mix of huge but established markets and lesser but high-growth markets.
Since its founding, Unilever has continuously established new businesses in different nations like the United States, United Kingdom, Turkey, Canada, China, Spain, Argentina, Netherlands, Italy, Sweden, Czech Republic, Russia, Brazil, and South Africa. The company operates production factories in more than 150 locations in each of those nations. The company uses the One Unilever business strategy, which involves the amalgamation of regional supply chain administration into a solitary organization where all sourcing operations from procurement through to supply are managed from a central position. Primarily, Unilever, distributes its commodities through a team of its own sales personnel, independent wholesalers, distributors, agents as well as a variety of business-specific networks, for example, independent grocers and foodservice dealers. Also the company uses distinctive distribution channels to supply its bulk customers. The company owns several storage facilities, warehouses, depots and uses other third-party facilities whenever there is need.
Unilever’s global market presence subjects the company to ferocious competition from numerous multinationals. Therefore, in order to obtain customers and generate sales, the company uses cross-market subsidization to fend off select competitors in-country markets. This offensive strategy helps Unilever to properly compete in various global markets with several brands and wide range of consumer goods (Hasan, 2015 p.13). Also the emerging-global markets Unilever competes on a pricing basis where it sells its products at lower prices to accommodate the smaller consumer markets. The company opts for this strategy because, in the emerging markets, the consumers are mainly focused on the prices, which affords the low-cost local rivals the edge. However, foreign companies can find techniques to generate sales with bargain prices as well as superior product offerings.
Unilever’s business strategy involves several smaller methods that enable the company to compete in the global market. For instance in 2006, Unilever’s business strategy resulted in a modest sales growth of about 5% which was slightly above the market performance, and it ensured that the company maintained its position as the third-largest player in the toiletries and cosmetics in the global market with a 7% market share. Unilever integrates social projects in its business strategy in various global markets. For instance the company uses educational campaigns as vital tools to raise awareness for Unilever brands like Dove and Close-Up. The company partners the World Dental Federation to create awareness on the importance of dental hygiene, which has seen it get involved in oral healthcare projects in both developed and emerging nations, such as Brazil and Austria. According to Clay (2005 pp.14-21), Unilever introduced the Pepsodent Fighter, a low-cost toothbrush, which retails at a relatively low price equivalent to just € 0.20, which sells in India and Indonesia.
Also, the company has established more direct brand-based programs, like Project Smile in Nigeria involving Close-Up, where small stall outlets are used to display its products and create awareness in regards to oral hygiene. Additionally, Unilever, along with the Girl Scouts of the United States and the United Kingdom’s Eating Disorder Association established the Dove Self-Esteem Fund, which funds informative Body Talk programs in educational institutions to develop body-related self-esteem. In a less direct approach, Vittorio and Caserta state that Unilever partnered with Pao de Acucar, a critical Brazilian retailer, to enhance recycling activities and helped employ over 300 locals in a recycling co-operative. This partnership also helped Unilever products to have better in-store status and raised Rexona’s profile among other brands through having their logos printed on educational supplies and point-of-sale information.
Unilever’s structural and business strengths are highlighted in this segment of the SWOT analysis. Strengths represent internal strategic elements determined by a company’s settings, including administrative structure, human resources, processes of production, and investments. Strong brands, broad product mix, economies of scale and strong global market presence represent some of the critical strengths significant to Unilever in consumer goods industry.
Unilever owns some of the most robust brands in the consumer goods industry. Firstly, strong brands allow the company to infiltrate markets and efficiently compete alongside other momentous global companies. Secondly, the broad product mix displays the magnitude of Unilever’s business evolution. For instance, the company continuously increases its product portfolio through mergers and acquisitions over the years, which has led to tremendous business growth and consistent rise in revenues (Jones, 2005). Thirdly, economies of scale help to maintain efficiency in production which is relatively essential for viable pricing schemes. Finally, Unilever has increased its market presence over the years through global expansion, which represents a critical strength that underlines brand acceptance. The internal strategic factors highlighted in this section represent the strengths that Unilever uses to sustain progress and success the global consumer goods industry.
Notwithstanding its resilient market position, Unilever has several weaknesses that hinder its prospective development in the consumer goods industry. This segment of Unilever’s SWOT analysis highlights the internal strategic influences that present barriers to the company’s business and structural development. Imitable products, limited business diversification, and dependence on retailers represent some vital internal factors that Unilever must address.
The imitable nature of some of its products by other companies presents a significant weakness for Unilever. Although the company significantly devotes efforts in its research and development processes, Dove and Rexona products can be easily imitated by other firms. Likewise, regardless of its broad product mix, Unilever is limited to the consumer goods industry. The lack of diversification in other industries presents a significant weakness in case the consumer goods industry experiences a significant recession. Additionally, the company lacks a direct and resilient sway on its consumers because the independent retailers are mainly in direct contact with Unilever’s actual buyers. Consequently, based on these internal strategic factors highlighting Unilever’s weaknesses there is need for significant diversification, innovation, and improved publicity activities.
Unilever ought to take advantage of the opportunities present in the global consumer goods industry. This section identifies the opportunities or exterior strategic elements that can enable business growth. Business diversification, product innovation for health, business enhancement for environment conversation, and market development represent strategic opportunities n Unilever’s external environment.
There exist numerous opportunities for Unilever to diversify by venturing into other businesses outside the consumer goods industry. Diversification can lessen market-based risks and increase business pliability. Also, Unilever can enhance product desirability by handling the needs of health-conscious consumers through product innovation. Correspondingly, the company can enhance business sustainability and increase its environmental conservation efforts to tap on the chance to attract and retain environmentally sentient consumers. Finally, through market development, Unilever can advance its business through accumulative revenues realized from increased sales of its current consumer goods in new market sectors. For instance, through marketing Lipton products as health drinks for individuals with special diet needs. The external strategic elements provide vital opportunities to grow the company to counter its weaknesses.
The business performance of Unilever faces a variety of external threats. Unilever ought to consider the external threats as key performance inhibitors that the company must purposefully control. Fierce competitive rivalry, product imitation and the increasing popularity of retailer’s house brands represent threats relevant to Unilever in the consumer goods sector:
The fierce competition represents a possible threat to Unilever and is a threat grounded on the strengths of other companies in the consumer goods sector. Rival companies threaten to decrease the business’s market share and resultant commercial performance. Product imitation represents a significant threat to Unilever where local firms offer imitated products as ideal substitutes and can significantly reduce Unilever’s market share.
Furthermore, retailers impose a significant threat to Unilever as they sell their brands. These brands, such as Costco’s Kirkland Signature house brand and Walmart’s house brands, directly rival Unilever. Unilever ought to establish strategies to focus on the improvement of its competitive advantage over rivals.
Unilever’s business eminence in the global consumer goods industry is much determined by its ability to handle external factors in its macro-environment. This PESTEL/PESTLE analysis helps to identify such external factors (Competitive). Unilever’s international scope leads to considerable differences in external factors. However, the company ought to focus on exploiting performance. Unilever can realize more exceptional performance through various approaches that overwhelm the most noteworthy threats and exploit the first opportunities.
The political environment involves the influence of governments on Unilever’s macro-environment. The political stability of most global countries presents a growth opportunity for Unilever in these subsequent markets. The political stability of a country helps decrease challenges in Unilever’s strategic operations in that particular country. Also, the political concerns in the EU present possible threats to Unilever for its operations in the consumer goods sector in that specific region. Nevertheless, increasing free trade relations, particularly in the emerging markets, presents the company with an opportunity for growth in the global market.
The performance of Unilever depends on the state of the world economy. This segment highlights the effect of economic conditions on company performance and macro-environment. Unilever has an opportunity to gain more from more significant prospective sales, as consumers realize more disposable incomes due to wage increments in developing countries. Conversely, the same factor presents a potential threat in terms of increased labor costs, because most companies have their main manufacturing facilities in developing markets. Though, Unilever can anticipate business progression as these markets experience growth in value and size in the consumer goods sector. Furthermore, the economic stability of developed countries mitigates the risks the business would encounter in the developing markets while enabling steady and firm growth.
Sociocultural inclinations and trends influence the performance of Unilever and its macro-environment. Unilever can expect growth through products that unswervingly address the growing interest of healthy products by consumers. Also, the growing conservationist behaviors present the company with an opportunity to draw more consumers by refining its environmental influence. For instance, the adoption of energy-efficient technologies can enable Unilever to reduce its energy consumption. Additionally, the company can potentially experience growth by generating higher sales by addressing the needs of female consumers worldwide as they represent the more significant population.
Unilever hugely depends on accessible technologies to maintain its business in the consumer goods sectors. Technological trends have various influences on companies and their macro-environment. Unilever can enhance its operational efficiency by using emergent technological advancement in business automation. With the emergent technologies, new business processing equipment can improve inventory checking to maintain distribution and supply chain proficiencies.
Nonetheless, this technological advancement factor presents a possible threat because it intensifies the effectiveness of rival companies in the global market as well as the small firms in local markets. Conversely, the advancements in research and development investments present a threat to Unilever because it equally improves the competitiveness of rivals in the consumer goods sector. Nevertheless, the declining cost of transportation reduces operating costs, which greatly enhance business progression. In contrast, the declining transportation cost also presents a threat because it enhances the competitive advantage other companies.
The natural environment affects Unilever’s macro-environment in various ways. Firstly, the rising concern in business conservationism presents Unilever an opportunity to advance its environmental agendas to appear appealing to consumers concerned with environmental conservation. Relatively, conservationism efforts can help the company to improve its sustainability plans to reinforce its competitive advantage over its rivals in the consumer goods sector. Unilever ought to deploy its corporate social responsibility strategy effectively to implement the environmental conservation programs within the whole organization. The strategy ought to reflect on product improvement and internal business procedures to significantly lessen the company’s environmental impact. Through these efforts Unilever ought to satisfy progressively composite environmental plans. Such an external factor presents an opportunity for Unilever to progress its competitiveness through corporate social responsibility.
The law and its corresponding regulations ought to be met for Unilever to lessen obstacles to its consumer goods business. The legal systems have different levels of influence on Unilever’s macro-environment. For instance, Unilever’s corporate social responsibility and environmental regulations ought to correspond in order to enhance its corporate image. Also, consolidating international patents regulation presents Unilever with the opportunity to grow. New patent laws in developing markets have a significant influence on reducing patent-related disputes. Besides, sturdier consumer rights laws build an opportunity for Unilever to develop the quality of its customer service and product offerings. These actions present an opportunity for Unilever to enhance its brand attractiveness in the consumer goods industry.
Unilever has enjoyed considerable success in the global consumer goods industry; however the company is struggling to meet its ambitious sustainability targets on health, environment, and work as well as cutting the company’s water consumption by half. The current water per consumer impact has only reduced by a mere 2% since 2010 which highlights the challenge the company faces to reach its target. Also the company struggles in finding effective ways to convince its consumers to take sustainability more seriously. Besides, Unilever struggles to compete with own-brand products as retailers continue to put more emphasis on them. Retailers are emphasizing on own-products because of their relatively low prices and have led to an increased number of categories in the market.
In order to remain competitive in the consumer goods industry where new brands continue to arise every day, Unilever ought o apply massive differentiation as its generic strategy for competitive advantage. Through differentiation, the company should focus on features and characteristics to ensure their product remains unique which makes them stand out against competitors. This strategy means that Unilever attracts customers with specially designed consumer goods. Also the company ought to aggressively market its products in all their established global markets and seek new markets. This strategy would ensure the company stands out against the new upcoming own-brand firms because most of these start-ups are relatively small in comparison to Unilever; hence, they would much struggle to match the company’s aggressive marketing strategies.
Also, Unilever should prioritize its strategies for growth and global expansion while enhancing its efforts to address the needs of health conscious consumers. Health-conscious can be integrated into their foods by adding nutritious elements that directly impact the consumers’ physical health. Unilever ought to explore diversification as a strategy to enhance growth through acquisition and merger of firms in other industries. As the company diversifies, it is essential to adopt product innovation as an opportunity to enhance business performance in the overcrowding global consumer goods industry as well as other different industries. The company should also explore strategies for market development to support its intensive growth strategy, where Unilever seeks to market its current products as solutions to unaddressed needs in various market segments.
Unilever’s sustainability-based business strategy has helped the company to soar into great heights in the consumer goods industry for a very long time. The company has maintained a competitive advantage over its rivals in the industry through a mix of marketing, diversification, product innovation, and social corporate social responsibility. However, the global consumer goods market continues to experience significant changes that should prompt Unilever to continually review their business strategies to ensure the company continues to grow. The changing trends in the market present numerous opportunities as well as threats; thus the company should utilize its internal strengths to capitalize on the opportunities. The new market entrants present substantial threats to Unilever’s business performance and therefore the company ought to acknowledge the threats and adapt its business strategy to counter them to enjoy continued growth.
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