CHAPTER ONE
INTRODUCTION
- Background of the Study
According to modern trends, most systems that are put to use are not performing as expected, hitherto as their cost effectiveness as regards to their operations and support. Correctly, some of the manufacturing systems usually operate at less than full capacity, producing low outputs but with high costs of productions. 20% to 50% of the total production costs are endorsed to maintenance activities within the factory. The rise of new technologies will lead to an increase in factory automation costs. These automation costs are associated with maintenance labor and materials. The rise to the significance of maintenance function is due to its responsibilities in keeping and improving the availability, product quality, safety requirements, and plant cost effectiveness levels since maintenance costs consist of an imperative part of the operational budget of manufacturing organizations.
The demonstrations of global competitive battles have explained the understanding of how competitive advantage is grown. Most companies by using a ‘resource-based view’ have accumulated valuable technology assets which are often secured by an aggressive intellectual property stand. Firms that are able to demonstrate timely responsiveness, rapid and flexible product innovation are attached to management capability to coordinate effectively and redeploy internal and external capabilities. This source of competitive advantage is termed as dynamic capability and emphasizes attention on the firm’s ability to renew its resources in line with environmental changes.
Unilever is a manufacturer of some of the world’s leading foods, home and personal care products such as Blue band margarine, Knorr, Royco, Lipton tea, Omro, Lux, Dove, Lifebuoy, Geisha, Sunlight, Vaseline, Lady gay, Close up among many other products (Unilever East and Southern Africa, 2011). Unilever’s main international competitors include Nestle and Procter & Gamble. They also face competition in local markets of product ranges from companies such as ConAgra, Danone, General Mills, Henkel, Kraft Foods, Mars Inc., PepsiCo, Reckitt Benckiser, Sara Lee and S.C. Johnson & Son (Unilever East and Southern Africa, 2011). Unilever as a global company adopted TPM in the 1990s to increase its manufacturing efficiencies therefore making its products competitive in the market (Johnson & Scholes, 2007). PI was adopted by Unilever Kenya Limited (UKL) in 1999 with the aim of improving operational efficiencies at a lower cost of production and giving UKL a competitive advantage over the other manufacturers.
- Product Innovation
Over the decades, the improvements in technological processes and innovations have contributed to the country’s economic development. Most significant factors that have led to growth of production and improvements in various aspects are the workers’ qualification and education levels. For many companies product innovation is the main surviving competitive and growth strategy and has taken advantage of market opportunities that cause competitive advantages. As explained in classic economy theory, it is prohibited that companies which operate without changes within the market creates a possibility for all companies to have space in the functioning environment. In case a company faces such a situation, a set of new finding must be elaborated to mention the entrepreneur role in the economy. The finding must be vital in maintaining a circular flow of economic development. Such ideas have had persistence by various business authors including therein the factors considered essential for innovation: routines, abilities and learning. In order to ensue innovation in an organization domain, there must be a mixture of materials and strengths. According to….. Product innovation is described as the process by which projects are put in practice. These projects consist of processes of products and manufacturing which are new for the firms. It is also defined as the economic and financial results arising from the introduction of a new technology aiming growth in an organization environment. An innovative firm is that which offers goods and services that never existed previously, using a new organizational method which helps in production of new product. Product innovations tend to be crucial because they differentiate products and services from their competitors thus creating additional value to their customers. For business competitiveness, innovation has become more crucial and has a reflection in a regional development. Therefore, innovation is reflected as a financial and economic result of new technology introduced into an organization domain that aims its growth. As per the above perspectives, the main aim of an innovation is to produce the best product and offer best services in its operations and determining competitors to follow. In such cases, in introduction of technological innovation, the organization will create a competitive advantage that contributes to greater financial incomes.
- competitive advantage
The complexity of the markets demands management to offer mechanisms that are able to follow and recognize future trends within the industry where firms are introduced. Having the knowledge of the competitors movements appear frequently in these firms. It is therefore impossible for a competitor to implement a new market strategy without arrangement of any reaction. There should be a new paradigm established where firms constantly seek reporting and following the surging of innovations in their processes, products created, organizations of the production process and ways to commercialization. The internal capacities, competence in the organization and a productive qualification influences the pace of responses.
Competitive advantage can only be accomplished when an organization is able to produce value out of a product or in a post-production cost which cannot be implemented alongside potential competitors. Additionally, it is a competitive measure because it compares the performance position of a given firm over its competitors. Moreover, a firm is capable of producing and offering a product of high technology that does not have a competitive advantage and other companies commercialize a low quality product being the only one in the market thus enjoying competitive advantage. There are questions that ask the reasons why other nations develop more than others. According to various studies, it is noticed that some firms have more market power while others being their followers thus finding it hard to follow the sector’s move. It is also possible for a firm to take advantage of their capacities and competences in order to promote growth activity and to achieve competitive advantage. The use of capacities and internal productive capacities to transform to competitive advantage is the reason why these developed countries are more competitive than others. These companies also enjoy the comparative advantages. For instance, a given location can have a fertile soil for plant production over another area. Therefore when the comparative advantages are added to the competitive advantages, a firm will be turned to highly competitive.
According to….. Lower cost of production and products and services differentiation are major sources of competitive advantages. If a firm produces a product and offers it then commercializes it reasonably more effectively than its competitors and in lower or similar prices then the lower cost of production is met. Product differentiation refers to ability of offering customers an extraordinary and superior value as far as product quality, distinctive features or assistance services.
1.1.3 Innovation as a Competitive Advantage Factor
There is emphasis about the link of innovation that makes competitive advantages possible for a given organization. The survival of a company is sought by managers in the initial stages which bring out the strategies for expansion of the activities within. These strategies are laid following various factors for instance, differentiation or competition for costs within broad or specific focus. Challenges appear naturally so the firms seek adaptation in their own unique ways over their competitors. For such firms to acquire sustainable competitive advantages, they must implement new procedures and attributes, either internal or external which has not been used before by the firm or whole market. From this context, innovation function is included as a competitive advantage generation factor. Since most firms operate in a competitive environment, they face their competitions through adoption of strategies that aim at strengthening the organization in the market. The achievement of the competitive advantages results from the way the company models its strategies in order to face the challenges and its form of taking advantage of opportunities. The firms can also take into consideration the available sources which can be identified on the difference on construction and consolidation of the advantages. Therefore, the competitive advantage is achieved in case a firm implements an effective strategy or an innovation that is capable of creating value for the market.
Innovation can be the major tool enabling a company to acquire a viable competitive advantage to face its competitors. Competitive advantages are met when prices are reduced, use of advertising in organizations and product innovations. The differences between a firm’s product and service with the competitors must be long-lasting differences under market’s supervision. Thus, the competitive advantage is only sustainable when no rival is able to duplicate the importance of adopted strategy.
The existence of the relationship between innovation and competitive advantage is derived from the organization’s fact in using its sources to generate innovations to achieve competitive advantage. Innovation can only be identified if there is economic and financial results thus enabling the determination of the firm to obtain competitive advantage thus facing its competitors.
1.1.5 Unilever Kenya Limited
Unilever was founded in 1930 out of a merger between Lever Brothers (UK) and Unit-margarine (Netherlands), Unilever is today one of the world’s leading Fast Moving Consumer Goods (FMCG) companies with a worldwide turnover of more than 4.3 billion Euros. Unilever has a strong presence in over 100 countries worldwide with corporate offices in London and Rotterdam. It is a manufacturer of some of the world’s leading foods, home and personal care products such as Blue band margarine, Knorr, Royce, Lipton tea, Omro, Lux, Dove, Lifebuoy, Geisha, Sunlight, Vaseline, Lady gay, Close up among many other products (Unilever East and Southern Africa, 2011). In addition Unilever is involved in the growing, buying, manufacturing and marketing of tea. This is done alongside, fuel wood production, sustainable agriculture, research and development.
Unilever Kenya Limited is a Unilever Subsidiary operating in Kenya. Unilever operates two businesses in Kenya, the consumer business dealing with FMCG and the tea plantations business. The plantations business is the biggest employer in Unilever with a workforce of 25,000. The consumer business employs over 1,500 people directly and thousands as contract manufacturers, growers, suppliers, distributors and service providers. Unilever’s main international competitors.
They also face competition in local markets or product ranges from companies such as ConAgra, Danone, General Mills, Henkel, Kraft Foods, Mars Inc., PepsiCo, Reckitt Benckiser, Sara Lee and S.C. Johnson & Son (Unilever East and Southern Africa, 2011).
Unilever Kenya Limited is one of the largest commercial enterprises in Kenya comprising of two factories; the foods and home and personal care, producing Blue band, Royco, Geisha and Sunlight Soap, Omo, Sunlight, Vaseline and Lady gay brands. Its contribution to the economy as a foreign exchange earner has increased from Kenya. 0.25 Million in 1972 to Kes. 5.5 billion In 2011 through the export of tea. The consumer business dealing with FMCG has a turnover worth Kenya. 12 billion. The company spends 2.5% of its turnover on research and development and 1.5% on Corporate Social Responsibility.
Unilever as a global company adopted TPM in the 1990s to increase its manufacturing efficiencies therefore making its products competitive in the market (Johnson & Scholes, 2007). TPM was adopted by Unilever Kenya Limited (UKL) in 1999 with the aim of lowering cost of production and giving UKL a competitive advantage over the other manufacturers.
RESEARCH PROBLEMS
In the current century, there is increase in competition within the manufacturing firms. Additionally, due to technology advancements, there is a greater demand of skilled manpower because of the existing wide range of informed consumer in the market. This has affected the industries since it is too expensive to maintain such a dynamic market. Therefore, some markets have resorted to various kinds of manufacturing approaches in order to improve their effeciencies and effectiveness thus reduces their operating costs. For instance, one of the approaches induced in the market is Total Productive Maintenance (TPM). This approach was introduced and defined by…. From Japan. This strategy shields a whole life of the equipment in most parts comprising preparation, developing and maintaining the equipment. It further expands the importance between productivity and maintenance to express how the equipment is stored in a good care and best up keep leading to high productivity.
Presently, there is a dramatic rise of customers’ focus on the qualities of products, timely deliveries and the prices of the products. Due to these factors, any manufacturing firm will need an organization to be successful only after achieving world class manufacturing and have both effective and efficient maintenance. In order to implement a Total Productive Maintenance system, there must be an development in performance of maintenance activities. TPM as a methodology improves the availability of existing equipment thus reducing requisite for extensive capital investment. According to Unilever East and Southern Africa ()..the adoption of TPM was in early 1990s to drive it to the top of the market within a short period. Giant car manufacturers like Toyota posses strategies that enable them arrive at the best productivity. Unilever borrowed advice on which strategy to apply from Toyota manufacturer. This enabled them to accomplish the highest efficiencies in operations. The major objective of TPM as a strategy was to upraise the efficiencies of machines which will enable Unilever to yield best quality products with lower costs. Overhead costs reduction, employees’ motivations, harmonization of global operations, improving safety standards and impact reduction of operations in the environment are some of other roles of TPM. Adoption of TPM by Unilever Kenya Limited was in 1999 when the firm planned to extend its growth in both turnover and profit margins within a two year period.
Many studies have been conducted on TPM strategy, competitive advantage of Unilever Kenya Limited but it has been difficult to find even a single company that has experience in the implementing TPM especially in Kenya for them to share their experiences in such a developing program. However, the companies are influenced to depend on the literature and Japanese manufacturers of Toyota experiences. Other studies are Increase in productivity in FMCG sector (), Development of E-business strategies (), comparative study of tea sector in Kenya: a case study of Unilever Tea Limited and James Finlay Kenya Limited () and Total productive maintenance in the operating room ()
Among the first companies to implement TPM strategy in Kenya was Unilever Kenya Limited. Therefore, the studies found in this company are important for other companies to apply in their industries. The studies in Unilever Kenya are not newly attributed in Kenya because most companies have adopted the studies for their functionality to productivity. Most competitive companies have adopted the TPM strategy due to the market uncertainty. The following research will obviously deify TPM through the extended knowledge as it is required to explain the contributions of Total Productive Maintenance strategy to the competitive advantage of Unilever Kenya Limited.
Objectives of study
The following are the objectives of the research study:
- To establish the goals of Total Productive Maintenance strategy at Unilever Kenya Limited
- To establish the contribution of Total Productive Maintenance strategy to the competitive advantage of Unilever Kenya Limited
Value of study
Contributions of TPM strategy in the Unilever Kenya Limited from these as observed from the researches have enabled effective implementation in order to achieve higher profitability. These contributions also include machine efficiency, improvement of workers’ skills and reliability. These researches also assists manufacturing firms which are looking for improvements in manufacturing efficiencies in order to achieve high returns in Kenya specifically in processing food stuffs, chemicals, brews, soaps and detergents manufacture. From research institutes, the studies add knowledge in creation of further researches. It also enhances and develops the dynamic in capability theories. This study findings shows how Unilever Kenya Limited have been in a position to influence TPM strategy in gaining competitive advantage in manufacturing firms to concentrate on cutting costs, rise in levels of production, guaranteeing quality deliveries for customer satisfactions. Therefore, the research findings are in level with changing capabilities as it focuses on the gradation of adequacy over a given time between varying external environment and its altering portfolio of activities and capabilities.