Strategic analysis of UNILEVER Pak. Ltd

Strategic 1

Management

Of

UNILEVER

STRATEGIC ANALYSIS OF

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 2

Management

Of

UNILEVER

Submitted by: Nadia Shoukat (23) MBA, 4th semester, Section A, (M)

Submitted to: Sir Shahid Yaqoob MBA Marketing

Submittion Submittion Date: 22 May, 2010


Strategic 3

Management

Of

UNILEVER

DEDICATION WE DEDICATE THIS HUMBLE EFFORT TO The Holy Prophet “HAZRAT MUHAMMAD” (P.B.U.H) The greatest Social Worker, Whose every tear was for The Cause of humanity And also dedicated to THE UNFATHOMABLE LOVE, UNFLINCHING SUPPORT UNTIRING MIDNIGHT PRAYERS AND STEADFASTNESS OF

“OUR REVERED PARENTS” WHO HAS BEEN A BEACONHOUSE FOR USFOR THE WHOLE OF OUR LIFE, WHO HAS ALWAYS SHOWED US THE RIGHT PATH, THE PATH OF TRUTHFULNESS AND HONESTY AND WHO HAS BEEN ALONG WITH US THROUGHOUT OUR STUDYING CARRIER


Strategic 4

Management

Of

UNILEVER

Acknowledgements God God neve neverr sp spoi oils ls any any effo effort rt;; ever every y piec piece e of work work is rewa reward rded ed according to the nature of devotion for it. We are extremely thankful ALLAH ALMIGH ALMIGHTY TY Who, to ALLAH Who, in sp spit ite e of nume numero rous us diff diffic icul ulti ties es,, vicissitudes and acute frustrations enabled us to probe the present ALMIGHTY for study and dissertation. We bow our head to ALLAH ALMIGHTY for the buntings and the blessings that He has bestowed upon us. Who has given us the courage and stamina to come up to the expectations of our revered teachers and ever loving parents and to sum up my maneuverings for the completion of this manuscript. All the respects are for the last Prophet of God, HOLY PROPHET MUHAMMED (Peace Be Upon Him) Who is the greatest scie sc ient ntis istt of all all the the ages ages,, whos whose e mora morall and and sp spir irit itua uall teac teachi hing ngs s enligh enlighten ten our our heart, heart, mind mind and soul soul and flouri flourishe shed d our though thoughts ts towards achieving higher ideas of life. We deem it utmost pleasure to avail this opportunity to express the heartiest gratitude and deep sense of obligation to our Shahid Yaqoo Yaqoob b , Lectur revered revered Teacher Teacher Sir Shahid Lecturer, er, Depart Departmen mentt of Business Management Sciences, Islamia University, Rahim Yar Khan for for his his skil skille led d guid guidan ance ce,, keen keen inte intere rest st,, cons constr truc ucti tive ve crit critic icis ism, m, constant constant encouragem encouragement, ent, valuable valuable suggestio suggestions ns and pains pains taking taking supervision throughout the course of our study and research work. The work presented in this manuscript is accomplished under his dynamic, dynamic, skillful skillful,, affection affectionate ate guidance guidance and generous generous transfer transfer of knowledge. Whenever we sought help from him, he was the person who was always there bearing a welcoming smile on his face and having the doors of his good offices always opened for us. We have learnt a great deal from him. We have the honor to express our deep sense of gratitude Sir Shah Shahid id and and prof profou ound nd inde indebt bted edne ness ss to ever ever affe affect ctio iona nate te Sir Yaqoob for his keen interest, encouragement, generous guidance and untiring help at all times. In fact it was not possible to bring this work to fruitful conclusions without his day and night persuasive and sinc sincer ere e effo effort rts. s. He has has guid guided ed us at ever every y step step that that we took took throughout our career at postgraduate level. He has always thought right for our betterment and for our success in the professional field. We cannot thank him, as we have no words that can have an idea of the respect we have in my heart for him.


Strategic 5

Management

Of

UNILEVER

Table of Contents 1- Introduction of UNILEVAER………… UNILEVAER…………………………… ……………………….6 …….6 2- Company Summary...………………………………………..…8 2.1- Vision………………………………………………..….8 2.2- Mission……………………………………………..…...8 2.3- Objectives……………………………………………….9

3- Internal and External Audit…………………………............. Audit…………………………..................10 .....10 4- The Input Stage………………….……………… Stage………………….……………………… ……… ...12 4.1- EFE matrix…………………………………… ………..12 4.2- IFE Matrix………………………………………………14

5- The Matching Stage ……………………………………………16 ……………………………………………16 5.1- SWOT Matrix………………………………………….16 5.2- SPACE Matrix ……………………………………..….18 5.3- BCG Matrix…………………………………………….21 5.4- IE Matrix……………………………………………….24 5.5- Grand Strategy Matrix………………………………….25

6- The Decision Stage …………………………………………..… …………………………………………..…26 26 6.1- QSPM Matrix………………………………………….26

7- Strategic Recommendation…………... ……………………….…27 ……………………….…27 8- References ………………………………………………….…..…28


Strategic 6

Management

Of

UNILEVER

INTRODUCTION OF UNILEVER PAKISTAN Ltd. Unil Unilev ever er is one one of the the worl world' d's s lead leadin ing g su supp ppli lier ers s of fast fast movi moving ng cons consum umer er good goods s acro across ss Food Foods s and and Home Home and and Pers Person onal al Care Care categories categories.. Unilever' Unilever's s portfoli portfolio o includes includes some some of the world's world's best known and most loved brands.

Unilev Uni lever er Pakistan Paki stan Ltd : Unil Unilev ever er Paki Pakist stan an (70. (70.4% 4% Unil Unilev ever er equi equity ty)) is the the larg larges estt FMCG FMCG company in Pakistan, as well as one of the largest multinationals operating in the country. Unilever Pakistan Ltd., a subsidiary of the Unilever Group is operating in Pakistan since 1948. The Company’s main business lines are Soaps and Detergents, Personal Products, Cooking Oils and Fats, Packed Teas, and Ice Creams. Unilever has a long list of brands such as Surf, Vim, Rin, Lifebuoy, Sunlight, Lux, Rexona, Sunsilk, Close-Up, Blue-Band, Dalda, Planta, Lipton’s Yellow Label, Taaza and Richbru, Brook Bond’s Supreme and Kenya Mixture etc. which are common household names in Pakistan. The The Comp Compan any’ y’s s fact factor ory y at Rahi Rahim m Yar Yar Khan Khan was was one one of the the firs firstt industrial units to be constructed after the creation of Pakistan. As the consum consumer er base base expand expanded ed over over the years and the Compan Company y ente enterred into new new produc oductt lines nes like Per Persona sonall Pro Product ducts s and and Marg Margar arin ine, e, it inve invest sted ed furt furthe herr in the the inst instal alla lati tion on of moder odern n manufacturing facilities including a factory at Karachi. Today, the Company is using latest state-of-the-art technology for producing high quality products. In 1995, the Company established a new factory near Lahore to manufacture the Wall’s range of ice creams, which have become popular within a short time. In 1996, the present group – Unilever UK acquired the Polka Group that produced ice creams. In 1999, Pakistan Pakistan industri industrial al promoter promoters s (Private) (Private) Limited, Limited, owners owners of ‘Polka’ ‘Polka’ brands of Ice Cream were merged with Lever. In order to leverage the synergies of Unilever’s international brand stre streng ngth th,, marke arkett edge edge and and corp corpor orat ate e imag image, e, Leve Leverr Brot Brothe hers rs Pakistan Ltd. changed its name to Unilever Pakistan Ltd., in August 2002.


Strategic 7

Management

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UNILEVER

Overview of Unilever Pakistan Ltd. The company had a turnover turnover of Rs. 23.3 bn (Euro 309 mn) in in 2007, and enjoys a leading position in most of its core Home and Personal Care and Foods categories, e.g. Personal Wash, Personal Care, Laundry, Beverages (Tea) and Ice Cream. The company operates through 5 regional offices, 4 wholly owned and 6 third party manufacturing sites across Pakistan.

Accountable to our stakeholders Since the time Unilever Pakistan began its operations in 1948, the Company has been closely connected to the Pakistani people and its brands have been an integral feature in their daily lives. In fact, the nature of our business enables our brands to be the pulse and heartbeat of the 164 million people in Pakistan. This is a huge commitment, commitment, which makes us responsible responsible and accountable to all our stakeholders and society as a whole and strengthens our resolve to: •

• •

Make a positive difference to the lives of low income consumers Create new opportunities for growth Improve the overall quality of life in Pakistan, by promoting education, nutrition, health and hygiene.


Strategic 8

Management

Of

UNILEVER

Our Vision

“Touching Hearts, Changing Lives.”

Our Mission

“Mission Is To Add Vitality To Life. We Meet Everyday Needs For Nutrition, Nutrition, Hygiene and Personal Care With Brands That Help People Feel Good, Look Good and Get More Out Of Life.”

Adding Vitality to life: 150 million times a day, in 150 countries, people use our products at key moments moments of their their day. In the future, future, our brands brands will will do even even more to add vitality to life. Our vitality mission will focus our brands on meeting consumer needs arising from the biggest issues around the world today – ageing populations, urbanisation, changing diets and lifestyles.


Strategic 9

Management

Of

UNILEVER

Scale and geographic reach: “Our deep roots in local cultures and markets around the world give us our strong relationship with consumers and are the foundation for for futu future re growt growth. h. We will will brin bring g our our weal wealth th of know knowle ledg dge e and and international expertise to the service of local consumers - a truly mult multii-lo loca call mult multin inat atio iona nal” l” - extr extrac actt from from Unil Unilev ever er’s ’s Corp Corpor orat ate e purpose. Strategy and long-term financial target At the heart of Unilever's strategy is a concentration of resources on areas areas where where we have have leadin leading g catego category ry and brand brand positi positions ons and and which offer excellent opportunities for profitable growth, especially in personal care, developing and emerging markets and Vitality. The focu focus s is prim primar aril ily y on deve develo lopi ping ng the the busi busine ness ss orga organi nica call lly, y, but but acquisitions and disposals can also play a role in accelerating the portfolio development. To To exec execut ute e this this stra strate tegy gy we have have reor reorga gani nise sed d the the busi busine ness ss to simplify the organisation and management structure and to improve capabilities in marketing, customer management, and research and develo developme pment. nt. The resul resultt is better better alloca allocatio tion n of resour resources ces,, faster faster decision-making and a lower cost level. This transformation, known as the One Unilever programme, allows us to leverage our scale both globally and locally. Unilever's long-term ambition is to be in the top third of our peer group in terms of total shareholder return. We expect underlying sales growth of 3-5% per annum and an operating margin in excess of 15% by 2010 after a normal level of restructuring charges of 0.5 to 1 percent of turnover. Return on invested capital is targeted to increase over the 2004 base of 11%. Over the period 2005 – 2010, we aim to deliver ungeared free cash flow of €25-30 billion. It should be noted that previous and planned disposals and the additional restructuring plans will have reduced ungeared free cash flow by about about €2.5 €2.5 bill billion ion over over this this perio period, d, while while enhanc enhancin ing g the ongoi ongoing ng cash generating capacity of the business.


Strategic 10

Management

Of

UNILEVER

Internal and External Audit of Unilever Strengths: 

Customer’s Loyalty.



Latest state of the art facilities and technology for producing high quality products.



International brand strength.



Commi Committe tted d to busin business ess ethics ethics,, safety safety,, health health,, envir environm onment ent and community.



UNILEV UNILEVER’ ER’s s key compet competiti itive ve advant advantage age over over other other market market partic particip ipant ants s is the retail retail reach reach of the compan company. y. UNILEV UNILEVER ER services 500,000 outlets with 50 % through direct distribution and remaining via wholesalers.



UNILEVER is enjoying market edge of 41% in FMCG industry. UNILEVER is at number one in ice cream segment and having 14% market share all over the globe.

Weaknesses: 

The biggest challenge in safeguarding market position is to become cost leader.



Operational complexity due to a large number of products in portfolio and due to diverse work force.



Strate Strategi gic c allian alliance ce with with other other small small mill mills s for manuf manufact acturi uring ng purpose is the weakness as well as a threat for UNILEVER. Although UNILEVER claims that it is a part of its cost reduction strategy but it can not hide the reality that it shows weakness of UNILEVER.

Opportunities:


Strategic 11 



Management

Of

UNILEVER

Markets of developing countries can be proved a profitable segmen segmentt becaus because e people people are consum consumpti ption on orient oriented ed rather rather than saving or investment oriented. UNILEVER can gear up its market share in the untapped rural market.



Diversification Diversification in unrelated business.



Rapid increase in world population. World population is set to grow grow by 80 800m 0m in 20 2010 10 and and almo almost st all all incr increa ease se will will be in developing countries.

Threats: 

FMCG FMCG market market is highl highly y respon responsiv sive e to econom economic ic condi conditio tions, ns, inflation and social disruptions resulting in variations in sales revenues and demand for the company.



P & G is the major competitor and threat for UNILEVER. Other organized players are Nestle and R & B.



UNILEV UNILEVER ER is facin facing g inten intense se compet competiti ition on from from unorga unorganiz nized ed players i.e. cheaper smuggled products and Chinese products. According to industry source, 40% of tea consumed locally and a large portion of HPC products are smuggled into the country.



Legal, Legal, poli politic tical al and regul regulato atory ry factor factors s of host host countr country. y. For For example, supportive Government policies for attracting FDI, 1% tax tax rate rate on corp corpor orat ate e prof profit it and and inab inabil ilit ity y of Paki Pakist stan an Government to control smuggled products etc.



Although UNILEVER has a first mover advantage in ice cream segm segmen entt but but Engr Engro o has has anno announ unced ced to ente enterr in ice ice crea cream m segment and is considering a big rival post CY2010.



Rapid increase in raw material cost and supply disruptions from suppliers of raw material. The unprecedented surge in palm palm oil, oil, tallow tallow prices prices and other other mater material ials s has resul resulted ted in declining margins. Going forward, high raw material costs are a key risk to UNILEVER’s profitability. profitability.


Strategic 12

Management

Of

UNILEVER

EFE Matrix Weigh t

Key External Factors

1. 2. 3. 4. 5. 1. 2. 3. 4. 5.

OPPORTUNITIES Market of developing countries due to more tendency towards consumption Rapid increase in world’s population. Unrelated diversification. Rural area. Hygiene Consciousness THREATS Competition Competition from organized players, P &G In Inflation Rate Smuggled products and local competition. Legal, political and regulatory factors of host country. Rapid increase in raw material cost. Total Weighted Score

Ratings: 1 – Poor 2 – Below Average

Rating Weighte s d Score

0.15

4

0.60

0.15 0.10 0.05 0.10

3 1 4 2

0.45 0.10 0.20 0.20

0.15

4

0.60

0.08

2

0.16

0.07

2

0.14

0.05

2

0.10

0.10 1.0

4

0.40 2.95

3 – Above Average 4 – Superior

Total weighted score of EFE matrix of UNILEVER (2.95) shows strong response of company towards external factors.

Justification of ratings: On opportunity side: 1. It is a general observat observation ion that people people of developin developing g countries countries like Pakistan are more inclined towards consumption rather than saving and the major portion of spending is on FMCG.

2. Worl World d popu popula lati tion on is incr increas easin ing g at an alar alarmi ming ng rate rate.. Worl World d population is set to grow by 800m in 2010 and almost all incr increa ease se will will be in deve develo lopi ping ng coun countr trie ies. s. An And d incr increas ease e in population leads to increase demand of FMCG sector.


Strategic 13

Management

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UNILEVER

3. Like Engro, UNILEVER can enter in unrelate ated areas of production. 4. The under penetrat penetrated ed rural market market offers offers tremendou tremendous s growth potential as rural population constitutes around 60% of the total population. In the past few years, favorable structural changes, such as double digit growth in agricultural credit, increased penetration of television cable media have boosted demand demand for FMCG products. products. Following Following table shows shows that rural popu popula lati tion on will will be almo almost st 50 50% % of tota totall popu popula lati tion on in near near future. % of total population Rural Urban Total (mn)

1990

1995

2005

2010

2015E

31.9 68.1 109.4

34.3 65.7 123.6

37.0 63.0 159.2

43.3 56.7 179.6

47 53 202.2

On threats side: 1. P & G with with 50% marke markett sh shar are e is a big big thre threat at for UNILE UNILEVE VER. R. Nestle with roundly 30% market share is also posing a threat in near future. Engro is planning to enter in ice cream market and a future rival in ice cream as well. 2. Rapi Rapid d incr increa ease se in infl inflat atio ion n rate rate can can incr increas ease e the the pric prices es of products and hence can reduce demand.

3. Smuggl Smuggled ed products products swallow swallow a big big part part of profits profits of UNILEV UNILEVER ER ever every y year year.. Almo Almost st 40 40% % tea tea and and 29 29% % sh sham ampo poo o us used ed in Pakistan is smuggled from Afghanistan and China. 4. Econom Economic ic system system of host host countr country y and rapid rapid increas increase e in raw material cost are last two major threats for UNILEVER.


Strategic 14

Management

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UNILEVER

IFE Matrix Key Internal Factors 1. 2. 3. 4.

5. 6.

STRENGTHS Customer’s Loyalty. Micro level retail outlets Latest Latest state of the art facil faciliti ities es and technology. International brand strength. Market share of 41% Committed to business ethics, safety, health, environment and community.

Weigh t

Rating s

Weighte d Score

0.15 0.10

4 4

0.60 0.40

0.10

4

0.40

0.08

3

0.24

0.12

3

0.36

0.10

3

0.30

0.15 0.15 0.05 1.0

1 2 1

0.15 0.30 0.05 2.80

WEAKNESSES 1. Strategic Alliance 2. Costly Products. 3. Operational Complexity. Total Weighted Score

The score 2.80 shows that company has solid internal position, its strengths are overcoming the weaknesses.

Ratings: 1 – Major Weakness 2 – Minor Weakness

3 – Minor Strength 4 – Major Strength

Justification of ratings: On strength side: 1. Cust Custom omer er’s ’s loya loyalt lty y is not not a hidd hidden en fact fact in UNIL UNILEV EVER ER case case.. People have developed and adopted the taste of UNILEVER’s high quality products and there is no comprise on quality. 150 million times a day, in 150 countries, people use UNILEVER’s products at key moments of their day. 2. Micro Micro marke marketin ting g in develo developi ping ng countr countries ies.. UNILEV UNILEVER ER servic services es 500,00 500,000 0 outlet outlets s with with 50 % throug through h direct direct dis distri tribut butio ion n and remaining via wholesalers.


Strategic 15

Management

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UNILEVER

3. UNILEVER’ UNILEVER’s s continuous continuous expansion expansion and its large large market share share indi ndicat cate thei heir stren treng gth in lates atestt faci acilities ties and qual qualiity management. UNILEVER has ISO certification. 4. Its brands brands are enjoying enjoying internation international al recognitio recognition. n. UNILEVER UNILEVER is serving almost 150 countries.

5. UNILVER is concerned about its customers as well as emplo employee yee.. There There are strict strict safety safety standa standards rds for emplo employee yees s and visitors of plants too. On weakness side: 1. Altho Although ugh UNILEVER UNILEVER claims claims that that strat strategi egic c allian alliance ce with with small small firms for manufacturing purpose is the part of its reducing cost objective but if we look at the other side of the picture, str strateg ategiic all alliance ance is a wea weakne kness as well ell as threa hreatt for for UNILEVER. For example, Asad Soap Factory is manufacturing soap soap for for UNIL UNILEV EVER ER Rahi Rahim m Yar Yar Khan Khan,, and and now now As Asad ad soap soap factory is searching for buyers of soap plant.

2. UNILEVER’ UNILEVER’s s products products are costly costly as compare compare to local produc producers. ers. Alth Althou ough gh cost costly ly good goods s are are not not posi posing ng any any big big thre threat at to UNIL UNILEV EVER ER but but in long long run run it can can be prov proved ed harm harmfu full for for company. So company is responding greatly towards covering its weakness. For this purpose, company has adopted policy of contractual hiring, strategic alliance etc. 3. UNILEV UNILEVER ER has a large large number number of produ products cts in its portfol portfolio. io. It means that UNILEVER has a large number of SBU’s to control. It adds operational complexity to UNILEVER’s operations.


Strategic 16

Management

Of

UNILEVER

SWOT or TOWS Matrix STRENGHTS 1. Cu Customer’s r’s Lo Loyalty. 2. Micro level retail outlets 3. Latest state of the art facilities and technology.

SWOT / TOWS Matrix

WEAKNESSES 1. St Strategic egic Allian iance 2. Costly Products. 3. Operational Complexity.

4. International brand strength. 5. Market share of 41% 6. Committed to business ethics, safety, health, environment and community.

OPPORTUNITIES 1. Developing countries. 2. Rapid increase in world’s population. 3. Unrelated diversification.

S-O Strategies

W-O Strategies

1. Discover new markets (O1,O2,O4,S4,S3) 2. New quality products (O3,O5,S3,S6) 3. Unrelated diversification (O3, S1)

4. Market Expansion in rural areas (O4, O1, W2)

4. Rural area. 5. Hygiene Consciousness

THREATS 1. Competition from orga organi nized zed play players ers,, P & G 2. Inflation Rate 3. Smuggled products and local competition. 4. Legal, political and regulatory factors of host country.

S-T Strategies 5. Vert Vertic ical al Inte Integr grat ation ion (T1,T3,S2,S4)

W-T Strategies 6. Increase in manufacturing capacity. (W1, T1). 7. Cost leadership(W2,T5)

5. Rapid increase in raw material cost.


Strategic 17

Management

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UNILEVER

Proposed Strategies: 1. UNILEVER UNILEVER can capture capture untapped untapped rural rural markets markets and markets markets of developing nations by using its state of the art facilities & technology. International brand strength is plus point which will be proved helpful while positioning. positioning. Commitm itmen entt to busi busine ness ss ethic ethics, s, safet safety, y, heal health th,, 2. UNIL UNILEV EVER ER’s ’s Comm enviro environm nment ent and and comm commun unit ity y can can be prov proved ed helpf helpful ul in order order to satisfy hygiene conscious customers. UNILEVER should focus more on quality of goods.

3. Unrelated Unrelated diversi diversificat fication ion is a risky risky decision decision to be taken. taken. Loyal customer is the major power to cope up with after effects of this decision. 4. Customers Customers in rural rural areas and in developi developing ng countries countries usually usually have low income level. UNILEVER should reduce its costs in order to capture that uncovered markets effectively. 5. UNILEV UNILEVER ER can use its internat internatio ional nal brand brand streng strength th and wide wide network of retail outlets in order to compete with organized and unorganized players of market. 6. Stra Strate tegi gic c alli allian ance ce is sh show owin ing g the the weak weakne ness ss of UNIL UNILEV EVER ER in particularly manufacturing area which the competitors do not hold. hold. UNILEV UNILEVER ER should should its its produc productio tion n capaci capacity ty in order order to compete in market and to reduce competitor’s threat. 7. If UNILEVER UNILEVER can obtain obtain cheaper cheaper raw materi material, al, it can reduce reduce cost of goods manufactured.


Strategic 18

Management

Of

UNILEVER

SPACE Matrix Financial Strength (FS)

Ratings

10% increase in net income in 2009 as compare to to 2008.

+4

Net sale sales s wer were e 15. 15.7% 7% 20 2009 09 as comp compar are e to to 14% 14% in 20 2008 08.. Total asset turnover is 3.2times in 2009 as compare to 3.1 times in 2008. ROI has declined from 87% to 86% in 2009.

+3 +2 +1

ROA is averaged 27% which is declined to 24% in 2009.

+1

Total:

+ 11

Industry Strength (IS) Consumption Oriented Culture. Rapid increase in raw material cost.

Grow Growth th pote potent ntia iall in rura rurall and and deve develo lopi ping ng coun countr trie ies s market. Profit potential is reducing due to intense competition especially from un-organized players. Total:

+4 +2 +4 +1 + 11

Competitive Advantages (CA) Committed to business ethics, safety, health, environment and community. Customer loyalty. Market share of 41%. Control over supplies and distribution. Latest state of the art facilities and technology.

Total Environmental Stability (ES) Demand in the retail industry is price elastic.

-1 -1 -2 -4 -1 -9

Smuggled products and local competition. Legal, political and regulatory factors of host country High rate of inflation effects demand. Law and Order Situation

-3 -5 -3 -4 -2

Total:

-17


Strategic 19

Management

Of

UNILEVER

Average scores: FS = 11/5 = 2.2 IS = 11/4 = 2.75 CA = -9/5 = -1.8 ES = -17/5 = -3.4 X-axis = IS+CA = 2.75-1.8 = 0.95 Y-axis = FS+ES = 2.2-3.4 = -1.2

FS +6

CA IS

-6

+ 0.95

+6

-1.2

Competitiv e Strategy -6

ES SPACE matrix indicates whether conservative, aggressive, defensive and and com competi petittive str strateg ategiies are are more appr ppropri priate ate for for give given n organization. UNUILEVER should pursue Competitive Strategies that are intensive and integration strategies. I will suggest following two strategies: 1. Product development 2. Market Development


Strategic 20

Management

Of

UNILEVER

Product Developmen Developmentt to incr Compan Company y will will use Product increa ease se sale sales s by slightly modifying its products. It would eliminate its threat from unorganized market competitors which are selling smuggled items and hurting the market of UNILEVER quite badly. Following are some factors that prove why I choose this strategy for UNILEVER: 



UNILEVER’s existing products are very much successful across the globe. Its 41% market share shows the number of satisfied customers. There are rapid technological developments in FMCD industry.



FMCG is a high growth industry. High growth is characterized by rapid increase in demand due to some factors like increase in population etc.



UNIL UNILEV EVER ER has has both both orga organi nize zed d and and un-o un-org rgan aniz ized ed riva rivals ls.. Organi Organized zed rival rivals s are compet competing ing by intro introduc ducing ing compar comparabl able e prices and un-organized rivals are hurting UNILEVER by selling even at lower of the cost.

Market development is another strategy suggested for UNILEVER, we’ve seen that UNILEVER is producing high quality products and captured the maximum market share. But still lots of lower and middle income people are out of its user for most of the products as they are highly priced. Rural area is also an untapped market for UNILEV UNILEVER. ER. UNILE UNILEVER VER must must consi consider der about about produc producing ing low-pr low-price iced d products as well so company c ompany can earn maximum share.


Strategic 21

Management

Of

UNILEVER

BCG Matrix Market Share High 1.0

Medium 0.50

High +20

Ice cream

Low 0.0

? Knorr

?

INDUSTRY SALES GROETH RATE (%)

Detergents

Medium 0

Dove

Beverages (Tea) Soap

Home & Personal care

Low -20

Industry Classification: Industry

Industry

Indicators


Strategic 22 Tea

Management Classification Mature

Of

UNILEVER

Industry growth lagging GDP growth. Low profit margins

Ice cream Growth

Reduced sales volumes 0.5kg per capita yearly consumption Double digit revenue growth Large Capex and advertising spend

Soap

Mature

ULEVE ULEVER R Growth Growth compan company y withi within n mature industry Lux sales doubled in 3 years High profit margins Introduction of liquid hand wash

Detergen t

Shampoo

Growth

11% rise in Surfs market share Low Low pene penetr trat atio ion, n, uses laundry soap

Growth

50% 50 %

popu popula lati tion on

Double digit turnover growth Lowest penetration in Asia. Clea Clearr Sham Shampo poo o high highes estt growt growth h in comparable regions

STARS - Ice cream: Unilever has the first mover advantage in the capital intensive ice cream segment. With around 65% market share, ULEVER is the only major operator in the industry. The company is in the process of increasing production capacity and strengthening its distribution channel. In CY07, sales were restricted by lost trade confidence, dela de lay y in fa fact ctor ory y ex expa pans nsio ion n re resu sult ltin ing g in pl plan antt sh shut utdo down wns, s, an and d adve ad vers rse e we weat athe herr co cond ndit itio ions ns.. Ho Howe weve ver, r, go goin ing g fo forw rwar ard d wi with th pe perr capi ca pita ta co cons nsum umpt ptio ion n at a lo low w 0. 0.5 5 li lite ters rs pe perr an annu num m tr trem emen endo dous us growth potential exists in the ice cream segment. We expect segment revenue growth of CAGR 19% in CY08-CY12E.

QUESTION MARK – Frozen foods: According to matrix, UNILEVER’s frozen foods like Knorr and some products of household care business units like Dove are question mark marks s as they they are are oper operat atin ing g in a grow growin ing g mark market et with withou outt high high market share, thus holding the sales growth of the company’s 400 leading brands by 0.6%.


Strategic 23

Management

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UNILEVER

Therefore it can be noticed that not the whole divisions are under performing, as a result UNILEVER needs to invest more in these business units to keep up with the fast growing market because they are already successful but need better performance. Brands such as Knorr and Lipton in food and Dove in the household product sector are among the core brands that raise concern for UNILEVER. As they operate in a growing market more investment is needed to boost sales and margin and as it is unlikely that these units achieve sufficient cost reduction benefits, UNILEVER may turn to its cash cow businesses to offset such investment. As part of its path to growth strategy UNILEVER must build on these businesses to improve performance as the market share must grow if they are to become stars otherwise they may face alternative solutions that could include the sale of the business, which should be the last alternative because of the growing divisions inside the business. UNILEVER might be better off investing more cash in frozen foods and household care; since the market is growing it may gain more share and dominance

CASH COWS – HPC: The HPC segment continues to drive the top-line and profitability growth, and is the key focus of the company’s growth strategy. In CY09 the company posted impressive turnover growth of over 25% attributable to higher volumes and price increases. Among the key brands in the HPC business Lux, Surf and Sunsilk continue to be the star performers with market leadership positions.

DOG – Beverages (Tea): The mature tea segment continues to follow a declining trend as ULEVER faces stiff competition in the tea market. ULEVER continues to lose sales volume to Tapal in organized sector and to small local brands in rural areas that are using cheap smuggled tea. Supply disru dis rupti ptions ons as a resul resultt of politi political cal turmo turmoil il and droug drought ht in Kenya Kenya ensue in squeezed margins. The The comp compan anys ys stra strate tegy gy is to defe defend nd losi losing ng mark market et sh shar are e as no grow growth th is expe expect cted ed in beve bevera rage ges s segm segmen ent. t. ULEV ULEVER ER had had two two prod produc ucti tion on faci facili liti ties es for for tea tea loca locate ted d in Kara Karach chii and and Khan Khanew ewal al.. Recently, ULEVER has closed down the Karachi tea factory in view of low demand and sales volumes. This is expected to result in restructuring charges in the short run, however, in the long run the company is expected to benefit in terms of cost efficiencies and reduced overheads.


Strategic 24

Management

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UNILEVER

In the the back backdr drop op of losi losing ng mark market et sh shar are, e, the the cont contri ribu buti tion on of tea tea busi busine ness ss to tota totall turn turnov over er has has decl declin ined ed over over the the year years s (34% (34% in CY09). Going forward, forward, the tea segment segment is expected to to remain under under pressure. It is forecasted a flat outlook for the segment with decline in turnover of 5-6% each year.

Internal-External Internal-External Matrix

IFE Weighted Scores Strong

Average 3.0

2.0

Weak 1.0

4 Hi

EFE Weight ed Scores

.0

gh

i

ii

i ii

iv

v

vi

vii

viii

ix

3 .0 Mediu m

2 .0 Lo

w

1 .0

The IFE matrix score for UNILEVER is 2.80 and for EFE matrix score is 2.95 therefore our IE matrix falls more around ‘v’ cell. The company should adopt HOLD & MAINTAIN STRATEGIES and I Market Developme Development nt and Product Product Developmen Developmentt recommend Market for UNILEV UNILEVER. ER. UNILEV UNILEVER ER can intro introduc duce e existi existing ng produ products cts to new geographical area that are rural markets and markets of developing nations. On the other hand UNILEVER can also modifying its existing products and introduce variants in order raise its market share.


Strategic 25

Management

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UNILEVER

Grand Strategy Matrix

Rapid Market Rapid market Growth Growth

Q1

Q2

Weak Competitiv e Position

Strong Competitiv e Position

Q3

Q4

Slow Market Growth The grand matrix helps us to determine the strategy that firm must pursue, based on its competitive competitive position and market growth. UNILEVER lies in Q1 which represents excellent strategic position of comp compan any. y. For For thes these e firm firms, s, cont contin inue ued d conc concen entr trat atio ion n on curr curren entt market market and produ products cts is an approp appropri riate ate strate strategy. gy. UNILEV UNILEVER ER has abundant resources so backward, forward and horizontal integration integration may also prove effective.


Strategic 26

Management

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UNILEVER

QSPM Matrix

Market Development

Product Development

Untapped Rural area. Market of developing countries. Rapid Rapid increase increase in world’s world’s population. Hygiene Consciousness Unrelated diversification. Legal, political and regulatory factors of host country. Inflation Rate. Competition from P & G Raw material cost increased. Smug Smuggl gled ed prod produc ucts ts and and local competition. competition.

0.05 0.15

Attracti ve Score 4 3

0.15

Total Internal Factors

1.0

Costly Products.

0.15 0.15 0.10 0.10

--3 4 3

---0.30 0.40 0.30

--4 1 3

--0.60 0.10 0.30

0.12

4

0.48

3

0.36

0.10

---

- --

---

---

0 .1 5 0 .0 8

--4

--0.32

--3

--0 .2 4

Operational Complexity.

0 .0 5

---

---

---

---

Total Grand Total

1.0

External Factors

Customer’s Loyalty. Micro level retail outlets Latest state of the art facilities and technology. Market share of 41% Comm Commit itte ted d to busi busine ness ss ethics, safet afety y, health, environment and community. Strategic Alliance

International strength.

brand

0.20 0.15

Attracti ve Score -----

4

0.60

1

0.15

0.10 0.10 0.05

--- -4

- ---0.20

2 --1

0.20 --0.05

0.08 0.15 0.10

2 4 3

0.16 0.60 0.30

3 4

0.24 0.45 0.40

0.07

3

0.21

4

0.28

Weig ht

Total

3

2.42

1.8 4.22


Total -----

1.77

1.6 3.37

Strategic 27

Management

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UNILEVER

Strategic Recommendation Recommendation Market Developmen Developmentt . Approp Appr opri riat ate e stra strate tegy gy for for UNIL UNILEV EVER ER is Market UNIL UNILEV EVER ER sh shou ould ld rema remain in in the the pres presen entt busi busine ness ss and and sh shou ould ld introduce present products in new geographical area. Following are necessary factors that must be present while choosing market development strategy: 

UNILEVER has its own strong distribution channel.



UNILEVER is very successful at what it does.



Untapped Untapped rural rural market market and market market of developin developing g countrie countries s exist for UNILEVER to cover.



UNIL UNILEV EVER ER is a stro strong ng MNE MNE in Paki Pakist stan an.. It has has abun abunda dant nt resources both financial and human, so it can easily expand geographically. geographically. Here we are not concerned about expansion of oper operat atin ing g acti activi viti ties es to new new geog geogra raph phic ical al area area.. We are are particularly concerned about capturing untapped market. It is up to UNILEVER whether it is decided to start operating in new area areas s too too or just just intr introd oduc uce e prod produc ucts ts by us usin ing g its its stro strong ng channel of distribution. distribution.



UNILEVER is operating globally. It means that FMCG is such an industry which can be grown globally.


Strategic 28

Management

Of

UNILEVER

References 

www.pakistanunilever.com



www.igisecurities.com.pk

And various news paper articles, research findings and blogs, which helped me indirectly to build up my mind about Pakistan UNILEVER and figure out their External and Internal Factors which were involved in the project.


Strategic analysis of UNILEVER Pak. Ltd

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