Organization Introduction Lever Brothers Pakistan Limited is a multinational organization. Unilever PLC London is its parent company. Unilever is a European based company with headquarters in London, and their shares are quoted at the stock exchange of several European countries. They deal in all kinds of products from animal foodstuff to foods and detergents plus other personal and consumer products. Unilever has its subsidiaries in over 80 countries of the world, to which it spreads its vast knowledge and resources. William Lever (its originator) commences business in England as a grocer. He established Lever Brothers in 1827 in England Sunlight was the first product of Lever Brothers, which makes the beginning of the marketing of branded products at the same time Margarine Uni was established in Nether Land by Simon Van Berg and Anton Jurgens. These two companies in term of: y
Buying raw material
y
Selling finished goods
Consequently both the companies loosing out money in term of profit. These problems led to think of the mergers in 1930. These two companies merged together and renamed the business as Unilever PLC / the word UNI is taken from margarine Uni and Lever is taken from Lever Brothers. Its head quarter was established in England and Rotter Dam. Unilever has 500 operating companies in 80 countries. It has 0.3 million employees and turnover of sales in 23000 million pounds. The global business proportion is 60% in Europe 20% in North America and 20% in rest of the world. An identified board of directors control the activities of subsidiary companies throughout the world. Lever Brothers Pakistan Limited started its operations in 1948. A merger of Sadiq Vegetable Oils and Allied Industries existed in Rahim Yar Khan was taken place with Lever Brothers and HVM
company based at Karachi. As a result of merger Lever Brothers Pakistan Limited was incorporated as an independent Unilever operating company in 1955. The company is quoted on the Karachi, Lahore and Islamabad Stock Exchanges. Lever Brothers Pakistan Limited has around 1900 employees in Pakistan. Lever Brothers Pakistan Limited played a dynamic role in boosting consumer products market. It stand at a unique position due to its honesty and integrity. Lever Brothers Pakistan Limited¶s main divisions of business are:
1
Merger With Brooke Bond
Brooke Bond Pakistan Limited was incorporated in 1948. Company¶s 40% shares are held by Unilever, 21% by financial institutions, 24% by individuals, and 10% by insurance companies. The company is quoted on Karachi and Lahore Stock Exchange market. The company is manually engaged in the blending, packaging and marketing of tea. It also has a small business in the sale of packing apices. The company employ around 850 persons. And has three manufacturing locations situated in Karachi and Khanewal. It also have three regional sales offices. The head office of the company is located in Karachi. After the amalgamation of Lever and Brooke Bond, Unilever will have a majority shareholding in the combined company and it will provide a comparable level of technical, management and financial resources. The proposed merger will benefit the consumer in term of price and quality. Acquisition Lever Brothers Pakistan Limited acquire the shares of Pakistan Industrial Promoters Limited, Mehran International Limited and Ambrosia International Limited, which is known as Polka Group of Ice Cream Companies. Product Mix
At present Lever Brothers Pakistan Limited is engaged in marketing of diversified varieties and classes of products and playing a dynamic role in boosting consumer product market. It stand at a unique position due to its honesty and integrity. Lever Brothers Pakistan Limited has both product length and depth i.e. it has by length a largest of product lines available and under each product line there are lots of variants like different weights, 100mg, 500mg, 1000mg, sache pack, family pack or in case of ice creams different brands have lots of flavor available which determines its product depth. So different no of product lines are called product length and no of products in each product line are called depth of product line. Lever Brothers Pakistan Limited¶s main product groups are listed below: Home And Personal Care Personal Personal Wash W ash (PW) Toilet Soaps Lifebuoy (Carbolic Soap) Lifebuoy Plus Lifebuoy Gold Lux (in 4 varieties) Rexona (in 2 varieties) Liril Hamman Fair & Lovely Soap
Fabrics And Home Care Fabric Wash
Surf Excel
2
Power Surf Sunlight Washing Powder Soap Wheel
Home Care Vim
Dish Washer / Scourers
Vim NSD Bard (in 2 varieties) Vim Powder Poly Bag
Personal Product Hair Care Sunsilk Shampoo (in 7 varieties) Harmony Soap Lifebuoy Shampoo
Skin Care
3
Fair & Lovely Skin Cream and Lotion
Dental Care Close-up Tooth Paste Pepsodent
Oil And Dairy Based Foods Banaspati Dalda Cooking Oil Dalda Cooking Oil(Soya Bean) Dalda Sunflower Oil Planta
Margarine
4
Blue Band
Industrial Fats A whole range of product for bakery and oils for the industry.
Beverages Leaf Teas Yellow Label
Yellow Label ± Danedar
Richbru Top Star Taaza Leaf Supreme Brooke Bond
Dust Teas
5
Pearl Dust Ruby Dust Laojee
Mixture Tea
6
Taaza
Ice Cream Cornetto (in 3 varieties) Feast (in2 varieties) Feast Stickless Top Ten Star Cup (in 4 varieties) Sundae ( 2 variant)
Chocu Bar Minimill Sola Jet Spot Ice Lolly Wall¶s Kulfi Panda Pop Corn g Three
Vision Of Lever Brothers Pakistan Limited The vision of Lever Brothers Pakistan Limited is driven by is the commitment to excel and we are here to sell aspiration not brand . So, the core vision is integrating and that is to excel in every field whatever Lever Brothers do to provide customer delight and value. The Lever Brothers have been able to follow the track set by their vision and to achieve the standards set by their customers. Mission Statement of Lever Brothers Pakistan Limited Lever Brothers Pakistan Limited will be the foremost consumer company in Pakistan with the dominant position in laundry, personal wash, skin, ice creams and spreads: a leading position in tea, hair, dental and household care and a sustainably profitable position in cooking oil and fats. 1. We will aim at delivering a 15% UVG rate, hence doubling the size of our business over 5 years and thereby delivering superior value creation.
2. We will achieve this by adopting a broad view of our market by seeking the new opportunities in the core categories of Unilever and by staying closer to all consumers than competitors, understanding their evolving needs and focusing on constant delivery of superior value for our brands through innovation. 3. Competitive advantage will also be developed by driving down relentlessly on relative cost positions and outpacing competition in operational efficiency improvement. 4. We shall build on our strong network of distributors to maximize penetrations and visibility in existing channels and to develop all new channels relevant to our consumers. 5. We shall establish Unilever¶s core brands in Afghanistan, building brand loyalty and strong distribution in the market. 6. To achieve these standards of performance, Lever Brothers Pakistan Limited will develop a strategically focussed organization and will motivate its personnel to use its full potential of creativity and commitment. It will also leverage Unilever¶s best practices and maintain the highest standards of operational control. 7. Through its commitment to high levels of care and safety for its employees, its consumers and the environment, Lever Brothers Pakistan Limited will be exemplary and will participate in the dissemination of such practices in Pakistan.
Analysis Of Mission Statement Mission Contents Organization Philosophy People
Peoples are key to strengths of Lever Brothers Pakistan Limited. The development of their potential is core to Lever Brothers Pakistan Limited business. So they provide extensive attention to developing human resources. Customers Lever Brothers Pakistan Limited is the customers focus organization. They do delight customers with their products and service. Their brands always deliver the high quality as they premise. Lever Brothers Pakistan Limited pays extra attention to the complaints of consumers. e.g. if the consumer complaints that detergent harmed any cloth or skin they send the sample for lab test a team analyzes that customer complaint is right or not and then they send the detailed response to customer along with gift of their products. With a questionnaire for suggestion for further improvement on the top of which is written ³WE CARE ABOUT YOU´. Suppliers Suppliers are considered the partners of Lever Brothers Pakistan Limited and Lever Brothers Pakistan Limited maintain mutually beneficial relationship with them. Integrity Lever Brothers Pakistan Limited never compromise on integrity management adhere to high standards in all they do. Environment responsibility Management adhere to all national and Unilever standards to ensure health, safety and protection of the environment in which they live and work.
Profit It is considered to be the ultimate measure of Lever Brothers Pakistan Limited¶s performance and it is required to maintain and grow their business. Product Market Domain This factor indicates where they are going to compete. Lever Brothers Pakistan Limited¶s field of operations is the consumer products and business and this is very clearly stated in their mission statement. Organization Key Value It defines that what do they want. They people of organization to be good at or how do they want them to behave and this very clearly stated in mission statement as always stay responsive to change, go for innovation, employee commitment to organizational objectives and mission and creating value for customers. So, if we check the mission statement through this aspect then we can easily state that they have clearly stated what should be the organizational key values and how to reinforce them. Critical Success Factor The central issue of this factor is that what do they have to be good at to succeed in this market or industry. The mission statement outlines this as ³adopting a broad view of our market, by seeking the new opportunities in the core categories and by staying closer to all consumers than competitors and understanding their evolving needs and focusing on constant delivery of superior value for our brands through innovation´. So far them critical success factor is consumer connectivity and commitment to excel and to provide superior value to customers and products of superior quality and value.
Concern For Different Stakeholders Mission statement describes that what are the obligations to different stakeholders
i.e.
stockholders,
employees,
suppliers,
customers
and
community at large. Lever Brothers Pakistan Limited¶s mission statement contains concerns about all stakeholders. First be foremost consumers and then other stakeholders and describes it as: ³Through its commitment to high level of core and safety for its employees, its consumers and environment. Lever Brothers Pakistan Limited will be exemplary and will participate in the dissemination of such practices in Pakistan´. Form And Sources Of Competitive Advantages Mission statement of Lever Brothers Pakistan Limited completely describes the form and sources of competitive advantage as: ³Competitive advantage will be developed by driving down relentlessly on relative cost positions and outpacing competitor¶s in operational efficiency improvements and through building strong network of distributors and by developing a strategically focused organization and by motivating its personnel to use its full potential of creativity and commitment and by maintaining the higher standards of operational control´. They are going for unique combination of cost reduction and superior value to customers so they entirely provide the form and source of competitive advantage that what they wanted to achieve and how they will achieve it. Scope And Types Of Mission Are the external dimensions covered?
7
Global Mission
8
Organization
Mission
10
Market Mission
11 12
No Mission
9
Yes No Yes No Are the internal dimensions covered?
The mission of Lever Brothers Pakistan Limited covers both the external dimension (product market domain, critical success factors) and internal dimensions (philosophy, organization key values, form and sources of competitive advantage, and concern for different stakeholders) so therefore, we can say that the mission statement of Lever Brothers Pakistan Limited is a global mission as according to the following exhibit. Lever Brothers Pakistan Limited wants to be market leader in consumer products. It enjoys greatest market share as compared to competitors by providing superior quality products. And customer value is what they value. And this is reflected in mission statement. The very first 3 points are all customer focused and has provided customer value as their main focus.
As both the dimensions are extensively covered so we can say that the mission of Lever Brothers Pakistan Limited is global mission. Now we can further go for rating of mission of Lever Brothers Pakistan Limited on a scale of 1-10 for testing of mission, which is as under: Testing The Mission Does the mission statement make it clear what the organization stands for and why it exists?
10
Does the mission statement makes it clear where we have to
5
compete and who are our customers? Does mission statement tell us the values we should adhere to in
8
working of this organization? Does mission statement make it clear what we have to be good at to
10
survive and prosper? Do different parts of mission statement hand together, does it make
10
sense? Is the mission statement short enough so that people can understand it?
10
Is the mission statement well written enough so that people will
5
remember it? Is the mission statement challenging and exiting, will it motivate us?
10
Does the mission statement tell us what we should be doing and
5
what we should not be doing? Total Criteria:
83 100 = Excellent 50 = Medium 00 = Poor or no mission
The total score indicates that the mission statement of Lever Brothers Pakistan Limited is approximately near to excellent standards and gives complete help for setting priorities guide strategic decision making, and performance evaluation or in short it fulfills the essential role i.e. to define the
business in such a manner which is important in overall strategic management. Objectives Of Lever Brothers Pakistan Limited And Attainment Of Objectives Objectives of Lever Brothers Pakistan Limited 1. Their main objective is to have a double-digit growth and resultant cash flows will be utilized in improving the product quality and contents to enhance the value to customer and final users. 2. Lever Brothers Pakistan Limited has an objective to have a responsive supply chain and technological based processes. 3. They want to have consumer connectivity, i.e. they want to know what they eat, drink, how they spend their lives, what are their preferences. So in this way they wan to be very close to customer, to know their real insight and desires so they can develop new strategy for product design and can implement their strategy in better manner i.e. avoidance of hit and trial approach and hitting the right target with right strategy at right time in right and accurate manner. 4. They want to be cost efficient i.e. they want to reduce in their cost of production, cost of transportation, distribution and packaging cost and finally reducing all the human cost to offer a competitive price to customer maintain the high standards of quality. 5. To have a partnership with their suppliers to enable them to provide high quality low cost material. 6. Have entered and will be aggressively developing new markets. 7. Be exciting to their customers with stream of innovative products. 8. To be no in all their existing markets.
Attainment Of Objectives
An objective or set of objective to be ideal must be ³SMART´ i.e. 1. Specific 2. Measurable 3. Attainable 4. Realistic 5. Time frame
Specific The objective of Lever Brothers Pakistan Limited are specific not general e.g. they want to be number one i.e. market leader in terms of market share. They want to be cost efficient it is specific i.e. they have to reduce their costs without compromising on quality. They want to have focused strategic thrust i.e. they are to simply reduce non-valuable slow moving product. So the nonvalue added products are quite obvious with their sale figure and popularity. Measurability Objectives of Lever Brothers Pakistan Limited are measurable as you can easily measure the double-digit growth with their balance sheet footings and cash flow analysis. Reduction in cost easily be measurable from reduced price level and cost of production. Responsive supply chain objective can easily be measured with quantity of real information available on computer terminals of Lever Brothers Pakistan Limited. Attainable All of the objectives are attainable. They can be market leader e.g. they are in Lux, Blue Band, Fair & Lovely, Lipton and Supreme. They have portfolio and cash flows to invest in their product categories to achieve their quality
standards thereby becoming market leader with their increased share, sales and growth. Thereby getting brand loyalty among their customers. Reliability One has to be at the top so to be number one in its realistic objectives. Other objective e.g. reduction in cost is realistic, you an reduce your cost by focusing on value chain. Cost of inbound and outbound logistics. The objective of launching innovative products is also realistic objective, it comes only from creative ideas and implementation of these innovative ideas comes up from investment. Time Frame All these objectives are to be attained in some specific time period. Attainment Of Objectives Lever Brothers Pakistan Limited¶s strategy to attain the objectives is: 1. Maximum coverage of outlets 2. Desirable sales volume 3. Display and merchandizing of products 4. Developing quality and want satisfying product.
Since every company is formed to accomplish certain objectives. There is no company, which had no goals. So Lever Brothers Pakistan Limited also has targets before it. These main targets and objectives are: 1. Profits
2. Consumerism 3. Welfare of consumer
The first objective of Lever Brothers Pakistan Limited is to earn maximum profit but keeping in view the customer demands as well company deals in those products which are profitable. If there are any indication that any item is not good from profit point of view, it will try to find out the reasons. Will soon what steps should be taken to overcome these reasons. Company will introduce different marketing strategies if there are problems in marketing. Here I would like to code two very famous examples, 1 st of Sunlight soap and Sunlight washing powder of Lever Brothers Pakistan Limited. Lever Brothers Pakistan Limited initially developed a sense of consumer to use washing powder other than washing soap, consumer switched s a result towards Sunlight washing powder, i.e. popular segment of washing powder and than the market share for Sunlight soap declined with passage of time, now the consumer who realized the convenience of washing powder started using it, but at the same time, as a result marketing strategy of Lever Brothers Pakistan Limited awareness of people, people switched to surf and wheel i.e. premium segment detergents. Finally due to the decrease in the market shares and sales volume of Sunlight soap and was light powder Lever Brothers Pakistan Limited management finally decided to stop the production of this very product i.e. it is now obsolete. Second example is related to the change of brand name of Surf to Surf Excel. The reason behind was introduction of competitor¶s brands like Arial by P&G which had brightness features, which caused the people to switch from Surf to Arial, Lever Brothers Pakistan Limited realized the fact due to disturbance in sale volume of Surf and introduced new brand name ³Surf Excel´ with extra brightness power.
Company also takes into consideration the welfare of the consumer. It takes into mind the taste and habits of the customer. They pay much attention on the customers¶ complaints. It also works for the welfare and interest of Pakistan, as it is an environment friendly organization. Strategic Management At Lever Brothers Pakistan Limited Now we will proceed with strategies being pursued by the Lever Brothers Pakistan Limited at different organizational level. First we will discuss the corporate level strategy. Corporate Level Strategy At corporate Lever Brothers Pakistan Limited is pursuing the strategy of vertical diversification i.e. driving away from the previously adopted strategy of vertical integration i.e. now they don¶t want to perform more than one step of the processes involved in converting raw materials into a product delivered and ready for consumption. Lever Brothers Pakistan Limited¶s operations are so complexed and involves 200 brands in Pakistan so now they wanted to reduce the operational complexity and going for strategic alliances with their suppliers, instead of producing themselves and going into complex operations now they want their suppliers to produce for them. The outsourcing the production so that they don¶t have to invest heavily in the production and to reduce the capacity problems, they now going for the third party contracting to produce themselves and now they want them to be restricted to marketing and distribution of products. Diversification strategy is being pursued by the Lever Brothers Pakistan Limited but they mainly go for related diversification as against unrelated diversification for conglomerates, they are diversified into number of businesses as mentioned earlier but they are all related to consumer products. Through vertical diversification they will be able to eliminate the operational complexity and costs of buying and selling i.e. the transactional
costs. Now they mainly wanted to step away from operations and want to focus more on customers. As means of diversification which are being utilized by the Lever Brothers Pakistan Limited as all the time, been acquisition, neither joint ventures i.e. strategic alliances nor the internal development. Here we can take the example of the acquisition of Brooke Bond and Polka for example which have Brother acquired through a hostile takeover. And to step away from operational complexities now they go for subcontracting with the suppliers and want them to produce for Lever Brothers Pakistan Limited as in case of oil and ghee and soap and with the passage of time will also be implemented in other categories as well. Business Level Strategy At business level Lever Brothers Pakistan Limited is adopting a very unique and interesting set of strategies. First and foremost strategy they want to follow is the cost leadership. They wanted to control cost as much as possible and want to reduce cost by every mean. First cost efficiency is achieved through outsourcing operations and stop producing themselves and go for cost efficient subcontracting. Second they want to achieve cost efficiency through responsive and cost efficient supply chain, want to be in touch with suppliers all the time and for that they have connected themselves with the suppliers and to their suppliers as well to minimize cost related to forecasting now they want better forecasting through computer networks so to get the real time information about the inventory, stock, demand and supply. They are now reducing the inventory as well as average carrying the inventory of only 3 days and getting closer to the concept of just in time except for those products for which they have to brought in raw materials from far flung areas like tea and moreover routings of logistics as well like air routing or ship routing to curtail the costs
other than cost efficiency, they have adopted the strategy of consumer connectivity i.e. want to stay closer to consumers rather to operations and want to focus all alternations to consumers through more research and customer profiles and demographics and wants to explore new customers and usage of products. To get customer connectivity they do the market research to check the trends of their customers. The do pre-launch, post-launch research, e.g. their did before and after lunching while antidandruff Sunsilk. The response was quite encouraging. Hence basically customer and market research and customer feedback, free samples distribution before and after launching new product / brand/ variant is aiming their basic strategy to implement and achieve the customer connectivity and to fulfill their customer demand. Here Lever Brothers Pakistan Limited has used the strategy of product development i.e. by modifying and improving their Sunsilk it into Sunsilk antidandruff (white), they have increased their sales. They are applying ³Market and Development Strategy´ as well in which by introducing present product (Sunsilk) into a new demographic area i.e. dandruff conscious market segment with the launch of only new variant i.e. Sunsilk antidandruff white. They have added conditioner in it as initially the conditioner was missing in all shampoos of Sunsilk. While it is available in competing brands of P&G. Other than these two strategies another very important strategy is being followed by tge Lever Brothers Pakistan Limited i.e. focusing on core brands or want to have a very focused on brand portfolio in which they wanted to get rid of the slow moving brands like in Surf you will get number of further variants like Surf Ultra, Surf Micro, Power Surf etc. and in Sunsilk number of variants, Black, Green, Pink, etc. to name a few and how they have curtailed all these slow moving brands like focusing attention to Surf Excel only and in case of Sunsilk Black and White (antidandruff) and discarding slow moving items like Sunsilk Pink and Green etc.
So, to avoid cannibalization effect now instead of number of brands to flood in the market only few better and improved brands, cash generating and more focused towards customers. Operational Level Strategy At operational level, Lever Brothers Pakistan Limited has always adopted the strategy of TQM only never went for CPR i.e. they have not come up with a new brand in last few years. Only the improvements or new variants in existing brands or using the same old brand name to introduce a new product like Lifebuoy Shampoo or Fair & Lovely Soap. So it can easily be said that they believe more in adopting changes rather generative ones or go for single loop learning only because according to them its very very expensive to introduce a new brand name. Strategy Evaluation Now after outlining the objectives and discussing the strategies we can now evaluate these strategies that whether they are in harmony with the objectives of Lever Brothers Pakistan Limited or not. And then we will evaluate these strategies on three types of evaluation criterion. Now as against the objectives, if we go through all the strategies being mentioned earlier, then we can see that all strategies are true reflection of the objectives being targeted by Lever Brothers Pakistan Limited. As an objective of consumer connectivity, responsive supply chain getting on line computer network with suppliers and more stronger R&D department and the objective of cost efficiency is supported by the vertical diversification in an sense that how they are outsourcing production and going for sub contracting with their suppliers and having more responsive and cost effective supply chain and to achieve growth more focused strategy in case of reduction of brands, etc. So these strategies are true measures to achieve those objectives. But other than objectives there is some other criterion which each strategy has to fulfill to be
of any worth and that criteria is as follows: its basically three types of evaluation criterion i.e. 1. Suitability 2. Acceptability 3. Feasibility
Suitability Suitability is a broad assessment of whether the strategy addresses the circumstances in which the organization is operating. For example, the extent to which the strategy would fit with the future trends / changes in the environment or how the strategy might exploit the core competencies of the organization. Now if we evaluate the strategy of Lever Brothers Pakistan Limited on these factors that whether the strategies fit with its existing circumstances would able to compete with the future trends like the strategy of cost reduction and focused brands and outsourcing production and consumer connectivity and more responsive value chain. All these strategies are not only suitable to the present condition but are prerequisite for future success as well i.e. by outsourcing production more focus towards customer needs and wants would be provided and it would help Lever Brothers Pakistan Limited to achieve even higher customer satisfaction level and market share and not only that lowering the cost would not only be beneficial for Lever Brothers Pakistan Limited but for consumers as well i.e. now they would receive better quality at relatively lower cost and Lever Brothers Pakistan Limited would be able to provide superior products quality and value to customers. Now a days, success lies at cost reduction and superior quality which the Lever Brothers Pakistan Limited has successfully opted for. Other than this, next factor is that whether strategy can exploit the core competencies of the organization or not. The answer is very simple that by reducing operational complexity and brands complexity more resources would
be available to focus more on the quality of the products as compared to the previous situation. So on the basis of these factors it can easily be said that the strategies being implemented are very suitable to Lever Brothers Pakistan Limited. Acceptability Acceptability of strategy is concerned with the expected performance outcomes such as the returns and risk if the strategies are implemented and the extent to which it would be in line with the expectations of the stakeholders. In case of returns, its pretty much assured that returns would definitely be enhanced when the cost would decrease and strategies would result in better quality products. But the elements of risk is there which could be quite significant in the case of subcontracting, whether the suppliers would be able to meet the quality standards or not. And as we inquired it from the branch manager of Lever Brothers Pakistan Limited, he said, that we have very strong quality control system and moreover we are entering into strategic partnership with our suppliers so to maintain quality is in their favor too and they would be beneficial from the better quality as well and it would not increase the cost in case of maintaining control over the suppliers as its partnership more as compared to only placing and receiving order we will work for mutual benefits and complete harmony which we already have. As far as the stakeholders are concerned first and foremost effect would be on the employees as the production is out-sourced so they would definitely feared the unemployment but they said that we will arrange it with our suppliers and will try to accommodate them as much as possible and in case of shareholders, they would receive benefits of this strategy and would receive higher returns on their investments and they would be able to maximize their earnings and in other stakeholders suppliers would now play more important role by entering into strategic partnership with the organization. Consumers
receive more attention now and would get more satisfaction as more and more products would be developed on the basis of the targets being set by the consumers. So after analyzing these factors it can easily be said that strategies being pursued by Lever Brothers Pakistan Limited has higher returns and lesser risks and more benevolent to stakeholders as well. Feasibility Feasibility is concerned with whether the strategy could be made to work in practice or not. And its more concerned with the assessment of practicalities of resourcing and strategic capabilities i.e. quantitative assessment, which is beyond the scope of this report, so, as an overview, all strategies seems feasible and some of them has already been implemented as well like the reduction in brands etc. So assessing; Is this a good strategy? Is the positioning viable? Does it improve value? Does it exploits core competencies? Will it lead to good financial performance? All these factors seems work in favor of Lever Brothers Pakistan Limited after analyzing the strategies of Lever Brothers Pakistan Limited.
Structural Analysis Organizational structure and management of Lever Brothers Pakistan Limited
Lever Brothers Pakistan Limited restructure the organization after the merger with Brooke Bond Pakistan Limited. The chairman is the executive officer of Lever Brothers Pakistan Limited. He leads the seven members management committee, which is the top of decision making. The management is responsible for corporate strategy of Lever Brothers Pakistan Limited and for initiating policies and overall planning as well as their general management duties. Management committee members are each responsible for specific function. Reporting to the management committee members are departmental heads who are responsible for advising the management committee for planning and implementation of policies for ensuring that targets are reached. The committee includes: Mr. Lain Strachan Sangster
(Chairman & Chief Executive)
Mr. Mashkoor Alam
(Vice Chairman)
Mr. Mujib-ur-Rehman
(Technical & Logistics Director)
Mr. Perwaiz Hassan Khan
(Director Personnel)
Mr. J. A. Lee
(Director Sales)
Mr. A. D. Bandaranayake
(Director Commercial)
Mr. N. I. Khockhar
(Business Unit manager ODF)
Mr. Clive David Welland
(Director Food Business)
Board Of Directors The board of directors control the whole operation of the organization it includes the following personalities: Mr. Lain Strachan Sangster
Mr. Syed Babar Ali Mr. Fateh Ali W. Vellani Mr. Mujib-ur-Rehman Mr. Perwaiz Hassan Khan Mr. J. A. Lee Mr. Clive David Welland Mr. Dr. A. D. Bandaranayake Mr. S. N. Patel Mr. M. Asadullah Sheikh Mr. Abdul GhaniBachani Mr. Azim Azmat Osman
As we can notice that the management of the company is composed of a mix of international and Pakistanis business professionalists. The management of the company includes Syed Babar Ali as director, who is also involved in many other organizations i.e. Packages and other industries. It includes in its board meetings one member from each province i.e. Punjab, Sindh, NWFP and Baluchistan. The top management of the company is fully professional specially marketing department which is headed by Mr. Jeff Lee who have world wide experience in this field.
Hierarchy Branch structure
All over Pakistan 6 branches of Lever Brothers Pakistan Limited are working. Its head office is located in Karachi at Avari Towers. The chairman and management committee as well as the most of the department heads have their offices there. Structural Analysis Lever Brothers Pakistan Limited has a functional structure i.e. its based on the primary tasks that have to be carried out such as production, accounting, finance, marketing, etc. and then there is separate department for each function and these functions are carried out by directors and they are assisted by managers of that very particular function like marketing manager and those managers have divided each product category into home and fabric care category, spread and cooking category, etc. And these categories are headed by one product manager and assistant manager. We cannot say that the structure of Lever Brothers Pakistan Limited is an ideal or exact functional structure as in functional structure CEO is in direct supervision of each primary activity but Lever Brothers Pakistan Limited have also included layers of vice chairman and very important management committee as described earlier. This structure maximizes the basic advantage of functional structure that the CEO is in charge and well informed about each primary activity and minimizes the basic disadvantage of functional structure that an organization become larger or more diverse, then CEO, senior management can be over burdened with everyday operational issues, which is true in the case of Lever Brothers Pakistan Limited and to offset this disadvantage they have created additional layer of management committee which is responsible of coordination between CEO and chairman, vice chairman, and the functional directors to take a strategic perspective on problems. So, Lever Brothers Pakistan Limited has an ideal structure to oversee the whole organization and to control the operations of the organization which in turn create problems as of very slow decision making process and very centralized too.
To continue with structure analysis discussion, now let¶s turn our discussion to five basic forces, which determines an organization¶s structure i.e. 1. Threat of new entrants 2. Threat of substitutes 3. Buyer power 4. Supplier power 5. Competitive rivalry.
Threat Of New Entrants This potential threat always exist in every organization. But an organization like Lever Brothers Pakistan Limited this threat is very minimum because you need a giant to compete with another giant like Lever Brothers Pakistan Limited and in a relatively small market like Pakistan, they are enjoying the highest market shares in most of their product categories like ghee, oil, soaps, spread, fabric care, etc. so, they face no threat of any new entrant. Threat Of Substitutes Same as in the case of new entrant no as such threat they are facing. Buyer Power To determine buyer power one condition is always necessary i.e. the buyers are few so they exert power over an organization. But this condition is not present in case of Lever Brothers Pakistan Limited, they have very diversified product categories and within each category they have brands targeted at almost each and every segment of the market so they don¶t face the buyers power as such but still ³customer is king´ and they do have to pay a lot of attention to buyers being a consumer product company.
Supplier Power Suppliers don¶t exert any power over Lever Brothers Pakistan Limited rather Lever Brothers Pakistan Limited provides buyer¶s power in this case, no body would like to loose a buyer like Lever Brothers Pakistan Limited so, they don¶t face any significant supplier power. Competitive Rivalry Competition is intense but not cut throat competition and all of them avoid frontal assault or direct attack. So, situation of healthy competition exist. Competitive rivalry would be discussed more in detail in the section ³competitor analysis´. Structure Types In Multinational Companies The growth in the size and importance of multinational business warrants some special mention, since the structural implications can be significant. In deciding the structure of multinational critical aspect or factor or issue is the extent to which local independence and responsiveness take precedence over global coordination. On the basis of these factors there are generally four types of multinational structures, such as: In all the four structures, Unilever has assumed the structure of transnational corporations in which they have developed structure, which attempts to combine the local responsiveness of the international subsidiary with the advantages available from coordination found in global product companies. The key is that they wanted to create an integrated network of interdependent resources and competencies, in which: 1. Each national unit operates independently, but is a source of ideas and capabilities for the whole corporation. 2. The corporate center manages a global network by first establishing the role of each subsidiary, then sustaining the culture and system to make the
network operates efficiently or in a way we can say that they have combined global and multi-domestic strategy, staying independent and responsive towards local or national market and yet not loosing touch or coordination with the worldwide network and parent company.
There are interesting differences between countries in the way that global strategy tend to develop. Companies, which originated in many European countries such as Unilever or Nestle needed to internationalize their activities at an early stage, owing to the small size of their home markets. This took the firm of ³international subsidiaries´ but now their challenge is to reduce the local autonomy and increase global coordination. But in contrast US companies with a large domestic market tended to favor ³international divisions´ and now they face two challenges: 1. The issue of local autonomy.
2. Barriers between their separate strategic views of the domestic and international business.
Unilever has well coped with these challenges by adopting the transnational corporation structure.
Value Chain Analysis Of Lever Brothers Pakistan Limited This method for accessing strengths and weaknesses divides the business into number of linked activities that may each produce value for the customer. ³Customer value´ is a function of factors that usually fall into one of three broad categories those that differentiate the product, those that lower its costs, or those that allow the organization to respond to customer needs more quickly.
The value chain frame work helps analyze the contribution of individual activities in a business to the overall level of customer value the firm produces and ultimately to its financial performance. If each part of the business produces value, the firm should be able to change more and/or incur lower costs either of which will lead to higher profit margins. The value chain analysis frame work of Lever Brothers Pakistan Limited appears as follows and is basically seeking cost leadership as their source competitive advantage. Explanation Of Value Chain Lever Brothers Pakistan Limited is basically focusing on cost leadership in branded shampoos market. For their raw material procurement they have opted ³outsourcing´ strategy. Many contents of shampoos are procured from Europe, America, Far East and some of raw material is locally available it increases the lead-time. Lever Brothers Pakistan Limited handles this situation with ³near to JIT system´ i.e. called Automatic Replenishment System. Through this system the suppliers of raw material are well connected through computer terminal, the detail and current level of all raw materials, inventory level is reflected on supplier terminal and on specific interval they ship the raw material automatically which reduces time for repeated requisition. After releasing the material from customs the ingredients are shipped to Rahim Yar Khan Plant. These ingredients are processed (both local and imported) in the machinery specifically designed for this purpose. Normally for sache packs 8 lanes are processed at a time in one lot. 8 lanes = 8 reels 1 r eel = 1 ton or 1000 kg of shampoo in quantity
It¶s cutting and packaging is completed as final step. Packaging material is typically not available around factory area. Lever Brothers Pakistan Limited has to purchase all packaging material from Packages Limited Lahore. Hence both primary and secondary packaging material comes from Packages Limited Lahore. Primary packaging material includes bottles and sache packaging while that of secondary material includes the cartons. After packaging of shampoo bottles and sache passes through distributor to retailer. Outbound logistics start from here on demand of 6 depots of Lever Brothers Pakistan Limited, the lot is packed and delivered to the wholesaler. Now we will discuss that how each individual activity of value chain (both primary and supporting activity contributes towards the maximization of profits to deliver value to final customer. Supportive Activities Firm Infrastructure Lever Brothers Pakistan Limited has a well established infrastructure. They have knowledgeable expert top management and middle management who have expertise in the consumer goods fields. Moreover they have some arrangements with hair exports to furnish their product knowledge. They have a very good and effective management information system, which not only shares the information within the organization i.e. Lever Brothers Pakistan Limited but also with their suppliers and wholesalers as well. This saves their time and gives them real-time information. Marketing research department is also sharing consumer research data to improve their standards according to customer demand and trends e.g. conditioner was missing in Sunsilk Research and Development searched out
and found that competitors are providing conditioner also in shampoo which Sunsilk and Lifebuoy shampoo didn¶t have in them. But this has been done very late and implementation is also very slow. Production people (manager) upon sharing this information from marketing research department has recently launched the antidandruff white Sunsilk with conditioner which has shown a very successful performance in market and has improved the sales of Sunsilk of Lever Brothers Pakistan Limited especially of this white variant. One important thing to be noticed is that though they have integrated information sharing network but the implementation on the needed strategy by production people is seeming to be very late as their decisions are centralized and are in hands of parent company and the implementation is also very slow. This problem of absence of conditioner was identified by marketing research people very earlier and was communicated to production department as well but a implication and action has been taken after a very long time when problems of sales become visible. We can say this is due to long term approach to strategy formation and implementation of Lever Brothers Pakistan Limited. Hence infrastructure contributes as a supporting activity for providing value to the customers and on some aspects e.g. centralized decision making and late implementation it proves to be a weak support. Human Resource Management Human resource management is the one of the most important supporting pillar of the value chain and it is useful for its analysis. A firm¶s higher technological and financial resources cannot do any thing for the betterment of company unless these two and rest of the resources are handled by the good appropriate human resources. We can surely say that Lever Brothers Pakistan Limited has a skilled, qualified, expert, communicative management and officers staff. They have both formal and informal network of communication in their organization to complete the tasks and target efficiently and effectively. Hence
we can say that there is healthy type of network among Lever Brothers Pakistan Limited staff¶s department. Lever Brothers Pakistan Limited offers the training programmes and arranges seminars for further skill development and career development purposes of its brand managers, marketing managers, research and development managers, and other staff, which enhances their efficiency to support the primary activities of value chain of shampoo product line of Lever Brothers Pakistan Limited. Due to necessary training, healthy pay scales, balanced empowerment, informal
and
formal
combination
of
communication
network
the
job
satisfaction of each and every employee is very high. Which reduces the employees turnover to minimal. All of them contribute a lot and positively for the support of value chain primary activities i.e. procurement manager putting his efforts for the purchase of high and right quality making inbound logistics. Operations / brand manager is focusing ensuring the relationship of the shampoo production. Sales and distribution manager of Lever Brothers Pakistan Limited is ensuring the complete coverage of retail outlets of Pakistan. He ensures that all variants and sache and shampoos of Lever Brothers Pakistan Limited are available on each shopping outlet of Pakistan i.e. from large shopping stores to small shop covering both rural and urban areas. But here we would like to add that one thing is missing as a support of value chain i.e. good relations of Lever Brothers Pakistan Limited marketing and sales manager with their retailer and distributors. Due to this retailer give preference to the competitor¶s brands of shampoos e.g. P&G. Hence Lever Brothers Pakistan Limited is providing training and job satisfaction to its human resources in turn there is low employee turnover and they support
value chain except good relationship and incentive to retailers which is of primary importance. Technological Development By technological development as a supportive activity we mean that how much organization is bringing further improvements in its products and product development. Lever Brothers Pakistan Limited mainly through its R&D department has recently brought a major improvement in its Sunsilk shampoo i.e. launch of antidandruff white shampoo. Hence this very element has also been supportive in value chain of Sunsilk and Lifebuoy shampoo. But still Lever Brothers Pakistan Limited are laggards in bringing this improvement. Procurement Procurement especially of raw material contents and packaging material is critical to the product and ultimately to the organization¶s success. Lever Brothers Pakistan Limited purchases its most of the contents of shampoo from foreign countries like America, Europe and Far East. The procurement system of Lever Brothers Pakistan Limited is mostly globally centralized and is long term as well. For purchase of local raw material Lever Brothers Pakistan Limited is outsourcing with its suppliers. They have get very good long term relationship with their suppliers of local raw material as well. Hence they get the quantity discounts and manage lead time as well. Primary Activities Of Value Chain Of Lever Brothers Pakistan Limited Inbound Logistics Of Value Chain Of Lever Brothers Pakistan Limited 1. Lever Brothers Pakistan Limited is focusing on the outsourcing for the purchase of basic inputs with their suppliers. Instead of backward integration they believe in outsourcing which reduces their cost. 2. Lever Brothers Pakistan Limited faces high lead-time for the global purchase of its imported raw materials but automatic replenishment system has solved
this problem. Lever Brothers Pakistan Limited is all the time connected via its management information system with their suppliers. 3. Quality and reliability of raw material for shampoo product line is checked and reconceived by the Lever Brothers Pakistan Limited at fixed intervals as they have centralized buying system.
Operations 1. Lever Brothers Pakistan Limited has been in shampoo product line since 1984. Within these 16 years they have got experience. Experience effect has raised efficiency, they have very old operations and product method as there has been no major turn around in production methods of its shampoo. 2. Lever Brothers Pakistan Limited has a factory at Rahim Yar Khan in which they produce different products array with shampoo, capacity of this plant has been designed in such a way that in current demand they get the economies of scale very easily which reduces cost of manufacturing of Sunsilk and Lifebuoy on this basis they offer lower prices as compared to P&G. 3. Since Lever Brothers Pakistan Limited¶s buying is centralized same is the case with production and operations methods as well. Rahim Yar Khan has to follow the predefined production process given by parent head office of Lever Brothers Pakistan Limited. Hence production process of both Sunsilk and Lifebuoy is reliable i.e. there is no fluctuation. This element gives reliability to final consumer.
Out Bound Logistics 1. Final product of shampoo of Lever Brothers Pakistan Limited is shipped to its 6 depots via truck on the demand of these depots. Whole Sellers have to add value themselves. They bear this cost of transportation. Hence Lever
Brothers Pakistan Limited has suppliers and Whole Sellers power over its wholesalers and gives cost cutting edge. 2. Lever Brothers Pakistan Limited covers all the retail and shopping outlets of Pakistan. Lever Brothers Pakistan Limited ensures availability and visibility of its shampoos as each and every large store, medium size stores, small shops. 100% coverage of outlet is the major strength of Lever Brothers Pakistan Limited.
Marketing And Sales 1.
Poor Marketing
Lever Brothers Pakistan Limited has very poor marketing of their product. They concentrate only on ³Nabila´ as their celebrity. They mainly focus on females for Sunsilk and ignore the rest potential market; males and kids. In case of Lifebuoy they focus only on males and ignore females and kids which reduces their market share as compared to P&G¶s shampoo Penteane, Head & Shoulder. 2. Lever Brothers Pakistan Limited has no strategy to make good relations with retailers. This element destroys their repute in retailer class they do prefer P&G and competitor¶s shampoo to recommend it to buy and they give more shelf space to P&G¶s shampoos as compared to Lever Brothers Pakistan Limited¶s Sunsilk and Lifebuoy. 3. Lever Brothers Pakistan Limited has never offered any major incentive, discount or prize scheme to retailers on its shampoos which the retailers often demand. Retailers think that prize incentives with product or any other prize scheme offered to retailers or consumer etc enhance sales. Lever Brothers Pakistan Limited has never paid any head to it. Services
Lever Brothers Pakistan Limited has good ³service´ in terms they offer free samples for the relaunch of Sunsilk, which helps as a primary activity. A Transition In Value Chain Lever Brothers Pakistan Limited is now focusing as extended value chain i.e. they are outsourcing with their suppliers and subcontracting with them to ensure reliability of raw material. Before this supplier¶s outsourcing they already have connected with their customers with their strong R&D Department. But one of thing in which they lag¶s in they have centralized long term strategy, formulated on system and implementation of results of R&D Department research based on customer connection in very late. Hence all the above individual activities (i.e. primary and supportive activities) contribute to enhance customer values and ultimately improves firm¶s financial performance. Lever Brothers Pakistan Limited becomes able to incur lower costs which leads to higher profit margins.
SWOT Analysis The SWOT analysis of Lever Brothers Pakistan Limited are as follows: Strengths 1. Unilever PLC England the parent company all over the world gives assistance to Lever Brothers Pakistan Limited so Lever Brothers Pakistan Limited enjoys a high level of support from Unilever. 2. Another major source of strength for Lever Brothers Pakistan Limited is its product targeting all income groups. Lever Brothers Pakistan Limited is
providing products total income groups i.e. providing quality with economy as well e.g. Wheel washing powder, Breeze beauty soap, Taza Chai, etc. 3. Lever Brothers Pakistan Limited is the oldest company operating in Pakistan which gives him a commanding position is Pakistan to certain extent. 4. Lever Brothers Pakistan Limited enjoys the services of highly professional management in the area of sales, marketing, technical and production. 5. Lever Brothers Pakistan Limited has such a strong goodwill in the market that some of its brand names has become the generic names for those products such as Surf for detergents and Dalda for ghee. 6. Lever Brothers Pakistan Limited is the largest producer of consumer products in Pakistan and has strong brands in every field such as Close Up, Dalda, Surf, Lifebuoy, Lux, etc. 7. Lever Brothers Pakistan Limited having the biggest shares in tea market having the biggest brand Lipton and Brooke Bond. 8. They are market leader in ice cream business of Polka i.e. horizontal integration with hostile takeover they have captured their competitors thereby reducing competition. 9. The company has the assets of more than 5 billion. So, it can invest further product innovation and development. 10. It has the largest and efficient distribution network then any its competition. 11. Lever Brothers Pakistan Limited is the only company in Pakistan which has its own corner research department. 12. The company is very strong financially.
13. The company is working for almost 50 years in Pakistan. That¶s why it has many advantages. Which other do not have. They have know how of the market. They understand the market very well. Similarly during this period they have developed a very organized distribution network all over the country. Another advantage is there wide range of products, which give them a position to monopolize the retailer¶s shop. It is estimated that over more than 30% of a retailer¶s shop items are by this single company.
Weaknesses 1. Lever Brothers Pakistan Limited unable to capture shampoo and toothpaste market i.e. low market share. 2. New variants of the company were not able to sustain in the market such as harmony. 3. Lever Brothers Pakistan Limited is relatively week in their innovation department i.e. being first to introduce Surf but after that has no major innovation. 4. Emphasizing only few products while ignoring others which could give them potential market shares e.g. beverages section. 5. Lever Brothers Pakistan Limited go for long term strategies for all their product categories which prove to be a weakness with change in the circumstances and taste, trends of people
Opportunities 1. With the help of further advertising their non competing brands can increase their market share i.e. market penetration strategy. People will definitely go for these products as Lever Brothers Pakistan Limited has a sound image in people¶s mind. Whatever the brand is being sold is mostly on the basis of brand loyalty. 2. They have capital to invest they can explore new product categories e.g. in food and beverages they can develop new products like Rafhan has launched custard, jelly, kheer mix, rasmalai mix, etc. through it again will broaden their product categories and will make their operations complex but this could be avoided with ³sub contracting´ i.e. strategic partnership with their suppliers. These products can prove a ³cash cows´ as customer in Pakistan always welcome food items especially they will welcome due to brand image of Blue Band and Dalda ghee in food category and due to Lipton and Supreme in beverages category.
3. Lever Brothers Pakistan Limited relaunches most of its products with same name or little change in the name e.g. Surf Micro to Surf Extra, ,then to Surf Ultra and then to Surf Excel, with little change of name and little changes in its formula. If Lever Brothers Pakistan Limited launch its products with in prevailing product categories, with entirely new name and new formula then they can capture new market shares as it will gain capture the attention of its target market more as compared to existing one. Though apparently it will increase the advertising cost but it will be compensated with exciting sales as you have to advertise more even in case of relaunch of products with little change in names and formulas. So why not to go for new name and new formula as it will increase your brand portfolio, it can satisfy the needs of customers which were unsatisfied with the previous brands, its names, its formula, e.g. people used to say Surf fades the clothes, they changed formula and not name only gave it a suffix of Excel i.e. Surf Excel now the people who developed this perception that it fades the color, remain reluctant for long time even after its relaunch and heavy advertisement.
Threats 1. P&G is giving very serious threats to Lever Brothers Pakistan Limited in the business of detergents and personal wash and shampoos. 2. No of local companies producing detergents and market them at very low prices which is a threat to Surf. 3. In the case of ghee and oil business Habib is giving very tough competition to Lever Brothers Pakistan Limited by introducing its variety of products. 4. Treat is promoting Bodyguard very much and trying to produce a competition in the carbolic soap market. 5. Increasing inflation in the country, persistently reducing the purchasing power of the people and dropping people from high price products to low price products e.g. the detergents and providing fuel to the expansion of unorganized sector.
6. Increased import duties are also adding to the prices of the products and in Pakistan which is a very price for all the firms not only Lever Brothers Pakistan Limited who are using imported raw material. 7. Threats of new entrants are also present. As ICI is a potential threat in detergents industry, because they are already involved in chemical business and providing raw material for detergent production to different manufacturing companies like Lever Brothers Pakistan Limited and Colgate Palmolive.
PEST Analysis PEST analysis is used to assess that what environmental factors affecting different organization and which of them are more important and how they affect the organization. It is indicator of political, economical, social and technological influences on organization. Political & Legal Factors As far as the Lever Brothers Pakistan Limited concerns according to them that political instability have do affect but not particularly Lever Brothers Pakistan Limited same as it affects any other organization around and specially they are in consumer products business which never make them out of business. In case of legal factors, any trade policy or import duties is not affecting particularly Lever Brothers Pakistan Limited. In Pakistan right now following liberalization policy under SAP by IMF made which they have to waive off all restrictions and moreover due to huge investment by Lever Brothers Pakistan Limited no government can afford to create hurdles in the way of an organization like Lever Brothers Pakistan Limited. And they don¶t have to go for only lobbying or what so ever as not action of Pakistan government has affected them adversely as such. Economical Factors
Economical factors affect Lever Brothers Pakistan Limited in the same way as it affect any other organization like current economic situation in Pakistan and inflation has reduced consumer¶s disposable income too, which in turn has reduced the purchasing power of consumer but affect is same for every organization and according to them Lever Brothers Pakistan Limited have edge that they have targeted all possible segments through their vast product category i.e. the width and length too. So one way or other they find way to cover it up. Capital Markets In other economic factors like ³interest rates´ and ³inflation´ has affected the borrowing ability of organization but Lever Brothers Pakistan Limited stayed unaffected as a company having business in billions and when in need of financing no single bank can fulfill the need, they have to make a consortium to finance Lever Brothers Pakistan Limited and with very good credit standing and very low risk definitely they get the lowest or justified interest rate as well. Socio-Cultural Factors In socio-cultural factors, factors like lifestyle changes and level of education affects an organization. In case of change in lifestyle, the world has converted into global town now and people have readily access to every sort of information and they are becoming more quality conscious. Now more concerned towards environmental issues now and demand more social responsibility on the part of organizations now. To cope up with all these factors now Lever Brothers Pakistan Limited which always maintained the quality standards needs to work towards other social factors like social responsibility and environmental concerns like P&G did in its Arial campaign and image of a society responsible organization. Technological Factors
In technological factors comes R&D first and foremost that how much an organization spending in terms of product improvement or development of new products or improvement in production process or in the raw material etc. and what is the trend in the industry as Pakistan is not that big and not very much innovation seeking as the other developed countries. Yet they keep on finding new ways of doing things and new things as well they continuously launched variants in brands etc. and moreover in the market like Pakistan in product categories of consumer products ³rates of obsolescence´ is not very high rather very slow so no great pressure to launch new products,. Other than the factors smuggling affects Lever Brothers Pakistan Limited¶s sales very negatively. This issue would be discussed more in detail in the problem statement. Problem Statement Our problem statement is regarding the shampoo segment of Lever Brothers Pakistan Limited. They have managed such a deep and broad product category and manage to do so well that some of their brand name has become the generic names for that particular product but this is not the story with Sunsilk and recently launched Lifebuoy Shampoo. Our problem statement is that what are the causes, which kept Lever Brothers Pakistan Limited away from market leader position in shampoo market. Problems Whenever we look for the problems of company its problems can be bifurcated into two broader categories. 1. Internal problems 2. External problems
Internal problems
These problems are normally faced by organization due to elements, factors and weaknesses which are present inside or which are existing internally in the organization e.g. problems due to organizational policies, culture, structure, information sharing networks, organizational strategies or even employees, they can be positive force and the problem child as a source of internal problem as well. 1. Company¶s management rely on long term strategies which they receive ready made from their parent company, head office as a modus operandi. And hence a strategy or a policy approval, formulated and implemented 50 years back becomes obsolete and discard in prevailing scenario and changing environment e.g. in their advertising campaigns of Sunsilk shampoo they only use ³Nabila´ as their celebrity (Hair Expert) and they have never tried any other sports or film media celebrity for the promotion of their product which their competitors use extensively. Here in this field they lag behind due to their long term strategy even in field of advertising given by their parent head office. Hence being an influenciable organization they exhibit bureaucratic management style they want to maintain their status quo before these environmental changes like advertising trend. 2. Offices and branches of Lever Brothers Pakistan Limited are normally placed in domestic setup especially Multan branch, since it is a marketing organization, its office outlook and location must be in professional and well to do area which will contribute in proper functionality of branch and its employees as well. This severe problem is being faced by Multan branch of Lever Brothers Pakistan Limited as well. 3. Management team of Lever Brothers Pakistan Limited normally arrange excessive operational meeting, they have less emphasis on the strategy implementation part as compared to strategy formulation and planning. 4. All the decisions regarding product planning, development, distribution and even targets of the branches are centralized and are in hands of central
sales office of Lever Brothers Pakistan Limited. They don¶t believe in MBO (Management by objectives). Branches are given inflexible targets of sales ± though data on these branch managers negotiate this figure but it takes too long. 5. Due to heavy capital investment in their brands Lever Brothers Pakistan Limited is unable to observe their slow moving brands which create a cost burden. 6. Since removing old/discarded brand is very expensive due to expensive installed machinery, technology and capital investment, launching new brand is also very expensive for Lever Brothers Pakistan Limited due to the same reason. As to launch a new brand complete research and development setup is required which is inflexible and can not be re-utilized for another brand along with its consumer market is heavily flooded with products, there is very low probability that market will absorb new brands. 7. Whenever Lever Brothers Pakistan Limited launch any product they first launch it in India if product proves a ³big success´ they try it in Pakistan which is not a good strategy due to cultural difference and religious differences. 8. Lever Brothers Pakistan Limited has very poor relationships with their dealers and retailers. They are far away form their competitors like P&G, in case of retailer relationship. Their brand manager makes very rare visits to the retailers to know their problems, very little discounts are offered by Lever Brothers Pakistan Limited to their retailers. No prize scheme and incentive is given to dealers, retailers, wholesalers of Lever Brothers Pakistan Limited. Even Lever Brothers Pakistan Limited brand manager never bargain on the proper and prominent shelf space of their shampoos (Sunsilk and Lifebuoy). 9. Lever Brothers Pakistan Limited has not been able to place any check on its smuggling shampoos into Pakistan e.g. Indonesian Sunsilk is made according to the demographic of Indonesia, when it will be used in
Pakistan it will damage the hair of people, which deteriorate the brand image. Which create problem on local sales of Pakistan. 10. Employment insecurities in Lever Brothers Pakistan Limited also contribute negatively towards the performance of branch operations. All branch managers, brand managers and operation are transferred within branches of Lever Brothers Pakistan Limited allover Pakistan. This create an uncertainty among management team, new managers takes much time to settle in new branch and to understand new setup of branch and new dealers network. This affects the branch operations and performance.
External problems Lever Brothers Pakistan Limited is not facing any prominent external problem as already analyzed in PEST analysis.
Introduction Of Sunsilk And Lifebuoy Sunsilk Shampoo Lever Brothers Pakistan Limited stepped into shampoo business in 1984 with Sunsilk initially with only two variants: 1. Sunsilk (egg shampoo) 2. Sunsilk (shikaki shampoo)
This was the first branded shampoo in Pakistani market then they launched another shampoo named as ³Clinic´ in 1985. For the reason that no other competitor was there in the market their sales figures was high in start, but as shampoo market started to develop and imported shampoo and other competitors entered into the market their sales started declining so they relaunched it as ³Clinic Plus´. Due to their poor marketing in 90s Clinic Plus
faced big failure. The sales of Clinic Plus was not up to the expectations of the company and they abandoned the production of Clinic Plus. They have recently launched the brand with the new name and new formula (as they claim) named as ³Clinic All Clear´ dandruff shampoo. Company re-launched Sunsilk shampoo with following five variants in 1998: Sunsilk Black
for dull hair
Sunsilk Yellow
for normal hair
Sunsilk Green
for thin hair
Sunsilk Pink
for dry hair
Sunsilk Orange
for oily hair
They promoted these 5 variants heavily but this could not get them their market share back due to entry of strong competitors like P&G (Pentene, Pert Plus, Rejoice, Head & Shoulder), Bio Amla & other imported shampoos as these shampoos got more shelf space in the retail outlets. Lever Brothers Pakistan Limited again re-launched the Sunsilk at the end of 1999 with 12 different variants with new name of fruitamines. Now the focus was on different kind of hair i.e. how many variation of Sunsilk are there with aspect of ingredients and contents. Then they reduced their frutamines Sunsilk to six variants. Now with launch of White Sunsilk they have seven variants of Sunsilk. Lifebuoy Shampoo Lever Brothers Pakistan Limited also tried to encash its another very popular brand name Lifebuoy soap which was popular among lower income segment. They launched Lifebuoy shampoo using this brand name in 1998. Initially it was successful according to the retailers every one was asking about it and
asked for retailers opinion as well. But it flopped badly because it was mainly targeted towards lower and middle income segment and Lever Brothers Pakistan Limited wanted this segment to switch from bath soap to shampoo and wanted to develop shampoo market in this segment as well. But this class did not switched to Lifebuoy shampoo because they were in habit of using soap for washing their hair, more over they did not find any thing unique and new about the shampoo. Other than being liquid. So, they again returned to Lifebuoy soap.
SWOT Analysis Of Shampoo Product Line Strengths 1. Lever Brothers Pakistan Limited has a good name as a market leader in consumer products this image always help its shampoo product line. Customer are brand loyal and of shampoo product line. 2. People have favorable opinions about Sunsilk that its contents do not include any harmful chemicals which could damage their hair. 3. First trial image of user are positive and they are generally brand loyal. 4. Sunsilk and Lifebuoy shampoos users believe that it is economical. Due to cost leadership strategy of Lever Brothers Pakistan Limited in shampoo product line. 5. They have recently launched antidandruff shampoo (white variant) with additional feature of conditioner which has been highly valued by the customers. It is competing successfully with P&G¶s shampoos which were already having conditioner in them.
Weaknesses 1. Packaging of Sunsilk and Lifebuoy shampoo is the biggest weaknesses of Lever Brothers Pakistan Limited. Retailers complaint that one leaked bottle of Sunsilk spoils the whole lot. But Lever Brothers Pakistan Limited do not pay any head to it.
2. Advertisement of Sunsilk does not promote the product very well rather its celebrity like ³Nabila´ is promoted. They don¶t switch their celebrity as they have to follow long term promotion and advertising designed by their head office as Elida (France) has always used beauty expert as their celebrity. 3. They focus on only females in their advertisement and they have ignored their bigger segment of males. 4. Lever Brothers Pakistan Limited does not pay any attention on the incentives and discounts given to the distributors and retailers. 5. Sales manager, brand manager and sales representatives do not conduct any personal visits to the retail stores which gives them dissatisfaction. 6. Lever Brothers Pakistan Limited does not pay any attention to the shelf space given to the Sunsilk in the retail stores. The store manager of ³Range´ told us that the brand manager of Lever Brothers has never been visited their store and they even never bothered about their shelf space. 7. Due to very huge number of variants in Sunsilk, Lever Brothers Pakistan Limited fined it very difficult to focus on particular variants and it created confusion among customers as well and increased complexity of operations to a large extent and created cannibalization effect. Though recently they have reduced their variants of Sunsilk from 12 to 6 and then launched another one Sunsilk white. Still it needs further reduction.
Opportunities 1. Due strong company image and strong distribution network if they promote their products through incentives, bonuses, allowances and discounts to the retailers they can get better shelf space in the display stores of retailers especially in shampoo product line. 2. Lever Brothers Pakistan Limited has very strong and resourceful research department. They can conduct through their personnel in all over Pakistan both in rural and urban areas and hence they can launch the new shampoo with new formula and with new name. For this they have such a big portfolio that they can afford its cost and returns will be maximized as a
result of increased sales which will definitely offset the cost and will result in maximum market shares. 3. People have ignored the relaunch of Sunsilk and its different offered variants. Lever Brothers Pakistan Limited should implement the idea of launching the new shampoo with new name and new formula because of this they well be better able to attract target market.
Threats 1. All new and existing and important shampoo and branded soaps, which are used, as shampoos are the threats for the shampoo product line of Lever Brothers Pakistan Limited especially Sunsilk. Since people are not that much price sensitive in case of shampoo but they have more concern about the ingredients, formula and quality of their shampoo. 2. Competitors of Lever Brothers Pakistan Limited like P&G have very strong relations with retailers and distributors which is greater threat to the Sunsilk. The detail of discounts offered by P&G re as followed: Order in Rs. Below 50,000 Above 50,000
Discount in % 2-3% 5-6%
While Lever Brothers Pakistan Limited offers even less than the above stated discounts on Sunsilk and Lifebuoy shampoos.
Competitors¶ Analysis The major competitors of Sunsilk can be categorized in two ways (all percentages have been provided by Lever Brothers Pakistan Limited: 1. Direct competitors 2. Indirect competitors
Direct Competitors
75% 25%
These competitors are in terms of product category. With reference to the product category we can divide users of shampoo into following segments: Upper Class This class normally use Pentene, Head & Shoulder, Pert Plus. These shampoos are giving tough competition to Sunsilk. Middle Class This segment is normally using shampoos in following percentage: * All the percentages have been provided by LBPL. Sr. No. 1 2 3 4 5
Shampoo Bio Amla Head & Shoulder Pentene Pert Plus Sunsilk
Percentage 10 20 35 25 10
Bio Amla Normally young girls and women want lengthy hair and try to avoid split edges of hair so they prefer Bio Amla. This is a shampoo which has the largest number of liters sales in Pakistan. Only lower middle and middle group people are using Bio Amla. Head & Shoulder 20% shampoo users are using Head & Shoulder as they are dandruff conscious people. 99% of the people are influenced by the advertisement of Head & Shoulder on daily use to get rid of dandruff and more over they re getting the promised results. They have targeted both males and females due to which they have got more number of shares in market. Pentene
Pentene is the strongest hair care product of P&G both formula and advertisement wise. As already explained they are giving top incentive to retailers and distributors. P&G sales staff pay more visits to their retailers and stores to check the shelf space of their shampoo. Thus due to these efforts they are getting 35% of market share. Pert Plus This shampoo is almost getting 25% of market shares and it is also a very strong brand of P&G. P&G has targeted on young busy people who want stylish hair within five minutes. So the need of separate conditioner is also committed. Sunsilk Rest of the market share i.e. only 10% is with Sunsilk.
Sales Analysis Now we will discuss briefly only Pentene and Sunsilk from retailers point of view i.e. how much order are generally placed by retailers in a month. 1. Pentene of P&G 2. Sunsilk of Lever Brothers Pakistan Limited
Pentene Of P&G According to the retailers like Range & Prince Store and other small shop keepers, normally place four order in a month i.e. the shelf space is refilled 04 times in a month or every week due to the increased sales of Pentene. It reflects the highest turnover of Pentene.
Sunsilk Of Lever Brothers Pakistan Limited On the other hand only one order is normally placed in month by retailers due to the low demand by consumers. Hence the shelf space of Sunsilk is refilled 12 times in a year or once in a month. We can say that ratio for order placement is 1:4 for Sunsilk and Pentene respectively. In other words 75% of the orders are of Pentene and only 25% of the orders are secured by Sunsilk if we compare only these two. Indirect Competitors Indirect competitors include: Imported shampoos
40%
Branded soaps
35%
Unbranded shampoos and soaps
25%
Imported Shampoos Higher income segment is very quality conscious. They are major innovators and variety seekers. They change their shampoo more often than any other segment. They are mostly influenced by advertisement and word of mouth or on the basis of the consultation of their beauty experts. Examples of imported shampoos include: 1. Finess 2. Agree 3. Saloon Selective 4. American Pentene (Pentene lively clean, ,Pentene Moisture lock)
5. Vidal Sasoon 6. Temi Tei
40% of the indirect competition is provided by these imported shampoos. Branded Soaps These soaps include: 1. Lifebuoy (Lever Brothers Pakistan Limited) 2. Safeguard (P&G) 3. Bodyguard (Treet) 4. Johnson & Johnson (J&J) mainly targeted on kids
These soaps account for 35% of indirect competition. Unbranded Shampoos & Soaps They are unbranded shampoos and soaps and are normally used by lower income segment. These unbranded soaps and shampoos provide a major competition to Lifebuoy shampoo for which Lever Brothers Pakistan Limited focuses on low income segment. Lifebuoy soap is also providing indirect competition to Lifebuoy shampoo, as users of Lifebuoy soap have not shifted to Lifebuoy shampoo. These unbranded soaps and shampoos account for 25% of indirect competition. Strengths And Weaknesses Of Competitors
For this purpose or major competitor of concern are P&G and their shampoos like Pentene, Head & Shoulder and Pert Plus are providing major competition to Sunsilk and Lifebuoy. Strengths Of P&G 1. Their shampoo like P&G has conditioner in its which Lever Brothers Pakistan Limited has only in one variant (Sunsilk White). This is most demanding feature of shampoo which P&G has focused upon. 2. Advertisement of P&G focuses on males and females both to appeal potential markets as their customers. 3. P&G has very strong relationship with their retailers. Their marketing and sales manager bimonthly visits these retailers to get knowledge of their problems. They provide them good incentive like discounts i.e. three to four percent on their sales, quantity discounts on large sales, moreover they launch price schemes continuously for their retailers. Lever Brothers Pakistan Limited have this very healthy strategy i.e. relationship with retailers. 4. P&G provides transportation facilities to its distributors and retailers which attract these distributors and retailers to buy the P&G¶s shampoo as compared to Lever Brothers Pakistan Limited¶s one. 5. P&G¶s management bargain and stresses more on its prominent shelf space with their retailers. In return of all above incentive not only retailers give a good shelf space but also promote P&G¶s products. 6. P&G fills its shelf space four times a months due to its high demand of shampoos. While Lever Brothers Pakistan Limited¶s shampoos order are placed once in a month due to low demand by retailers. Hence high sales volume is an other strength of P&G¶s.
Weaknesses 1. People have perception that P&G¶s shampoo (e.g. Pentene) has harmful chemical, it causes fall of hair. It is a weaknesses of P&G people think that it softens the hair and gives silky touch but it causes the hair fall.
2. Though there is not too much big difference of price of Sunsilk and Pentene but people perceive that Pentene and P&G¶s shampoo are of high prices. Due to this they face competition from Lever Brothers Pakistan Limited. But now they have overcome this element by price reduction i.e. from Rs. 120 to Rs. 99 i.e. just one rupee below the retail price of Sunsilk (retail price of Sunsilk family size bottle is Rs. 100).
Existing Strategies Of Sunsilk The strategy rather group of strategies adopted by Lever Brothers Pakistan Limited for Sunsilk are as follows: Four main groups of strategies are available to us i.e. 1. Product development 2. Market development 3. Market penetration 4. Diversification
Out of these four strategies Lever Brothers Pakistan Limited has adopted the market development strategies i.e. finding new market or target customers for the Sunsilk in case of launching shortly new variant of Sunsilk White antidandruff and second strategy followed is diversification which they are know about to follow through launching complete hair care package i.e. not only shampoo but conditioners and hair dyes and sprays as well. And in this strategy an other group of sub-strategies being followed is 4-P¶s. Product Strategy For
product
continuous
improvement
strategy
is
being
adopted
i.e.
continuously launching different variants in Sunsilk. Previously launched 12
variants than reduced to 6 variants, and now launched another variant i.e. Sunsilk White antidandruff. Pricing Strategy Lever Brothers Pakistan Limited have been using mediocre price strategy i.e. neither too high nor too low i.e. lower than P&G but higher than Bio Amla Shampoo. Due to cost focused strategies they are able to provide customers with low prices as to retain their target market which is mainly the middle class. Promotion Strategy In case of promotion, due to restriction from parent company and Elida Hair Institute they are bounded to follow celebrity beautician focused promotional campaigns (Nabila) and entirely focusing the female segment for Sunsilk Shampoo. Placing Strategy Distribution strategy is not different other than any product same distribution strategies adopted for complete product line. No separate or customized strategy adopted for Sunsilk. Suggested Strategies From about mentioned for group of strategies considering the weakness inherited in those strategies and problems faces by Lever Brothers Pakistan Limited, we would recommend product development strategy instead of market development. And now implication of this strategy over four P¶s. Product Strategies They should launch a new product with completely new brand name instead of matured rather declining brand name and excuse for not launching a new brand. Hence as being very expensive is no excuse for a company having portfolio for the financing of which backs have to make a consortium. Pricing Strategies Pricing strategies adopted are quite justified. Promotion Strategies
Main problem lies with promotional strategies being followed by Sunsilk using Nabila for almost last 5-6 years continuously. They should bring a change in their promotional campaign and should diversify it not only rely on television but should utilize other sources as well, should have market penetration strategy effectively. Place (Distribution) Strategy Lever Brothers Pakistan Limited should develop long term relationship with their retailers and provide them more attention and focus on them and listen to their complaints which they are not doing right now and sales force only are to pick and place orders and fulfillment of orders and don¶t bargain on shelf space and not providing any incentive to retailer for the promotion of Sunsilk. So, developmental beneficial relationship with the retailers along with wholesalers.
Existing Strategies Of Lifebuoy Since Lever Brothers Pakistan Limited has launched a new product of Lifebuoy shampoo on the basis of its existing product Lifebuoy soap. Lever Brothers Pakistan Limited has tried to encash it generic brand hence cash cow Lifebuoy soap in a new form Lifebuoy shampoo. So Lever Brothers Pakistan Limited is following related diversification strategy in Lifebuoy shampoo. Within this group of strategies I its 4-P¶s. Product Strategy In case of Lifebuoy shampoo they have made a related diversification in Lifebuoy soap. Pricing Strategy The are following cost leadership in Lifebuoy shampoo. Their focus is on low income group which is already loyal to Lifebuoy soap due to its low prices. Hence brand name and brand loyalty has been focused. Place (Distribution) Strategy
