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Strategic Analysis of UNILEVER Pak LTD
Strategic Analysis of UNILEVER Pak LTD
STRATEGIC ANALYSIS
OF
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Submitted to:
DEDICATION
OF
Acknowledgements
God never spoils any effort; every piece of work is rewarded according
to the nature of devotion for it. We are extremely thankful to ALLAH
ALMIGHTY Who, in spite of numerous difficulties, vicissitudes and
acute frustrations enabled us to probe the present 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
scientist of all the ages, whose moral and spiritual teachings enlighten
our heart, mind and soul and flourished our thoughts towards
achieving higher ideas of life.
Table of Contents
1- Introduction of UNILEVAER………………………………….6
2- Company Summary...………………………………………..…8
2.1- Vision………………………………………………..….8
2.2- Mission……………………………………………..…...8
2.3- Objectives……………………………………………….9
3- Internal and External Audit…………………………..................10
4- The Input Stage………………….……………………… ...12
4.1- EFE matrix…………………………………… ………..12
4.2- IFE Matrix………………………………………………14
5- The Matching Stage ……………………………………………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
6.1- QSPM Matrix………………………………………….26
7- Strategic Recommendation…………... ……………………….…27
8- References ………………………………………………….…..…28
The Company’s factory at Rahim Yar Khan was one of the first industrial
units to be constructed after the creation of Pakistan. As the consumer base
expanded over the years and the Company entered into new product lines
like Personal Products and Margarine, it invested further in the installation of
modern manufacturing facilities including a factory at Karachi. Today, the
Company is using latest state-of-the-art technology for producing high
quality products.
The company had a turnover of Rs. 23.3 bn (Euro 309 mn) 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.
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.
Our Vision
Our Mission
150 million times a day, in 150 countries, people use our products at key
moments of their day. In the future, our brands will do 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.
“Our deep roots in local cultures and markets around the world give us our
strong relationship with consumers and are the foundation for future growth.
We will bring our wealth of knowledge and international expertise to the
service of local consumers - a truly multi-local multinational” - extract from
Unilever’s Corporate purpose.
Strengths:
Customer’s Loyalty.
Latest state of the art facilities and technology for producing high
quality products.
Weaknesses:
Opportunities:
Threats:
EFE Matrix
Weighted
Key External Factors Weight Ratings
Score
OPPORTUNITIES
Market of developing countries due to more
1. 0.15 4 0.60
tendency towards consumption
2. Rapid increase in world’s population. 0.15 3 0.45
3. Unrelated diversification. 0.10 1 0.10
4. Rural area. 0.05 4 0.20
5. Hygiene Consciousness 0.10 2 0.20
THREATS
1. Competition from organized players, P & G 0.15 4 0.60
2. Inflation Rate 0.08 2 0.16
3. Smuggled products and local competition. 0.07 2 0.14
Legal, political and regulatory factors of
4. 0.05 2 0.10
host country.
5. Rapid increase in raw material cost. 0.10 4 0.40
Total Weighted Score 1.0 2.95
Ratings:
1 – Poor 3 – Above Average
2 – Below Average 4 – Superior
Justification of ratings:
On opportunity side:
1. It is a general observation that people of developing countries like
Pakistan are more inclined towards consumption rather than saving
and the major portion of spending is on FMCG.
On threats side:
1. P & G with 50% market share is a big threat for UNILEVER. 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. Rapid increase in inflation rate can increase the prices of products and
hence can reduce demand.
IFE Matrix
Weighted
Key Internal Factors Weight Ratings
Score
STRENGTHS
1. Customer’s Loyalty. 0.15 4 0.60
2. Micro level retail outlets 0.10 4 0.40
Latest state of the art facilities and
3. 0.10 4 0.40
technology.
4. International brand strength. 0.08 3 0.24
5. Market share of 41% 0.12 3 0.36
Committed to business ethics, safety,
6. health, environment and community. 0.10 3 0.30
WEAKNESSES
1. Strategic Alliance 0.15 1 0.15
2. Costly Products. 0.15 2 0.30
3. Operational Complexity. 0.05 1 0.05
Total Weighted Score 1.0 2.80
The score 2.80 shows that company has solid internal position, its strengths
are overcoming the weaknesses.
Ratings:
1 – Major Weakness 3 – Minor Strength
2 – Minor Weakness 4 – Major Strength
Justification of ratings:
On strength side:
On weakness side:
1. Although UNILEVER claims that strategic alliance with small firms for
manufacturing purpose is the part of its reducing cost objective but if
we look at the other side of the picture, strategic alliance is a weakness
as well as threat for UNILEVER. For example, Asad Soap Factory is
manufacturing soap for UNILEVER Rahim Yar Khan, and now Asad
soap factory is searching for buyers of soap plant.
STRENGHTS WEAKNESSES
1. Customer’s Loyalty. 1. Strategic Alliance
2. Micro level retail outlets 2. Costly Products.
3. Latest state of the art
facilities and technology. 3. Operational Complexity.
4. International brand
SWOT / TOWS strength.
Matrix
5. Market share of 41%
6. Committed to business
ethics, safety, health,
environment and
community.
5. Hygiene Consciousness
THREATS S-T Strategies W-T Strategies
1. Competition from
organized players, P & G 5. Vertical Integration 6. Increase in
(T1,T3,S2,S4) manufacturing capacity.
2. Inflation Rate
(W1, T1).
3. Smuggled products and
local competition. 7. Cost leadership(W2,T5)
4. Legal, political and
regulatory factors of host
country.
5. Rapid increase in raw
material cost.
Proposed Strategies:
5. UNILEVER can use its international brand strength and wide network
of retail outlets in order to compete with organized and unorganized
players of market.
SPACE Matrix
Total: +11
Industry Strength (IS)
Total: +11
Competitive Advantages (CA)
Total -9
Environmental Stability (ES)
Total: -17
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 -6 + 0.95 +6 IS
-1.2
Competitive
Strategy
-6
ES
1. Product development
2. Market Development
Following are some factors that prove why I choose this strategy for
UNILEVER:
BCG Matrix
Market Share
?
High +20
Ice cream
Knorr
INDUSTRY
SALES
GROETH
RATE (%) Detergents Dove
Medium 0
Beverages (Tea)
Soap
Low -20
Industry Classification:
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, delay in factory expansion resulting in
plant shutdowns, and adverse weather conditions. However, going forward
with per capita consumption at a low 0.5 liters per annum tremendous
growth potential exists in the ice cream segment.
We expect segment revenue growth of CAGR 19% in CY08-CY12E.
According to matrix, UNILEVER’s frozen foods like Knorr and some products
of household care business units like Dove are question marks as they are
operating in a growing market without high market share, thus holding the
sales growth of the company’s 400 leading brands by 0.6%.
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
Internal-External Matrix
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.
Rapid
Rapid Market
market Growth
Growth
Q2 Q1
Weak Strong
Competitive Competitive
Position Position
Q3 Q4
The grand matrix helps us to determine the strategy that firm must pursue,
based on its competitive position and market growth.
QSPM Matrix
Market Product
Development Development
Attractive Attractive
External Factors Weight Total Total
Score Score
Strategic Recommendation
Following are necessary factors that must be present while choosing market
development strategy:
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.