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A multinational company with Dutch and British roots, Unilever creates over 400 brands in the
area of health and wellbeing. It is one of the largest food manufacturers and consumer goods
companies in the world (Dentoni & Peterson, 2011). While Unilever headquarters is based in
London, England the company offers food, household goods, and personal care items on all
major continents. In 1930, the British soap manufacturer Lever Brothers and the Dutch
margarine company Margarine Unie merged to form Unilever. Due to their frequent competition
for the same oils and fats as raw ingredients for their products, the two businesses decide to
merge and as a result the company is able to be one of the FMCG market leaders.
Industry Analysis
The Asia-Pacific area has a sizable market for fast-moving consumer goods (FMCG), which
includes products like food, drink, personal care, and home maintenance. The largest segment
of the FMCG industry and the top category for consumer expenditure in the Asia-Pacific region
is food and beverages (Statista, 2022).
According to Worldpanel's most recent Asia Pulse study (2022), despite inflationary pressures,
Asia's FMCG industry maintained growth at a consistent rate in Q4 of 2022 compared to the
prior year, with a 2.9% gain in value. The home care and beverage industries, which increased
by 5.7% and 4.6%, respectively, were the main drivers of this expansion. Numerous economies
in the Asia-Pacific region, including those in India, Indonesia, China, and South Korea, have
continued to rise. The year-over-year value growth of the FMCG market is declining in other
economies, such as Hong Kong and Myanmar, potentially as a result of the reappearance of
COVID-19 and the corresponding political conditions (Statista, 2022). The data suggests that in
the last two years, the FMCG sector has been learning, innovating and tapping into pandemic-
induced trends. However, in order to continue growing and remaining competitive, FMCG
companies must capitalize on new opportunities in the coming years. Additionally, Porter's 5
Forces Model gives a brief overview of this industry:
Competitive Rivalry
Competition is a major force in Unilever’s industry environment. Nestle, Johnson & Johnson,
Procter & Gamble, PepsiCo, GSK and many others are among Unilever's top rivals. There are
numerous corporations that oppose Unilever, and each firm has a broad range of industries
falling beneath them. Since the products have very little differentiation, switching costs are
extremely low as the FMCG industry is home to numerous businesses with minimal switching
costs. While the FMCG businesses are generally aggressive, it can be said that the intensity of
competition for Unilever is quite high.
Threats of Substitutes
Due to Unilever's presence in numerous market segments, each segment has its own set of
market leaders. As it is quite inexpensive for the customers to switch the products, the threat of
substitutes in the industry is quite moderate. Unilever acts as the market leader in many
segments therefore, new substitutes could affect its leadership position in the market as there is
always a possibility of cheaper knock-offs being placed on the same market shelf as the market
leader. However, the majority of alternatives offer a poor quality at a negligible cost premium
which weakens the overall impact of substitution on Unilever’s business.
Complements
The complements of Unilever plays a very important role in enhancing the business operation
and developing a strong market position. The company benefits from partnership and
collaboration with various stakeholders, suppliers and retailers. For instance, partnership with
retailers, helps the company to secure a prime shelf space for their products to be promoted
efficiently. Similarly, partnership with different logistic companies helps Unilever to ensure
efficient supply chain management and eventually enhance customer accessibility and
satisfaction with timely delivery.
Understanding these competitive forces and their underlying causes is very important for any
businesses as it reveals the root of an industry’s current profitability while providing a framework
for anticipating and influencing competition over time. A healthy industry structure should be as
much a competitive concern to strategists as their company’s own position. Understanding
industry structure is also essential to effective strategic positioning as defending against the
competitive forces and shaping them in a company’s favor are crucial to strategy (Harvard
Business Review, 2008).
Internal Analysis
Porter's five forces model (1985) depicts the idea of strategic fit or positioning as it claims that
successful businesses must consider the needs of customers along with the actions of
competitors by bringing strategic changes as per its external environment. However,
considering the fact that markets are changing at double, many scholars have questioned this
approach as they claim that businesses are not able to adapt in the ever changing environment
and develop their strategies quickly in accordance to the industry situation. Hamel and Prahalad
(1993) have argued that the concept of ‘strategic fit’ is unbalanced and should be supplemented
by the idea of strategy development by 'stretch'. Competitive advantage is minimized when an
industry-based strategy is effective because competitors tend to copy it. In the same
circumstances, a study of a firm's unique skills and abilities will yield the unique insights that
environmental analysis, by itself, cannot (Barney, 1986).
Therefore, in the 1990s, as an alternate strategy, Resource Based View developed for
analyzing the competitive advantage of the firm. ‘Firms should seek to develop inimitable
resources over time. It is possession of these and these alone that will help produce a
meaningful and long-term competitive advantage’(Clegg et al., 2011: 84).
Grant (1991) clarified the role of resources and capabilities as the foundation for strategy of the
firm. He indicated that the idea of making the resources and capabilities of the firm as the
foundation for its long term strategy rests upon two concepts. Firstly, internal resources and
capabilities provide the basic direction for a firm’s strategy. When the external environment is in
a state of uncertainty, the firm’s own resources and capabilities may be a much more stable
basis (Grant, 1991, p. 116).
Secondly, the company's basic source of profit is its resources and capabilities. The
attractiveness of the industry in which a firm is based and the establishment of a competitive
edge over competitors are the two criteria that determine whether a firm can generate a rate of
profit that exceeds its cost of capital. According to the resource-based approach, "competitive
advantage rather than external environments is the primary source of inter-firm profit
differentials between firms” (Grant, 1991, p. 117).
Resource-based approaches to the theory of competitive advantage point towards four
characteristics of resources and capabilities which are particularly important determinants of the
sustainability of competitive advantage: durability, transparency, transferability, and replicability”
(Grant, 1991, p. 124), that are complement to the VRIO model of Barney (1991) (in which the
resources that create sustainable competitive advantage for the firm must be valuable, rare,
inimitable and nonsubstitutable).
To ascertain whether the selected resources for Unilever enable for the long-term development
of competitive advantage, the VRIO strategic tool may be applied to the resources. However, it
is important to note that even if Unilever has all the important resources that are both rare and
difficult to imitate, it won't necessarily result in a sustainable competitive advantage. The key to
build a sustainable competitive advantage is to have organizational capabilities, expertise, and
structure to exploit the resources.
Resources/ Value Rare Imitation Organized Advantage
Capabilities
Competitive Parity: The resources that enable Unilever to generate the standard and average
outcomes and performances in an industry are those that help the company develop
competitive parity.
Abdelkafi and Tauscher (2016) defines a business model as a “ reinforcing feedback loop
between the created value to the customers, the value captured by the firm, and the value to the
natural environment. It represents the firm's money-earning logic in a transition to sustainability.”
Similarly, Baden-Fuller and Haefliger (2013) defines the model as a “ system that solves the
problem of identifying who is (or are) the customers, engaging with their needs, delivering
satisfaction and monetizing the value. The framework depicts the business model system as a
model containing cause and effect relationships and it provides a basis for classification (p.419).
In the ever changing needs of the consumer goods market, Unilever has continually
distinguished itself as a true giant in the market despite the constant changes and uncertainties.
The company has been able to establish itself as an undisputed industry leader with its
diversified portfolio of well-known brands and a purposeful global presence. This kind of
success, though, is not the product of a lucky break; rather, it is the outcome of their carefully
designed and meticulously carried out business model. (Ritter, 2014) claims that the elements
of the business model must be internally aligned and coherent. For instance, the capabilities of
the firm must be able to provide the planned customer value and the model must be aligned
with the internal structure and overall management model of the company (Birkinshaw and
Ansari, 2015).
Unilever’s value proposition is “ to make sustainable living commonplace”. This depicts that the
company’s main objective is to incorporate sustainability as a part of their strategy into each
component of its business operations and product line. Unilever constantly struggles to build a
better future by improving people's health and wellbeing, the environment, and the livelihoods of
those in their supply chain. The company highlights its commitment to social responsibility and
works towards bringing about positive change inside their industry and outside by making
sustainable living approachable and appealing to the general public. The business model of
Unilever can be explained via below components of the Business Model Canvas.
● Value proposition: “To make sustainable living commonplace”. The company offers a
diverse range of high quality and affordable products from innovative brands with a
purpose of meeting the daily needs and improving health and well-being of the
customers. The company also partners with global e-commerce marketplaces through to
small family owned stores in order to benefit their business and Unilever as a whole.
● Customer segments: Unilever serves diverse customer segments, which include
individual consumers, families, professionals and workers, retailers and distributors,
businesses and institutions and overall global and local markets. Their products cater to
customers of all ages, genders, and socio-economic backgrounds.
● Channels: Unilever reaches its customers through a variety of channels, consisting of
both traditional retail outlets and modern e-commerce platforms. These include; mass
media, retailers and point of sales, social media and other social platforms. The
company also has an extensive distribution network that ensures their products are
readily available across the world.
● Customer relationship: Unilever establishes and maintains strong customer relationships
through consistent product quality, extensive product selection, and putting the needs
and preferences of the consumers at the center of their decision-making process.
Additionally, the company uses marketing, social media, and customer service to
engage with and receive feedback from customers.
● Key activities: The company’s key activities include manufacturing, production,
marketing, operation, distribution, research and development and quality control and
assurance processes.
● Key resources: Unilever’s key resources include their established brand identity,
factories and distribution network, production technology, open innovation along with
their extensive product portfolio.
● Key partners: Unilever collaborates with a diverse range of partners, including investors,
retailers and distribution networks, farmers, advertising agencies and providers along the
supply chain.
● Cost structure and revenue streams: Unilever’s cost structure primarily consists of
production and manufacturing costs, marketing and advertising expenses, research and
development investments, logistics, and distribution costs, and employee wages and
benefits. Similarly, their primary source of revenue is sale of consumer goods along with
the licensing and royalties from e-commerce and online sales.
The above business model of Unilever depicts that there is an alignment between the
company’s strategy and customer needs with its business model. (Rumelt, 2011) says that the
most important alignment for business model implementation is that of company and customer
needs in a way that provides the company an ongoing stream of profits.
Sustainable Value
While there is a common agreement that any business needs to adopt sustainability, there is
still very limited guidance from research on sustainable development in the management field
on how this should be done. However, (Hart and Milstein 2003) developed a sustainable value
framework that links the challenges of global sustainability to the creation of shareholder value
by the firm. The model demonstrates specifically how the global issues surrounding sustainable
development, when viewed through the proper set of business lenses, can help in the
identification of strategies and processes that promote a more sustainable society while also
enhancing shareholder value, which the authors have defined as the creation of sustainable
value by the firm (Hart and Milstein 2003).
The primary goal of business is to benefit society, and Unilever has always embraced this
responsibility. Their ultimate mission has been to enhance people's lives on a daily and
individual basis for more than 100 years. Since William Lever, their founder, concentrated on
what he called "shared prosperity" in the 1880s, their objective has remained largely
unchanged. The Unilever Sustainable Living Plan (USLP), which aims to develop the company’s
business while making their environmental footprint and enhancing their social impact is how
Unilever is putting the sustainability commitment into practice (Murray, James 2018).
Each sustainability driver has a specific dimension of shareholder value that is reflected in the
business strategies and practices that are linked with it. The first step managers may take to
create lasting value for the company is to consider all of the obstacles and possibilities (Hart &
Milstein, 2003).
There are four core dimensions of sustainability strategy with different linkages to firm
performance and value creation:
● Pollution Prevention: minimizing waste and emissions from current facilities and
operations
● Product Stewardship: engaging stakeholders and managing the full life cycle of today’s
products
● Clean Technology: developing and deploying “next-generation” clean technologies; and
● Base of the Pyramid: co-creating new businesses to serve the unmet needs of the poor
and underserved.
The Sustainable Living Plan by Unilever is a prime example of how a business may use
corporate social innovation to balance profit and purpose. The corporation has included this
idea into its business strategy because it understands that success is correlated with the well-
being of the globe and its people. It aims to create change across their value chain, from their
operations, to their sourcing, to the way consumers use and dispose of their products. In order
to drive their Sustainable Development Goals forward with greater speed, the company is
consistently setting new ambitions and targets. For instance, the company’s goal is to become
carbon positive by 2030 and ensure that all plastic packaging is fully recyclable, reusable or
compostable by 2025 (Unilever, 2023).
Unilever has recognised that the only business model for the company is one in which all of
their stakeholders benefit and where the planet and society thrive. The sustainable practices of
Unilever can be connected to the framework of Hart and Milstein 2003 based on the following:
Strategic Options
According to the famous author Mintzberg, the term strategy has been defined with five key
aspects which includes plan, ploy, position, pattern and perspective (Pryor et al, 2007).
Mintzberg defines strategy as a position as the ability of the company to locate or fit the
business with its environment and decide which position is suitable for it to adopt, for instance,
product portfolio, brand position, market position, etc. (Pryor et al, 2007).
Melton, Damron, and Vernon (2017) examined how Unilever implemented the strategy of
position and concluded that the business has a number of successful brands around the world
where it has also moved into the foreign markets where it does not now participate. This
strategy was based on its need to reach global customers for consumer goods products.
Sunsilk, Dove, Lux, and Rexona are the four main international brands of Unilever that have
effectively aided the company's entry into other markets.
Unilever currently follows a global market strategy known as ‘Think Global Act Local’ in order to
be the market leader in the global market of consumer products. By following this strategy,
Unilever practices a competitive approach in all international markets by selling similar products
everywhere while also making few changes in the products as per the local consumer needs.
Unilever’s strategy based on Porter’s Generic Strategy
Based on Porter’s Generic Strategy Framework, the company followed a differentiation focus
strategy which made the company succeed in the FMCG market. Through the differentiation
strategy, the company strives to gain a competitive advantage while meeting the unique needs
and preferences of the customers. The company currently employs broad differentiation,
focusing on qualities and features that set its products apart from those of competitors.
For instance, the company improves its Dove Cream Bars personal as gentler and less drying
soaps to meet consumer demand (Patton and Holstius, 2015). Although the price range is quite
higher as compared to other brands, Dove is successfully able to differentiate itself from other
competitors of soaps who focus on cleaning rather than moisturizing. Through this generic
differentiation strategy, the company is able to attract customers with its customized designed
consumer products.
Unilever’s strategy based on Ansoff Matrix
As per the above discussed differentiation strategy of Unilever, their strategic objective is to
grow by focusing on its product development as per the customers needs and preferences.
According to the Ansoff Matrix, product development is one of the core strategies where the
company develops new products in the existing markets.
Researchers also argued that a company’s developing new products to existing markets could
give them a competitive advantage over competitors (Tajvidi and Karami, 2015). Hence, based
on the model of Ansoff Matrix, the ‘good’ strategy for Unilever is product development, where
the company can develop products that stay ahead of the competition and can attract more
customers globally. This can also lead to an increase in the company’s revenue in those regions
where it currently operates but has low-profit margins. For instance, Unilever can introduce new
versions of its personal care products from time to time to maintain its market share.
Recommendations
In the present context, there is an increased competition in the FMCG industry all over the world
as through social media and e-commerce, consumers have become more aware about the
products. The product life expectancy is at a diminishing state and there is an increased number
of powerful retailers in the market (Unilever, 2023). This means that most FMCG products fall by
the edge despite the important nature of the product grouping process.
On the other hand, the research conducted by Anselmsson and Bondesson (2015) argued that
the habits and needs of consumers are changing where firms in consumer goods could no
longer make similar assumptions about the shopping activities of the mass market. Hence, they
can depend on a large group of homogenous middle-class consumers which is comparatively
large, and those who can purchase both luxury and staples at mid-price stores (Sakellariou,
Karantinou, and Poulis, 2013).
Based on this finding, focusing on the product development strategy by Unilever can give these
middle-class consumer groups a wide range of products from which they can make their
choices and that can ultimately meet the shifting needs and preferences of these consumers.
On the other hand, as consumers increasingly demand more sophisticated personal care
products, growth in the personal care market in Europe is rising at new heights. In a study of
Frost & Sullivan, an international marketing consultant, emphasizes the need for more product
development in the European market (Frost & Sullivan, 2017). New products will be necessary
to try to take advantage of new opportunities for consumers. Hence, the use of a product
development strategy could help Unilever to achieve the strategic objective of company growth
by means of continuous product innovation.
Bibliography
https://www.grin.com/document/429846
https://www.grin.com/document/215742
https://www.unilever.com/our-company/at-a-glance/
https://panmore.com/unilever-vision-statement-mission-statement-analysis
https://d1wqtxts1xzle7.cloudfront.net/41304821/
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