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Student Number: 2327276

Module Code: MB5528

Module Title: International Business

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INDEX

UNILEVER BACKGROUND AND INDUSTRY: 3

CONCEPT OF INSTITUTIONAL DISTANCE 3

INSTITUTIONAL DIFFERENCES BETWEEN THE UK AND INDIA FOR UNILEVER: 4

Cultural Differences: 4

Political: 4

Market Dynamics: 4

Business Strategy and Innovation: 4

INTERNATIONAL STRATEGY: 4

Unilever Institutional Distance Has Influenced the Firm's International Strategy: 4

Unilever approach to entry modes, market selection, adaptation, etc., to local institutional
environments: 5

UNILEVER PERFORMANCE: 5

Brand Recognition: 6

IMPACT OF INSTITUTIONAL DISTANCE ON UNILEVER PERFORMANCE: 7

Financial Performance: 7

Organizational Structure and Evolution: 7

Operational Model and Decision-making: 8

HOW THE FIRM'S INTERNATIONAL STRATEGY HAS LEVERAGED OR MITIGATED

INSTITUTIONAL DIFFERENCES: 8

Leveraging Institutional Differences: 8

Mitigating Institutional Differences: 8

ADAPTATIONS AND RECOMMENDATIONS: NAVIGATING INSTITUTIONAL DISTANCE

AND ENHANCING PERFORMANCE 8

REFERENCES: 10

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The Role of Institutional distance in Shaping International

Strategy and Firm Performance

Unilever Background and Industry:

With a legacy that spans over a century, Unilever, a lasting giant started over a century ago, emerges
as a mighty entity in the domain of consumer goods. Ever since its establishment in 1930 as a result of
a successful Dutch-British merger, this multinational corporation has managed an extensive
distribution network, supplying detergent, processed foods, and various consumer goods in numerous
countries. Within the complex fabric of Unilever's historical narrative, significant events emerge like
celestial entities: from the foregoing exploration of mass markets in the burgeoning regions of Africa
and Asia to the monumental endeavour of extending its sphere of influence into the continental fabric
of Europe and distant territories. A multitude of corporate evolutions have been woven into a complex
narrative through the acquisition of numerous entities [16].

The extravagant assortment of Unilever, which includes but is not limited to food, beverages, cleaning
elixirs, and personal care products. This celestial marketplace is embellished with renowned brands
including Dove, Liquid I.V., Sunsilk, and Vaseline. Unilever, a multinational corporation with a
dominating influence in the chilly domain of ice cream, exerts control over sectors including beauty
and wellness, personal care, home care, and nutrition. Its omnipresent presence reverberates through
the sonic waves of international trade [14,7].

International operations flourish as the cartographic tendrils of Unilever extends across the vast extent
of space, shaping consumer goods enterprises in the fertile regions of Africa, the mysterious terrains
of Asia, and the rhythmic pulses of Latin America. A testament to Unilever's economic ascent, the
1970s witnessed the emergence of a European court of grandeur, wherein approximately 177,000
disciples laboured throughout the European Economic Community and invested ardently in fixed
assets. As strategic acquisitions, comparable to celestial alignments, strengthen Unilever's presence in
North America, the narrative progresses westward, encompassing entities such as National Starch in
the laborious landscapes of the United States and Frigo ice cream in the warm Iberian regions [15].

Unilever's transformation, a cosmic ballet of commerce characterised by an alchemical evolution into

a transnational entity choreographed by the pragmatic harmonies resonating in the marketplace.
However, within this symphony of stars, Unilever's guiding principle becomes apparent: an allegiance
to Positive Beauty and Healthy Way of Life, which surpasses mere financial gains. Unilever,
symbolising regeneration, equity, and inclusivity, persists in crafting its mysterious history, which is
an intrinsic part of its very being [18].

Concept of Institutional Distance

Institutional distance is all about spotting the dissimilarities in the formal and informal setups, like
cultural, regulatory, and political factors, between different countries. These disparities become a big
deal for multinational companies when they're spreading their wings into foreign markets. It's crucial
for them to get a handle on these differences to make their international business endeavours
successful [3].

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Institutional Differences Between the UK and India for Unilever:

Unilever, this giant global company, does its thing in both the United Kingdom (UK) and India. But it
bumps into quite a few differences in how things work in these two places.

Cultural Differences:

According to Hofstede's cultural model, India has this thing called a low power distance culture,
which basically means a more equal structure in how organizations are set up. That's not quite the
norm in the UK, and this difference might shake up how people manage stuff and make decisions at
Hindustan Unilever Limited (HUL) [7].

Political:

Now, India's rules and politics are on a whole other level compared to the UK. Taxation, labour laws,
government policies – they're not the same. Unilever has to be like a chameleon, changing its
strategies to fit into India's scene [14].

Market Dynamics:

India's market is like a wild ride with twists and turns – consumer habits, economic conditions, and
rural demands create unique challenges and opportunities for Unilever. Like, there's even a recent
report talking about how wonky monsoon rains affected farming income and what people are buying,
messing with how much Hindustan Unilever sells [13].

Business Strategy and Innovation:

Unilever's game plan in India, like their "Winning in Many India’s" approach, shows they get that
India is a diverse market. So, they're customizing their products, ads, and how they get stuff from
point A to point B.

Unilever has its work cut out, dealing with these big differences between how things roll in the UK
and India. We're talking about culture, rules, politics, and how people shop. Figuring out how to
handle these gaps is like the secret sauce for Unilever's success in different corners of the globe [5].

International Strategy:

Unilever Institutional Distance Has Influenced the Firm's International Strategy:

The company’s international marketing strategy has been an interesting blend of both globalisation
and localisation. This is in recognition of the varied natures of the Indian market as well as specialised
products, messages, marketing communication and transport solutions. Saffron, the company’s
“Winning in many India’s” growth strategy is another example of the strategy. Similarly with its
international strategy where it has put emphasis on successful Brand Strategy, Creativity Brands
Strategy and focus in emerging markets (United States Securities 4-10, qtd. in United States
Department of Education).
Unilever institution distance has impacted the company’s ownership pattern, entering mode and area
selection in India. Political risks and other problems like the recent Indian economic crisis and a little
bit of inflation have really hit this company’s performance. The country of India’s politics and
tradition have influenced the way that Unilever conducts its business. [19], [10]

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Unilever approach to entry modes, market selection, adaptation, etc., to local

institutional environments:

The institutional distance in Unilever has influenced how it has approached its entry modes, market
selection, as well as adaptation in their local institutional environments. The following analysis
highlights these aspects:

Entry Modes:

 At different times, Unilever has relied on different entry modes that include joint venture,
acquisition, investment, and franchising into local markets.
 For most of its existence, Coca-Cola has had an aggressive globalization policy. It buys up local
firms in any country into which it expands and then raises the production standards while
promoting each product’s brand name inside that same marketplace.

Market Selection:

 Emerging markets in countries like India are important for Unilever because they acknowledge
the potential in the lower income level market.
 This is clearly evident in its “Winning in many India’s” approach which necessitated customizing
products, advertisements, and distribution strategies to cater for India’s pluralistic makeup.

Adaptation to Local Institutional Environments:

 Localization was instrumental in Unilever’s policies and actions particularly after the war.
 This company’s organizational setup provides for decentralized operations and localization as
well as encouragement of unileverization of product groups which give them more control and
freedom to initiate actions.
 Research and innovation have combined both global and unique approaches to develop local
skills and allow cross-posted managers from all over the world to gain different knowledge.

Briefly, Unilever’s institutional distance is the basis of how the company will select its entry modes,
markets, and adapt to local institutional environments. In order to address challenges and
opportunities that are unique to every emerging market, the company employs a mix of globalization
and localized approach [10], [7], [1].

Unilever Performance:

Financial Performance in the United Kingdom:

 Unilever's 2022 Annual Report highlights strong financial performance, with a 9.0% increase in
underlying sales, demonstrating broad-based growth across its five business groups
 The report emphasizes the company's resilience in a challenging macroeconomic environment,
with strong top-line growth and underlying operating profit
 Unilever's investment choices and portfolio management have contributed to its financial success,
with a focus on sustainable business performance and growth

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Financial Performance in India:

 Hindustan Unilever (HUL) in India has demonstrated strong financial performance, with a
turnover growth of 11% and underlying volume growth at 3%, significantly ahead of the market,
and the highest year-on-year market share gain in a decade
 Despite market pressures such as droughts and depreciating demand from rural consumers, HUL
has demonstrated resilience, with segments like Dove hair care and Pond’s skin lightening creams
performing well

United Kingdom Market Share:

 Unilever's market capitalization in the UK is $113 billion
 The company's 2022 Annual Report highlights strong financial performance, with a 9.0% increase
in underlying sales, demonstrating broad-based growth across its five business groups
 Unilever's investment in brand and marketing has increased, reflecting the company's
commitment to driving growth and competitiveness

India Market Share:

 Hindustan Unilever's market capitalization is $78 billion, equal to 69% of the market value of its
parent Unilever
 HUL's turnover growth of 11% and underlying volume growth at 3% were significantly ahead of
the market, and its year-on-year market share gain was the highest in a decade
 Despite market pressures such as droughts and depreciating demand from rural consumers, HUL
has demonstrated resilience, with segments like Dove hair care and Pond’s skin lightening creams
performing well

Brand Recognition:
 Unilever's brand value worldwide has been consistently strong, reflecting the company's global
recognition and brand strength
 The company's strategic focus on core brands, priority markets, and key channels has significantly
contributed to its brand recognition and performance
 Unilever's investment in brand and marketing has increased, reflecting the company's
commitment to driving growth and competitiveness [4],[20].

Unilever performance in terms of any other relevant performance metrics in United Kingdom
and India
United Kingdom:

 Unilever's 2022 Annual Report highlights strong financial performance, with a 9.0% increase in
underlying sales, demonstrating broad-based growth across its five business groups
 The company's strategic focus on core brands, priority markets, and key channels has significantly
contributed to its performance
 Unilever's investment in brand and marketing has increased, reflecting the company's
commitment to driving growth and competitiveness

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India:

 Hindustan Unilever's financial performance in India has demonstrated resilience, with a turnover
growth of 11% and underlying volume growth at 3%, significantly ahead of the market, and the
highest year-on-year market share gain in a decade
 Despite market pressures such as droughts and depreciating demand from rural consumers, HUL
has demonstrated resilience, with segments like Dove hair care and Pond’s skin lightening creams
performing well [17].

Impact of Institutional Distance on Unilever Performance:

Financial Performance:
 Unilever's 2022 full-year results demonstrate strong topline growth, with underlying sales growth
of 9.0% in challenging macroeconomic conditions.
 The company's investment in brand and marketing increased, reflecting a commitment to driving
growth and competitiveness, with underlying sales growth of 10.9% from billion+ Euro brands.
 Despite significant input cost inflation, Unilever prioritized stepping up brand and marketing
investment, leading to broad-based growth across its five business groups.

Organizational Structure and Evolution:

 Unilever's historical evolution has been characterized by a Darwinian system of retaining what
was useful and rejecting what no longer worked, responding to the marketplace.
 The company's "ization" policy and the increasing number of local competitors have influenced
its organizational structure and management dynamics, emphasizing the need for localized,
decentralized management and a common mission across subsidiaries.

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Operational Model and Decision-making:

 Unilever's more category-focused operating model, organized around five business groups and a
technology-driven backbone, Unilever Business Operations, has driven greater operational focus
and faster decisions.
 The company's simpler, more category-focused operating model has been in place since July
2022, aiming to generate around €600 million of cost savings over the first two years, with the
majority in 2023 [2],[1],[7],[19],[8].

How the Firm's International Strategy Has Leveraged or Mitigated

Institutional Differences:
The global business approach of Unilever has been used to leverage and counter the implications of
institutional variations through its mode of market entries, politics and regulations and performance in
the UK and India countries respectively.

Leveraging Institutional Differences:

 In fact, this has enabled Unilever to effectively target different customer segments and customize
its advertisements accordingly.
 For the company to have succeeded, it had to learn how to survive in different institutional
environments and overcome the difficulties in these markets, therefore exploiting the available
opportunities and promoting the competitive advantage and increment of their sales level.

Mitigating Institutional Differences:

 Unilever has attempted to diminish the impact of institutional differences through emphasizing
brand funding and operational effectiveness, making it possible for the firm to withstand political
and administrative obstacles together with flexible market environments and preferences of
consumers.
 This is why the company’s emphasis on core brands, priority markets, and most important
channels have significantly shaped the company’s success. The organization could easily identify
the particular categories of consumers by adopting these strategies.
The conclusion is that Unilever’s international strategy on one hand capitalises on the differences due
to institutions, and on the other hand attempts at diminishing them so as to enable the company to
more specifically address certain customer groups, fine tune the marketing efforts to fit into individual
customers’ preferences, this has enabled the company to fit into various institutional environments as
well as confront the challenges in these markets.[19],[8],[1],[11].

Adaptations and Recommendations: Navigating Institutional Distance and

Enhancing Performance

Based on the analysis of Unilever's international strategy and the challenges posed by institutional
distance, the following strategies could be considered to better navigate these challenges and further
enhance the firm's performance:
1. Focus on a combination of globalization and localization: Despite this, Unilever should
persistently develop new product strategies to meet varying consumer needs across various
markets but still under their one world brand strategy.
2. Prioritize brand investment and operational efficiency: Unilever should also maintain investments
in its brand and marketing as a strategy to spur growth, boost competitiveness and manage issues
of politics and regulation as well as changing demands by customers with varied market
conditions.

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3. Embrace research and innovation: Unilever should maintain its tradition of embracing research
and innovations to discover ways that will meet the specific needs of various markets and
consumers.
4. Foster local talent and initiative: Unilever therefore, ought to maintain supporting local talent and
initiatives in coming up with effective strategies that take into account the diverse markets and
consumers’ interests.
5. Simplify organizational structure: Simplifying organisational structure of Unilever will enhance
operational effectiveness through more focused organisation and fast decision-making process
which in turn can allow it to adjust itself to different market conditions and customer
requirements.
In conclusion, we recommend that Unilever can use various options to deal with idiosyncrasy and
improve their overall performance such as globalization and localisation, brand promotion and
operational improvement, research and innovation, talent development, and organisation
simplification. Such strategies would assist Unilever manage varying institutional settings, politico-
regulatory problems and seize the chances presented by the market [7],[16],[15],[11],[17].

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Www.cascade.app, 15 Feb. 2023, www.cascade.app/studies/unilever-from-soap-manufacturer-to-

multinational-giant.

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Hindustan-Unilever-Limited-Hofstede-Cultural-Model. Accessed 11 Dec. 2023.

4. “India Will Overtake US as Unilever’s “Largest Business”, Says Hindustan Chief.” Financial Times, 4 Oct.

2022, www.ft.com/content/91f84f4d-62ff-40c7-a2a3-a397dab2c323.

5. “India’s Hindustan Unilever Slides as Weak Rural Recovery Drags Volume Growth.” Reuters, 20 Oct.

2023, www.reuters.com/business/retail-consumer/indias-hindustan-unilever-shares-fall-analysts-flag-

gradual-volume-recovery-2023-10-20/. Accessed 11 Dec. 2023.

6. Jones, Geoffrey. “Learning to Live with Governments: Unilever in India and Turkey, 1950-1980.”

Entreprises et Histoire, vol. 49, no. 4, 2007, p. 78, https://doi.org/10.3917/eh.049.0078.

7. Maljers, Floris A. “Inside Unilever: The Evolving Transnational Company.” Harvard Business Review,

hbr.org, .org/1992/09/inside-unilever-the-evolving-transnational-company.

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us.ukessays.com/essays/marketing/market-and-operations-analysis-of-unilever-marketing-essay.php.

Accessed 11 Dec. 2023.

9. Shirodkar, Vikrant, and Palitha Konara. “Institutional Distance and Foreign Subsidiary Performance in

Emerging Markets: Moderating Effects of Ownership Strategy and Host-Country Experience.”

Management International Review, vol. 57, no. 2, 19 Sept. 2016, pp. 179–207,

https://doi.org/10.1007/s11575-016-0301-z.

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2018, globisinsights.com/purpose/values/unilever-emerging-markets/.

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Institute, 3 Dec. 2016, panmore.com/unilever-operations-management-10-decisions-productivity.

12. Unilever. 2022 Full Year Results. 2022.

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13. ---. “Inside Our Markets: Unilever in India.” Unilever, 20 Jan. 2023, www.unilever.com/news/news-

search/2023/inside-our-markets-unilever-in-india/.

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www.unilever.com/our-company/our-history-and-archives/1950-1980/.

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www.unilever.com/our-company/our-history-and-archives/1900-1950/.

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