Final Ppt Of Unilever.pdf

Strategic Management Analysis of Unilever

Hello! Our team consists of: Fany Kartika 16/392647/EK/2079 Kinanthi Hayuning 16/395940/EK/20912 Made Bilan A. B. 16/397187/EK/21143 Vanessa Speciale MEB3354

Table of Contents I. Company Overview Business Model. II. Mission, Vision, Goals, Values. III. External Environment Analysis. Macro Environment Analysis (PESTEL) Industry External Environment Analysis (5 Porter’s) Position of Industry’s Rivals (Strategic Group Mapping). IV. Internal Environment Analysis. Value Chain Analysis. SWOT Analysis. V. Generic Strategies Analysis. Broad Differentiation Strategy. Broad Low Cost Strategy. VI. Strengthening Unilever’s Competitive Position. Unilever’s Strategic offensive strategy. Choosing which rivals to attack. Timing Unilever’s Attack Moves. Horizontal or vertical acquisition strategy. Outsourcing strategy.

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Table of Contents VII. Strategies for competing in International Markets. Unilever’s Strategic Offensives. Unilever’s Horizontal Merger and Acquisition. Evolving Transnational Company. VIII. Diversification and the Multi-Business Company. Unilever’s Diversification Strategy. Weighted industry attractiveness score analysis. Competitive Strength Score analysis. 9 Cell Industry Attractiveness. IX. Case of Unilever’s Unethical Conduct in Palm Oil. Drivers of unethical conducts. Corporate Social Responsibility. X. Superior Strategy Execution. 4

1. Company Background & Business Model 5

Company Background -British-Dutch transnational consumer goods company co-headquartered in London, United Kingdom and Rotterdam, Netherlands (Dual listed company). -Part of the Fast-Moving Consumer Goods (FMCG) industry. -One of the world’s top three food firms beside Nestle and Kraft. -World’s second largest packaged consumer goods company after P&G. -Main success factor is the continuous development of R&D.

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400 BRANDS 190 COUNTRIES Whoa! That’s a big number. 7

Organised into four main divisions – Foods, Refreshment (beverages and ice cream), Home Care, and Personal Care. .

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Business Model

“

“ We believe that sustainable and equitable growth is the only way to create long term value for our stakeholders. That is why we have placed the Unilever sustainable living plan at the heart of our business model. ” 9

Business Model >Collaboration: >Sales: >Logistics: Work closely Centralising Work with with retailers governments, network through to ensure the global NGOs & other brands are UltraLogistik stakeholders. always and control to >Innovation: properly improve R&D mission to customer service, displayed from build brands supermarkets and use hybrid through to e-commerce. vehicles & rail benefit-led instead of roads. innovation. 10

2. Mission, Vision, Values, Objectives 11

“To add vitality to life. We meet everyday needs for nutrition, hygiene and personal care with brands that help people feel good, look good and get more out of life.” >create expectations. >realistic. >active and positive. >adaptable

“Unilever has a simple but clear purpose - to make sustainable living commonplace. We believe this is the best long term way for our business to grow.” >short & easy to understand. >focused - use of campaigns.

Mission

Vision

“The highest standards of corporate behaviour towards everyone we work with, the communities we touch, and the environment on which we have an impact.” 4 Core Dimensions of Values: >Integrity, Responsibility, Values Respect, Pioneering.

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3. External Environment Analysis 13

Pestel Analysis Political Trade barriers are possible and 53% of Unilever’s business comes from developing markets which are not stable

Economic Unemployment and low wages increase in many areas. Market in China and Latin America increases

Social Life expectancy is increasing and birth rate is decreasing. Awareness about sustainability and health consciousness is increasing 14

Pestel Analysis Technological Strong increase in technological usage leads to a need of adaptation

Legal Unilever keeps adjusting to local laws due to their existence in 190 countries

Environmental Environmental aspects for example reducing the carbon footprint are becoming more and more important

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Five Forces Analysis -> Buyer Bargaining Power

-> Threats of Substitution

- Low switching costs

- Low switching costs

- Easily accessible to wide array of information

- Low-moderate substitute availability

- Small size of individual buyers

Weak Force

Strong Force -> Supplier Bargaining Power - Moderate size of individual supplier - Moderate population of suppliers - Moderate overall supply Moderate Force

- low performance to price ratio -> Threat of New Entrants - High cost of brand development and economies of scale Weak Force -> Competitive Rivalry - Big and aggressive competitors - Low switching costs Strong Force

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Strategic Group Map

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Key Success Factors -

2010 Unilever launched organizational transformation plan -

Use of supply chain sustainability changed processes, politics and people’s mindset

1.

Incorporate sustainability into long-term strategy

2.

Create a vision and 10 year plan

3.

Create a division that focus on the alignment of the strategy and the sustainability

4.

“Weed” out suppliers that don’t align with vision 18

4. Internal Environment Analysis 19

Unilever’s Value Chain Main goal: reduce impact on environment while growing as a business 100s of Unilever factories add up to 3% of greenhouse gases and 26% of environmental impact are from suppliers 68% of environmental impact are from consumer 20

-

Strongest brands on the market Diverse products Strong market presence Expertise of distribution channels

- Transnational strategy leads to adaptation - Economies of scale - High funded R&D Strength - Globalization offers many opportunities - Rising awareness about health and sustainability - Ability to diversify

Opportunities

-

No uniqueness Easily substituted No direct influence Strong competitors therefore need for innovation

Weakness -

Strong competitor Easily substituted Independence of retailer Asian Multinationals Sustainability and Health consciousness

Threats

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Unilever’s internal factor evaluation Strengths 1.

Contribution of home and personal care to net

Weight

Rating

Weighted Score

0.12

4

0.48

0.08

2

0.16

0.09

3

0.27

0.08

3

0.24

sales is 72.9% 2.

Marketing and selling expenses increased by 12.5% to Rp6.6 trillion

3.

Strong portfolio of brands and diversified product range

4.

Contribution to Total Turnover is 57% in 2017 (Emerging markets)

5.

Shares outstanding reaching the number 7.63B

0.11

4

0.44

6.

Cash position in 2014 increased by 13.7% or

0.09

4

0.36

Rp31.5 billion

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Unilever’s internal factor evaluation Weakness 1.

Finance income decreased by 61.5% to Rp14.5

Weight

Rating

Weighted Score

0.11

4

0.44

0.05

2

0.10

0.06

3

0.18

billion 2.

Sales growth for the year 2017 was 3.1%, lower than the previous year growth of 3.7%

3.

The Company’s collection period weakened from 30 days in 2012 to 33 days in 2013

4.

No direct connection with customers

0.08

4

0.32

5.

Excellent R&D; lead to high quality products

0.06

3

0.18

0.07

3

0.21

and higher prices 6.

As of Dec 31 2017, employ 161,000 employees globally Total

1.00

3.38

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Unilever’s external factor evaluation Strengths

Weight

Rating

Weighted Score

1.

The diversity of Unilever’s competitors is low

0.06

2

0.12

2.

Unilever Indonesia goes into 2018 on the back

0.10

3

0.30

0.08

3

0.24

0.13

4

0.52

0.12

4

0.48

of market share gains and robust growth in almost all categories 3.

Keeping with product innovation based on customer expectation

4.

The high customer satisfaction can be seen from the title of prime index of consumer satisfaction

5.

Since 1962, PT. Unilever Indonesia, Tbk has been listed on the Indonesia Stock Exchange

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Unilever’s external factor evaluation Weakness

Weight

Rating

Weighted Score

1.

Substitute products in the market

0.15

4

0.60

2.

The company sells its products through a

0.06

3

0.18

0.10

3

0.30

0.12

3

0.36

0.08

3

0.24

network of about 370 independent distributors covering outlets throughout Indonesia 3.

In the second half of the year, the Indonesian macro economy experienced another test with high inflation (post-fuel subsidy cut), weakening the Rupiah.

4.

Government laws and regulations are quite challenging to maneuver around

5.

Many smuggling of products from outside of Indonesia Total

1.00

3.38

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Unilever’s CPM Unilever

Nestle

Critical Success Factors

Weight

Rating

Score

Rating

Score

Advertising

0.10

3

0.30

2

0.20

Product Quality

0.20

4

0.80

4

0.80

Price Competitiveness

0.15

3

0.45

4

0.60

Management

0.10

4

0.40

3

0.30

Financial Position

0.15

4

0.60

4

0.60

Customer Loyalty

0.05

2

0.10

3

0.15

Global Expansion

0.20

4

0.80

3

0.60

Market Share

0.05

4

0.20

3

0.15

Total

1.00

3.65

3.4

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Strategic Challenges “SUCCESS IN OUR OPERATIONS, BUT VALUE CHAIN CHALLENGES REMAIN”

“UNILEVER IS HALF WAY THERE ON THE KRAFT CHALLENGE”

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5. Generic Strategies Analysis 28

Differentiation Approach -The company has intended to distinguish its brand from its two main competitors - Nestle and P&G. -Won over new features of attributes, and over time hoping to increase customers loyalty. -Eg: Dove Cream Bars with features not harsh/ drying, OMO Black in Middle East. -Cost? Revamp the value chain but kept its coordination with retailers, distribution & dealers to keep its cost as low as possible. -Eg: Give discounts to shop owners when put their products at front. -High investment in its Human Resources Management to encourage differentiation approach. 29

Low-cost Approach -Approach used in Developing Countries. -Eg: In Philippines, the company tried a small size of Rexona in stick form costing 35 cents - but it wasn’t cheap enough. Then unilever developed a cream version in a single use sized packet that cost about 10 cents. -Captive product pricing strategy is another low cost to high cost pricing strategy. Captive products are products that are designed to be used with another product, the core product. -Eg: Dove Shampoo and Dove Conditioner. While the shampoo is low cost, the conditioner is priced relatively higher. -Also the use of sachets.

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Unilever’s unique drivers ▷ Seeking out high quality inputs - Based on Unilever’s code of business principles. ▷ Investing in production related R&D activities - “Discover, Design, Deploy”. ▷ Pursuing continuous quality improvement Food Safety System Certification FSSC 2000 for its 140 Unilever Foods & Refreshment Sites and support with the British Standard Institute & Industry Partners for Beauty and Personal Care. ▷ Emphasize HR activities to improve skills, expertise and knowledge - People is a key success for Unilever using aims to “develop strong talent, employee engagement, assess readiness etc.”

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6. Strengthening Unilever’s Competitive Position

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Unilever’s Strategic Offensives ● Giving discounts to shop owners to put their products right up front, ● Selling smaller, cheaper versions of products that people can actually afford ● Millions of free sachets to boost marketing

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Choosing Which Rivals to Attack ● In the latest quarterly results in 2017 suggest some relative minnows are nibbling away Unilever’s sales in developed countries (ex. Halo Top company in US) ● Sales fell by 2.3% ● So far, Unilever has responded by cutting costs and raising prices, as mentioned by Charles Higgins, fund manager at Unilever shareholder Hargreaves Lansdown ● However, these are short-term fixes.

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Timing the Attack Moves ● Introducing the sustainable living plan early before all their rivals in 2010 ● Based on the company’s research 33% already purchase products with sustainability in mind Over 50% of all consumers want to buy sustainably 21% do not ● By applying the strategy early, Unilever is a few wide steps ahead of its rivals, in terms of attracting customers with environmental causes 35

Horizontal Merger & Acquisition Strategies - Unilever has penetrated almost every part of the retail industry, from beauty products, food items, and detergents - The company logo is one of the most recognized logo in the industry. - In the last twenty years, Unilever has succeeded to make more than 40 acquisitions throughout the world. - Unilever’s steady stream of mergers and acquisition strategy has helped them stocked consumers shelves over the years 36

Outsourcing Strategy ● Dividing the functioning of this company into various division of consultation, distribution, operations, maintenance and finance analysis to other global firms like IBM and Accenture to name a few. ● Unilever follows 4 steps approach to outsourcing: - Prioritize : decides on which functions to outsource - Select : focuses on marketing and selling its brand names - Trust : Unilever maintain full confidence in the outsourced company - Monitor : Constant monitoring and checks have to be kept

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7. Strategies for Competing in International Market

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Unilever’s Strategic Offensives ● Focusing on emerging market (Indonesia, India and China) → $10 trillion by 2020 ● Think-global & act-global strategy ● Building strong character brand ● “An early mover” ● 33% of the consumers thinking about sustainability and 21% would like to 39

Unilever’s Horizontal Merger and Acquisition Strategies ● Extending to new product categories ● Creating more cost-efficient operation ● Expanding geographic coverage ● Gaining

quick

access

to

new

technologies or resources & capabilities ● Total of 40 acquisitions 40

Evolving Transnational Company ● OMO sells well in almost any countries ● Introducing “OMO Perfect Black”

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8. Corporate Strategy: Diversification and the Multibusiness Company

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Unilever’s Diversification Strategy ● Widening product offerings beyond traditional ice cream and diversifying the price mix ● Bru World Café by Hindustan Unilever → $185 million

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Calculating Weighted Industry Attractiveness Scores Rating scale: 1 = Very unattractive to company; 10 = Very attractive to company

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Calculating Weighted Competitive Strength Scores for a Diversified Company’s Business Units Rating scale: 1 = Very weak; 10 = Very strong

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9 Cell Industry Attractiveness/Business Strength Matrix

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9. Unethical conduct and a road to a more sustainable living

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Unethical behaviour - Palm Oil Case -Unilever, alongside with Nestle and P&G was involved in human abuses of workers of hazardous working environment from Wilmar, North Sumatra. -The use of palm oil is important to 50% common end consumer products in foods such as packaged bread, margarine and others, alongside in soaps, shampoos, detergents. -Roundtable on Sustainable Palm Oil (RSPO) was set up in 2004 and worked with Amnesty International to investigate any labor exploitation. 48

-> Abuses found by Amnesty International: 1. Minimum wages are low: -Whilst the workers are working overtime insufficient to meet family needs as towns were also quite afar. Exploitation of workers are due to the system of piece rates and consequences of workers not meeting target was serious. 2. Child labor to meet targets: -Or faced with serious consequences (not being paid, no bonuses etc). They do hazardous work. 3. Forced labor; -Women forced to work long hours earning as little as $2.5 a day with no health insurance. -Workers worked outdoor with no safety requirements. -Exploitation in terms of using heavy manual equipment to cut fruit from 20m tall. 49

-> Unilever’s Respond to Amnesty International: -In 2013, Unilever played a role to engage with Wilmar to release its sustainable palm oil policy and commit to the principle of “no deforestation” & “no exploitation of people”. -Unilever is committed to full traceability for all the crude palm oil - including dedicated plantations, plasma smallholders and independent smallholders. -The release of Sustainable Palm Oil Sourcing Policy: “We ask our suppliers to adhere to Unilever’s responsible sourcing policy as it stipulates the mandatory working requirements on human rights and protection of workers.” 50

10. Superior Strategy Execution

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Allocating Resources to Strategy-critical Activities In 2010, Unilever has formed Unilever Sustainable Living Plan that includes its blueprint for sustainable growth - Profitable growth: helping more than a billion people improve their health and well-being by 2020, with 397 million counted by the end of 2014. - Save costs: already invested in new technology such as the roll-out of the compressed deodorant sprays and its new body wash bottles to save costs -

Fuel its innovation: sourcing more than half of its agricultural raw

materials

sustainably.

800,000

provided with training and help facilities

smallholder

farmers 52

Unilever’s Procedures to Strategy Execution - The Sustainable Living Plan premise is to apply the best practice everywhere - The approach is called “design once deploy everywhere” -

A “virtual knowledge network” encourages employees to adapt the best solutions to their problems

-

Runs a ring-fenced capital investment pool, allocated at factory level, that funds more than 200 of the best projects each year.

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The use of rewards & incentives to promote better strategy execution ● Unilever believes in a fair compensation policy. ● To get employees sustained and always committed ● This is also the core to achieving the Sustainable Development Goals ● Unilever Compensation Procedures and Policies: 1. Fair and liveable compensation policy: 2. Market based competition policy: 3. Open and explainable compensation policy: 54

Thank you! Any questions?

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