Unilever’s New Global Strategy Competing through Sustainability
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Unilever’s new global strategy competing through sustainability case analysis
In a single day 2.5 billion people use Unilever products to feel good, look good and get more out of life. Unilever is one of the world’s top makers of packaged consumer goods. Operating in 190 countries and have a large brand portfolio of over 400 brands under two divisions: Foods and Home & Personal care. Unilever is one of the world’s top three food firms with Nestle and Kraft and the world’s second-largest packaged consumer goods company –behind Procter & Gamble.
The main success factor of the company is the constant focus on innovative product developments. Unilever has a simple but clear purpose, to make sustainable living commonplace. They believe this is the best long-term way for their business to grow. Unilever started its journey in the 19th century and it was a rich cultured company and it was created from a family business in the Netherlands. A decade later Unilever started his golden journey with inexpensive household soap. Because of its 1930s depression, they broke the culture and appoint Paul Polman, after Polman entered as CEO he found several problems like sales growth and transformational strategies etc. Polman also has taken some good and very useful strategies but it also has some challenges and limitations. Unilever is a massive consumer goods corporation.
To participate in the green movement Unilever took a great initiative called Unilever Sustainable Living Plan (USLP). This initiative was taken into action to become an environment-friendly organization and also to fulfill social responsibility. The major step Unilever took so far was that they decided to use the ingredients of their product without harming the environment and stand against deforestation. It was an ambitious effort as corporate social responsibility (CSR).
Problems and Issues
Like every company, Unilever also had some issues and problems. We will show this problem in two phases before Polman and after Polman. Before Polman taking Unilever, the main priority of Unilever was the stockholders but after his arriving consumers is the first priority to Unilever.
Issues before Polman
1. Survival of Unilever: In 1930 Unilever faces big depression.
2. Led by an outsider for the first time: in 2004 for the first time, the company decided to bring an outsider to lead the company.
Issues after Polman
1. New Motto: With the new CEO Unilever started its journey with a new motto “Never waste a crisis”
2. New Strategies: Company with a new thought brings new strategies was the key to Unilever. The sustainable business strategy was the deal breaker for the Unilever.
3. Customer Oriented Thinking: Polman brings the idea that works for the customer, not for stockholders.
4. Measurable Targets: Company set their three main goals to fifty or more specific goals to attain the goal easily.
Sales growth has fallen
In 2014 Unilever was outperformed by the competitors, the company face the lowest growth rate in a decade. After the announcement of Unilever’s financial results for 2014, The Company was facing the greatest challenge in sales growth. This was the lowest in a decade. The sluggish growth in the developed world caused reduced sales growth. It has been a result of shrinking demand in the emerging market.
Foreign Exchange Impact
Because of Unilever’s broad operational reach, it is subject to risks from changes in foreign currency values that could affect earnings. As a practical matter, it is not possible to fully evade these fluctuations. Additionally, Unilever believes that most currencies of major countries in which it operates will equalize against the euro over time. Unilever does have a foreign exchange policy that requires operating companies to manage trading and financial foreign exchange exposures within prescribed limits. This is achieved primarily through the use of forwarding foreign exchange contracts. Depending on potential income statement instability that can be caused by the fair value movement of the derivative, companies decide whether or not to apply cash flow hedge accounting. Regional groups monitor compliance with this foreign exchange policy.
To achieve sustainability in the global market, Unilever had leveraged their scale and adopted with a new transformational strategy and engage with other companies to take responsibility. But this new sustainability creates a new market demand and effects on its brand portfolio and three objectives.
Possible Solutions and Recommendations
Solutions for the Problem “Sales Growth Fallen”
Rewards for Managers
Managers are playing an essential role in the organization. They are important players in any reward and recognition strategy. Reward supervisors and managers for developing employee engagement among their peers. However, while many organizations have reward and recognition programs in place to recognize the achievements of employees, too few have specific initiatives to reward managers for their efforts.
Innovative Product with Customer Demand
As the market of products is getting more and more competitive Unilever needs to come up with better products and effective marketing strategy. According to business customer demand is defined as quality. So the company needs to focus more on customers’ requirements. The company has to come up with more and more innovative products than the other multinational company as well as local market competitors.
Effective Marketing Strategies
Unilever has set three goals for 2020. The three goals are: to help a billion people improve their health and well-being, to halve the environmental footprint of making and using Unilever products, and to enhance the livelihood of those in their value chain. While there is a sales growth fall implementing transformational strategy USLP made the situation more complex while it is not fully embraced by the organization.
Solutions for the Problem “Foreign Exchange Impact”
Control the Global Market with Effective External Market Analysis
Foreign exchange is the principal part of Unilever because the company’s revenue also controlled by it. The virtues of global sourcing are very appealing to a market that care about their consumers, have sustainability concerns. The global revenue generated by the Unilever Group’s personal care product segment was about 15.47 billion euros.
Unilever is a leading consumer goods business in the global market. A SWOT analysis of the company highlights business strengths that ensure long-term success. It shows significant opportunities that the company can use for further international growth and expansion. The business is in a strong position to withstand the threats in its external environment. Unilever’s largest international competitors are Nestlé and Procter & Gamble. Procter & Gamble, also known as P&G, is the biggest consumer goods company in the world. So, external factors analysis is important for Unilever and PESTEL analysis should be the best possible solution. In PESTEL analysis, all external factors will be analyzed and it actually reflects the situation of the global market in terms of political, environmental, social, technological, economic and legal.
Solutions for the Problem “Market Transformation”
The successful competitive strategy is dependent upon differentiation, cost-effectiveness, and sustainability. They help their clients focus time and resources where areas of opportunity overlap with their own best capabilities. With their guidance, their clients follow a specific process for assessing their own strength, assessing the competitive situation, and formulating appropriate responses. Importantly, their consultants also understand that a competitive strategy is ineffective if it fails to ultimately produce profitable top-line growth.
They, therefore, support their clients in managing decision making and implementation with a total focus on driving change and measurable impact on clients’ economics and competitive strength. Competitor analysis no business is an island. For success, the business will need to deal with customers, suppliers, employees, and others. In almost all cases there will also be other organizations offering similar products to similar customers. These other organizations are competitors. And their objective is the same: to grow, make money and succeed.
Effectively, the businesses are at war, fighting to gain the same resource and territory i.e. the customer and like in war, it is necessary to understand the enemy. For that reason, we will analyze the competitive market of Unilever. The start of the 21st century marked the launch of a restructuring plan-path to Growth-a strategy devised by the company to transform the business thereby leading to more acquisition and formation of centers of excellence. The following were the planned target of the new plan: · The new plan aimed at an annual sales growth of 5% and op. margins of 15% within 4 years.
1200 brands that generated only 9 percent of revenue, as well as around 25000 job and a quarter of manufacturing plans, were eliminated. · Supply chain IT system was standardized and improved to optimize the fully integrated network of mfg. plants and distribution facilities. · Purchasing was further automated and became centralized to reduce costs. To aid the new plan, Unilever unveiled its new organizational structure in April 2000.
The salient features of the new structure adopted are as follows
a) Each regional organization was split into two divisions: 1. Foods 2. Home and Personal care (HPC)
b) Each division possessed its own Sales & Marketing(S&M) and regional innovation functions.
c) Regional presidents managed the two divisions as separate entities.
d) Each regional president served either a Foods or an HPC executive committee.
e) Each executive committee was chaired by a divisional director.
f) The R&D and supply-chain functions were then consolidated globally by product division. This allowed the individual Foods and HPC supply chains to develop platform mfg. and dist. solutions across regions.
g) Large global technical centers focused on core technologies that were adopted in small regional innovation centers.
Limitations of the Solutions
Limitation for the Solution “Sales Growth Fallen”
As sales growth decreased in 2014 for Unilever, we have recommended some recommendations and solutions for improving the growth rate. Managers should be rewarded but for rewarding managers, it needs extra salaries for the company. For global market expansion, new demand is increasing and to cope up with the new demand of the global customers, Unilever needs to invest in its R&D.
So, rewarding managers will be tough for Unilever. For effective marketing and promotional strategies are the best solutions for increasing the sales growth. Integrated Marketing Communication (IMC) tools like advertising, CSR activities, PR (Public Relation) should be implemented by Unilever. But for market expansion and cultural variation, it is risky for Unilever to make a strategic move.
Limitation for the Solution “Foreign Exchange Impact”
For controlling the global market with effective external market analysis, PESTEL analysis should be more accurate for Unilever. In PESTEL analysis, all the macro-environmental factors should come first and by doing this, Unilever can access the global market with their core market value and share. But PESTEL analysis is more expensive and time consuming for Unilever. PESTEL analysis is feasible and insufficient for strategic planning since it only focuses on external factors.
Since 2010, Unilever starts the Unilever Sustainable Plan and it became the spirit of its corporate strategy: to double size the business whilst reduce its environmental impact and increase social impact. Unilever is one of the first companies to look outside their walls by giving the opportunity to expert and startups to collaborate and share Unilever Vision. Unilever also invests a huge amount in Marketing to reduce the power of substitution. The case study actually includes success, problems and overall financial and strategic information of Unilever to compete through sustainability.
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