CaseStudy: Unilever Company
CaseStudy: Unilever Company
Thecompany is confronted by a plethora of challenges majority of whichare purely administrative in nature. By the fact that the firm hasrolled out various measures to mitigate its dwindling economicprospects, underlines the reality that it is slowly coasting towardsthe negative regarding its prosperity targets and ambitions. TheUnilever Sustainable Living Plan (USLP) strategy was a strategicpublic relations attempt that was majorly aimed at nurturing itsreputation as caring for the local community and its environment ofoperation at large while maintaining an upward curve in its netprofit outcomes. However, recent results have pointed to the contrarysince as of now the company is reeling from a major economic setback.
Despiteoutwitting its perennial opponents like Procter and Gamble, thecompany had registered its decade low net profit valuation of 2.1percent. Its penetration into the developed world markets-which have,the highest number of consumers, had shrunk significantly with alsothe same trend witnessed in the emerging markets. This dealt a hugeblow to its long terms growth prospects since according to its ChiefExecutive Officer Paul Polman, there were little growth projectionsexpected in 2015. This was just but a reflection of what was expectedin the coming days.
Anothermassive hurdle that the USLP faced was being embraced by thecompany’s staff since a majority of them deemed it to be wide offthe mark. This took its toll on the implementation process since theycould not devote their efforts towards completion. Upon beingimplemented, despite achieving the premeditated target of 40 percentreduction of greenhouse gas emissions as well as the 30 percent dropin water usage, it was found to have widely moved away from theprimary objectives. This entails gross failures in the value chain,sourcing of potential patrons to the company’s products and alsoproduct disposal methods.
MajorDecisions to Be Made in the Next Five Years
Theprevailing situation at the company projects to a downfall inattempts to ensure the long-term sustainability of the business. As aresult, the following five years will be instrumental to itsprospects since its senior administration led by Paul Polman willhave to come up with ways of averting the unprecedented downfallsince failure to do this will place the company in a disadvantagedposition with its competitors. It could eventually be forced to closeshop if it all proves to be unsustainable in the long term.Consequently, its planning will have to address the following issuesand major decisions regarding the same will have to be made:
Penetrationinto the developed and emerging markets.This is paramount to the mega firm’s renaissance. The previousattempts to gain more penetration into the mentioned markets haveproven to be futile due to the reality that net returns have beenmarginal. The organization will have to conduct thorough researchinto the predominant factors in these markets so that its long-termstrategies can be relevant to the realities of the market. This willgreatly help in boosting the company penetration into the market.
Strategizingon long-term sustainability.This has to do with coming up with strategies that will ensure thecompany remains relevant and profitable in the long term. Apparently,despite the goodwill of the USLP, its sustainability is notguaranteed since its implementation has resulted in the companylosing focus on its objectives. Strategies regarding long-termviability will have to cater for the company’s economic prospects,shareholder interest, the environment as well as the community of itsoperation. Observably, penetration into emerging markets in thedeveloping world will be instrumental in gaining traction andlong-term prosperity (McGregor & Doshi, 2015).
Consequently,Unilever will have to strategize on how to tap the potentialexhibited into these sorts of markets. There is also the need to planon how the mega-firm will outwit its perennial competitors in thedeveloped markets. This will serve as the means of maintainingshort-term profitability. Long term sustainability will also meanthat the mega enterprise will have to cater for its employees.Organizational staffs are the wheels that move the corporatejuggernaut. Therefore, if they are not content with workingconditions-policies and remuneration, it will be tough to mount aserious long term sustainability bid. As it can be seen from the USLPstrategy, many of the staff members were not convinced with theapplicability of the approach something that partly led to theeventual failure of the project (McGregor & Doshi, 2015).
Strategizingon making the most of Public Relations.This has a lot to do with maintaining the image of the company. Thisis critical for its long-term sustainability. Mr. Polman’s idea ofbeing responsible and caring for society is vindicated in thisapproach. The company should strategize on boosting its image as afirm that is socially responsible since this will win it morepatronage. These plans should target markets in developing countriessince they are the ones that have a serious implication on the futurewell-being of the industry. Projects like corporate socialresponsibility programs will do a lot of favor to the company’sreputation since many in their society of operation will prefer itdepending on how they view it as caring. Minimizing its footprints onthe environment should also come top of its agenda. On the face ofit, the company has done exemplarily well in ensuring that it hasminimal negative impacts on the environment despite the previousstrategy being hugely ineffective. Regardless of this failure, thefirm should continue to make the environment better.
Theabove issues and decisions will have to be prioritized if the firmhas realistic chances of staying afloat in the long term, failure towhich it could be prompted to scale down its operations or eventuallyclose shop.
Externalmarket: Porter’s Five Forces
Thistoo will examine the company’s competitive edge, bargainingabilityas well as issues that are relevant its operation both in theshort and long term. For instance, determining the company’sbargaining ability is critical but is also important to understandthat it has little influence on the firm (Aguinis, Joo &Gottfredson, 2013). Also, the threat or risk of there beingsubstitutes and new entrants into the market has a minimum impact thecompany and consumer goods as well. It the same vein all strategicactions are expected to put more emphasis on enhancing the firm’scompetitive advantage and the bargaining prowess of its customerbase. Due to the current realities, the mega-enterprise is expectedto farther strengthen its competitive power by innovating itsproducts. For instance, it can boost its level of investment byproducing more advanced products that can stage a serious competitionwith its competitors. As a result, the company should innovatevariants of home care and personal care products.
CompetitiveRivalry-Strong Force analysis
Theindustry environment in which Unilever exists is characteristic ofstiff competition. This is because there are many firms that providethe same type of products, all businesses are aggressive in naturethus underlining the level of competition as well as the low-costvaluation of switching. Apparently, there are numerous tracks thatexist in the consumer goods industry. This external dimension exertsa strong force on the firm’s business operation (Aguinis, Joo, &Gottfredson, 2013). The low switching costs imply that company canswitch from one business to another with relative ease. Thus furtherpiles more pressure on the enterprise to ever reinvent itself. Anexcellent illustration of the reality that consumers can quicklyswitch from one firm to another. This means that the company isexpected to be on top of its game all the time.
Buyeror Customer Bargaining Power-Strong Force
Thecompany’s industry environment greatly depends on how consumersrespond to the available products. This section examines howsignificant is the consumer influence on the company economicprospects. Due to the realities that are in the market at the moment,Unilever has to address the following aspects that are rife in theindustry (Stahl et al., 2012).
Onthe face of it, the low cost of switching from one firm to anothermakes consumers have a significant influence on a given enterprise’scompetitive ability. This aspect ensures that consumers have the lastsay on the suitability of the products and their eventual absorption.Therefore, the company should make sure that it tailors its productoutputs with the consumer perspective in mind. Additionally, thereis more than enough information available to consumers regardingproducts. This means that they can quickly switch from Unilever toits competitors if they realize better deals there. However,consumers who purchase small amounts of goods have little implicationon the net profit valuations (Aguinis, Joo, & Gottfredson, 2013).Despite this, the low switching cost makes this a significant threat.Based on the above observations, the consumer bargaining power is thebiggest threat to the company’s long-term economic prospects. Thisimplies that all strategies should be aimed at making thissuccessful.
ModeratePower-Supplier Bargaining Power
Suppliershave a direct implication on some available products. This underlinestheir strategic influence on the level of operation. If they decideto reduce the number of existing products, this will prompt consumersto look for alternatives to the same thus plunging the industry tomore losses.
Despitethe fact that the company has many suppliers just like many foreigncompanies, it exhibits a moderate size provider reputation. Thispresents a force that is moderate in intensity to the consumers sincethey are at liberty to invest their resources where they realizemaximum utility. The modest nature of the suppliers means that thereis a limited but significant pressure on firms that operate onUnilever’s scale (Aguinis, Joo, & Gottfredson, 2013). In asimilar manner, the moderate level of suppliers available impliesthat there is a little but important influence on suppliers. A vividillustration of this is the fact that a slight change in theproduction level results in the critical but limited shift in theavailable raw materials in the company’s business operations. Thisimpacts other players in the industry in a similar magnitude.Therefore, this has the moderate impact on the level of businessoperations.
Availabilityof Substitutes-Weak Force
Thishas a dire implication since it can potentially reduce the company’sprofitability as well as its competitive ability. Availability ofsubstitutes has the following effects on the business’ economicprospects. Due to the nature of the switching cost, consumers canjump ship to the available alternatives if they realize better offersthere. This exerts a strong force on the firm and the industry atlarge. This is because the major players have to act strategically sothat they are not caught unaware by the ever stiffening competition(Stahl et al., 2012). However, this force is weakened by the realitythat there are few available alternatives for consumers. Forinstance, it is relatively easier to the company’s Close-Uptoothpaste in groceries than accessing its substitutes that areavailable in herbal or homemade versions. In the same vein, theavailable alternatives are reputable for guaranteeing low performancethus implying that they are not a significant to establishedenterprises. This puts Unilever in an advantaged position since itsproducts are more attractive that the competing alternatives(McGregor & Doshi, 2015).
TheRisk of There Being New Entrants -Weak Force
Thelevel of competition that is in the market is facilitated byestablished entities as well as the emerging participants. Newentrants are seen as threats due to the reality that they cannot bepredicted. Thus they are a huge risk to established players in theindustry (McGregor & Doshi, 2015).
Thefact that the switching cost is low makes new firms in the industry athreat to Unilever. For example, consumers can decide to try newproducts and gauge them against what they get from Unilever. Theymight end up switching thus reducing the company’s patronage.However, the company can enjoy economies of scale that come withhaving a strong and established brand. This reduces the risk of newentrants since it provides some cushion. The economies of scale canhand the company a pricing advantage since its products are testedand proved unlike of new entrants (McGregor & Doshi, 2015). Thisplaces the company on a better standing since it can have a huge sayin relative terms with its competitors.
Thisrefers to activities that take place in a business and how they helpthe company to have a competitive advantage (Stahl et al., 2012). The company is focused on getting rid of waste thereby achieving leanproduction. This is implemented in every stage right from sourcingraw materials to consumers. Its procurement assumes a complex modelwhich is scattered in various places thus making it possible toenhance it at any time. Unilever wants to become a company that mindsabout the locals by producing goods that meet their physical andpsychological needs.
Dueto the magnitude of its operation, the firm needs to innovatecontinuously so that its value chain can be clean of waste. At thispoint, outsourcing sounds economically viable, but the reality isthat foreign companies cannot meet Unilever’s standards. Forexample, the scenario with Peru has helped the company to cut downthe cost of production, but at the same time, it has made itincredibly to implement the company’s quality standards. It alsoresults in layoff which is costly to the firm’s operations. As ofnow the waste management of the company is efficient since itsproduction facilities are clean (Aguinis, Joo, & Gottfredson,2013).
Here,marketing & sales oversee more services get outsourced. Thiscomes in the form of advertising, activation of the firm’s brandand reputation, managing leading events, planning for media programs,outsourcing, and managing distribution networks in this department,collaborations are strategically handled for delivery of qualityresults. There also a waste in this department due to the delays thatoften leads to inventory stockpiles. This can lead to late deliveriessomething that can cause customers to move on to the next client. Asa way of making the most of the available opportunities, Unilevershould employ more proactive strategies like enlisting collaborationswith its distribution channels (Aguinis, Joo, & Gottfredson,2013). This will significantly boost its sales. It should also avoidbeing too reliant on outsourcing by coming up with plans that enableit to handle its stuff. If these changes are effected, there will bea palpable change in efficiency a minimization of organizationalresources required in the production process (McGregor & Doshi,2015). Also these implementations can lay a good foundation forfuture prosperity.
Thisrefers to examining products of a company regarding whether they areof good value, are rare, easy to imitate, and the ability of theorganization to exploit its capabilities. These elements collectivelyhelp to determine the competitive edge of a given organization.Apparently, Unilever’s products are of good value since the companyenjoys economies scale when compare with new entrants into themarket. The company can take advantage of these to strategically fixits prices to that it can dominate the market for a long time. Unilever commodities are rare in the sense that they aredistinguished in quality owing to the mega enterprise’s commendablereputation. Apparently, the company has laid some good strategiesthat have boosted its reputation thus placing its products on highbidding. This gives Unilever a competitive edge over its perennialcompetitors as well as new entrants.
Unfortunately,Unilever’s products are easily imitable meaning that rivalcompanies can come up with replicas but label them differently. Thisis likely to hamper its pricing strategies since they are most likelyto fix relatively lower products thus winning over the company’scustomers. The organization can make the most of the availableopportunities and potential by strategizing accordingly. This meansthat it can grow regardless of the stage as long as the growthstrategies are on course and in tandem with the general growthstrategy. Also, the company can take advantage of its economies ofscale to woo more customers thus increasing its net sales thus moreprofits. However, despite this analysis pointing to positiveprospects, the company should do more to safeguard its products fromimitation by securing and documenting its patents. This will cushionit against competitors who are always on the lookout foropportunities to floor it regardless of the cost.
Goals.Unilever operations are tailored to achieving multidimensional goals.According to Paul Polman, the company aims at being social,responsible by employing environmental friendly approaches in itsproduction, carrying out corporate social responsibility projects,minimizing resources in the course of production as well as reducinggreenhouse gas emissions (Gunter et al., 2012). Apart from this, thecompany intends to gain dominion by boosting its traction in theemerging markets-where it disposes of a bigger percentage of itsproducts-thereby increasing its net profits. The mega enterprise`ssenior management is after ensuring long-term sustainability byemploying strategies that will enable it to guarantee long-termprofitability and also stand out from the rest (Heywood,2014). As away of ensuring that the company is on course at every step, itcarries out reflective activities that enable it to realize whetherit is in sync or not.
Thisrefers to the deliverables in a given project. Among the manydeliverables that can be achieved in the course of implementingchange include, reduction of the production cost, reduced greenhousegas emissions, increased penetration into the market-both developedand emerging, a good reputation as well as increased profit netvaluations. All these are measurable meaning that any progresstowards achieving them will be measured. Of course, adjustments willhave to be implemented on the way as a way of ensuring that theimplementation is on point.
Unileveris competitive as examined below.
The company has active operations in 190 nations globally. Therefore, Unilever has a footprint globally. This gives it a better footing when competing with other players in the industry (Gunter et al., 2012).
Unilever has a comprehensive portfolio that is littered with brands that are diverse. Hs makes it unique thus placing better to handle changing consumer demands across the world.
It invests heavily in research and development. This helps it to be more efficient and innovative thus having superior quality products. They are always in touch with consumer demands and preferences thus avoiding incidences where customers refuse to patronize their outputs (Gunter et al., 2012).
The company’s competitive advantage is distinct over the main rivals in the market like Proctor and Gamble since it is flexible regarding products pricing as well as the consummate prowess in the distribution channels this guarantees that more material is available at all corners of the world. This also helps to boost its image since many consumers love patronizing companies that are consistent and reliable (Stahl et al., 2012)
Unilever is in a position to leverage its economies of scale that stems from its broad operations and also has exemplary synergy in its production, and distribution in the world. This is surest indication efficiency when handling various organizational tasks.
The company blends goal-oriented planning and execution of projects as a way of ensuring efficiency. This ensures that every strategy is on course with the premeditated plans.
The level of competition is so stiff to the extent that in every locality that it has an outlet, its main rivals like proctor and gamble as well as Nestle have outposts that are operating and offering similar magnitude (Kotter, 2007)These are meant to challenge it at any particular moment thus making it difficult for the company to sleep on its laurels.
Most of the company’s products are easily replaced with replicas or substitutes from other businesses. This is the case, particularly in Asia and Africa. In these areas, consumers prefer cheap and traditional and natural products to the company’s ultramodern products that are expensive to them. This poses a serious challenge to the company since it has to strategize on how to overcome this problem.
Generally,despite these weaknesses, the company is better positioned to dealwith this. However, this should be a reality check.
Structure.Unilever has adopted a centralized system of leadership meaning thatall decisions are made by the senior management. This somehow isdisadvantageous since it hinders its flexibility and implementationof any change will take some time (Herman , 2015).
Culture.The company’s administration is of the idea that the organizationalactivities should be tailored to benefit both the company andsociety. Thus the overriding cultural dimension is that on minds thecommunity of its operation. This can be seen in its mainstreamactivities.
Observablythe Unilever Sustainability Living Plan has failed terribly becauseit is out of sync with the realistic expectations (Stahl et al.,2012). As a result, the company will have to decide which aspects ofthe same plan are to be plucked off or retained. For instance, PaulPolman can choose to get rid of or reduce the environmentalresponsibility part of the project if at all it proves to beeconomically sound for the company. This will help the company toachieve its financial targets. However, this is likely to be met withrancor since many environmental activists are likely to challenge thecompany. On the other side, it will help the company to achieve itslong-term sustainability targets (Kotter, 2007)
Thecompany can decide to carry on with the plan but inject it withadjustments like thorough research into the market realities. Thiswill help to adjust the strategy so that it can be relevant to thepractice demands (Stahl et al., 2012).However there is a risk thatthe sorts of losses that are being experienced at the moment couldpersist. The company might continue to lose more resources if itsticks to the same approach over a long time. This willsignificantly hamper the company’s prosperity (Baltazar, 2017).Alternatively, the mega enterprise will continue with its goodwilltowards the environment by ensuring that its activities areeco-friendly.
Tomove forward, Unilever should undertake the followingrecommendations.
Beingpragmatic and prudent.It should streamline its outsourcing mechanisms in the sense that itshould not heavily rely so much on outsourcing majority of itsservices since this might seriously dent the quality of its services.This will help to protect the quality of services thus helping retainits customers.
Aspart of the big strategy of achieving change, Unilever should enlistthe support of its top players in the distribution network so thatthey can help in gathering information about the realities of themarket. This will assist in customizing its products to meet customerneeds and demands as well.
Radicalchanges aimed at thwarting the dwindling outcomes should follow thefollowing steps.
Carry out through market research on demographics. This will facilitate a comprehensive understanding of the market and factors that influence demand.
Understand what entails the market and what alternatives are available. In this context, the company will have to adjust the current plan by prioritizing profit.
Choose the best option and implement it. Contextually, this will entail putting first profit while getting rid of the social awareness facet though sparingly.
Monitor the progress while making necessary adjustments. This will enable the company to know the sort of development the project is taking.
Bysuccessfully implementing this plan the company will be able torecapture its lost glory while staging a serious challenge to itscompetitors.
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