Unilever Case Study Analysis: SWOT
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Published: Wed, 07 Feb 2018
There are many kinds of business everywhere; where there are many issues related to the growth of the company and Different strategies will enable different companies to reach those goals. Unilever is a company started in 1930 formed of Dutch Margarine Company and British based lever brothers. Unilever holds a wide range of products which include food, personal care, beverages, canned foods, ice creams and many more which are worlds best consumer brands. The case study describes a lot of information regarding Unilever’s business strategies, key elements of Unilever’s path to growth, how they rejuvenated and restructured the companies’ slow moving performance to wide range of brands across the world.
BRIEF CASE STUDY:
Unilever was created in 1930 as an outcome of merger with dual chairpersons and headquarters one in Netherlands and other in United Kingdom. This is of one the giant and best competitor’s in the industry which holds wide range of products. The two chairpersons have launched a strategy in early 2000 to recover the company’s performance which was said to be lackluster. With the new strategies the company showed a significant progress and has gone through many dealings over the next years, this made the company to open 20 new acquisitions worldwide and increased the sales of the company. Thus the company’s business was restructured, renovated and improved through its acquisitions. Then their came companies likes nestle which effecting the growth of Unilever. Unilever then started efforts to attract and motivate young, talented and innovative managers from outside its company.
A planning technique which is used for summarizing the key issues and evaluates the Strengths (S), Weaknesses (W), Opportunities (O) and Threats (T) in any business is called an SWOT analysis. Analysis is the brief study of any case how they are going to be obtained, who are responsible for causing it and solving it by planning which involves internal and external factors of a business or an organization; internal factors are classified as strengths(S) or weaknesses (W) and external factors are classified as Opportunities (O) or Threats (T). Strengths are those characteristics of a person or a company that are useful to achieve the goals. Weaknesses are the characteristics of a person or a company that is destructive to achieve the objective. Opportunities and threats are the external factors that are helpful in achieving and damaging the business performance respectively.
The figure1 show the illustrative diagram of SWOT analysis. The internal factors include personal, finance, manufacturing capabilities, etc and the external factors may include technological changes which may cause changes in products and processes that is inventing a new product or making the product better which include quality of the product and the consumer desire, market influences due to unemployment rates effect the company and price factors is one of the important thing to keep in mind , market place is one more thing which is very important that is the company or a business should be located in a convenient environment to the consumers to attract and the product should be user friendly. Another important factor is that its external appearance the packing and the name of the products should be eye catchy. At last he customer relations should be friendly and consumer satisfaction is very necessary. Other than these there are some more factors which may be changing due to economic and social factors and competitive positions which may create new opportunities or threats.
SWOT analysis is useful in decision making when most wanted these include nonprofit organizations, individuals. It is the only method for classification and has its own weaknesses. A SWOT which produces no strategies is of no use whereas which generates important strategies is useful.
Unilever had a very tough competition during that time when it was bringing about the changes it was probably at this stage that these companies had moved forward with there various strategies.
Skills, assets, finance, facilities are the resources which are used in any business to compete in the industry. In the same way Unilever used their own resources to grow as giant company. They have implemented SWOT analysis and implemented new business strategies and rejuvenated their company from lack lust to significant progress in sales. It has concentrated on marketing and advertising its business and gained increased pricing with supermarket vendors. Unilever was lagging in sales when compared with nestle, Procter & Gamble, Kellogg’s etc its path of growth strategy which met considerable uncertainty which made Unilever to undertake a series of actions by cutting the companies profile to reach corporate goals and introduced 20 new acquisitions worldwide and restructured the company into two divisions one includes all food products and other household and personal care. Then started other two new businesses across the world.
The external market factors such as technological changes, social factors, and other companies’ growth made a very big impact on the consumer preferences and Unilever had to cut its revenue growth. Later it continued to obtain more products across the world and these products gave managers to make their own decision making to set priorities by introducing new initiatives. Unilever has even motivated and attracted young talented managers from outside the company to join their company.
According to Unilever’s SWOT analysis the strengths of the company are recognized as it is a global company with strong brand profile with worlds best brands and maintains strong relation with its retailers. But coming to its weaknesses it has insufficient management of brands and doesn’t not connect with customers. And inability to maximize acquisitions has reduced spending for R& D. Thought it has got many opportunities by introducing many products by changing customer preferences and increase in production of quality goods. There are threats equally which cause decrease in revenues with high market competition, increasing the number brands and exchange rates.
There are many growth expectations, risks, profit margins in food and house hold industry which is composed of many sectors and sub sectors by challenging the change of customer’s preferences with challenging rival firms to gain market shares. Then with competitive achievement by creating attractive products through acquisitions and with capability of growing sales of the brands which existed and improve margins. For all this the many key to success was advertising the products. By improving the profits of the company not only included shifting sales of the products but also boosting efficiency and unit costs.
There were three factors which worried in 2000, the consolidation pressures in food industry which bothered were slower growth rates in food industries, rapid consolidation among grocery markets that is between branded manufactures and private manufactures for good self space in the grocery stores. In the United States for several years the food industry was miserable and was expected to continue for few more years due to more women working and decreasing house hold sizes, single parents and singles. But the food industry in Europe, Asia, Africa and other less developed countries were attractive. Thought the competition between branded and private manufactures was a never ending issue, private manufactures improved their quality of products by growing market shares. Then there came many giant super markets and gave an opportunity for private brands with attractive prices below branded products and even provided checkout scanners to help the customers know price difference which tempt them to
BRIEF SWOT ANALYSIS OF UNILEVER’S CASE STUDY
Reduced spending for R & D.
Best Brands. Inability to maximize acquisitions.
Strong relation with retailers. Insufficient management of brands.
Increasing in need of quality products. Decrease in revenues.
Changing customer preferences. Strong competition.
Increase in brands.
shift to the private brands. Due to the heavy competition among them manufactures had to cut down the costs of the products, number of versions of the products and weed out weak brands and concentrate on those brands which were popular among the customers and those could develop into global brands.
Introducing dual headquarters by dividing the food industry which consisted of 6 categories and household industry which consisted of 8 categories there were many benefits such as improving food and household industry by focusing more on them regionally and globally. Accelerating decision making and successful integration of R & D though there were some critics that Unilever has been paying more for some of its acquisitions such as acquire Amora Maille.
Unilever as of then in 2003 had been seen as a growing organization which probably had all the necessary requirements to make it a force to recon with, during the Path to Growth strategy many aspects of the company had come out some of them included the strengths, weaknesses, opportunities and threats. Strengths, probably the biggest strength that the company had at that time was the correct selection of the brands and the products it had in store unilever had done many researches and had to make many decisions to get the right combinations products that where to be sold it also had the right ideas to increase the sales and all the leading brands to help its cause. Unilever was very good at that time even if the financial aspect was taken into consideration it could experiment with various aspects of its store cause had the financial backup which was required at that time to help it implement various ideas and deal with the market pressures, for any company to improve its sales marketing always plays a very important role this was probably there biggest strength as the marketing strategy applied by them managed to grab peoples attention as they easy to be connected to and much more simplistic and realistic.
Unilever did manage all its clients very well considering that during a phase when they where cutting on the brands it would have been a risk to out anything at that time but it was very well managed by the company. Mainly the fact that unilever was now looking to make the higher range or the brands which where more famous as there core brands which made it much easier for them to advertise considering that it is much easier to promote a very well known and a trusted brand rather than a normal or new brand to increase the sales.
Weaknesses, though unilever had a very good policy and all the right objectives to make a difference in the industry it couldn’t happen basically due to the lack of proper organization, it was actually much like a bureaucratic organization where things where divided between too many people and it had become difficult to get the ideas moving due to the lack of proper organization, it probably all started with the fact that the company had to deal with too many brands in the first place it would obviously have the impact when the Path to Growth strategy came up cause of the then 1600 brands only 400 brands where retained and rest all where either removed or replaced, that shows that due the lack of proper organization and too many brands being part of it didn’t help it in making the changes it wanted to in a better and quickest way. The organization was probably one field in which the company was lacking because it was felt that at the top of the company as there were too many people making decisions and these decisions had to be put forward and this delayed the process of improvement for the company.
Opportunities, during this phase of development and renewing it content and upgrading of the stock it turned out to be very fruitful as it provided many working opportunities for people it was at that time that many people where starting to get full time work, during this phase a lot of acquisition also took place with the major brands which resulted in some alterations in plans to that which were planned.
SlimFast which is a private company is another acquisition of Unilever after implementing path to growth strategy in 2000 the company bargained an agreement to purchase slimfast diet foods. It had strong sales and network and has a special space in every super market and drugstores these products were made from natural ingredients and added vitamins and minerals to provide good nutritional profile. It also maintained a very good relationship with Food and Drug Administration (FDA) and other agencies. Unilever has concentrated more on this Slimfast since the company was growing fast and attracted the customers to buy more of it for healthier and long living life .Management of Unilever utilized the opportunity to globalize the product in other countries like Europe, Australia due to increase in the percent of obese. According to the world health organization percent of the obese was increasing gradually.
UNILEVERS TOP COMPETITORS
Figure: Competitors Performance Comparison http://finance.aol.com/company/unilever-plc-amer/ul/nys/top-competitors
Ben & Jerry’s acquisitions which produces one of the finest ice creams anywhere in pint cartons and wholesale at groceries. Their sales slogan was Vermont finest All Natural Ice cream. They never use any artificial flavors thought the cost is little more it is worth the price. According to the time magazine Vermont makes the best ice cream in the world with 29 flavors in pint cartons and 45 flavors in bulk cartons. There products were distributed throughout the world. On demand Ben & jerry operated three manufacturing plants where Vermont plant produces super premier ice cream and frozen yogurts where as spring field produces ice cream, lot fat ice creams in bulk, pint cartons and half gallons.
Dreyer’s and Haagen-Dazs were the two major competitors of Ben & jerry and other competitors were Colombo frozen yogurts, Kemps ice cream and star bucks. Ben & Jerry produces a wide range of ice creams products like sticks, bars, frozen yogurt pops etc. Though Haagen- Dazs was the global market leader followed by Ben & jerry it had an insignificant market share in United States where as Haagen- Dazs was more significantly sold in foreign markets. Both Ben & jerry and Haagen-Dazs produced ice creams with cookies and candies in it.
Bestfoods was a global company across the world almost in 60 countries which was busy in manufacturing and marketing the food products. Bestfoods profits are almost from outside of the United States that is almost 60 percent of its profits. It is one of the best managed food companies among United States who has much number of employees working with in their company in which half of them were at non US locations. The company increased payments for 14 successive years has its revenues grow by7.8 percent annual rate and suddenly slow downed during the period of 1997 and 1999. Then the company introduced a strategy with four core elements.
Globalization of the company’s core consumers:
Products which are new in the market are needed to be globalized that is the products which are less popular among the consumers, are needed to be advertised and market those products to increase its sales and profits of those products. Few such products are knorr product line, salad dressing and food service operations. The advertising of such kind of products was done very well in order to get those products globally recognized and be accepted among many big brands and soon they became household names.
Improvement in cost effectiveness:
With changing customer preference the quality of the products must be improved and therefore there should also be improvement in cost effectiveness as the quality improves cost increases. Cost effectiveness is nothing but it is a way by which you show to a customer that a certain is product is worth using or is better than other product or the money u spend on it is worth it. Cost effectiveness in simple would be defined as showing the worth of the product.
Looking for new market opportunities:
Extending the product sales all over the world via new product introductions and extending sales of the products which are existed in the market. It is very important for any company to be always alert and look for opportunities to extend the business to a large scale and see it in a bigger picture based on the opportunities it gets.
Using free cash to make new acquisition:
With expanding the products and brands company has created 60 acquisitions in the global market.
After struggling a lot in June 2000 best foods agreed to be acquired by Unilever. Best foods were the largest acquisition undertaken by Unilever by as far as concerned and which makes a largest combination of food companies in 12 years. Management of Unilever believed that combining and assimilating bestfoods would result in pre tax cost saving, better efficiencies in business process, synergy in distribution marketing, reformation of general and administrative functions and improved economies of scale.
By creating robust business in United States market, increasing strengths of Unilever and best foods in Europe, building of best foods in Latin America to speed up the growth of Unilever brands, by distributing strengths in Asia- pacific to grow and sped up Bestfoods brands and increasing the sales of Unilever products by food service channel of Bestfoods.
The work culture was so casual to make the atmosphere fun and lively with communication between the management and employees. The company respected the employees suggestions and respected them even paid the employees a reasonable salary
Finally Unilever has announced sale of Bestfoods Backing Company to Canadian food and super market group known as George Weston for $ 1.76billion though Unilever declared to divest Bestfoods Baking Company and Unilever other products and bakery products does not exit any more at Unilever. Bestfoods has 19plans across the United States with a strong management team and was entirely US based. It was one of the best distributing for delivering the baked products which are really baked fresh and sent directly to the retail stores. With its dedication and hard work Bestfoods sales has increased its profit margins by 8 percent.
Later again Unilever announced to sell 19 Bestfood brands across North America to ACH food companies which is a supplementary of Associated British Food. By successfully combining the operations of bestfoods with Unilever by the year end of 2003 the two companies had been merged in 63countries across the world
Path to Growth:
Path to growth strategy was initiated in 2000 and was restructured for several years for better and significant results. The key elements of this Unilever’s path to growth strategy were cutting down its brands from 1600 brands to 400core brands to achieve top line sales and increase profits by advertising the brands which are more popular and leading brands across the world and concentrating on R & D. Another important key element was divesting underperforming brands and theirs companies and introducing more innovated things to enhance the internal development of the organization and making new acquisitions.
Unilever’s years of slow performance and its lack of corporate strategy in the competition industry with low number of brands and ordinary performance in growing markets with a little global presence made to create a path to growth strategy which was a 5 year growth plan which made them to concentrate on more brands and product innovations for internal and external growth of the company. And made the company to grow with acquisitions.
According to FitzGerald and Bergman’s path to growth strategy they predicted to manufacture double digit wages per share growth and superior positions. Focusing on the key brands by advertising and marketing made business grow higher and build brand value and increased brands prices. The case study shows Unilever as a global company according to SOWT analysis after introducing the path to growth strategy the company had really increased its sales and with introducing more number of acquisitions and cutting down the cost of revenues. As the acquisitions like Slimfast, Ben & jerry and best foods were rapidly growing their market across the world building a very strong profile and providing customers attractive products and offers. Slim fast has 20%anual growth rate with strong sales and distribution all over the world and also maintained good customer relation. Where Ben & jerry was worlds giant ice cream products and yogurt maker with strong brand equity. Bestfoods was US’s 10 largest food products company with a strong global position.
The two key elements of the Unilever’s new business strategy was to cut down on the number of brands that were being sold or being marketed by the company, at that time Unilever was operating with as many as 1600 brands and much more products due to this the cut down on the number of products and brands was considered, the 1600 brands that where part of the company were cut down to as many as 400 core brands, the core brands mostly included all the famous and popular brands which are generally very popular among people, this idea came up as to make sure that the products where sold and by doing this it would not be much of a problem for the marketi8ng of these products as most of these brands where already day to day and very famous brands which people would generally prefer buying, which would mean that it would take much less an effort to connect to the people and more over the marketing was also done in such a way that people where able to connect to it very easily, the other key element of the unilevers strategy was to remove all the underperforming companies or brands and introduce some other new brands or companies in order to enhance the internal development of the organization and make new acquisitions which would enhance the sales of the company and make it more likable for the people this strategy was designed to increase the sales of the company and get rid of the companies which where not much in demand .
Weaknesses according to SWOT analysis showed the company has dual leadership, insufficient management of brands and reduced R & D after all this slow performance and small global presence the management has introduced path to growth strategy, which increased the company sales with cutting down it costs and introducing more acquisitions resulted in globalizing the company.
As a result there were few expectations to achieve a double digit growth and securing a better position in global market for food and household products by increasing the quality of the product to gain pricing power and attract more customers. But according to the strategy plan the targets which were set was really high that is top line sales growth of 5-6 percent annually, increasing profits, and plan to complete by the end of 2004.
If we look and analyze the path to growth strategy we can tell whether the strategy is working or not, we can say that it is working by its success rates and increase in profits and increase in brands and acquisitions that is the consumer preferences have changed due to which the products quality has changed and prices have changed the leading brands sales have increased from 75 percent to 93 percent. Food and personal care industry have increased its profits consistently. Operating assets have also improved by 9 percent. Acquisitions like slim fast, Ben & jerry and best foods have gradually improved its growth and established its acquisitions all over the world. But the other side it is completely not yes, Unilever was gaining profits significantly after introducing new strategies but it was losing too yes it reported a net loss of $318M as the competitions was increasing and new brands were coming in to the market and rivals were introducing new strategies to compete Unilever. In the year 2004 sales grew only by .4 percent leading brands by .9 percent so this proves that Unilever was lagging behind competitors in terms of innovation and advertising.
Unilever’s lack of advertising and marketing failed to improve sales. The company was small and not globalized. In this case Unilever attracted the new young talented manages to join their company with innovated ideas to increase its company profits by new methods of advertising and marketing. To justify Unilever strategies it maintained dual headquarters and dual chairpersons which reduced effective thinking and slow downed the decision making. Unilever is divided into Unilever Plc and Unilever NV. This made Unilever to focus on the needs of the customers and increase its sales profits in various industries like food, personal case, and household industries all over the world.
As customers demand the products which are of the best quality and branded but at the same time convenient, cheap and attractive. The market for household products have been decreased its profits as the numbers of single parents have been increased and the rate of females working out have been increased and the demand for the healthy and high quality food has been increased. The consumer’s preference of the products such as its look, quality of the product and nutritional values has been increased by providing a strong competition against its giant competitors and private manufactures. This allows Unilever to focus on the need of its customers by increasing its sales.
In 2003 Unilever executing its path to growth strategy by increasing its operating margins to over 15percent, but the sales of the leading brands growth as slowdown and raised questions among the investors and retailers that whether company brands could deliver some 5-6 percent of growth in revenues in the next coming years.
Unilever’s current business Strategies:
Ever since the ‘Path to Growth’ strategy ended in 2005 there has been a 15% increase in the sales and development in the overall progress of Unilever. After the ‘Path to Growth’ came to an end a new process was developed by Unilever called as the Brand Imprint which helped the marketing teams in understanding how the business could face risks as well as opportunities from the social, economic and environmental issues. In this process each brand was scrutinized by a team looking into various aspects of it such as the direct as well the indirect impacts of the product, it also checked how the brand would go ahead in the future looking at the products possibilities of growth both from a customer and a stakeholders point of view.
The outcome of the Brand Imprint is that the process has helped in making important decisions for the company keeping the future in perspective it also developed in addressing social missions, social and environmental issues.
The Brand Imprint provided a perfect experience to find some systematic and measurable ways to explore different brands and improve the brands by addressing social issues, helping people the product well and reducing the environmental issues.
When the S.W.O.T analysis was done on the ‘Path to Growth’ strategy many different aspects of the strategy where scrutinized using the SWOT analysis in which it dealt with many aspects such as the strength, weakness, opportunities and the threats that are being faced. After the analysis it came out that it had been very useful to determine the various aspects attached to it.
Unilever for years had been a slow developing company, though the company had the right infrastructure and the capital but it couldn’t utilize it properly that was basically the reason why the path to growth and various other strategies where starting to come up to help the company to increase the sales of the products and improve the business. Path to growth played a major part in the development of the company.
The Path to Growth strategy did prove to be quite a useful thing considering the fact that during this period almost all of the unsuccessful brands where removed or replaced and the brands which where trusted and kept managed to increase the sales by 75% to 93%.
Unilever’s growth was considerably slow during this phase because the company was at that stage making very drastic changes and for these changes to come up and make a difference was something unexpected but the company’s growth was obvious in certain fields thanks to the new strategies that had come in to improve the sales of the company so as to improve the business of the company. It was due to the fact that the company probably took way too much time u started and implement its plans that it caused the success to be not as higher as expected.
Many business analysts and commentators felt that most of the strategies of the path to growth where working fine but there was always a speculation that what ever progress was talking place was happening too slow considering the competition the market was in with at that time, it was also felt that as the basic functionality of the business was spread among way too many people made the management way to complex and it would have been better off if it was simpler. It did work out fine when it came to the advertising of the product and getting it known to the people as it was more public oriented and it used the sources to the full extent to connect to the people.
It did experience a drastic growth during that period as the analysis had proved that the company had the highest growth percentage as compared to any other company during that period it did bring in high profits to the company but looking at the whole picture it did prove to be a huge loss for the company considering the fact that they faced a countable loss in the revenue margin and that proved to be the difference, though it did have the right amount of sales and customers due to the slowness of there analysis to sort out and remove or replace the stuff did make a difference to analysis in the larger picture.
But the company did grow during that time which might as well have effected the revenue cause many new store where started and large number of employees where starting to be employed on a full time basis. It did do quite well on the international market as well.
By looking at the way the company had grown during this stage is quite remarkable many business analysts and commentators had felt that they probably had the right scheme of action because during that time they where handling 1600 brands and which was way too much and among those were quit few brands which hardly made any diff to the company so then the whole idea of brands cut based on the market outlook and sales reports was looked into to classify as to which of the products or brands where fast selling and which had the scope to sell more. It was that idea to cut down on the number of brands and start promoting only few brands which where much easier to be marketed and which where more likable by the people by which it would increase the sales and also make the marketing of these products easier cause when you are promoting bigger brands which are often very well known to public would mean that u don have to spend much on the marketing.
Did the company experience growth during this period? Yes, would be the right thing to say voiding the minor things which might effect the outcome but it did see the light of success though slowly and there process and ideas where starting to get implemented in a better way and in a more successful way to deal with the growth of the company, the process of cutting down on the under selling companies was probably the decision that started to turn the tide for the company as it was when the losses where starting to be covered and it was mor
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