Unilever Limited along with Procter &Gamble and Colgate-Palmolive are the leading international companies active in the market of FMCG (Fast Moving Consumer Goods) today
Performance figures for Unilever for 2011: In the year 2011, Unilever had a business turnover of 46,467million Euro and a operating profit of 6433 MEur. It declared a PAT of 4,623 MEur. As with trends, the majority of the company’s turnover comes from the new and emerging markets of India, China and East Europe. [Annual Report 2011]
The Corporate strategy of the company is not only obsessed with growth but it lays clear strictures that this growth should not be at the cost of sustainability. This will be the official mantra of the company at the corporate level of business strategy, which relates to how the company relates to a particular market and plans to establish advantage over the competition. Corporate Strategy will be indirectly related to Functional Strategy, which is resource deployment at different operational levels. We also have Business Strategy, which is concerned with how the company performs in a particular market and its competitive advantage over its rivals. (Strategic Management Concepts, David.F)
The Unilever Business Model
Unilever’s strength is its brands, coupled with its experience in freshly emerging markets, which can be claimed only by a limited no of companies. Having defined its corporate strategy, the company’s business and functional strategy is brand based with innovation providing the necessary value addition and impetus for sustained growth. The Unilever Sustainable Living Plan (USLP) says that (1) “we will help 1 billion people improve their health and wellbeing” (2) we will our products halve the environmental footprints of (3) we will source 100% of agricultural raw materials sustainably”[Unilever Annual Report and Accounts, 2011]. The company’s free cash flow in 2012 was 3.1BillEuro against an underlying 6.5% sales growth and 14.9% operating margin.
Some key business strategy tools for analysis are the External Factor Evaluation (EFA) Matrix and the Competitive Profile Matrix (CPM). Such strategy forecasting tools have now become all the more important because of Globalization as factors like cultural issues, political instability, foreign exchange rates etc. have to be considered. Unilever has an advantage in this as it has already established presence throughout the world. Similar is the story for CPM. As Unilever brand competitors have experience too maybe not huge but enough to make the above tools redundant.
Unilever’s main strategies for growth include the following
1. Driving growth through market development. Unilever aims to bring many of their brands a step higher or lower, so as to be, within the reach of an extended market.
2. Making sustainability grow by working with customers and retailers.
3. Continuous innovation towards increase of qualities of the company’s top brands so that the distance between them and the company’s products are huge.
4. Dispose of segments where the company’s brands have been trailing ever since inception.
5. Introducing new brands and new brand-names for new markets.
Implementation of strategy is very important obviously and the Unilever business model places due importance on the same. The SBU concept of organizational model, which is followed by Unilever, will support this strategy. In a SBU model, different departments or business units are formed in the organization’s administrative center which report directly to the top management which are then crosschecked with the forecasted strategy figures..
Mergers, acquisitions and disposals are also an important part of the Unilever strategy for profitable growth. Some important activities in 2011 in MA&D are
1. Alberto Culver 100% acquired in 2011 ; brands such as TRESemmé, Nexxus, St. Ives and Noxzema, will add value in US and internationally
2. Purchased 100% of Sara Lee’s Personal Care Business.
3. Sold tomato products business in Brazil to Cargill.
4. Sold global Sanex brand to Colgate-Palmolive.
5. Sold Culver Specialty Brands division to B&G Foods Inc.
6. Purchased 82% of Concern Kalins, Russia’s leading personal products Company.
There are some of the key acquisitions and disposals, which Unilever has already carried out towards maximizing profit vision. Others are also in the pipeline.
The above gives in a nutshell, the strategic planning of Unilever for maintaining growth. And although detailed strategic decisions have been taken and constructive steps taken, The success of the company’s short term strategy and the actual figures etc. will be only known at the end of the year.
References:-
Byrne John A. (1997) ; Business Article called “Strategic Management”in Businessweek: (Digital version available at http://www.businessweek.com/1996/35/b34901.htm dtd 24/06/97, Accessed on 27/04/2012)
David, F. (2011). Strategic Management Concepts, Thirteenth Edition. Upper Saddle River, NJ: Prentice Hall
Porter Michael E. (1998); Competitive Strategy: Techniques for Analyzing Industries and Competitors, The Free Press (A divison of Simon and Schuster Inc), 1230 Avenue NY 10020
Unilever Annual Report & Accounts, 2011 (digital version available at http://www.unilever.com/images/Unilever_AR11_tcm13-282960.pdf ; Accessed on 27/04/2012.)
