Strategic 1

Management

Of

UNILEVER

STRATEGIC ANALYSIS OF

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 2

Management

Of

UNILEVER

Submitted by:
Nadia Shoukat (23) MBA, 4th semester, Section A, (M)

Submitted to:
Sir Shahid Yaqoob MBA Marketing

Submittion Date: 22 May, 2010

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 3

Management

Of

UNILEVER

DEDICATION
WE DEDICATE THIS HUMBLE EFFORT TO The Holy Prophet “HAZRAT MUHAMMAD” (P.B.U.H) The greatest Social Worker, Whose every tear was for The Cause of humanity And also dedicated to THE UNFATHOMABLE LOVE, UNFLINCHING SUPPORT UNTIRING MIDNIGHT PRAYERS AND STEADFASTNESS OF

“OUR REVERED PARENTS”
WHO HAS BEEN A BEACONHOUSE FOR USFOR THE WHOLE OF OUR LIFE, WHO HAS ALWAYS SHOWED US THE RIGHT PATH, THE PATH OF TRUTHFULNESS AND HONESTY AND WHO HAS BEEN ALONG WITH US THROUGHOUT OUR STUDYING CARRIER

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 4

Management

Of

UNILEVER

Acknowledgements
God never spoils any effort; every piece of work is rewarded according to the nature of devotion for it. We are extremely thankful to ALLAH ALMIGHTY Who, in spite of numerous difficulties, vicissitudes and acute frustrations enabled us to probe the present study and dissertation. We bow our head to ALLAH ALMIGHTY for the buntings and the blessings that He has bestowed upon us. Who has given us the courage and stamina to come up to the expectations of our revered teachers and ever loving parents and to sum up my maneuverings for the completion of this manuscript. All the respects are for the last Prophet of God, HOLY PROPHET MUHAMMED (Peace Be Upon Him) Who is the greatest scientist of all the ages, whose moral and spiritual teachings enlighten our heart, mind and soul and flourished our thoughts towards achieving higher ideas of life. We deem it utmost pleasure to avail this opportunity to express the heartiest gratitude and deep sense of obligation to our revered Teacher Sir Shahid Yaqoob, Lecturer, Department of Business Management Sciences, Islamia University, Rahim Yar Khan for his skilled guidance, keen interest, constructive criticism, constant encouragement, valuable suggestions and pains taking supervision throughout the course of our study and research work. The work presented in this manuscript is accomplished under his dynamic, skillful, affectionate guidance and generous transfer of knowledge. Whenever we sought help from him, he was the person who was always there bearing a welcoming smile on his face and having the doors of his good offices always opened for us. We have learnt a great deal from him. We have the honor to express our deep sense of gratitude and profound indebtedness to ever affectionate Sir Shahid Yaqoob for his keen interest, encouragement, generous guidance and untiring help at all times. In fact it was not possible to bring this work to fruitful conclusions without his day and night persuasive and sincere efforts. He has guided us at every step that we took throughout our career at postgraduate level. He has always thought right for our betterment and for our success in the professional field. We cannot thank him, as we have no words that can have an idea of the respect we have in my heart for him.

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 5

Management

Of

UNILEVER

Table of Contents
1- Introduction of UNILEVAER………………………………….6 2- Company Summary...………………………………………..…8
2.1- Vision………………………………………………..….8 2.2- Mission……………………………………………..…...8 2.3- Objectives……………………………………………….9

3- Internal and External Audit…………………………..................10 4- The Input Stage………………….……………………… ...12
4.1- EFE matrix…………………………………… ………..12 4.2- IFE Matrix………………………………………………14

5- The Matching Stage ……………………………………………16
5.1- SWOT Matrix………………………………………….16 5.2- SPACE Matrix ……………………………………..….18 5.3- BCG Matrix…………………………………………….21 5.4- IE Matrix……………………………………………….24 5.5- Grand Strategy Matrix………………………………….25

6- The Decision Stage …………………………………………..…26
6.1- QSPM Matrix………………………………………….26

7- Strategic Recommendation…………... ……………………….…27 8- References ………………………………………………….…..…28

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 6

Management

Of

UNILEVER

INTRODUCTION OF UNILEVER PAKISTAN Ltd.
Unilever is one of the world's leading suppliers of fast moving consumer goods across Foods and Home and Personal Care categories. Unilever's portfolio includes some of the world's best known and most loved brands.

Unilever Pakistan Ltd:
Unilever Pakistan (70.4% Unilever equity) is the largest FMCG company in Pakistan, as well as one of the largest multinationals operating in the country. Unilever Pakistan Ltd., a subsidiary of the Unilever Group is operating in Pakistan since 1948. The Company’s main business lines are Soaps and Detergents, Personal Products, Cooking Oils and Fats, Packed Teas, and Ice Creams. Unilever has a long list of brands such as Surf, Vim, Rin, Lifebuoy, Sunlight, Lux, Rexona, Sunsilk, Close-Up, Blue-Band, Dalda, Planta, Lipton’s Yellow Label, Taaza and Richbru, Brook Bond’s Supreme and Kenya Mixture etc. which are common household names in Pakistan. The Company’s factory at Rahim Yar Khan was one of the first industrial units to be constructed after the creation of Pakistan. As the consumer base expanded over the years and the Company entered into new product lines like Personal Products and Margarine, it invested further in the installation of modern manufacturing facilities including a factory at Karachi. Today, the Company is using latest state-of-the-art technology for producing high quality products. In 1995, the Company established a new factory near Lahore to manufacture the Wall’s range of ice creams, which have become popular within a short time. In 1996, the present group – Unilever UK acquired the Polka Group that produced ice creams. In 1999, Pakistan industrial promoters (Private) Limited, owners of ‘Polka’ brands of Ice Cream were merged with Lever. In order to leverage the synergies of Unilever’s international brand strength, market edge and corporate image, Lever Brothers Pakistan Ltd. changed its name to Unilever Pakistan Ltd., in August 2002.

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 7

Management

Of

UNILEVER

Overview of Unilever Pakistan Ltd.
The company had a turnover of Rs. 23.3 bn (Euro 309 mn) in 2007, and enjoys a leading position in most of its core Home and Personal Care and Foods categories, e.g. Personal Wash, Personal Care, Laundry, Beverages (Tea) and Ice Cream. The company operates through 5 regional offices, 4 wholly owned and 6 third party manufacturing sites across Pakistan.

Accountable to our stakeholders
Since the time Unilever Pakistan began its operations in 1948, the Company has been closely connected to the Pakistani people and its brands have been an integral feature in their daily lives. In fact, the nature of our business enables our brands to be the pulse and heartbeat of the 164 million people in Pakistan. This is a huge commitment, which makes us responsible and accountable to all our stakeholders and society as a whole and strengthens our resolve to:
• • •

Make a positive difference to the lives of low income consumers Create new opportunities for growth Improve the overall quality of life in Pakistan, by promoting education, nutrition, health and hygiene.

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 8

Management

Of

UNILEVER

Our Vision
“Touching Hearts, Changing Lives.”

Our Mission

“Mission Is 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.” Adding Vitality to life: 150 million times a day, in 150 countries, people use our products at key moments of their day. In the future, our brands will do even more to add vitality to life. Our vitality mission will focus our brands on meeting consumer needs arising from the biggest issues around the world today – ageing populations, urbanisation, changing diets and lifestyles.

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 9

Management

Of

UNILEVER

Scale and geographic reach: “Our deep roots in local cultures and markets around the world give us our strong relationship with consumers and are the foundation for future growth. We will bring our wealth of knowledge and international expertise to the service of local consumers - a truly multi-local multinational” - extract from Unilever’s Corporate purpose. Strategy and long-term financial target At the heart of Unilever's strategy is a concentration of resources on areas where we have leading category and brand positions and which offer excellent opportunities for profitable growth, especially in personal care, developing and emerging markets and Vitality. The focus is primarily on developing the business organically, but acquisitions and disposals can also play a role in accelerating the portfolio development. To execute this strategy we have reorganised the business to simplify the organisation and management structure and to improve capabilities in marketing, customer management, and research and development. The result is better allocation of resources, faster decision-making and a lower cost level. This transformation, known as the One Unilever programme, allows us to leverage our scale both globally and locally. Unilever's long-term ambition is to be in the top third of our peer group in terms of total shareholder return. We expect underlying sales growth of 3-5% per annum and an operating margin in excess of 15% by 2010 after a normal level of restructuring charges of 0.5 to 1 percent of turnover. Return on invested capital is targeted to increase over the 2004 base of 11%. Over the period 2005 – 2010, we aim to deliver ungeared free cash flow of €25-30 billion. It should be noted that previous and planned disposals and the additional restructuring plans will have reduced ungeared free cash flow by about €2.5 billion over this period, while enhancing the ongoing cash generating capacity of the business.

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 10

Management

Of

UNILEVER

Internal and External Audit of Unilever
Strengths:
 Customer’s Loyalty.  Latest state of the art facilities and technology for producing high quality products.  International brand strength.  Committed to business ethics, safety, health, environment and community.  UNILEVER’s key competitive advantage over other market participants is the retail reach of the company. UNILEVER services 500,000 outlets with 50 % through direct distribution and remaining via wholesalers.  UNILEVER is enjoying market edge of 41% in FMCG industry. UNILEVER is at number one in ice cream segment and having 14% market share all over the globe.

Weaknesses:
 The biggest challenge in safeguarding market position is to become cost leader.  Operational complexity due to a large number of products in portfolio and due to diverse work force.  Strategic alliance with other small mills for manufacturing purpose is the weakness as well as a threat for UNILEVER. Although UNILEVER claims that it is a part of its cost reduction strategy but it can not hide the reality that it shows weakness of UNILEVER.

Opportunities:
THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 11

Management

Of

UNILEVER

 Markets of developing countries can be proved a profitable segment because people are consumption oriented rather than saving or investment oriented.  UNILEVER can gear up its market share in the untapped rural market.  Diversification in unrelated business.  Rapid increase in world population. World population is set to grow by 800m in 2010 and almost all increase will be in developing countries.

Threats:
 FMCG market is highly responsive to economic conditions, inflation and social disruptions resulting in variations in sales revenues and demand for the company.  P & G is the major competitor and threat for UNILEVER. Other organized players are Nestle and R & B.  UNILEVER is facing intense competition from unorganized players i.e. cheaper smuggled products and Chinese products. According to industry source, 40% of tea consumed locally and a large portion of HPC products are smuggled into the country.  Legal, political and regulatory factors of host country. For example, supportive Government policies for attracting FDI, 1% tax rate on corporate profit and inability of Pakistan Government to control smuggled products etc.  Although UNILEVER has a first mover advantage in ice cream segment but Engro has announced to enter in ice cream segment and is considering a big rival post CY2010.  Rapid increase in raw material cost and supply disruptions from suppliers of raw material. The unprecedented surge in palm oil, tallow prices and other materials has resulted in declining margins. Going forward, high raw material costs are a key risk to UNILEVER’s profitability.

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 12

Management

Of

UNILEVER

EFE Matrix
Weigh t 0.15 0.15 0.10 0.05 0.10 0.15 0.08 0.07 0.05 0.10 1.0 Rating Weighte s d Score 4 3 1 4 2 4 2 2 2 4 0.60 0.45 0.10 0.20 0.20 0.60 0.16 0.14 0.10 0.40 2.95

Key External Factors OPPORTUNITIES Market of developing countries due to more tendency towards consumption Rapid increase in world’s population. Unrelated diversification. Rural area. Hygiene Consciousness THREATS Competition from organized players, P &G Inflation Rate Smuggled products and local competition. Legal, political and regulatory factors of host country. Rapid increase in raw material cost. Total Weighted Score

1. 2. 3. 4. 5. 1. 2. 3. 4. 5.

Ratings: 1 – Poor 2 – Below Average

3 – Above Average 4 – Superior

Total weighted score of EFE matrix of UNILEVER (2.95) shows strong response of company towards external factors.

Justification of ratings:
On opportunity side: 1. It is a general observation that people of developing countries like Pakistan are more inclined towards consumption rather than saving and the major portion of spending is on FMCG. 2. World population is increasing at an alarming rate. World population is set to grow by 800m in 2010 and almost all increase will be in developing countries. And increase in population leads to increase demand of FMCG sector.

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 13

Management

Of

UNILEVER

3. Like Engro, UNILEVER can enter in unrelated areas of production. 4. The under penetrated rural market offers tremendous growth potential as rural population constitutes around 60% of the total population. In the past few years, favorable structural changes, such as double digit growth in agricultural credit, increased penetration of television cable media have boosted demand for FMCG products. Following table shows that rural population will be almost 50% of total population in near future. % of total population Rural Urban Total (mn) On threats side: 1. P & G with 50% market share is a big threat for UNILEVER. Nestle with roundly 30% market share is also posing a threat in near future. Engro is planning to enter in ice cream market and a future rival in ice cream as well. 2. Rapid increase in inflation rate can increase the prices of products and hence can reduce demand. 3. Smuggled products swallow a big part of profits of UNILEVER every year. Almost 40% tea and 29% shampoo used in Pakistan is smuggled from Afghanistan and China. 4. Economic system of host country and rapid increase in raw material cost are last two major threats for UNILEVER. 1990 31.9 68.1 109.4 1995 34.3 65.7 123.6 2005 37.0 63.0 159.2 2010 43.3 56.7 179.6 2015E 47 53 202.2

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 14

Management

Of

UNILEVER

IFE Matrix
Key Internal Factors 1. 2. 3.
4.

Weigh t 0.15 0.10 0.10
0.08

Rating s 4 4 4
3

Weighte d Score 0.60 0.40 0.40
0.24

5. 6.

STRENGTHS Customer’s Loyalty. Micro level retail outlets Latest state of the art facilities and technology. International brand strength. Market share of 41% Committed to business ethics, safety, health, environment and community.

0.12 0.10 0.15 0.15 0.05 1.0

3 3 1 2 1

0.36 0.30 0.15 0.30 0.05 2.80

WEAKNESSES 1. Strategic Alliance 2. Costly Products. 3. Operational Complexity. Total Weighted Score

The score 2.80 shows that company has solid internal position, its strengths are overcoming the weaknesses.

Ratings:

1 – Major Weakness 2 – Minor Weakness

3 – Minor Strength 4 – Major Strength

Justification of ratings:
On strength side: 1. Customer’s loyalty is not a hidden fact in UNILEVER case. People have developed and adopted the taste of UNILEVER’s high quality products and there is no comprise on quality. 150 million times a day, in 150 countries, people use UNILEVER’s products at key moments of their day. 2. Micro marketing in developing countries. UNILEVER services 500,000 outlets with 50 % through direct distribution and remaining via wholesalers.

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 15

Management

Of

UNILEVER

3. UNILEVER’s continuous expansion and its large market share indicate their strength in latest facilities and quality management. UNILEVER has ISO certification. 4. Its brands are enjoying international recognition. UNILEVER is serving almost 150 countries. 5. UNILVER is concerned about its customers as well as employee. There are strict safety standards for employees and visitors of plants too. On weakness side: 1. Although UNILEVER claims that strategic alliance with small firms for manufacturing purpose is the part of its reducing cost objective but if we look at the other side of the picture, strategic alliance is a weakness as well as threat for UNILEVER. For example, Asad Soap Factory is manufacturing soap for UNILEVER Rahim Yar Khan, and now Asad soap factory is searching for buyers of soap plant. 2. UNILEVER’s products are costly as compare to local producers. Although costly goods are not posing any big threat to UNILEVER but in long run it can be proved harmful for company. So company is responding greatly towards covering its weakness. For this purpose, company has adopted policy of contractual hiring, strategic alliance etc. 3. UNILEVER has a large number of products in its portfolio. It means that UNILEVER has a large number of SBU’s to control. It adds operational complexity to UNILEVER’s operations.

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 16

Management

Of

UNILEVER

SWOT or TOWS Matrix
STRENGHTS
1. Customer’s Loyalty. 2. Micro level retail outlets 3. Latest state of the art facilities and technology.

WEAKNESSES
1. Strategic Alliance 2. Costly Products. 3. Operational Complexity.

SWOT / TOWS Matrix

4. International brand strength. 5. Market share of 41% 6. Committed to business ethics, safety, health, environment and community.

OPPORTUNITIES
1. Developing countries. 2. Rapid increase in world’s population. 3. Unrelated diversification. 4. Rural area. 5. Hygiene Consciousness

S-O Strategies
1. Discover new markets (O1,O2,O4,S4,S3) 2. New quality products (O3,O5,S3,S6) 3. Unrelated diversification (O3, S1)

W-O Strategies
4. Market Expansion in rural areas (O4, O1, W2)

THREATS
1. Competition from organized players, P & G 2. Inflation Rate 3. Smuggled products and local competition. 4. Legal, political and regulatory factors of host country. 5. Rapid increase in raw material cost.

S-T Strategies
5. Vertical Integration (T1,T3,S2,S4)

W-T Strategies
6. Increase in manufacturing capacity. (W1, T1). 7. Cost leadership(W2,T5)

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 17

Management

Of

UNILEVER

Proposed Strategies:
1. UNILEVER can capture untapped rural markets and markets of developing nations by using its state of the art facilities & technology. International brand strength is plus point which will be proved helpful while positioning. 2. UNILEVER’s Commitment to business ethics, safety, health, environment and community can be proved helpful in order to satisfy hygiene conscious customers. UNILEVER should focus more on quality of goods.

3. Unrelated diversification is a risky decision to be taken. Loyal customer is the major power to cope up with after effects of this decision. 4. Customers in rural areas and in developing countries usually have low income level. UNILEVER should reduce its costs in order to capture that uncovered markets effectively. 5. UNILEVER can use its international brand strength and wide network of retail outlets in order to compete with organized and unorganized players of market. 6. Strategic alliance is showing the weakness of UNILEVER in particularly manufacturing area which the competitors do not hold. UNILEVER should its production capacity in order to compete in market and to reduce competitor’s threat. 7. If UNILEVER can obtain cheaper raw material, it can reduce cost of goods manufactured.

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 18

Management

Of

UNILEVER

SPACE Matrix
Financial Strength (FS)
10% increase in net income in 2009 as compare to 2008.

Ratings
+4

Net sales were 15.7% 2009 as compare to 14% in 2008. Total asset turnover is 3.2times in 2009 as compare to 3.1 times in 2008. ROI has declined from 87% to 86% in 2009.
ROA is averaged 27% which is declined to 24% in 2009. Total:

+3 +2 +1
+1 +11

Industry Strength (IS)
Consumption Oriented Culture. Rapid increase in raw material cost. +4 +2 +4 +1 +11

Growth potential in rural and developing countries market. Profit potential is reducing due to intense competition especially from un-organized players.
Total:

Competitive Advantages (CA)
Committed to business ethics, safety, health, environment and community. Customer loyalty. Market share of 41%. Control over supplies and distribution. Latest state of the art facilities and technology. -1 -1 -2 -4 -1 -9

Total Environmental Stability (ES) Demand in the retail industry is price elastic.
Smuggled products and local competition. Legal, political and regulatory factors of host country High rate of inflation effects demand. Law and Order Situation Total:

-3 -5 -3 -4 -2 -17

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 19

Management

Of

UNILEVER

Average scores:
FS = 11/5 = 2.2 IS = 11/4 = 2.75 CA = -9/5 = -1.8 ES = -17/5 = -3.4 X-axis = IS+CA = 2.75-1.8 = 0.95 Y-axis = FS+ES = 2.2-3.4 = -1.2

FS
+6

CA IS

-6

+ 0.95

+6

-1.2 Competitiv e Strategy -6

ES
SPACE matrix indicates whether conservative, aggressive, defensive and competitive strategies are more appropriate for given organization. UNUILEVER should pursue Competitive Strategies that are intensive and integration strategies. I will suggest following two strategies: 1. Product development 2. Market Development

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 20

Management

Of

UNILEVER

Company will use Product Development to increase sales by slightly modifying its products. It would eliminate its threat from unorganized market competitors which are selling smuggled items and hurting the market of UNILEVER quite badly. Following are some factors that prove why I choose this strategy for UNILEVER:  UNILEVER’s existing products are very much successful across the globe. Its 41% market share shows the number of satisfied customers.  There are rapid technological developments in FMCD industry.  FMCG is a high growth industry. High growth is characterized by rapid increase in demand due to some factors like increase in population etc.  UNILEVER has both organized and un-organized rivals. Organized rivals are competing by introducing comparable prices and un-organized rivals are hurting UNILEVER by selling even at lower of the cost. Market development is another strategy suggested for UNILEVER, we’ve seen that UNILEVER is producing high quality products and captured the maximum market share. But still lots of lower and middle income people are out of its user for most of the products as they are highly priced. Rural area is also an untapped market for UNILEVER. UNILEVER must consider about producing low-priced products as well so company can earn maximum share.

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 21

Management

Of

UNILEVER

BCG Matrix
Market Share
High 1.0
High +20

Medium 0.50

Low 0.0

Ice cream
INDUSTRY SALES GROETH RATE (%) Medium 0

?
Knorr

?
Detergents Dove Beverages (Tea) Soap

Home & Personal care

Low -20

Industry Classification:
Industry Industry Indicators

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 22 Tea

Management Classification Mature

Of

UNILEVER

Industry growth lagging GDP growth. Low profit margins Reduced sales volumes 0.5kg per capita yearly consumption Double digit revenue growth Large Capex and advertising spend

Ice cream Growth

Soap

Mature

ULEVER Growth company within mature industry Lux sales doubled in 3 years High profit margins Introduction of liquid hand wash

Detergen t

Growth

11% rise in Surfs market share Low penetration, uses laundry soap 50%

population

Shampoo

Growth

Double digit turnover growth Lowest penetration in Asia. Clear Shampoo highest growth in comparable regions

STARS - Ice cream:
Unilever has the first mover advantage in the capital intensive ice cream segment. With around 65% market share, ULEVER is the only major operator in the industry. The company is in the process of increasing production capacity and strengthening its distribution channel. In CY07, sales were restricted by lost trade confidence, delay in factory expansion resulting in plant shutdowns, and adverse weather conditions. However, going forward with per capita consumption at a low 0.5 liters per annum tremendous growth potential exists in the ice cream segment. We expect segment revenue growth of CAGR 19% in CY08-CY12E.

QUESTION MARK – Frozen foods:
According to matrix, UNILEVER’s frozen foods like Knorr and some products of household care business units like Dove are question marks as they are operating in a growing market without high market share, thus holding the sales growth of the company’s 400 leading brands by 0.6%.

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 23

Management

Of

UNILEVER

Therefore it can be noticed that not the whole divisions are under performing, as a result UNILEVER needs to invest more in these business units to keep up with the fast growing market because they are already successful but need better performance. Brands such as Knorr and Lipton in food and Dove in the household product sector are among the core brands that raise concern for UNILEVER. As they operate in a growing market more investment is needed to boost sales and margin and as it is unlikely that these units achieve sufficient cost reduction benefits, UNILEVER may turn to its cash cow businesses to offset such investment. As part of its path to growth strategy UNILEVER must build on these businesses to improve performance as the market share must grow if they are to become stars otherwise they may face alternative solutions that could include the sale of the business, which should be the last alternative because of the growing divisions inside the business. UNILEVER might be better off investing more cash in frozen foods and household care; since the market is growing it may gain more share and dominance

CASH COWS – HPC:
The HPC segment continues to drive the top-line and profitability growth, and is the key focus of the company’s growth strategy. In CY09 the company posted impressive turnover growth of over 25% attributable to higher volumes and price increases. Among the key brands in the HPC business Lux, Surf and Sunsilk continue to be the star performers with market leadership positions.

DOG – Beverages (Tea):
The mature tea segment continues to follow a declining trend as ULEVER faces stiff competition in the tea market. ULEVER continues to lose sales volume to Tapal in organized sector and to small local brands in rural areas that are using cheap smuggled tea. Supply disruptions as a result of political turmoil and drought in Kenya ensue in squeezed margins. The companys strategy is to defend losing market share as no growth is expected in beverages segment. ULEVER had two production facilities for tea located in Karachi and Khanewal. Recently, ULEVER has closed down the Karachi tea factory in view of low demand and sales volumes. This is expected to result in restructuring charges in the short run, however, in the long run the company is expected to benefit in terms of cost efficiencies and reduced overheads.

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 24

Management

Of

UNILEVER

In the backdrop of losing market share, the contribution of tea business to total turnover has declined over the years (34% in CY09). Going forward, the tea segment is expected to remain under pressure. It is forecasted a flat outlook for the segment with decline in turnover of 5-6% each year.

Internal-External Matrix

IFE Weighted Scores
Strong 3.0 4 Hi .0 3 .0 Mediu m .0 Lo w .0 1 vii viii ix 2 iv v vi Average 2.0 ii Weak 1.0 iii

EFE Weight ed Scores

gh

i

The IFE matrix score for UNILEVER is 2.80 and for EFE matrix score is 2.95 therefore our IE matrix falls more around ‘v’ cell. The company should adopt HOLD & MAINTAIN STRATEGIES and I recommend Market Development and Product Development for UNILEVER. UNILEVER can introduce existing products to new geographical area that are rural markets and markets of developing nations. On the other hand UNILEVER can also modifying its existing products and introduce variants in order raise its market share.

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 25

Management

Of

UNILEVER

Grand Strategy Matrix

Rapid Market Rapid market Growth Growth

Q2

Q1

Weak Competitiv e Position

Strong Competitiv e Position

Q3

Q4

Slow Market Growth The grand matrix helps us to determine the strategy that firm must pursue, based on its competitive position and market growth. UNILEVER lies in Q1 which represents excellent strategic position of company. For these firms, continued concentration on current market and products is an appropriate strategy. UNILEVER has abundant resources so backward, forward and horizontal integration may also prove effective.

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 26

Management

Of

UNILEVER

QSPM Matrix
Market Development Product Development

External Factors Untapped Rural area. Market of developing countries. Rapid increase in world’s population. Hygiene Consciousness Unrelated diversification. Legal, political and regulatory factors of host country. Inflation Rate. Competition from P & G Raw material cost increased. Smuggled products and local competition. Total Internal Factors
Costly Products.

Weig ht 0.05 0.15 0.15 0.10 0.10 0.05 0.08 0.15 0.10 0.07 1.0 0.15 0.15 0.10 0.10 0.12 0.10
0.15 0.08 0.05

Attracti ve Score 4 3 4 ----4 2 4 3 3

Total 0.20 0.15 0.60 ----0.20 0.16 0.60 0.30 0.21 2.42

Attracti ve Score ----1 2 --1 3 3 4 4

Total ----0.15 0.20 --0.05 0.24 0.45 0.40 0.28 1.77

Customer’s Loyalty. Micro level retail outlets Latest state of the art facilities and technology. Market share of 41% Committed to business ethics, safety, health, environment and community.
Strategic Alliance

--3 4 3 4 ----4 ---

---0.30 0.40 0.30 0.48 ----0.32 ---

--4 1 3 3 ----3 ---

--0.60 0.10 0.30 0.36 ----0.24 ---

International strength. Total Grand Total

brand

Operational Complexity.

1.0

1.8 4.22

1.6 3.37

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 27

Management

Of

UNILEVER

Strategic Recommendation
Appropriate strategy for UNILEVER is Market Development. UNILEVER should remain in the present business and should introduce present products in new geographical area. Following are necessary factors that must be present while choosing market development strategy:  UNILEVER has its own strong distribution channel.  UNILEVER is very successful at what it does.  Untapped rural market and market of developing countries exist for UNILEVER to cover.  UNILEVER is a strong MNE in Pakistan. It has abundant resources both financial and human, so it can easily expand geographically. Here we are not concerned about expansion of operating activities to new geographical area. We are particularly concerned about capturing untapped market. It is up to UNILEVER whether it is decided to start operating in new areas too or just introduce products by using its strong channel of distribution.  UNILEVER is operating globally. It means that FMCG is such an industry which can be grown globally.

THE ISLAMIA UNIVERSITY OF BAHAWALPUR

Strategic 28

Management

Of

UNILEVER

References
 www.pakistanunilever.com  www.igisecurities.com.pk

And various news paper articles, research findings and blogs, which helped me indirectly to build up my mind about Pakistan UNILEVER and figure out their External and Internal Factors which were involved in the project.

THE ISLAMIA UNIVERSITY OF BAHAWALPUR