BMG815 – Global Policy & Strategy Assignment Sample
Introduction
As the Earth’s surface shrinks due to globalization, so do people’s demands for the most basic of necessities. It was easier to get what you needed when you could change or buy it in your own neighborhood or country back in the good old days. International trade plays a role even though more and more individuals are importing goods from other countries to meet their needs. International business has made it possible to shift the production and distribution of items from one country to another. Borderless trading is made easier by global business (Collinson, 2020). Unilever is one of the world’s most successful multinational corporations, with operations in 190 countries.. There are almost 400 brands owned by Unilever, many of which are well-known throughout the world. A few well-known examples of this type of product include Vaseline and other well-known names like Dove, Colgate, Xe, and Lux Lifebuoy (Unilever, 2021). It is considered as an iconic corporation by numerous businesses around the world because of its effective and unique management style. They have been able to take full control of their global business operations. Depending on the demands and cultures of the people who live in different areas, they have different management systems in place. As a firm grows and expands, it is important to find a distinctive management strategy and a variety of competitive strategies that can help it succeed.
Justification of reasons for internationalization
International business means the trading of products with different countries crossing the nation’s borders. The international business enables one who is living in Singapore to get the product of USA easily. International business has broken all the national boundaries of the world because this enables the trading of products. There are certain rules and regulations that must be followed by the organization doing international business (Liu et al., 2021). There are many benefits of international business. Some of them are:
- International business enables an organization to increase its sales by selling products in foreign markets
- Increase in sales results in an increase in net profit for the organization
- As the organization deals in different markets, it reduces the risk
- International business reduces competition for the organization
- Access to foreign markets resulting in access to new customers
- An organization can establish the business name internationally by doing international business
- Companies can purchase different resources at a low cost from countries which currencies are depreciating
But with so many advantages, international business has some disadvantages as well (Wild, 2020). Like
- Different countries with different cultures
- Different languages for communication
- High shipping and customs duties
- Time consuming for shipment products
- Problems in return of products
- Changes of exchange rates on a regular basis
Porter Five Forces Model
| New market players,
|
Concerning the development of the Chinese market, Procter & Gamble and Unilever have developed a cooperation founded on rivalry, mutual transcendence, and joint advancement. Procter & Gamble and Unilever are both multinational corporations. |
| Threat of substitution | . In terms of market share, Procter & Gamble is the company’s most major competition. When it comes to the everyday chemical product market in the United States, which accounts for approximately half of the country’s entire annual market volume, General Electric and Unilever are the two most prominent participants in the industry. |
| Power of Customer | There are a number of other daily-use product firms, such as L’Oreal and others, that were big competitors to Procter & Gamble in the past. |
| Preparation is key | According to the survey, more overseas brands, including as Italy’s luxury toothpaste and Japan’s Shiseido, as well as more reasonably priced and popular Chinese domestic brands, have entered the consumer’s perspective. |
| Supplier power | The offensive strategy was implemented so that it could be used side-by-side with the “brand expansion” strategy, which is the approach that drives market consumption trends in the opposite direction of how the offensive strategy is implemented. |
But irrespective of these disadvantages, many counties with many organizations are engaged with international business all over the world. A survey showed that USA was on the top of the exporter list in 2020 followed by the USA in the second position and Germany in third place (World’s top exports, 2020).
There are different theories regarding international business and these vary from writer to writer. But the majority of the people agree that there are 7 types of theories. These theories were proposed by different authors between 1630 to 1990 (Nambisan et al., 2019, pp. 1473). These theories are:
- Mercantilism
- Absolute advantages
- Comparative Advantage
- Heckcher-Ohlin theory
- Product life cycle theory
- Global strategic rivalry theory
- National competitive advantage theory
To do international business, one organization must follow some principles. The organization must show proper respect to the other organizations. The organization must follow the rules set by the both countries. It should cope up with the situation and make the best out of it (Hamilton, 2015). Besides that, the exporting organization must understand its consumer. If they don’t establish a good relationship with the other organization in other countries then they might not import in the future which will harm the organization. Promotion of the product is one of the major things in the international business. Here the organization must respect the cultures of both of the countries and ensure that no promotion goes aging the country’s culture (Minarosa, 2018, pp. 521).
Strategy to internationalize
The generic strategy followed by Unilever
There are four different dimensions of competitive advantage porter’s model. These are cost leadership, differentiation, cost focus, differentiation focus. Among these, Unilever uses the “differentiation” dimension (Panmore Institute, 2017). This dimension of Porter’s model enables an organization to create effectively a series of products that are different from the existing competitors. This enables the organization to stand out among the competition because the organization has many products which will give a competitive advantage. This dimension also suggests producing a product that is concerned with the consumers and fulfills the need of the consumers. Market research focused on the customer is another important element of this dimension (Kharub, 2017, pp. 152). Unilever has a diversified series of brands with almost over 400 brands. These brands cover different needs of consumer needs (Unilever, 2021).
Transitional
When someone is asked to name an international organization, the majority of people will take the name Unilever. Unilever established in 1929, started their business by doing local trade. But due to changes in the demand of the consumer need, it expanded its business globally in the second half of the 20th century. Now its product is being sold in about 190 countries throughout the world. Unilever has a series of successful brand lines. These include consumer goods, beauty products ice cream, cleaning products, toothpaste, personal care, and many more (Murphy, 2018). Unilever has a long list of products that they sell all over the world and due to its quality people accept them and use them regularly. These brands and products are regularly used by almost 2.5 billion people all over the world. It does not use the same process to sell its product all over the world, rather it has divided its management process based on the country in they are doing business (Unilever, 2021). It ensures the quality of all of the products. All the products are designed in a way so that the consumer can use them effectively and easily.
Multi-domestic
All of these brands’ products are produced focusing on the consumer need. This means all of these products are always objected to the fulfillment of consumer needs and customers are given the full priority. Uniliver always does market research before introducing a new product or brand. It has a specific department for research and development (R&D). In 2018, statistics show that Unilever invested almost £810 million only for research and development globally. This research is done on the consumers (Food manufacture, 2019). The research starts by identifying the problems faced by the consumers.
Global
After that, the R&D identifies the perfect solution for the consumers’ problem and brings out the perfect product for the consumers. Throughout this process, consumers are always given the highest priority. Before the final production, Unilevertest the product and if they give a good outcome then the product is produced in a large result. People choose the product of Unilever because its consumer concerned product and this gives Unilever a huge competitive advantage.
International
Consequently, Unilever’s products are well-known throughout the world. That is why Unilever’s products and brands stand out from the competition. Unilever targets the markets that have the potential for future growth. Although its products are unique still the prices are consumer friendly. That is why most of the consumers of Unilever are loyal towards the brands. All these generic strategies give Unilever a competitive advantage over the competitors and expand its business globally.
Country Analysis
The learner has selected USA for this study, To increase this consumer number, Unilever tries to take away the customers from the competitors in order to make them its own customers. Besides this, they can also reach out to the new consumer to increase the number of sales. Unilever always focuses on customer satisfaction which enables Unilever to convert their current customers into loyal customers who will buy Unilever products in the future again and again. This gives Unilever a competitive advantage over its competitors because it ensures strong market shares and the potential to enhance them in the future.
PESL Framework
Intensive Growth Strategies followed by Unilever for International Expansion
Successful organizations in the international market always have some special strategies that they follow and this is no different for Unilever. Unilever has some specific strategies that it follows in order to expand its business successfully all over the world. Every strategy it follows, its main concern is always about the problem and solution of the consumers. These strategies are unique to Unilever because they made successfully implemented these in their way. Some of the strategies that Unilever follows are described in the following section.
Environmental Analysis
PESL
| Political | The crisis management capabilities of huge global firms such as Unilever ensure that they are well equipped to deal with the issue and get the company back on track as quickly as possible. |
| Economical | As previously said, Unilever has been able to reduce operating risk to a manageable level as a result of its large investment in capital expenditures as well as research and development, as well as the fact that the firm has a vast selection of brands to choose from. |
| Social | In order for any company to break even with the others, it is vital for each company to ensure its commercial viability while also growing its market capacity at the same time. |
| Legal | According to the corporation, the adoption of channel re-integration and marketing integration is a critical component of the firm’s broad business strategy, which is intended to reduce operational expenses while simultaneously increasing income. The adoption of channel re-integration and marketing integration is a critical component of the firm’s broad business strategy. |
Porter Five Forces
| New market players
|
When attempting to introduce new products to the market, it is probable that you may be compelled to compete with the methods of your competitors, such as package sales, and that you will experience difficulties. |
| Threat of substitution | Consider, for example, Procter & Gamble’s new product in the garment washing industry, which fulfils the key needs of current female consumers while yet retaining some of the aroma of the company’s previous product. |
| Power of Customer | Unilever must boost the speed with which new brands are produced and brought into the market in order to meet the growing need for individuation and diversification of customer expectations in the United States, according to the company. |
| Preparation is key | To maintain a competitive advantage, Unilever must act fast when new client needs arise in order to maintain its market position. |
| Supplier power | As a result, despite having huge potential to grow its business and expand its market share, Unilever did not act as swiftly as it could have in order to take advantage of this tremendous chance to grow its market share. |
Market Penetration:
Market penetration strategy is one of the many strategies that is followed by Unilever to be successful in the international market. This is a primary strategy for Unilever. This strategy enables an organisation to sells its product in a certain market. This strategy is important for the growth of the company because this strategy is always concerned with the number of sales (Mwangi, 2020, pp. 28). As Unilever is a multinational organization, it operates in different markets all around the globe. Unilever divides its market according to consumer needs. Unilever always tries to sell the maximum number of the product which gives a competitive advantage. It always gives it best to sell the maximum number of products in specific markets like the USA, UK, and Canada. Unilever has many competitors in its market. To have a competitive advantage over the competition, Uniliver always tries to increase the number of its consumers. Currently, on a regular basis, 2.5 billion people use Unilever products (Unilever, 2021).
Mode of Entry
licensing, franchise, JV or M &; A.
This is a secondary strategy used by Unilever. This strategy brings a new product to the market in order to solve the new problems or needs of the consumers. This strategy aligns with the generic strategy followed by Unilever. This strategy requires market research before introducing new products to the market. Market research relates to identifying the new problems faced by the consumers and finally finding the best solution to the consumer in the market. This strategy enables Unilever to bring innovative products and solutions for consumer problems. Modification to the existing products can also be an option but Unilever always tries to bring a new product to their existing product line (Zahay et al., 2018, pp. 52). Unilever has a long list of products among which many of them are famous around the world and earns a lot of profit. Some of them are – dove, lux, axe, Rexona, magnum, Sunsilk. There are major thirteen brands of Unilever that earned almost one billion euros. A study was done in 2019 that showed, in terms of sales, at that time Unilever was the fourth largest FMCG company globally (Statista, 2019). This strategy has some sequential stages that start from idea generation and ends market entry. Before entering the market, Unilever always runs a test of the product and if the product is feasible along with potential growth rate, then they finally produce the product. In every stage of product development, Unilever puts the consumer in the problem which ensures high customer satisfaction.
Problems/issues from managerial and organizational.
Diversification:
This is a supporting strategy of Unilever. This strategy suggests an organization to expand its business by doing business in different sectors by using different types of products. This market expansion can also be done by the acquisition of other countries or merging with different countries (Hauser, 2021). As Unilever is a multinational company, it operates in different markets all over the world. Unilever deals with different sectors like consumer goods, beauty products, ice cream, cleaning products, toothpaste, personal care, pet food, and others. This enables Unilever to diversify its business sectors. This also reduces the risk because as its operating in multiple sectors, if one of it faces loss it will not harm Unilever that much. Acquisition and merging are also one of the strongest sides of Unilever. Unilever has merged with multiple organizations in the past and also has done acquisition many organizations. In 2021, Unilever has signed an agreement with Paula’s Choice for digital-led skincare purposes. Also, it has announced its acquisition of Onnit. In 2020, there were multiple merging agreements and acquisitions of Unilever with multiple organizations like Carozzi, Liquid I.V, Horlicks, and others (Unilever, 2021).
Market Development:
This is a supporting strategy for Unilever. These strategies suggest that an organization should also focus on the nonusers in the market. This means that the organization should focus on reaching out to the consumers who haven’t yet used the products of the organization. This increases the number of consumers for the organization (Hauser, 2021). As Unilever is a multinational company operating in multiple countries it has more scope for reaching out to the new consumer market. Although Unilever is operating for such a long time and most of the people know this organization but still, there are consumers who have not used the Unilever products or don’t know about its product. According to this strategy, Unilever should also focus on the nonusers who haven’t used Unilever products besides the loyal consumers. Unilever also should focus on converting these non-users to convert into loyal consumers by ensuring high customer satisfaction. This will increase the sale of Unilever and result in high profits as well. This strategy is helpful for the growth of the company.
Location strategy:
This strategy suggests that an organization should choose the perfect place of the organization from where it can operate at the lowest cost. As a result, the company will face low costs which, consequently, increase the net profit for the company (Li, 2018 pp. 982) this strategy is one of the main reasons why Unilever earns so much profit. Unilever always tries to reduce the production costs as well as transportation costs resulting in lower total costs for the product. Unilever’s operations managers ensure that the company’s facilities are close to labor markets, suppliers, and target consumers. As these costs go down, the total cost for the Unilever products goes down as well which enables the consumers to buy these products at an affordable cost.
Hofstede Analysis
This strategy ensures the quality of the product of the organization. Quality products result in high customer satisfaction and turn current customers into loyal customers. This strategy ensures the safe usage of the product. According to this strategy, if the organization is not being able to produce quality products then it should take the necessary steps to identify the problem for low quality and take proper steps to solve these problems (Gun Jea Yu, 2020). In Unilever, all the products are produced keeping the consumer in the center. Unilever always ensures the product matches the quality standard. It ensures the safety of the consumers. This strategy makes sure that the consumers are highly satisfied. According to this strategy, Unilever also provides services to the consumers if needed. No doubt, it is an initial and advanced development plan that creating a product line should include the factors that help to maintain high productivity. So, it is a preferable choice that quality management, corporate standards, as well as local standards need to be polished for those particular certain lines of the product. It will help to support not only the generic but also the product development strategies of Unilever. These are some of the major strategies that are used by Unilever. These strategies are unique and Unilever has successfully used these strategies in order to be successful in the international.
Recommendations
Besides these major strategies, there are some important decisions that are made by Unilever. Unilever designs its product so that they can be easily used by the customers. The R&D team does research for the problem and comes up with a solution. Unilever ensures that these solutions are designed well so that they can be easily realized as Unilever’s product and also kept in mind the user friendly for the consumers. Unilever uses new technologies to use the resources effectively and at the same time produce high quality products on a large scale. Unilever designed it all process starting from the collection of the raw materials and ending with the delivery of the product in a systematic way so that it reduces the wastages of the products. The layout is effectively designed so that the company can get the best out of everything. Unilever also ensures the effective usage of the information as well. For this it usages the new and updated computer and network technologies alone with database management system. The inventory management system is one of the strongest sides of Unilever. It employs both the perpetual and periodic inventory methods of inventory management. It always maintains the optimal required inventory, often known as just-in-time (JIT) inventory management, which means it never keeps more or less inventory than is required. Unilever uses environmentally friendly materials for its production of goods. If there is any waste is being created in any process then Unilever takes proper steps to use it as a by-product. All of these strategies and decision results in successful strategies used by Unilever.
Conclusion
International business is not an easy sector where anyone can get in and do business. This sector is very much competitive. International business enables the free flow of products all over the world. To run an international business, an organization should follow some specific strategies. Unilever is no different from this. Unilever is a renowned multination company that deals with international business in different countries around the world. The product of Unilever is well known to the consumers of the world. Unilever operates in different markets. It has some of the most successful strategies that make Unilever unique and stand out among the other competitors. Its low cost product and high customer satisfaction coverts the customers into loyal ones. Unilever’s large product lists make it harder for competitors to reach out to new customers while making it easy for Unilever to do so, giving it a competitive advantage. All the products that Unilever provides are all concerned with a customer’s problem and all of these products are designed keeping the customer in mind. Unilever’s products are also environmentally friendly and cost-effective and that is why, by 2020, Unilever has targeted to become 100% renewable.
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