MD4100 Strategy & International Management Assignment Sample
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Executive Summary
The essay is based on Unilever Plc and its diversification strategy and impact of expansion of industry or markets on profits. It is being identified by the study that the Unilever Group’s largest market area is personal care that earned roughly 21.1 billion Euros throughout earnings in 2020. Considering the case study, it is assessed that Unilever has experienced financial image harm as a result of Polman’s poor leadership when he took over the business in 2009. Further, the diversification is the key contributor to the success of the firm.
Introduction
Unilever is a globally recognised brand in consumer goods that established in 1929 and headquarters in UK. The product range mainly segregated in three major parts including food and drink, home care and personal care including range of subsidiaries- Lipton, Dove, Comfort, Blueair. The Unilever, as any other company, has seen its profit of ups as well as downs within the corporate journey.
The essay aims to define such ups and downs with its diversification strategy via a critical perspective, as well as the structure will methodically analyse the situation in the aftermath of Paul Polman’s employment as the company ‘s Director in 2009. The research will also look at this in the setting of sustaining corporate profitability as well as the difficulties that this raises for the parent company’s standing in regard to its subsidiaries.
Content and analysis
Overview of the diversification strategy in Unilever
Unilever’s generic competitiveness approach is wide diversification. The concentrate of this generic approach is on traits and qualities which distinguish the company’s products from those of rivals. The firm owns approximately 400 brands as well as had revenue of 53.7bn Euros as of 2017. Considering Unilever as an illustration, bath soap is among the corporation’s product lines, whereas fabric cleaning is another, tea is a third, as well as cosmetics are another (Unilever, 2021). Unilever offers many bath soap products/brands, including Dove, Lux, Liril, Lifebuoy, as well as Hammam. Cleaning soaps, washing powders, as well as detergent gels are all part of the textile washing product range.
As per the firm’s site, their mission encompasses a variety of factors, including expanding its business that involves sales, profit, as well as operational efficiencies, increasing quality of life and well-being that encompasses nutrients as well as cleanliness, and boosting livelihoods. This encompasses workplace equity, women’s empowerment, including socially inclusive, as well as environmental effect, covers water, wastes, as well as long-term resilience.
Considering the case study, it is being identified that the commodities were divided into four categories: personal care, food and beverages, homecare in 2014. The marketplace was divided into eight groups based on geography. Such modifications resulted in better allocation of resources as well as quicker decision-making. The diversification was being successful in several nations like India, UK, and USA. In 2008, the Unilever Company, located in India, established as the globe’s largest ice cream firm, demonstrating strong market dominance as well as an enormous supply network (Murphy and Murphy, 2018). It allowed them to gain an advantage over their competitors, which they have maintained throughout time. Unilever was fortunate to score first in 2009 including its hair care products, earning them around $250 m. As a result, they are able to produce more items and sell them throughout the trade, retaking the advantage. They have amassed a sizable market position.
The firm also launched projects in its Research and Innovation department that are well-funded in order to keep up with evolving customer demands. It has R&D facilities in India, China, the United Kingdom, the United States, as well as the Netherlands. Unilever has indeed been able to decrease expenses and increase knowledge in its distribution networks thanks to its production facilities in roughly 270 sites across the world.
Discussing the profits and issues created by the expansion
The strategy of diversifying the product range and focus on different geographic regions enable Unilever to maintain the profit as well as create some issues for the position of the parent in relation to its subsidiaries. Unilever, one of the dual businesses Unilever PLC (established in London) or Unilever NV (sited in Rotterdam), that are the parent company for over about 500 firms throughout the globe that produce and sell soaps, foodstuff, as well as other home items (Unilever, 2021).
In the context of maintaining profit and focusing on the case study, it is being identified that in 2010, the firm acquire Sara Lee Corporation & Albert Culver which resulted in 44.3bn Euro turnover with 6.3bn Euro profit.
Based on diversification decision by Polman in the case study, it has been evaluated that between 2010 as well as 2017, strategy adjustments suggest a remarkable increase in the company’s success. The corporation’s revenue in 2010 amounted €44,262 m, with an operating profit of €4,598 m, an increase over previous years (Bhattacharya and Polman, 2017).
On the other hand, the diversification increased the cost as well as time for re-launching the brand. Along with it, it is difficult to maintain advertising and promotional expenses within the regions. In the context of position as organisational parent relation to its subsidiaries, the rapid diversification leads towards different environmental and carbon footprint issues. Unilever has experienced financial image harm as a result of Polman’s poor leadership when he took over the business in 2009. Polman’s issue stems from his willingness to prioritise shallow feel-good ideals over smart financial choices, and he isn’t hesitant about bragging about his warped objectives.
The Unilever Group’s largest market area is personal care that earned roughly 21.1 billion Euros throughout earnings in 2020 (Ridder, 2021). Mists as well as antiperspirants are produced by two of Unilever’s most valued brands, Dove as well as Axe. Unilever had a 36 % share throughout the worldwide deodorant industry in 2013, but that percentage has subsequently decreased to around 26% by 2020. Dove was the most popular deodorant label within the US in 2019.
Unilever’s food division is still a high-earning operation throughout the third quarter of 2019, owning to its leading food label, Knorr, a German manufacturer of stews and soups. Around the same period, revenue totalled 5bn Euros, barely shy of the 5.6bn Euros reported by the personal care industry. Around 2010 as well as 2010, the business success enhanced as it altered its strategy as well as personnel, which comprised a shift as well as rearrangement in the expansion strategies (Unilever, 2021).
In accordance to the case study, Unilever’s Home Care division is quickly expanding, with revenue expansion throughout developing regions being a significant driver. Fabric washing, household water filtration, as well as washing goods were among the 10.8bn Euros throughout revenue generated by Home Care in 2019. Personal Care revenues accounted for 16 percent of the corporation’s overall operating income in the year. Over time, Unilever was able to manage its position in the competitive market through its diversification strategy.
However, throughout the diversification several challenges affected the operations and profitability of the firm as considered by the case study. The adoption of the entire organisation plan necessitated a shift in culture and personnel. Well before era 2010-2017, Unilever required to cease conducting operations the manner it had in the earlier periods (Langham, 2018). Dismal management, declining margins, and high turnover characterised that time period. When looking at the stock price increase, it is indeed worth noting that, notwithstanding Unilever’s attempts to stay relevant via its distinctive style, its rivals’ stock prices have grown at a comparable rate.
Measurement of such factors
The growth in the profit is effectively met by expanding the business or market in the context of Unilever PLC; however the measurement of factors is important to monitor the growth and gap. There are various techniques to measure such factors of diversification;
Market size, market share, sales growth, market penetration are some of the metrics that are helpful in measuring the growth. For example; Unilever’s fundamental market growth for the entire year 2020 has been 1.9%, with 1.2% increase in personal care products, 4.5% development in home care, as well as 1.3% expansion in foods including beverage leading the way (Zhang and Fan, 2020).
The product market expansion grid is yet another suitable way of measurement. Considering the example of Unilever in the area of market penetration, it is being identified that the firm’s goods, like Magnum, have a broad reach throughout the current foreign regions. Unilever’s products are consumed by 2.6 billion people every day in diverse areas of the world, demonstrating the company’s global reach (Dawes, 2018). One of the significant benefits that Unilever has enjoyed over the generations seems to be the corporation’s diversified market base that is mostly attributable to a wide range of product offers. The business began with soap as well as has now expanded to include tea, milk, ice cream, yoghurt, soap, detergents, as well as body washes.
Conclusion
By summing up the analysis, it has been evaluated that one of the main success factor of the global leading firm Unilever is diversification of products and expansion in foreign markets. Along with it, the leadership of Paul Polman enabled the firm to position effectively in the marketplace and generate revenue with maintaining sustainability. It has also been identified that diversification and expansion created different issues for the firm like decline in the stock prices, high expenses, lack of resources, high waste and environmental degradation, et cetera. However, every segment of Unilever contributes in high profit earning in host and home nation.
References
Books and Journals
Bhattacharya, C.B. and Polman, P., 2017. Sustainability lessons from the front lines. MIT Sloan Management Review, 58(2), p.71.
Dawes, J., (2018). The Ansoff matrix: A legendary tool, but with two logical problems. But with Two Logical Problems (February 27, 2018).
Langham, T., 2018. What Makes a Great Reputation? What Makes a Great Reputation? Obsessing for PerfectionJames BondThe Importance of Unilever CEO Paul PolmanThe Secrets of Britain’s Most Trusted PersonDove and John Lewis. In Reputation Management. Emerald Publishing Limited.
Murphy, P.E. and Murphy, C.E., 2018. Sustainable Living: Unilever. In Progressive Business Models (pp. 263-286). Palgrave Macmillan, Cham.
Zhang, L. and Fan, Z., (2020, November). Analysis of Unilever’s Branding and Marketing Strategy in China. In 2020 International Conference on Management, Economy and Law (ICMEL 2020) (pp. 288-291). Atlantis Press.
Chernukha, V., (2018). 4 Facts About Unilever That Will Help You Trade It Successfully. [Online]. Accessed through <https://blog.iqoption.com/en/4-facts-about-unilever-that-will-help-you-trade-it-successfully/>. [Accessed on 8th July 2021].
Ridder, M., (2021). Unilever- Statistics & Facts. [Online]. Accessed through <https://www.statista.com/topics/1397/unilever/>.
Unilever, (2021). Our Company. [Online]. Accessed through <https://www.unilever.co.uk/brands/>.
Unilever, (2021). UNILEVER TRADING STATEMENT FIRST QUARTER 2021. [Online]. Accessed through <https://www.unilever.com/Images/ir-q1-2021-full-announcement_tcm244-561145_en.pdf>.
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