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Strategies of hul

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STUDY OF HINDUSTAN UNILEVER LTD With respect to Strategic model

Contents:I. Company overview a. Mission b. Corporate purpose c. Objectives

Strategic positionII. Environment a. Porters five forces b. SWOT c. Market segments and strategic customers:STP Value chain

III.

Strategic choicesIV. Corporate level strategies a. Takeovers b. Joint ventures c. Organic growth d. Integration Business level strategies a. Product innovation b. Market development c. Pricing strategies

V.

VI.

d. Ad spending and sales promotions e. Investors interests Operational level strategies a. Institutionalizing talent b. Capability building c. SCM d. ROMI e. IT

Strategy into actionVII. VIII. IX. Organization structure Balance score card Managing people

Introduction

I.

Company overview:

HUL (HUL) is Indias largest fast moving consumer goods company, with leadership in Home & Personal Care Products and Foods & Beverages. HUL's brands, spread across 20 distinct consumer categories, touch the lives of two out of three Indians. They endow the company with a scale of combined volumes of about 4 million tonnes and sales of Rs. 13,718 crores. The mission that inspires HUL's over 15,000 employees is to "add vitality to life". With 35 Power Brands, HUL meets every day needs for nutrition, hygiene, and personal care with brands that help people feel good, look good and get more out of life. It is a mission HUL shares with its parent company, HUL, which holds 52.10% of the equity. A Fortune 500 transnational, HUL sells Foods and Home and Personal Care brands in about 100 countries worldwide.

Mission:HUL's 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.

Corporate Purpose:Our deep roots in local cultures and markets around the world give us our strong relationship with consumers and are the foundation for our future growth. We will bring our wealth of knowledge and international expertise to the service of local consumers - a truly multi-local multinational. Our long-term success requires a total commitment to exceptional effectively, standards and to a of performance willingness to and productivity, to working together embrace new ideas and learn

continuously. To succeed also requires, we believe, the highest standards of corporate behavior towards everyone we work with, the communities we touch, and the environment on which we have an impact.

Strategic position

II.a)

Environment: Porters five forces

Buyer power: Consumer faces weak buying power because customers are fragmented and have little

influence on price or product. Considering buyer power retailers it is very high since they are able to negotiate the price

with the companies. Verdict: strong buyer power from retailers.

Supplier power: Consumer product faces some amount of supplier power simply because of the cost they

incur when switching suppliers. Suppliers that do a large amount of business with these companies are also beholden to

their customers. Verdict: limited supply power

Threat of new entrants: Given the amount of capital investment needed to enter certain segment in house hold

consumer products, the threat of new entrant is fairly low. Whether the new entrant can get its products on the shelves of the same retailers as its

much larger rivals. Verdict: low threat of new entrants.

Threat of substitutes: Within the consumer product industry, brand succeeds in helping to build a competitive

advantage, but even the pricing power of the brands can be eroded. Verdict: high threat of substitutes.

Degree of rivalry: Consumer in this category enjoy multitude of choices. It does not cost anything for a consumer to buy one brand of shampoo instead of another,

making the industry quite competitive.

b) SWOTStrengthsHUL enjoys a formidable distribution network covering over 3400 distributors and 16 million Outlets. This helps them maintain heavy volumes, and hence, fill the shelves of most outlets. The New sales organization named 'one hll' brings "household and personal care" and foods Distribution networks together, thereby aligning all the units towards the common goal of achieving success. Hll has been continuously able to grow at a rate more than growth rate for FMCG sector, thereby reaffirming its future stronghold in Indian market. Project Shakti - Rural India is spread across 627,000 villages and possesses a serious Distribution challenge for FMCG cos. Hll has come up with a unique and successful initiative wherein the women from the rural sector market hll products, and hence, are able to reach the same wavelength as of the common man in village. Apart from product reach, the initiative also Creates brand awareness amongst the lower strata of society. This has brought about phenomenal results. Deep roots in local culture & markets & great understanding of consumer needs. Wealth of local knowledge & international expertise helps it to be globally competitive. Exceptional high quality standard products. New innovative ideas & products. Highly professional management. Excellent distribution network & good relationship with the wholesalers & retailers. Continuous efforts to reduce cost & pass on benefit to consumers. Good reputation & goodwill in the market for its products. Good advertisements so as to make the consumers aware of its products, uses & price &

also have a lasting impression by catchy ads.

Excellent brand making capability. It has 110 brands out of which 30 are power brands

(ie, leader in market share with high growth potential) Ability to provide good quality goods to middle class at reasonable rates & also cater to

the premium segment for the upper class. Very high market price per share compared to the face value. Good returns by way of dividend per share every year. Last year 5/- rs dividend per share. Steady increase in the return on capital employed. Continuous increase in earning per share (EPS) Good cash reserves. Excellent past performances for a number of years. Ability to manage diverse business Having Unilever as parent company gives it a global presence. Excellent research & development. Use of rs-net a web enabled customer management system to establish two way

connectivity with stockist. Using information technology to connect supply chain Excellent financial support from banks & financial institutions. Good financial liquidity & also ability to complete projects on time. Good export earnings

WeaknessHUL's market dominance, originating from its extensive reach and strong brand presence, allowed it to raise the prices even as raw materials were getting cheaper. Hence, though the volumes decreased, the margins grew, and company was able to earn more profits. But higher margins attracted competition in areas of operations. HUL's strategy remained focused on creating power brands and earning higher margins. It was not left with any other option but to try cutting down the costs in order to protect volumes, if not increase it.

As shown in above figure, the key differentiators for an fmcg player are ability to call shots and pricing power, and hll has shown weakness over both these factors. Hll's weakness was its inability to transform its strategies at the right time. They continued with the same old strategy which helped them gain profits but was not genuine in this changed environment. Hll's risk aversion and market myopia led to stagnation of business, and ferocity of competition forced it into a defensive mode. Lack of pricing power in core business and absence of growth drivers have put HUL on a deflationary mode.

Diversification into various lines in which it does not have much knowledge would be

very risky proposition. High competition from established brands which has resulted in reduction in profit

margins. Non FMCG products are losing ground & their market share & sales have been declining. Working capital turnover is negative. Unable to make a big impact in rural areas. Competition from its own brands ( lux, liril, lifebuoy )

OpportunitiesOpportunities India is one of the world's largest producer of FMCG goods but its exports are miniscule as compared to production. Though Indian cos. Have been going global, their focus is more towards Asian countries because of the similar preferences. Hll is one of the top companies exporting FMCG goods from India. An expansion of horizons towards more and more countries would help HUL grow its consumer base and henceforth the revenues. Opportunity in food sector - the advent of modern trade has opened up greater opportunities For HUL to diversify its brand and strength its food division. It could look at introducing products. From its parents stable like margarines and could also look at expanding its more range of products.

Well-placed to take advantage of future fmcg growth - hll reach out 80% of 207 million Households in the country through various brands. It has a very well-defined product portfolio Spread across many product categories. Penetration levels for some major categories like skincream (22%), shampoo (38%), toothpaste (48%) and processed foods, continue to remain low offerings but great growth opportunities products. Big untapped market available., especially the rural areas. Growth potential is high for the power brands. Good source of revenue & foreign exchange available by way of exports of its products. Its competitors dont have the financial banking like it so it can take advantage of this. Due to good reputation it may e