Strategic Management Report

UNILEVER PAKISTAN

SUBMITTED BY:

ANAM SHAHID

IntroductionBACKGROUND:

Incorporated in 1948, we, Unilever Pakistan Limited, are one of the most prominent multinationals in the country today.

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, and Brook Bond’s Supreme etc. which are common house hold 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 issuing 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. In1996, the present group – Unilever acquired the Polka Group that produced ice creams. In 1999, Pakistan industrial promoters (Private) Limited, owners of ‘Polka’ brands of Ice Cream was 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

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OUTLINEINPUT STAGE:

Internal analysis

External analysis

MATCHING STAGE

TOWS matrix

BCG matrix

SPACE matrix

IE Matrix

GRAND matrix

DECISION STAGE:

QSPM

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Vision statementWe help people meet needs for nutrition, hygiene and wellbeing, with brands that help people look good, feel good and get more out of life.

CRITICAL ANALYSIS OF VISION

The vision that is mentioned on their website predominantly seems to be fulfilling the requirement of mission rather than vision if taken in literal sense, but if taken subjectively it does address the vision statement. After a careful and thorough study of Unilever and especially whatever is mentioned on their website we would like to propose the following vision and Mission Statements.

PROPOSED VISION STATEMENT

Lead the FMCG MARKET by achieving significant growth objectives by developing new ways of doing business while decoupling growth from environmental impact for the wellbeing of humans in general and thus by directing them towards a healthy, hygienic lifestyle.

Our MissionVitality is at the heart of everything we do. It's in our brands, our people and our approach to business.

PROPOSED MISSION STATEMENT

Our Philosophy sets out our aspirations in running our business. It's underpinned by our code of business Principles which describes the operational standards that everyone at Unilever follows, wherever they are in the world. The code also supports our approach to governance, corporate responsibility and defines our state of existence which to help people around the world meet everyday needs for nutrition, hygiene and wellbeing, with brands that help people look good, feel good and get more out of life and this requires requires "the highest standards of corporate behavior towards everyone we work with, the communities we touch, and the environment on which we have an impact."

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INTERNAL STRENGTHS:

Largest Producero Unilever Pakistan Limited is the largest producer of consumer products in Pakistan and

has strong brands in every field such as Close Up, Dalda, Surf, Lifebuoy, Lux,etc. Advance technology

o Unilever Pakistan Limited is the only company in Pakistan which has its own corner research department

Supply Chain Managemento It has the largest and efficient distribution network then any its competition

Financial Backingo The company is very strong financially

Experience Top Managemento Unilever Pakistan Limited enjoys the services of highly professional management in the

area of sales, marketing, technical and production

INTERNAL WEAKNESSES Tall Organization Structure

o Due to tall structure it is difficult to handle the organization easily.

High Operating Expenseso No doubt its sales are large but in same time its operating expenses are huge.

High Cost of Productiono As in the production unilever keeps its environment very neat and clean, and

produce high quality products so cost of production is very high. Increased import duties are also adding to the prices of the products

Long term strategieso Unilever Pakistan Limited go for long term strategies for all their product

categories which prove to be a weakness with change in the circumstances and taste, trends of people

Emphasize on only few productso Emphasizing only few products while ignoring others which could give them

potential market shares e.g. beverages section

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IFE MATRIX

Key Internal Strengths weight rating Weighted score

Largest producer 0.1 4 0.4

Advance Technology 0.05 4 0.2

Supply Chain Management 0.05 3 0.15

Financial Backing 0.2 4 0.8

Experience Top Management 0.2 3 0.6

Key internal Weaknesses

Tall Organization Structure 0.1 2 0.2

High Operating Expenses 0.05 2 0.1

High Cost of Production 0.05 2 0.1

Long term strategies 0.1 2 0.2

Emphasize on only few products 0.1 1 0.1

TOTAL 1.00 2.85

EXTERNAL AUDITExternal opportunities:

Hygiene Consciousnesso People are becoming more conscious about their health and are becoming more

conscious about brands. As unilever has good positioning in consumer’s mind so itcan increase their market share to launch products in hygienic category.

Increasing Populationo As population is increasing it may lead to creat valuable opportunity to enhance

the growth of unilever. Innovation (R&D)

o Innovation in unilever may creat opportunity to more penetrate in the market

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Product Diversificationo They have capital to invest they can explore new product categories e.g. in food

and beverages they can develop new products like Rafhan has launched custard, jelly, kheer mix, rasmalai mix, etc.These products can prove a “cash cows” as customer in Pakistan always welcome food items especially they will welcome due to brand image of Blue Band and Dalda ghee in food category and due to Lipton and Supreme in beverages category.

Explore New Marketso Unilever Pakistan has opportunity to develop new markets by identifying the

needsof customers

EXTERNAL THREATS: Product smuggling

o unilever Pakistan Limited has not been able to place any check on its smuggling shampoos into Pakistan e.g. Indonesian Sunsilk is made according to the demographic of Indonesia, when it will be used in Pakistan it will damage the hair of people,which detoriate the brand image and decreases the local sales of Unilever PAKISTAN.

Increase demand for Antibacterial Soapso Demand for antibacterial soaps is increasing while unilever has not yet been

introduced any antibacterial soap,it may switch the brand loyals of Unilever Counterfeit Products

o There may be imitation of products in Pakistan which may damage the goodwill of Unilever Pakistan ltd.

International Trendso People of Pakistan prefer to purchase foreign products, it may be prove to be a

threat for unilever Local Competition

o Number of local companies producing detergents at low price.

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EFE MATRIX

KEY EXTERNAL OPPORTUNITIES WEIGHT RATING WEIGHTED AVEARGE

Hygiene Consciousness 0.2 4 0.8

Increasing Population 0.15 3 0.45

Innovation (R&D) 0.10 2 0.2

Product Diversification 0.10 4 0.4

Explore New Markets 0.05 4 0.2

KEY EXTERNAL THREATS

Product smuggling 0.15 1 0.15

Increase demand for Antibacterial Soaps 0.05 3 0.15

Counterfeit Products 0.10 3 0.3

International Trends 0.05 3 0.15

Local Competition 0.05 4 0.2

TOTAL 1.00 3.10

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PORTERS 5 FORCES ANALYSIS

LOW THREAT OF OF ENTRY:

• Time and cost of entry

• Specialized technology

• Economies of scale

• Large industry size

• Brand strength

HIGH THREAT OF SUBSTITUTE PRODUCTS:

• Low switching cost

• Low alternatives price

• Substitutes quality

LOW BARGAINING POWER OF SUPPLIERS

• Large number of suppliers

• High competition among suppliers

LOW BARGAINING POWER OF BUYERS

• Large number of buyers

• Brand identity

HIGH COMPETITIVE RIVALRY

• Number and size of competitors

• Required strong distribution network

• Customers are loyal in existing brands

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PEST ANALYSIS

POLITICAL

UNILEVER is subject to laws and regulations both locally and globally Volatile of emerging market Involvement of government and regulatory authorities

Economic

Economic recession affects customers behavior Reduced purchasing power

Socio cultural

Socially responsible company Conscious about health and safety of its employees and customer

Technology Development of E business HIGH LEVEL OF AUTOMATION

Unilevers competitorsProctor & gamble:P&G commenced operations in Pakistan in 1991. Headquartered in Karachi, our goal was to become the finest global consumer goods company operating locally in Pakistan Procter & Gamble Co., also known as P&G, is an American multinational consumer goods company headquartered in downtown Cincinnati, Ohio, United States, founded by William Procter and James Gamble, both from the United Kingdom. Its products include cleaning agents, and personal care products. Prior to the sale of Pringles to the Kellogg Company, its product line also included foods and beverages

NESTLE

Nestlé in Pakistan is operating since 1988 under a joint venture with Milk Pak ltd and took over management in 1992.

Nestlé Pakistan today is the leading Food & Beverages Company in Pakistan with key focus on Nutrition, Health and Wellness and reaching the remotest of locations throughout Pakistan to serve the

consumers. Nestlé Pakistan also prides itself in being the leaders in Nutrition, Health & Wellness

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CPM MATRIX

UNILVER NESTLE P&G

WEIGHT RATING W.SCORE RATING W.SCORE RATING W.SCORE

QUALITY PRODUCT 0.2 3 0.6 2.5 0.5 3.5 0.7

ATTRACTIVE PRICES 0.2 4 0.8 4 0.8 3 0.6

BRAND EQUITY 0.1 3 0.3 4 0.4 3.5 0.35

DISTRIBUTION CHANNEL 0.1 4 0.4 4 0.4 4 0.4

INNOVATION AND R&D 0.2 2 0.4 4 0.8 3 0.6

EMERGING MARKET PENETRATION

0.2 4 0.8 3.5 0.7 3 0.6

TOTAL 1.00 3.3 3.6 3.25

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TOWS MATRIX

strengths weaknesses

Largest producer Tall Organization StructureAdvance Technology High Operating Expenses

Supply Chain Management High Cost of ProductionFinancial Backing Long term strategies

Experience Top Management Emphasize on only few productsOpportunities SO Strategies WO strategies

Hygiene Consciousness Create awareness among customers about hygiene.

Accommodate rural demand by your supply network

Launch new products for lower class

Accommodate local demand by joint ventures

cater new markets and new segments

Increasing PopulationInnovation (R&D)

Product DiversificationExplore New Markets

Threats ST Strategies WT Strategies

Product smuggling

Control Cost Reduce high operating

expense and cost of production for strong position against competitors

Increase demand for Antibacterial SoapsCounterfeit Products

International TrendsLocal Competition

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BCG MATRIX

LUX FAIR & LOVELY SUNSILK RAFHAN WALLS

SUPREME

KNORR LIFEBUOY SURFEXCEL CLOSEUP LIPTON BLUE BAND PONDS

COMFORT CLEAR

MARKET SHARE

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MAR

KET

GRO

WTH

Question mark:Supreme of unilever come in this region which has low market share but yet competing in high growth industry.Cash need is high and cash generation is low. its up to the organization whether to strengthen this brand by an intensive strategy or to sell them.

STAR:Brands come in this region shows best long run opportunities for growth and profitability.it has high market growth as well as high market share. Intensive and integration strategies are suitable for this brands

CASH COWS:They create cash in excess of their needs, they should be managed to maintain their long position. Product development and diversification are suitable strategies.

DOG:Organization should decide whether to divest these brands or liquidate.

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IE Matrix

I IIUnilever

III

IV V VI

VII VIII IX

IFE total weighted score STRATEGIES APPLIED:Grow and build

Integration strategies Market penetration Market development Product development

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EFE

tota

l wei

ghte

d sc

ore

4.0 3.0 2.0 1.0

1.0

2.0

3.0

SPACE MATRIX:

FINANCIAL POSITION RATINGS 10% increase in net income Net sales were 15.7% ROA is declined to 24% ROI has declined Total asset turnover is 2times

+5+4+1+2+3

AVERAGE +3

INDUSTRY POSITION RATING Consumption Oriented Culture. Rapid increase in raw material cost. Growth potential in rural and

developing countries market. Profit potential is reducing due to

intense competition especially from un-organized players.

+4+2+5

+2

AVERAGE +3.25

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ENVIRONMENTAL STABILITY RATING 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

-3

-3

-2

-3-2

AVERAGE -2.6

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COMPETITIVE ADVANTAGE RATING 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

AVERAGE -1.8

SPACE MATRIX:

X axis: IP+CA=3.25-1.8=1.5

Y axis: FS+ES=3-2.6=0.4

FP

(1.5, 0.4)

CP IS

ES

AGGRESSIVE STRATEGY

Integration strategy,Market development,Product development

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Grand strategyRapid Market Growth

II I

UNILEVER

Weak Competitive Position Strong Competitive Position

III IV

Slow Market Growth

STRATEGIES FOR QUADRANT I:

MARKET DEVELOPMENT MARKET PENETRATION PRODUCT DEVELOPMENT INTEGRATION STRATEGIES RELATED DIVERSIFICATIO

QUANTITIVE STRATEGIC PLANNING MATRIX

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INTEGRATION MARKET DEVELOPMENT

KEY FACTORS WEIGHT AS TAS AS TAS

STRENGTHSLargest producer 0.1 2 0.20 3 0.30

Advance Technology 0.05 3 0.15 3 0.15Supply Chain Management 0.05 2 0.10 3 0.15Financial Backing 0.2 3 0.60 4 0.80Experience Top Management 0.2 - - 3 0.60

WEAKNESSESTall Organization Structure 0.1 3 0.30 2 0.20High Operating Expenses 0.05 2 0.10 3 0.15High Cost of Production 0.05 - 2 0.10Long term strategies 0.1 3 0.30 2 0.15

Emphasize on only few products 0.1 2 0.20 - -

OPPORTUNITIESHygiene Consciousness 0.2 - - 2 0.20Increasing Population 0.15 2 0.30 2 0.40

Innovation (R&D) 0.10 3 0.30 2 0.20Product Diversification 0.10 4 0.40 1 0.05Explore New Markets 0.05 - - 3 0.30

THREATS

Product smuggling 0.15 1 0.15 1 0.15Increase demand for Antibacterial Soaps 0.05 1 0.05 - -Counterfeit Products 0.10 3 0.30 2 0.10International Trends 0.05 4 0.20 - -Local Competition 0.05 4 0.20 2 0.4

TOTAL 5.8 7.8

IMPLEMENTATION

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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

OBJECTIVES:Unilever is already doing well so we need to focus on the following areas.

Sustain the brand image. Launch affective and aggressive market campaign. Ensure tough competition to competitor’s strategies To enter in lower middle class by marketing their products with low price.

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EVALUATIONReviewing Bases of Strategy How have competitors reacted to our strategies?How have competitors' strategies changed?Have major competitor's strengths and weaknesses changed?Why are competitors making certain strategic changes?Why are some competitor's strategies more successful than others?How satisfied are our competitors with their present market positions and profitability?How far can our major competitors be pushed before retaliating?How could we more effectively cooperate with our competitors?

Reviewing SWOT

Are our internal strengths still strengths?Have we added other internal strengths? If so, what are they?Are our internal weaknesses still weaknesses.Do we now have other internal weaknesses? If so, what are they?Are our external opportunities still opportunities?Are there now other external opportunities? If so, what are they?Are our external threats still threats?Are there now other external threats? If so, what are they?Are we vulnerable to a hostile takeover?Measuring Organizational Performance

Some key financial ratios that are particularly useful as criteria for strategy evaluation are as follows. Return on investment (RIO)Return on equity (ROE)Profit marginMarket shareSales growthAsset growth

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In terms of Strategy :

Is the strategy internally consistent?Is the strategy consistent with the environment?Is the strategy appropriate in view of available resources?Does the strategy involve an acceptable degree of risk?Does the strategy have an appropriate time framework?Is the strategy workable?

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