UNILEVER'S Business-Level Strategy

Unilever’s Business Level Strategy

Business-level strategy helps an organization achieve core competencies, keep its focus on satisfying the customer needs and preferences to achieve economies of scale and profit above average. It also dictate the actions need to be taken to provide value to customers and gain a competitive position in the industry by outperforming its rivals and competitors and also by fully utilizing its core competencies in a particular, individual product or in services. The position of a business or firm in an industry, its relative position or standing to its rivals and five forces of competition, all are related to business level strategy.

The foundation of any business-level starategy is the customers of an organization. What they need, what services they want and they can be ultimately satisfied, all these matters are concerned with the upper-level management and thus the importance of business level strategy is also very crucial for these factors.

Business level strategy of Unilever is very important determinant of its overall performance and market performance. It take care of its customers by focusing on demographic, geographic, lifestyle choices, tastes and values, personality traits, consumption patterns and brand loyalty.

Its competitive advantage based on three Generic Strategies can be analyzed in the following way:

Cost Leadership

Unilever compete for a wide range of customers based on price. Its products Prices are based on internal efficiency to obtain a margin that allows it to sustain its business above average profit or returns and cost to the customers. Based on this cost and return analysis that determine the price, make customers to purchase a particular product. This strategy works well when the product or service is standardize, have generic qualities, fulfill customer needs and offer lowest price with best quality. In order to become a cost leader a business should keep an eye on the price strategy followed by its competitors and its continuous efforts to keep its prices low relative to its competitors.

This can include:

• Lower cost products with best quality
• Building efficient production facilities
• Maintain tight control over production and overhead costs
• Minimize cost of sales, R&D, and service
• Focusing on primary and support activities to reduce cost related to these activities
• Configuring the value chain

Porter's 5 Forces Model 

For cost leader businesses like Unilever a cost leadership strategy may help to remain profitable even with:

Rivalry, new entrants, suppliers' power, substitute products, and buyers' power. This analysis for Unilever is as follows:

• Rivalry
• Unilever competes on the basis of its prices since the low cost products of Unilever and its broad range of products allow it to enjoy a big family of customers.  It is because of its diversified product line that allows it to enjoy above average profit and allow it to maintain low cost advantage over its competitors in the market. 

• Customers
• As it’s a part of Unilever’s competitive advantage that it offer low prices that help it to retain its customers and to earn profit.
• Suppliers
• Unilever as a Cost leader is able to absorb greater price increases before it must raise price to customers.
• Entrants
• Unilever creates barriers to market entry through its continuous focus on efficiency and reducing costs and because of its economies of scale.
• Substitutes
• As there are many substitutes available in the market to Unilever’s products so for Unilever its more likely to lower costs to attract customers to stay with their product, invest to develop substitutes, purchase patents and invest in R&D.

As Unilever deal with a wide variety of products so it also focuses on its value chain. It identify and evaluate the ways in which it can use its resources to identify and evaluate the ways in which its resources and capabilities of workers can add value. It focuses on its primary as well as support activities to achieve this objective.

According to Unilever’s annual report, it defines its customer’s importance as:

We believe we are well placed to help people understand how their brand choices and small actions, when added to those of others, can make a big difference across the world.

For example, Unilever's detergent brands are used in 125 billion washes a year. That is the equivalent of 14 million washes every hour. Every time a Unilever consumer does the laundry at a lower temperature or with a full load, the reductions in energy, CO₂ and water are cumulatively very large.

With consumer use accounting for nearly 70% of our greenhouse gas footprint, inspiring our consumers to change their behavior will be key to achieving our mission of creating a better future every day. Unilever’s Five Levers for Change methodology is helping us create effective behavior change campaigns. (Unilever annual report, Web)

Differentiation

Unilever is providing value to its customers through unique features and characteristics of its products. This is done through high quality, features, high customer service, rapid product innovation, advanced technological features, image management, etc Unilever Creates Value by:

• Lowering Buyers' Costs with Higher quality and quicker response to problems.
• Sustainability
• Higher quality products
• Creating barriers by perceptions of uniqueness and reputation
• Creating high switching costs through differentiation and uniqueness
• Wide product line
• Efficient customer service and focus on customers’ needs
• Operating all over the world

Porter's Five Forces Model 

Effective differentiators can remain profitable even when the five forces appear unattractive. Analysis of Unilever’s differentiation strategy porter’s five forces is as follows:

• Rivalry
• Brand loyalty is the strongest point for Unilever to have its competitive advantage. It means that customers will be less sensitive to price increases, as long as the firm can satisfy the needs of its customers
• As Unilever always strive to satisfy the needs of its customers so intense rivalry for Unilever is not a threat
• Suppliers
• Because differentiators charge a premium price they can more afford to absorb higher costs and customers are willing to pay extra too so bargaining power of suppliers is low here that give a competitive edge to Unilever (Albany, Web)
• Entrants
• Brand Loyalty provides a difficult barrier to overcome

·         Substitutes  

§  Once again brand loyalty helps combat substitute products.

Focus

Unilever focus more on the demographic features of population, it targets all age groups and offer a wide variety of products to the people of all ages. It also focus on the emerging markets like a few years ago it started to focus more on India because its an emerging market. Apart from that its wide variety of products more and its attention to its value chain make it capture a big market share. It focuses on customer needs and customer satisfaction. It focuses on innovation, quality and R&D. It also focus on its low cost and has a wide base of customers so all these factors together give it a competitive advantage over others in the same industry.