Friday, March 22, 2013

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.

Unilever brands, small every day actions and billions of consumers make a big difference

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.


 



Monday, March 11, 2013

INTELLECTUAL CAPITAL OF UNILEVER


Intellectual Capital:
Unilever consider knowledge as their most valuable and strategic asset, it is crucial to effectively manage their intellectual resources and capabilities. Unilever integrate technology and organizational initiatives for managing and supporting knowledge processes. Unilever by using its superior intellectual resources understands how to exploit and develop their traditional resources better than competitors. 
In its highly competitive environment organizations clearly require a creative, motivated workforce which is intellectually professional and which contributes to the strategy of increasing value in aggressively changing environmental conditions.  Since Unilever has such specialized knowledge and produce high-quality intellectual output. Unilever use its intellectual capital to maintain its competitive advantage in the following way:
  • ·         Its focus on R&D
  • ·         Building the employees skills through training programs
  • ·         Encouraging the innovations by its employees
  • ·         Valuing the skills of its employees
  • ·         Strong leadership to direct goals and motivate to achieve the goals of the organization
  • ·         It encourages the knowledge transfer so that tacit knowledge also positively affects the organization
  • ·         Encouraging its human capital to share knowledge
  • ·         Building employees skills
  • ·         Giving them feeling of affiliation and recognition by rewarding their efforts and work
  • ·         Skilled decision making employees
  • ·         It use its external environment information to make the strategies to compete in the market
  • ·         It creates its environment to value the intellectual capital
  • ·         Highly educated, experienced and skilled workers
  • ·         Managers work in teams and encourage information sharing
  • ·         Retrieving information is important and organization supports the sharing of ideas and information
  • ·         Using the experience of its employees and rewarding them it retain its intellectual capital
  • ·         The information needed to compete in the market is carefully analyzed and sound decisions and strategies are made
  • ·         It is its intellectual capital that make it progress and promote its products through effective marketing
  • ·         Its intellectual capital focus on sales promotion and come up with ways that are innovative
  • ·         Its intellectual capital provides it competitive edge by product differentiation and diversification
  • ·         It is because of its intellectual capital (experienced employees, skilled and knowledgeable workers and their deep insight about market conditions and opportunities) that it is operating in all the continents and more than 90 countries of the world.
  • ·         Its intellectual capital helps it overcome its threats and weaknesses and enjoy its opportunities and strengths.

·         This intellectual capital of Unilever is its biggest strength.
 

It is the intellectual capital that give an organization its competitive advantage and to maintain its competitive advantage as well. If the employees experiences, skills, knowledge and expertise are valued and encouraged it help an organization maintain its competitive edge, make it efficient, increase its profitability and help rule the market. If the employees of the organization are rewarded, paid better for their work and feel the affiliation that is needed it not only help builds its competitive edge but the intellectual capital of the organization also remains with the organization.
Intellectual capital of Unilever is really taken care of because it is the reason behind that it is leading the market for past many years. It is its intellectual capital that beats its competitors and helps it to remain the market leader. Unilever rewards its employees and build their skills by arranging training programs, on the job trainings and different courses. It also recruits newly graduated employees to have the current knowledge and fresh ideas. It gives them a chance to implement their knowledge and experience actual world of competition. The ability of Unilever to retain, recruit and encourage its intellectual capital makes it enjoy the competitive advantage. The product differentiation, product diversification and effective marketing are all because of its intellectual capital and by valuing its intellectual capital it maintain this competitive advantage.  


Friday, March 1, 2013

VALUE-CHAIN Analysis



VALUE CHAIN ANALYSIS
It is defined as activities that take place in a business and relates them to an analysis of the competitive strength of the business. At every level of the product manufacturing, each activity adds to its value and it is the reason that makes the customers to pay for the product. There is a chain of activities that at each level help making a product and to reach at its final shape and finished products. A firm is said to be earning profit or is profitable when the value it receives exceeds the cost that it put in making that product. In analyzing the firm’s competitive position the key concept is creating the value for buyer’s that exceeds the costs of production. Value chain analysis is an approach presented by Micheal Porter to understand its importance as a building block of competitive advantage. It describes two different types of activities;
(1)   Primary Activities
Activities that are directly concerned with creating and delivering a product (e.g. assembling the parts of a product or putting different components of a product together)
(2)   Support Activities,
Activities that are not directly involved in production, but that may increase effectiveness or efficiency of a firm (e.g. human resource management, staffing, intellectual capital etc.). 
Primary activities
Inbound Logistics
This is primarily associated with receiving, storing and distributing inputs to the product. It depicts how material is stored, retrieved and used for the production activity. How material is saved and kept and how it is stored to be used when needed. It also takes into account the availability of enough quantity available when needed to use. It deals with returns to suppliers, scheduling of vehicle, inventory control and material handling. It further deals with;
·         Time to use the material
·         Processing the material when requested
·         Plant capacity
·         Plant scheduling
·         Location of distribution facilities
·         Layout of warehouse
·         Increasing efficiency by operations
Operations
·         Efficient ways of operating the plant to minimize efficiency
·         Maximizing and maintaining the product quality
·         Fulfilling the order in given time
·         Customer handling
·         Customer satisfaction
·         Effective way of handling and minimizing the customer complaints
Outbound logistics
·         Order fulfillment
·         On time delivery
·         Dealing with emergencies (delivering the product where needed or supply is short)
·         Managing the inventory
·         Shipment and orders
·         Audit
·         Transaction management
·         Accuracy
·         Quick and in time response
Marketing and sales
·         Pricing
·         Total cost analysis
·         Cost benefit comparison
·         Understanding the product’s value
·         Innovative approaches to promote and advertise the product
·         Identification of customer needs and targeted audience
·         Understanding customer needs
·         Capturing needs of the customers
Service
·         Quick response to customer needs and emergencies
·          Problem solutions
·         Call centers
·         24/7 service availability
·         Putting customer at the front line
·         Customer survey
·         Quality of service
·         Personnel training and proper staffing
Support Activities:
General Administration:
·         Firm’s infrastructure
·         Audit
·         Accounts
·         Staff
·         Finance
·         Communication systems
·         Planning and strategies
·         Flow of information
·         Chain of command
·         Relationships with stakeholders
·         Effective information technology application
·         Automated systems and value chain mechanism
·         Planning systems to achieve goals and objectives
Human Resource Management
·         Manpower development
·         Employees training
·         Labor skills
·         Recruitment
·         Reward and incentives
·         Good relations with trade unions
·         Motivating employees and workers by intrinsic and extrinsic rewards
·         Appreciating the efforts of the employees
Technology development
·         R&D
·         Innovations and discoveries
·         Positive collaboration between R&D and other departments
·         Scanning the lifecycle of a product
·         Improvement in products, process and quality
·         Adopting new technologies
·         Substituting labor with technology to reduce cost by one time investment
Procurement
·         Raw material procurement to reduce cost and optimize quality
·         Procuring machinery
·         Selecting and analyzing the alternative sources of inputs to maintain bargaining power of a buyer and to minimize the dependence on one supplier
·         Maintaining good relations with suppliers
·         Supplies mechanism


Linking Value Chain Analysis to Competitive Advantage
 
A business that undertake its business activities efficiently by product differentiation, cost minimization, efficient customer handling and by putting more emphasis on value-chain activities perform better than its competitors. By undertaking these business activities a business achieve its competitive advantage more quickly than its competitors. Value-chain analysis is a tool to analyze the performance and to trace where firm needs to focus more on.