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.