UNILEVER'S GLOBAL BUSINESS STRATEGY

Unilever’s Global Strategy

As one of the strong and healthy companies in the world with many successful brands, Unilever has an opportunity to expand into foreign markets that it is not yet operating in, in order to gain access to customers around the world. Supported by strengths of its four key global brands – Dove, Sunsilk, Rexona and Lux, Unilever firstly entered in foreign market to compete internationally by entering just one or select few foreign markets. Once successfully introduced its product in several market, Unilever expands its success brand to many other markets and starting to compete globally.

In entering and competing in foreign markets for its cosmetics and toiletries product, Unilever follows a global strategy, also called by a think-global and act-global strategy, The strategy using essentially the same competitive strategy approach in all country markets where the company has a presence (with only minimal responsive to local conditions), sells much the same products everywhere (make minor adaption to local countries where needed to accommodate local countries preferences), strives to build global brands, and coordinates its actions worldwide (centralized).

A global strategy used by the Unilever is preferable to localized strategies because Unilever can more unify its operations and focus on establishing a brand image and reputation that is uniform from country to country. It strategy implies to the Unilever success in building strong character brand such as Dove, Sunsilk, Rexona and Lux. Moreover, with a global strategy Unilever should coordinated its marketing, operational and distribution worldwide.

Unilever is increasing its efforts to build on its long-established local roots in developing regions. Through its well-established distribution network in both the traditional and modern retail outlets and with a good ability to adapt successful global brand concepts to suit local markets, Unilever is in a good position to be able to capitalize on the growth forecast in these regions.

Once Unilever became one of the most successful global companies in the world, it has many profit sanctuaries. By having multiple profit sanctuaries, Unilever has strong competitive advantage over its competitor with a single or few sanctuaries.

In the cosmetics and toiletries globally competitive industry, there are no doubt that Unilever’s major rivals over the next few years will be Procter & Gamble and L’Oréal, both of which give significant resources to new product development activity, and respond to changes in the market faster than Unilever. L’Oréal also has the benefit of being exclusively involved in cosmetics and toiletries, unlike both Unilever and Procter & Gamble which both have cross-industry involvement, such as in packaged food. Much the same group of rival companies competes in many different countries. Therefore, the competition pursues the company to be more innovative in developing its products and maintaining its brands. The following diagram shows the market performance of Unilever’s skin care and hair care market share:

To win customers and sales away from select rivals in country markets, Unilever employ cross-market subsidization. This offensive strategy is appropriate for Unilever which is compete in multiple county markets with multiple brands and wide variety of products. Finally in entering the emerging-country market Unilever prepare to compete on the basis of low prices. Unilever pursued this strategy because consumers in emerging markets are often highly focused on price, which can give low-cost local competitors the edge unless a company can find ways to attract buyers with bargain prices as well as better products.

All strategies executed by Unilever for competing in foreign market resulting in moderate 5% sales growth in 2006 – just above market performance – ensured that Unilever kept its position as third largest player in cosmetics and toiletries with a 7% market share. Second-placed L’Oréal fared a lot better, increasing the gap between the two companies in part thanks to its acquisition of The Body Shop. Market leader Procter & Gamble remained over five percentage points ahead of Unilever’s share. In 2006, Unilever remained comfortably ahead of Colgate-Palmolive in fourth place. Unilever decision to introduce its product on emerging market such as Asia-Pacific, Latin America and North America implies to the high contribution of Unilever total revenue by 26%, 21% and 16% respectively.

On January 1^st, 2013 Unilever released its results for the fourth quarter and full year 2012 which show good quality, profitable growth ahead of our markets. This underscores the good progress we are making in transforming Unilever into to a sustainable growth company. The past year performance of the company was as follows:

v  Turnover increased by 10.5% to €51.3 billion with a positive impact from foreign exchange of 2.2% and acquisitions net of disposals of 1.1%

v  Underlying sales growth 6.9% comprising volume growth of 3.4% and price growth of 3.3%

v  Emerging markets underlying sales growth 11.4% now representing 55% of turnover

v  Core operating margin up 30bps to 13.8%; gross margin up 10bps, advertising and promotions up €470 million at constant exchange rates

v  Core earnings per share increased by 11% to €1.57; free cash flow of €4.3 billion

ANALYSIS

Before analyzing the Unilever strategies for competing in foreign market, it’s important to identify company’s resource strengths and weaknesses and its external opportunities and threats, commonly known as SWOT analysis. This analysis provides a good overview of whether the company’s overall situation is fundamentally healthy or unhealthy. Therefore, for a company’s strategy to be well-conceived, it must be:

- Matched to its resource strengths and weaknesses

- Aimed at capturing its best market opportunities and erecting defenses against external threats to its well-being

SWOT Analysis of Unilever Cosmetics and Toiletries

 

Based on the SWOT analysis we can infer that the company has very healthy and strong condition in overall. Therefore, this condition provides high capabilities to the company and offers wide opportunities for the company to compete in foreign market. Based on this analysis, Unilever firstly entered foreign market in the year of 1950 by offering its product to European community.

From the Unilever mission statement, we can conclude that the company expands into foreign markets in order to gain access to customers around the world. Unilever recognized that its product is commonly used for all people worldwide. The company’s objective to bring their wealth of knowledge and international expertise to the service of local consumer pursues the company to produce many nutrition, hygiene and personal care product with successful brands. Therefore, Unilever are moving rapidly and aggressively to extend their market reach into all corners of the world.

For its cosmetics and toiletries product, Unilever start to compete internationally by entering just one or select few foreign markets. Unilever launched Axe/Lynx/Ego deodorant body spray in the US and Canada in autumn 2002 and introduced Dove initially in Italy, France and Belgium in 2002. Once successfully introduced its product in several market, Unilever expands its successful brand to many other markets and starting to compete globally.

Through its successful growth strategy, Unilever has continued to build on the strengths of its four key global brands–Dove, Sunsilk, Rexona and Lux–and by doing so, created strong platforms for further growth in a number of cosmetics and toiletries sectors. This has been particularly evident in deodorants, men’s grooming products and bath and shower products, with strong growth for the Axe, Dove and Rexona brands. However, competition in the cosmetics and toiletries industry remains tough, and while the current strategy is providing results, greater product innovation and marketing support, as well as further development of functionality in products will be needed to keep up with the market. There are no doubt that Unilever’s major rivals over the next few years will be Procter & Gamble and L’Oréal, both of which give significant resources to new product development activity, and respond to changes in the market faster than Unilever. L’Oréal also has the benefit of being exclusively involved in cosmetics and toiletries, unlike both Unilever and Procter & Gamble which both have cross-industry involvement, such as in packaged food.

In a globally competitive industry faced by Unilever, much the same group of rival companies such as Procter & Gamble and L’Oréal competes in many different countries, but especially so in countries where sales volumes are large and where having a competitive presence is strategically important to building a strong global position in the industry. Therefore, a company’s competitive position in one country both affects and is affected by its position in other countries. In this case innovation plays an important role. Thus, in a market where innovation is often the key to growth, Unilever has invested in improving its research and developing procedure further including speeding up the process of getting new products to market. Through a mass-market positioning, much of the company’s organic growth strategy is to leverage the value of key brands by cross-sectoral brand extensions, thus taking advantage of customer brand recognition and loyalty, and creating marketing efficiencies. The Dove brand is one of the examples of a recognized soap brand being successfully extended into skin and hair care, deodorants, baby care and men’s grooming products.

Unilever’s marketing strategy for competing in foreign market

For its marketing strategy Unilever combines its strategy with social project in many countries. Educational campaigns have been important tools for raising awareness for Unilever brands such as Close-Up and Dove. The company’s partnership with the World Dental Federation has seen it become involved in oral healthcare projects in both developed and emerging nations, including Austria and Brazil. In 2006, Unilever developed a low-cost toothbrush, the Pepsodent Fighter, which retails at a price equivalent to just EUR0.20 and is distributed in India and Indonesia.

The company also has more directly brand-related programs, including Close-Up’s Project Smile in Nigeria, which used small kiosk outlets to showcase both its products and oral hygiene information, and the Dove Self-Esteem Fund, which has joined with organizations such as the Girl Scouts of the USA and the UK’s Eating Disorder Association to fund educational Body Talk programs in schools to improve body-related self-esteem.

Less directly, a Brazilian recycling partnership with Pao de Acucar, a major Brazilian retailer, not only helped employ more than 300 people in a local recycling co-operative, but also gave Unilever’s products greater in-store prominence as well as raising the profile of brands including Rexona by having their logos on point-of-sale information and educational materials.

The company’s successful brand innovation program is supported with a high level of marketing and advertising activities including most media. As there are many opportunities in the foreign markets but the tendency of threats is also same as opportunities. The powerful R&D, diversified and differentiated product line and market analysis are all important factors that make a company enjoy its potential and good market share in foreign market.