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Katarina Viglaska ___________________________
TABLE OF CONTENTS
CERTIFICATE OF AUTHORSHIP page 2
TABLE OF CONTENTS page 3
LIST OF TABLES page 4
LIST OF FIGURES page 5
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CHAPTER 4. CONCLUSION page 59
LIST OF TABLES
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LIST OF FIGURES
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CHAPTER 1. INTRODUCTION
For years Unilever has followed The Path to Growth with the intention to boost sales, profit
margin and create long-term value for shareholders and employees. By refocusing around 200
core products and concentrating on marketing and advertising activities on these product
leaders, this strategy has proved to work. However, due to some factors such as
underperformance of Unilever’s prestige perfumes, frozen foods and household care business,
decline in food business; shift in consumer tastes (e.g. more exercise, consistently healthy
diet), slum in demand from America, extensive competition has caused that Unilever’s share
price fell by 8% and also lead to reduction of its growth target for sales. Due to these factors,
it was essential to develop another 5-year marketing strategic plan so that Unilever can
maintain its position of the market leader.
This study provides an insight into a global strategic marketing plan, which is one of the most
complex undertakings, as it should be and is much more in depth than a domestic marketing
plan. Global strategic marketing plan, as marketing management tool, is used to contribute to
Corporate planning with the purpose to help an organisation do a better job – to focus its
energy, to ensure that members of the organisation are working toward the same goals, to
assess and adjust the organisation’s direction in response to a changing environment. In other
words, it is an effort to produce marketing fundamental decisions and actions that shape and
guide what an organisation is, what it does, and why it does it with a focus on the future.
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In Chapter 2 we addressed such issues as Unilever corporate vision, corporate mission,
corporate objectives and corporate, competitors and global strategies. Marketing issues were
subject of the Chapter 3. This chapter is concerned with marketing audit, analyses of external
environment (including PESTLE and 5-forces framework) and financial audit, which
provided basis for identification of Unilever’s main strengths, weaknesses, opportunities and
threats. The analysis also focuses on development of marketing objectives and marketing
strategies with regards to STP, competitive advantage, Ansoff matrix and marketing mix.
Furthermore, we also addressed an issue of marketing implementation regarding structural
cultural implementation and development tactics, so that the global strategic marketing plan
developed for Uilever Group will be put into action and will ensure the accomplishment of
stated objectives. Lastly, our efforts were directed to the process of control to ensure that the
human, physical and technological resources are allocated so to contribute to achievement of
the overall purposes of an organisation.
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CHAPTER 2. CORPORATE ISSUES
“To maintain the position of the leading global consumer goods manufacturer, be
recognised around the world for its outstanding products and exceptional commercial
performance, thereby bringing substantial and growing benefits to the Unilever – not just
commercially but also creatively.”
“Being the best in customer satisfaction, value, cost and maintain standards of quality.
Being a socially responsible producer, a good player, a good corporate citizen, a
responsible partner with its distributors and a caring employer to ensure honesty, fairness
and respect.”
1. To increase the company’s overall profits by 5% per annum in real terms each
year for the next 3 years.
This is one of the prime objectives of Unilever related to return on capital
employed. If Unilever manages to increase its profits, it will satisfy expectations of
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its shareholders and attract new investors leading to further development and
growth.
2. To increase the global market share by 5% per annum in real terms each year
for the next 3 years.
If Unilever wants to strengthen and maintain the position of the market leader, it
will have to expand within the existing markets with better quality products.
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Contraction defense will help to concentrate on particular businesses by withdrawing from
others.
The market where Unilever is nowadays operating is a mature market. The most obvious
identifying characteristic of industry maturity is slowing demand to such an extent that
competitive rivalry is affected. Customers use this intensive competition having the power to
drive down prices and to demand extra performance in terms of product quality, features and
servicing. Therefore, it is advisable to follow generic strategies such as differentiation and
low cots strategy.
Differentiation will be the main strategy used for Food division, especially brands which
have been recently underperforming.(e.g. Slim Fast, Frozen Foods). This strategy is aimed at
the broad mass market and involves the creation of a product or service that is perceived
throughout its industry as unique. We will provide unique and superior value to the buyers in
terms of product quality, special features, or after sale service. By following this strategy,
sales will increase and the company will go towards investment for slim fast side of
production.
Low cost strategy has been chosen as the most appropriate strategy for Home Care Products
especially in developing areas such as Africa, Asia, Middle East, Latin America etc. This
strategy pursues the ability of a company or a business unit to design, produce, and market a
comparable product more efficiently than its competitors. In other words, Unilever will try to
gain the competitive advantage in these markets through low cost strategy, whereby the
company will sell its Home Care products at the lowest possible price.
Furthermore, one of the central corporate strategies which will be pursued by Unilever is
concerned with moving some of its operations and plants from North America and Europe
into Africa, Asia and Latin America. This will significantly reduce production cost, leading to
the achievement of the corporate objectives of cost efficiency, technological advancement,
provision of international expertise to the developing markets, as well as create strong brand
awareness, create extra jobs in remote areas and therefore, increase the concern for
community. The strategy is even more viable as Unilever has already ploughed significant
financial resources into building infrastructure in those countries.
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2.4.2. Global strategies
Developing marketing strategies for Unilever, three options have been considered:
Standardization
Adaptation
Stand-adapt strategies
Impressed with the potential savings from global standardization, many companies including
Unilever have tried to launch their own idea of retail for world market.
Whereas Unilever can use standardization to save costs, it can be better to offer more of what
customers in each country want. At this point it is worth stressing that rather than assuming
that Unilever domestic products and ideas can be introduced as is in another country, the
company should review adaptation elements and determine which would add more revenue
than costs. Bestfood has already pursued the adaptation strategy, whereby its strength lies in
its ability to tailor products to different markets and anticipate consumer demands. This
comes from an in-depth understanding of the countries in which Unilever operates and a
policy of listening to customers. Therefore, Unilever Company as a whole should stick to this
adaptation strategy.
The adaptation elements that we can consider in the case of Unilever are following:
• Product design
Unilever can use this element of adaptation by developing more variety lines, which will be
more appealing to the customers around the world. The company should distinguish
differences what people are eating and cleaning with in different countries and sometimes
completely different lifestyle.
For example, Frozen food should be distinguished between countries. People are juggling
with the life in Europe. They don’t cook as much as African or Asian nations. Moreover,
European culture is characterised by “Dingdong” culture, i.e. eating microwave meals.
Therefore, Frozen food, namely freshly frozen food and ready meals, is good option for them.
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• Brand name
Unilever used to have the portfolio of 1,600 brands. However, due to Path to Growth strategy
Unilever cut down the brands to 400 core brands which are exceptionally recognisable in the
world. For instance, Knorr is the biggest brand, with Euro 2.3 billion sales in over 100
countries and a product range covering soups, bouillon cubes, sauces, noodles and complete
meals. Frozen foods brands in Europe - the Findus brand in Italy, Bird’s Eye brand in the UK,
and Iglo brand in other European countries. Margarine and spreads brands in most European
countries and North America - Becel (the Netherlands), Flora (UK) and Take Control (US).
As this tactic has proved itself to be very successful, Unilever is recommended to follow it for
further 5 years.
• Prices
Unilever can change the prices of its products according to the area where it is sold. This
should be applied in the poorer countries (African, Asian, Middle East, Eastern Europe etc.)
where customers are very price sensitive. In the same time more exclusive products should be
introduced targeted to the richer customers.
• Sales Promotion
Unilever can use different kind of sales promotion in the different markets to attract the
customers. For example, in Europe and America customers who spend certain amount on
grocery (food products) can also choose from free personal care product in the same shop. In
that way of adaptation, Unilever could promote its big superstores in the shopping centres.
• Advertising themes
In the case of Unilever this element can be useful as well. Considering different markets
where Unilever exists, it can provide the more effective advertisement to different group of
potential customers.
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CHAPTER 3. MARKETING ISSUES
Niall FitzGerald, the chairman, feels that the trouble lies with these under-performing
businesses and believes these three businesses are well capable of meeting their standards, if
not they have to look for alternative solutions. Therefore, Unilever should revise its situation,
resources and capabilities including those skills and infrastructure required for the core
competence to be effective in this highly competitive business environment.
The marketing audit consists of examining five major components of the company’s
marketing situation. The five components are listed below:
Marketing structural audit
Marketing strategy audit
Marketing systems audit
Marketing productivity audit
Marketing-mix audit
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making and strengthens their capacity for innovation by more effectively integrating research
into the divisional structure.
Executive Committee
The Executive Committee (7members) has particular responsibility within the Board for the
operation of Unilever's business. The Board is led by the chairmen of Unilever PLC and
Unilever N.V. ( the parent companies). Other members are the global division directors for
Unilever Foods and Home and Personal Care; the corporate development director; the
financial director and the personnel director.
Regional Presidents
The Regional presidents (15 members) are responsible for delivering business results in their
respective regions and report either to the director of the Foods division or the director of the
Home and Personal Care division.They play an important role in shaping divisional strategy
and ensuring that regional strategies and plans are consistent with overall objectives.
Reporting to their respective divisional executive directors, are the Unilever Bestfoods and the
Home and Personal Care regional presidents, responsible for the profitability of their regions.
The regions remain the driving force behind Unilever, comprising as they do the operating
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companies which provide the key interface with customers and consumers, allowing quick
response to the needs of local markets.
Advisory Directors
The Advisory directors (13 in all) are the independent element in Unilever's governance. They
comprise a majority of the members of certain key committees of the Boards.
Chairman of Chairman of
Unilever PLC Unilever NV
REGIONS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
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Bringing wealth of knowledge and international expertise to the service of local
consumers
Total commitment to exceptional standards of performance and productivity, working
together effectively and a willingness to embrace new ideas and learn continuously
Highest standards of corporate behaviour towards employees, consumers and societies
In recent years, the company has been following the path to growth strategy. This strategy has
meant shedding more than 1000 products, refocusing around 200 core products (reflected in
400 brand names, such as Knorr, Lipton and Magnum in food or Dove and Persil in the
household products sector) in order to boost sales and margins and to concentrate marketing
and advertising activities on the 200 product leaders.
Moreover, another strategy used under Path to Growth was a buy of new brands, at the same
discarded brands, notably Hellmann’s mayonnaise and Ragu sauces, which came with the
takeover in 2000 of the American firm, Bestfoods.
Path to Growth strategy has also led to another shift in the balance of Unilever. In the north,
factories closed and the supply chain narrowed. It was considered that in Europe and America
Unilever had half the physical plant it owned a decade ago, while at the same time money was
ploughed into building infrastructure in Asia and Latin America.
In May 2003 it was announced that Unilever lost sales on Slim-fast as consumers moved over
to carbohydrate-free meals provided by its competitors. Unilever’s strategy relating to Slim-
Fast is to fight back through innovation to gain competitive position.
To conclude one can say that the company is using the best strategies, the best basis for
segmentation and has achievable criteria for rating the segments and choosing the best ones to
develop accurate profiles of each target segments. Adequate resources allocated and budgeted
to accomplish the marketing objectives.
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timely information about marketplace developments with respect to customers, prospects,
distributions and dealers, competitors, suppliers, and various publics. For example, when
problems with Slim-fast accured, Unilever conducted various researches to correct the
situation and employed the best methods for market and sales forecasting.
As people’s lives are changing fast and as the way we all live and work, our needs and tastes
change too. Unilever has tried to keep up with this trend and consequently innovating and
developing new products tailored to its expanding customer base around the word. It has also
improving tried and tested brands and promoting better, more efficient ways of working.
From the point of technological intensity, Unilever has a relatively high position. New
working practices, which became possible due to new technologies, cash and efficiency,
created an opportunity for intensive work on new products. Technological diversification of
the company is high, as products are designed considering variety of tastes and preferences of
the customers.
Unilever continued on track towards its Path to Growth targets of 5-6 %sustained top-line
growth and operating margin of 16% by 2004. Leading brands grew by over 5% for the
second year running and they constituted 89% of total at the end of the year.
A further healthy increase in operating margin was achieved whilst progressively increasing
investment behind the brands. Restructuring programmes continued to deliver on plan and the
target of ₤1.0 billion procurement savings was passed ahead of schedule.
Overall Unilever has 14 global brands with a turnover of ₤ 0.6 billion. In Home & Personal
Care the company sustained the leading brand growth in excess of 6%.
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Marketing-Mix Audit
Products
Unilever’s product line consists of around 200 core products and concentrating on marketing
and advertising activities on these product leaders, this strategy has proved to work. However,
due to some factors such as underperformance of Unilever’s prestige perfumes, frozen foods
and household care business, decline in food business; shift in consumer tastes (e.g. more
exercise, consistently healthy diet), slum in demand from America, extensive competition has
caused that Unilever’s share price fell by 8% and also lead to reduction of its growth target for
sales. To correct the problem Unilever should phase out, add to, or improve its products.
Innovation is highly required to increase sales of these under performing products. Therefore
Unilever keeps developing new products, improving tried and tested brands and promoting
better, more efficient ways of working.
Unilever has become a market leader with its newly bought brands in food division such as
Bestfoods, Lipton, Hellman’s, Ragu, Knorr, Findus, Bird’s Eye, Flora, Becel, Algida, Ben &
Jerry and in home and personal care division such as Cif, Comfort, Domestos, Omo, Skip,
snuggle, Axe, Dove Lux, Pond’s Rexona, Sunsilk etc. These products are enjoying high-
growth and high-share position.
Brands such as Slim-Fast, Frozen foods, Cif and Domestos have been under-performing
against a benchmark target of 5 % annual revenue growth per year sales-growth rate due to
decline in demand, shift in consumer demands, saturations of the particular markets and
extensive competition, therefore they require critical decision-making. In the case of Slim-
Fast, the major competitors are strong on innovation and moved over to carbohydrate-free
meals, e.g. Weigh Watchers.
The company has looked at the developing markets of food and personal care products
(Middle East and Africa etc.) and has made some moves towards these markets. Unilever’s
desire is to meet and respond to its consumers' needs all around the world. Unilever has
earned a reputation for conducting its business with integrity and with respect for the interests
of those their activities can affect. Unilever has a portfolio of brands that are popular across
the globe – as well as regional products and local varieties of famous name goods. This
diversity comes from two of their key strengths such as strong roots in local markets and first-
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hand knowledge of the local culture, world-class business expertise applied internationally to
serve consumers everywhere.
Price
Unilever’s products appeal to wide range customer profile and income. Unilever’s products in
relation to competitors can be described as highly branded high quality and medium price
products tailored to different markets and anticipated consumer demands. The pricing
objectives, policies, and strategies are based on the international price competition in each
country. The company's prices are in line with the product's perceived value in the market.
Promotion
Unilever does not do corporate advertising, although in some markets where the Unilever
brand well-known, communications such as advertising is used.
Physical evidence
Unilever did not want to completely let go of the sense of organizational strength and
reputation that Unilever knew its logo represented – particularly in certain developing markets
where the Unilever 'U' is already used more widely and where Unilever is already a much
more visible brand in its own right.
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Eye, Iglo, Flora, Take Control, Algida, Wall’s, Slim-fast, Cif, Comfort, Domestos, Omo, Axe,
Dove, Lux, Pond’s Rexona, Sunsilk and many more.
According to the life cycle stage and for the simplicity we have clustered some of these
brands into different quadrants of the Boston Consulting Matrix as question marks, stars, cash
cows and dogs. (as shown in Figure 2. below)
RELATIVE
GROWTH CASH COWS DOGS
Low
The market growth rate is shown on the vertical (y) axis with division between low and high
growth, the market share on the horizontal (x) axis.
According to BCG matrix we have positioned brands such as Dove, Pond’s, Knorr, Rexona,
Wall’s, Algida, Helmann’s, Ragu, AdeS, Findus, Birds Eye, Iglo as “stars”. The reason for
doing so was that newly bought brands Helmann’s and Ragu, which came with the takeover in
2000 of the American firm- Besfoods, Dove (extension from skin care to hair care), Pond’s
Perfect (particularly anti-aging products), Knorr (covering soups, bouillon cubes, sauces,
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noodles, meals), Algida/Wall’s (innovative products) and Rexona (particularly Rexona for
Men) have recently grown strongly and are enjoying high- growth and high-share position.
Brands such as Findus, Iglo and Birds Eye are the only frozen foods brands that show strong
growth, even though frozen foods in Food division were underperfoming. The soy-based
health drink introduced in Brazil and Mexico was also positioned as “star” due to positive
response from consumers to health and wellness brands. The growth of these brands is rapid
and they need heavy investment to finance the growth. Eventually their growth will slow
down and they will turn into “cash cows”.
Brands such as Slim-Fast, Cif, Domestos, Calvin Klein, Frozen foods (except Findus, Birds
Eye) etc. were positioned as “cash cows”. These market leaders holding strong market
position have relatively low-growth and high market share. Brands such as Slim-Fast, Frozen
foods, Cif and Domestos have been under-performing against a benchmark target of 5 %
annual revenue growth per year sales-growth rate due to decline in demand, shift in consumer
demands, saturations of the particular markets and extensive competition, therefore they
require critical decision-making. In the case of Slim-Fast, the major competitors are strong on
innovation and moved over to carbohydrate-free meals, e.g. Weigh Watchers.
Considering the low-profit and low-volume of more than 1000 names, which have been shed
or shelved due to restructuring program – Path to Growth, we can put them in the dog’s
quadrant. We can only assume that the reason why these brands were shed was the under
performance, a low market shares and growth generating low profit or losses.
We concluded that the company’s portfolio is healthy and balanced. It has relatively many
stars and cash cows and has therefore sufficient finance to invest into R&D and product
innovation contributing to an achievement of company’s goals and mission.
Considering its portfolio the next step that Unilever should take is to determine what objective
and strategy to assign to each SBU.
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The strategy chosen for “stars” is invest, i.e. great deal of money keeping up with the market’s
rate of growth and fighting off competitors’ attacks. Undertaking this strategy would mean for
Unilever investing more in innovation, adding more features to these brands, e.g. different
flavours etc. The strategy developed for cash cows is to hold in order to preserve high market
share and generate cash flow. In the cases of Slim-Fast, Findus, Frozen foods, Cif and
Domestos Unilever should use market extension strategy. For the products identified as
“dogs” the most suitable strategy is divesting. Here the objective is to sell or liquidate the
business because the resources can be better used elsewhere.
The company’s main regional sectors are – Europe (22 countries), Africa, the Middle East and
Turkey (20 countries), Asia and Pacific 917 countries), Latin America (8 countries) and North
America (2 countries).
RELATIVE
MARKET
GROTWH CASH COWS DOGS
North America,
Western Europe
Low
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The geographic area matrix shows that Unilever has a very good strategic position on the
global market. Regions such as Eastern Europe, Latin America, Africa, the Middle East,
Turkey, Asia and Pacific can be referred to “stars”, particularly Latin America with its newly
launched soy-based health drink AdeS and Japan with Pond’s Perfect.
Two major regions North America and Western Europe are considered as “cash cows”,
particularly North America with its well-known Bestfoods, Slim-Fast, prestige perfumes,
some household care businesses and Western European countries with brands such as
Bestfoods, (Knorr, Bird’s Eye, Iglo, Bertolli, Algida).
When looking at the Figure 3. above we can conclude, that Unilever’s geographic portfolio is
balanced and healthy. It has a few cash cows and relatively many stars with strong potential of
becoming cash cows, through the process of adaptation (tailoring products to different
markets and anticipating consumer demands) coming from in-depth understanding countries
Unilever operates.
3.3. PESTLE
Unilever doesn’t exist in a vacuum, it co-exist with other organisations in a complex, increasingly
global external environment. Governments, customers, suppliers and other stakeholders, including
competitors, shape its destiny. Mark Twain said in the 19th century: “Get the facts first. You can
always distort them later” (Lawrie, A., 1996) thus we’ve studied external environment in which
Unilever exists.
The Dutch and English governments support and most probably will support the domestic
manufacturers through legislative and administrative measures. The basic tools of support are: the
customs on import, hence, raising its cost and lowering their competitiveness; lower tax and other
privileges.
Prospects of political stability help Unilever to keep and attract investors, so United States
stability gives easy tools for Company’s expansion opening factories in other countries increasing
Unilever’s expansion.
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Political /legal practices of foreign countries and proposed legislative changes may impact upon
the organisation. Some governments in emerging markets are guarding their own industries by use of
tariff barriers and high taxation. This will decrease profits.
In South America market the lack of the uncorrupted political class presents a risk for Unilever,
where operations could be delayed due a slow bureaucratic system.
Countries with strong executive are fully dependant on the strong executive. As the president
can issue decrees without deputies’ consent, his political issues can be crucial for the Company. e.g.
Mr. Putin’s (Russia) attempt to impose more control over the oligarchs can restrict the Company’s
activities. A weak legislature cannot protect companies from unfair competition.
Regional conflicts might result in international condemnation and through that in loss of
investors
Economical factors
Social/Demographic
The social environment is one of the main factors, which must be taken into account when conducting
research and plan to introduce a new product.
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Social factors (change in preferences etc.) like demographic factors (size, age etc. of
populations) may impact upon an organisation.
Ageing of population might affect the businesses, the customer buying behaviour picture.
Association of Pension Funds in the UK is now considering rising the retirement age to 70 for both
men and women between the years 2020 and 2030.
As "culture reflects the society’s beliefs and values, preferences and behavioural norms"
(Adcock, 2001), it affects the Company through employee’s attitude (core belief in education, work)
and buyers attitude.
Changes in the buying habits due to growing number of single person households and ready
meals culture
Technological factors
The world is changing fast and Unilever needs to be flexible and constantly innovate to be ahead of
others. So, Domino’s Pizza is embarking on extra feature, it is currently working on “minizepp”, a
radio-controlled airship that can deliver pizza to customers across rivers or to those in tall buildings,
pulling up outside the customer’s window.
New patents and products. Development of substituting services which represents a substantial
threat for Unilever. If a new, cheaper and qualitative alternative arises, less customers will be
interested in the Unilever’s products.
Technological transfer. Unilever should continually improve the production methods, changing
the out-of-date technologies to the modern ones. Great importance is attached to the image of the
company and packaging design. The improvement in quality is seen as one of prerequisites of
increased sales.
Ethical Factors
The expansion of Unilever around the globe is based on its main goals, so Unilever must
accomplish with the different factors in its communities.
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Unilever is giving a great opportunity of employment to millions people in countries of
production with company based around the world.
Competitive analyses are based on Porter’s Five Forces Competitors Analysis as shown in
Figure 4 below.
Threats of New
Entrants
(low)
Bargaining
Bargaining power Competitive power of
of suppliers rivalry buyers
(low) (high) (low)
Threat of
substitute
products
(medium)
Potential competitors, who are likely to enter the market where Unilever operates, constitute a
threat that the firm must limit and protect itself against. The threat of new entry seems to be
low. This is due to principal barriers to entry that Unilever creates:
Economies of scale.
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This is significant barrier in the case of market where Unilever operates. The company is
selling at large scale and gaining a cost advantage. This factor is likely to deter most would-be
entrants, because it impossible for them to come in on a large scale or accept inevitable cost
disadvantages.
The capital requirement of entry
Theoretically, it is not difficult to enter food or home and personal care market. However,
when we are talking about big multinational consumer goods manufacturers like Unilever, it
is not possible to compete effectively with such giant companies if there is no significant
amount of money. If someone entering the business wants to be competitive, it is necessary to
involve high sum of money. Undoubtedly, the high sum of money is required to enter food or
personal and home care market where Unilever operates.
Access to distribution channels
It is assumed that Unilever has a very strong distribution network on which the company
focuses aggressively, especially when supplying its growing global operations. Developing a
strong bond with suppliers can be seen as important barriers to entry and can influence the
decision making process of new entrants as well. It is difficult for competitors to break into
the market when companies already in the market control the distribution channels.
Cost advantages independent of size
Unilever gained big experience through early entry into the market. An established company,
such as Unilever, knows the market well. Therefore, it is difficult for a competitor to break
into market.
Expected retaliation
New entrants cannot forget about this barrier. It can be high because, in the high competitive
food or home and personal care manufacturers monitor very closely the performance of their
competitors. Therefore the reaction of an existing firm can be significant. It can be very costly
for potential new entrants.
Legislation and government action
It seems that this kind of barrier is not significant in the case of food or home and personal
care market.
Differentiation
It is important to know that organisations able to achieve strategies of differentiation provide
for themselves real barriers to competitive entry. Unilever has already created an image for
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product and quality specification, its ability to tailor products to different markets, and strong
corporate values supportive of the social and efficiency aspects.
Due to lack of sufficient information, we can assume that the power of suppliers, who are
supplying raw materials to Unilever, is low. This could be a result of factors such as scattered
concentration of suppliers, a low degree of substitution of raw materials by various suppliers
or low switching cost from one supplier to another one etc.
Competitive Rivalry
Unilever operates in very competitive environment. Although Unilever is a multinational
manufacturer representing values like high quality, affordability, adaptation, concerns for
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major stakeholders, it is under constant attack from its major competitors such as Kraft Foods,
Nestle, H J Heinz, Conagra Foods, Tyson Foods, Procter & Gamble etc. When looking at
slimming food industry, Unilever faces high competition from manufacturers Novartis with
slimming brands Gerlinea and Acutrim; Nestle with Nesvital and Sweet Success; Kraft Foods
with Jenny Craig and Danone with Gayelord Hauser as well as from grocers such as
Sainsbury’s and Marks & Spencer. These companies represent a real threat to Unilever,
mainly due to their high innovation programmes and swift respond to consumer demand for
reduced-fat, reduced-carbohydrate, reduced-salt or low-calorie food products. As a result of
Slim-Fast customers moving over to carbohydrate-free meals provided by its competitors,
food business declined and Unilever’s share price fell by 8%.
Apart from the number of competitors and their concentration, there are likely to be other
factors affecting competitive rivalry and these are as follows:
The extent to which competitors are in balance
Unilever is one of few of roughly equal size manufacturers operating in global markets and
this fact is one of the reasons for the danger of intense competition.
The rate of growth of the industry
To illustrate this point, we look at slimming industry. As Mintel International, the research
house reported, the value of the UK slimming products market rose by 18% between 1997
and 2002. This will definitely result in intensive competition, as companies will try to take the
advantage of the growth of this market.
Differentiation
The degree of differentiation is extremely important as it leads to an achievement of
competitive advantage and customer’s loyalty. Unilever has achieved it through the ability to
tailor products to different markets and anticipate consumer demands (e.g. laundry soap bars
for consumer using river water, tablets for the most advanced washing machines). However,
many of Unilever competitors have been competing with Unilever on the basis of
differentiation resulting in intensive rivalry.
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As a part of micro audit, financial analysis to Unilever and its public to understand many
useful facts about trends of business affairs (i.e. what is happening in the business), so that the
public can make judgment on relevance of the information or the control of the business can
be achieved.For our purposes, we have decide to analyse key financial trends in respect of:
- top management
- shareholders
- bankers
- supplier/employees.
Top management is usually concerned with the profitability, liquidity and activity of the
business. Therefore, analysis of Gross/Net profit, Turnover, Stock turnover, ROCE, ROE etc
needs to be carried out.
The five-year consolidated profit and loss account points toward the spiral effect of Net profit
for Unilever as shown in Table 1. and Figure 5. As we can see, in 1998 the company earned
the extensive amount of Net profit (€2,944 million), follow by the significant plunge in years
2000 and 2001. This had obvious effect on Number of shares, Earnings per share, Dividends
per share etc as explained later in the section. However, in 2002 Unilever experienced
recovery and earned considerably higher income due to factors such as the Path to Growth
(i.e. refocusing around 200 core products, reflected in 400 brand names) and restructuring
programs leading to higher sales and margins.
31
3000
2500
2000
1500
1000
500
0
2002 2001 2000 1999 1998
When examining the performance of Unilever in its regions in 2001 and 2002, we can
conclude that on the whole the company’s performance fell in all its regions, significantly in
North America. (see Table 2 and Figure 6 below) The slump in demand from America,
underperformance of prestige perfumes, frozen foods and household care business against a
benchmark target of 5% and sales decline of Slim-Fast contributed to this plunge. The decline
in demand for Slim-Fast in North America region was due to factors such as extensive
competition, shifts in consumers demand for carbohydrate-free meals, healthy eating and
being light on innovation.
32
25
Europe
20
North America
15
0
Latin America
2002 at 2002 2002 at 2001 2001 at 2001
rates* rates* rates*
33
10
0
2002 2001 2000 1999 1998
Furthermore, our financial analysis has led us to the calculation of the most important ratio
from all profitability ratios, Return on Capital Employed. ROCE shows how much profit has
an organisation made and how well the capital has been employed. The Table 4. and Figure 8.
below illustrate the Unilever ROCE for the last 5 financial years. Similarly to the trend of Net
profit, Unilever received higher profits for every € 100 invested in 1998 and 1999, follow by a
slump in 2000. However, since 2001 the ROCE has been increasing and in 2002 reached
21%, i.e. rising its profit, which has contributed to an increase in shareholders value.
34
40
35
30
25
20
15
10
5
0
2002 2001 2000 1999 1998
Shareholders are usually concerned with the quality of their investment and the payoffs they
can expect in dividends and in capital growth. Therefore, we have analysed measures such as
Earnings per share, Price/earnings ratio and Dividend yield.
The analysis of the consolidated profit and loss account for the five financial years ending
2002 showed the spiral effect of Unilever’s Earnings per share. This measurement is very
much useful to shareholders and helps to find out how much will shareholders earn for each
share they hold. As we can see from the Tables 5., 6. and Figures 9.,10. below, shareholders
enjoyed the highest Earnings per share in financial years 1999 and 1998, follow by the slum
in these earnings in 2000. However, the Earnings per shares have started to pick up in 2001
and 2002, due to e.g. Path to Growth and restructuring programs, which indicates that more
shareholders were attracted.
Table 5.: Earnings per share; NV – euros per €0.51 of ordinary capital (€ million)
35
Figure 9.: Earnings per share; NV – euros per €0.51 of ordinary capital (€ million)
2.5
1.5
0.5
0
2002 2001 2000 1999 1998
Table 6: Earnings per share; PLC – euros cents per 1.4p of ordinary capital (€ million)
Figure 10: Earnings per share; PLC– euros cents per 1.4p of ordinary capital (€ million)
40
35
30
25
20
15
10
5
0
2002 2001 2000 1999 1998
Tables 7.,8. and Figures 11., 12. below show Ordinary dividends (i.e. shareholders reward in
the form of a share of the profits), NV and PLC for the 5 financial years ending 2002.
Similarly to Earnings per share, there has been a significant growth in Ordinary dividends,
e.g. Ordinary dividends NV grew from 1.14 to 1.7 and likewise Ordinary dividends PLC grew
from 10.7 to 16.04. The reason for this trend might be the Path to Growth program, whereby
the Unilever managed to boost sales and margin, attract new shareholders and therefore pay
higher dividends to its shareholders.
36
Table 7.: Ordinary dividends; NV – euros per €0.51 of ordinary capital
1.5
0.5
0
2002 2001 2000 1999 1998
Table 8.: Ordinary dividends; PLC – pence per 1.4p of ordinary capital
Figure 12.: Ordinary dividends; PLC – pence per 1.4p of ordinary capital
20
15
10
0
2002 2001 2000 1999 1998
37
Bankers and other providers of interest-bearing loans are usually concerned about the risk
associated with their loans, so it would help them to decide whether or not to invest further
with a particular company. This might be assessed through looking at the capital structure of
the company – particularly the gearing ratio.
Debt to equity ratio is used to examine the relative importance in the business of borrowed
funds as opposed to the investment of the legal owners. From the Table 9. and Figure 13.
below we can see, that Unilever’s dependence on long-term borrowings from outside of the
firm has grown from 38% in 1999 to 197% in 2002, i.e. Unilever has become a high-geared
company. That can be is seen as a sign of weakness. Although in circumstances of inflation, it
can bring benefits. The higher rate of debt to equity ratio means that in bad times very little
might be left for ordinary shareholders after payment of interest on the debt items and also
preference share. In good times, the ordinary shareholders will enjoy a far higher return than
in a low-geared company. In other words, this means that people investing in ordinary shares
in a high-geared company are taking a far greater risk with their money than if they had
invested instead in a low-geared company. Investors, who are prepared to risk their money in
the hope of large dividend would have wanted to cut down on their risk and be more certain
about receiving dividends, would choose a low geared company.
250
200
150
100
50
0
2002 2001 2000 1999 1998
Suppliers and employees are most likely interested in liquidity of the company, which
38
measures the company’s ability to meet its short-term financial commitments to creditors and
wages, as they are due.
When looking at Current liquidity ratio of Unilever Group for financial years 1999 to 2002
(Table 10. and Figure 14. below), we can observe that the ratio is under commercial standard
(i.e. the commercial standard is 2:1) with significant fall in 2000, 2001 and 2002. This
indicates that Unilever has a weaker liquidity position and this could be due to slower growth
in the global economy, tougher environment, underperformance of some brands etc.
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2002 2001 2000 1999 1998
3.6. SWOT
"The purpose of strategy is to be really clear before you take the direction. The point of a SWOT
analysis is to have the best shot at a grounded plan. We’ve used SWOT analysis to carve out a strong
business strategy for further Unilever development.
39
3. Strong growth of some brands within the divisions, e.g. Britain’s Birds Eye and Italy’s Findus
in frozen foods
4. Company’s restructuring efforts to consolidate its position (merge of Bestfoods and Lipton in
2000)
5. Majority of company’s products is satisfying diverse consumers tastes
6. Company’s strong innovative activities – production of snack sized ice cream (Magnum) and
miniature and multi-packs ice cream (Cornetto), launch
7. The company reputation as a producer of qualitative goods
8. The company’s ability to take into account the requirements of the consumers, e.g. company’s
response to consumer demand for healthy foods; to consumer’s taste for Mediterranean food
9. Strongly developed policies of listening to customers, satisfy their needs within the company
10. Good understanding of difference in cultures and adjustment of company’s Bestfoods
production to different demands.
11. Strong sense of responsibility to the communities they serve
12. Creation of regional business groups that form a regional interface with corporate strategic
customers
13. Leadership in more than 20 products
14. There is a precisely formulated purpose of the company and duties on every level of the
organisation
15. Structural unity of two companies, PLC and NV
16. International character of company’s management team to match company’s global character
17. Company’s recent growth through takeover of Bestfoods in 2000 with strong businesses, Ragu
sauces and Hellmann’s mayonnaise.
18. Company’s actions about stimulation of the developing world
19. Gradual re-branding of Slim Fast from meal replacement drinks and snack bars to low-fat meals
20. Recognition of shift in consumer’s tastes towards healthy diets gave an impetus to repositioning
of Slim Fast
21. Growth of leading brands by over 5% to 2003; excessive 6% growth of leading brands in Home
& Personal Care in 2003; procurement saving of euro 1.6 billion was passed ahead of schedule
22. 25% growth of Dove achieved through successful extension of dove from skin care to hair
care, Knorr being extended well beyond it original concept of bouillon cubes
23. Region wise, 12% growth in Latin America, 7% in Africa, Middle East and Turkey, 5% in Asia
and Pacific
24. Increase in shareholders value by offering relatively high dividends/EPS
40
Internal weaknesses (W) of Unilever:
1. Diversity of products – Foods and Home and Personal Care which require diverse strategies and
efforts
2. Under performance of three of company’s divisions, esp. in America
3. 17% drop in revenues from the core product in Food division, the Slim Fast in years prior to
2003
4. 2% fall in sales of ice-creams by May 2003
5. Hold back of sales growth of Unilever’s 400 leading brands by 0.6% through the year
6. The loss of Slim Fast was unexpected and so especially difficult to deal with
7. Substantial Financial resources are being ploughed into Asia and Latin America
8. Unilever being light on innovation of Slim Fast
9. Drop in Unilever’s share price by 8% to 2003
10. High-geared company (over-dependence on long-term borrowings from outside of the firm)
creating risk for shareholders
11. Weaker liquidity position, i.e. weaker ability to meet short-term financial commitments to
creditors and wages, as they are due
1. The present slump in demand in America for prestige perfumes frozen foods and household care
2. Increase in sales of the substitutes (competitive analogues)
3. Shift in consumer tastes from Slim Fast to alternative diets carbohydrate-free meals, reduced fat,
reduced salt, low-calorie food products, constant exercise
4. Consumer having considerable power when choosing what brands or products they want (i.e.
company vulnerable to consumers)
5. Disbelief of consumers in effectiveness of Slim Fast in long run
6. A imperfect inventory system of company’s retailers
7. Unilever’s competitors having embarked on shift in consumer’s consumption towards healthy
diets and reacted with active own-label offerings
8. Competitors strong in innovation programs
9. Slow growth of global economy which created tough environment to operate in
10. Turbulence in financial markets, economic and political uncertainty
41
11. High competitive rivalry from Kraft Foods Inc, Nestle, Procter & Gamble Co.
12. Potential threats from pressure groups, e.g. Greenpeace demanding ban of GM ingredients and
biotechnology
Unilever does not have sufficient power to have significant impact on external factors and
therefore it can only adapt its marketing mix to account for the opportunities and threats that
arise. The task for Unilever managers is to build on their strengths, minimise their
weaknesses, exploit the opportunities and defend against the threats.
In delivering successful products and services critical success factors of Unilever play crucial
role. They are related to main Strengths of the Company and are listed below:
Even though the diverse portfolio is of advantage to the company, the huge product portfolio is
already associated with unnecessary weight as every product requires contribution from all
42
departments within the organisation, R&D, Marketing and Sales, Production and is connected
to big financial investment and lack of flexibility. This CSF was considered to be an important
element in achieving proactivity. These actions are thought to generate substantial cash to be
used in the areas where it was required.
These are Bestfoods North America in US and Canada; Margarine and spreads in most
European countries and North America; Frozen foods known under Findus brand in Italy,
Bird’s Eye in UK, Iglo in other EU countries; worldwide leadership in production of ice cream,
culinary category (Knorr) and branded olive oil with the famous Bertolli; Unilever is the
largest worldwide seller of packet tea. In Home Care market these are Brilhante, Cif, Comfort,
Domestos, Omo, Skip, Snuggle and in Personal Care: Axe, Dove, Lux, Pond’s, Rexona,
Sunsilk.
As the company has many products that are leading the market with their excellent
performance, the Unilever will embark on its CSF, on the strong positive image fixed in the
minds of consumers with the company in all around the world. This in addition to other
innovative actions will allow the company to improve performance of products currently
performing under the targets.
This CSF has helped Unilever and will be the main one to help the company to overcome the
competition. The company’s ability to take into account the requirements of the consumers e.g.
company’s response to consumer demand for healthy foods or to consumer’s taste for
Mediterranean food gave company impetus to innovative work and brought to market products
which were required. The currently identified problem with Slim Fast should be tackled using
this CSF. The large size of product portfolio is also the means to satisfy diverse consumers
tastes.
43
Recognition of shift in consumer’s tastes towards healthy diets
As the experience with Slim Fast showed, consumers are very much health and fitness
conscious, but are gradually shifting towards healthy diets, which made the company innovate
the product and reposition it. The company should embark further on this CSF at times when
proportion of population in Europe eating ecologically produced food is growing dramatically.
This was seen as essential elements in achieving efficiency and tackling losses which occurred
in some businesses unexpectedly (in case of Slim Fast).
This will add new features to existent products, so prolonging their life, but foremost, it will
bring new products to the market that are better quality than the ones produced by Unilever’s
competitors. From earlier experience, the company achieved 25% growth of Dove through
successful extension of dove from skin care to hair care and Knorr being extended well beyond
its original concept of bouillon cubes. Improving product offerings, changing design, flexibility
in distribution, good check on quality is thought to be critical success factors for Unilever.
44
3.8. Marketing objectives
Marketing objectives are concerned with what is sold (products) and to whom it is sold
(market). Considering above-mentioned corporate objectives, the following marketing
objectives were set for the company assigned for simplicity just to three products that are
currently underperforming. It is clear to us, though, that in real life in an organisation of
Unilever’s size objectives would be set for each product division or even each regional part of
the organisation. These were the following marketing objectives:
2. To create awareness about the company’s Home Care products among 80% of the
target audience in the African market.
Word of mouth is considered to be a powerful tool in African countries and the company wants
to be known as being cheap but good. The market for cleaning products in Africa is growing
and the company will enter the market with this product, it will solidify its position by building
local plants in order to produce for local population.
3. To increase Unilever’s market share by 5% per annum in the Home Care sector of
the African market in the next 3 years.
This objective will contribute to the achievement of the overall corporate objectives of
increasing the company’s global market share.
45
Although the figure of 7% sales increase is above Unilever’s recent financial targets, the
objective is considered to be achievable and realistic as the company is planning to accomplish
it by extending the assortment of the current Slim-Fast range and introducing a highly
promising low-carbohydrate, low-calories, low-salt line, which should in turn gain a significant
share of the US slimming food market.
The company will aim to regain its lost customers, who have defected to a competitive product.
The problem that Unilever has faced is the growing competition and demand for natural
products on the market. By offering Slim-Fast products, ranging from snack bars, soups, ready
meals to ice creams, as an healthy option of low-calories, low-carbohydrate and low-salt
products the company will be able to regain the image for this product and improve
performance.
3.9.1. STP
In order to formulate global marketing objectives and strategies, it was essential to understand
the market, to identify the market segments that present the best opportunities for generating
profit, target this particular market segments, and position the Unilever’s brands/products so
that they occupy a meaningful and distinct competitive position in the target customers’
minds.
For the simplicity, when conducting segmentation and targeting of the market for Unilever we
considered brands/products such as Slim-Fast in North America, Frozen foods (Findus, Iglo,
birds Eye) in Europe and Home Care products in Africa (Cif and Domestos) in relation to
factors such as age, gender, income, life style and family lifecycle, i.e. combining
demographic and psychographic segmentation.
46
35-45 X X X
45-55 X X X
55+ X X
Gender Male X X
Female X X X
Income £0 - £15k X X X
£15k - £25k X X
£25k - £40k X
£41k and more
Life style Healthy X X
Natural X X
Active X X X
Independent X X
"Couch potatoes" X
"Ding-Dong" X
Contented housewife X
X
Traditionalist
Mainstreamers X X
Family lifecycle Bachelor X X X
Newly married
couples X X X
Full nest I X X X
Full nest II X X X
Full nest III X X
Empty nest I X X
Empty nest II X X
Solitary survivor, in
X
labour force
Solitary survivor,
X
retired
As the Figure 14 above indicates, the targeted audience for Slim-Fast will be females, age 20-
55, earning up to £40k a year with healthy, natural, active and independent lifestyle.
According to family lifecycle, these females will be bachelors or in any of Full nest.Frozen
Foods’ in Europe targeted audience will be all age groups either male or female, earning from
£0 to £25k a year with healthy, natural, active, independent, “couch potatoes” and “ding-
dong” lifestyle. This target audience will be also traditionalist and mainstreamers in all types
of family lifecycles. Lastly, Home Care products will be offered to mass audience (i.e. male/
females of all age groups) in African countries, earning up to £15k a year with active and
mainstreaming lifestyle. Regarding family lifecycles, these contented housewives will be
either bachelors or in any of Full and Empty nests.
47
Having established selected target segments for Slim-Fast, Frozen foods (Iglo, Findus, Birds
Eye) and Home Care products (Cif and Domestos), we can position them on the Multiple
Perceptual Map.
Due to a slum of Slim-Fast’s sales in North America, this product has to be re-positioned
from being low-quality, low innovative, medium price supplemented food product - blue dot
to being a high quality, medium price and high innovative slimming product – black dot (see
Figure 15. below). This would mean that Unilever ought to pursue a product innovation
strategy, so that it can compete with extensive competition, attract customers and enjoy high
profits. E.g. offering Slim-Fast products, ranging from snack bars, soups, ready meals to ice
creams, as an healthy option of low-calories, low-carbohydrate and low-salt products.
High quality
High innovation
Despite the fact that frozen foods brands such as Findus, Iglo and Birds Eye continue to show
relatively strong growth in comparison to other underperforming frozen foods, their overall
performance has to be improved and therefore, they must be re-positioned (from being
medium quality, low differentiated medium price products – blue dot) otherwise Unilever
management will look for alternative solutions. These products will be positioned as high
quality, highly differentiated and medium price products to fulfil the needs of modern life –
black dot. (see Figure 16. below) To create this perception in existing and potential
48
customers’ minds, Unilever ought to offer expanded line of trustworthy and freshly prepared
frozen products.
High Quality
High differentiation
Low Quality
Low differentiation
Lastly, Home Care products such as Cif and Domestos have not been performing up to
standard recently and therefore, they also need to be re-positioned. Due to factors mentioned
in segmentation (85% of people who are eating and cleaning is in developing countries which
expect 100% growth of the population) these products will be re- positioned in Africa from
being medium price, difficult accessible chemicals based products – blue dot to being low
price, high accessible and high effectiveness multi-purpose products – black dot.
Figure 18: Positioning of Home Care products (Cif and Domestos) in Africa
High accessibility
High effectiveness
49
Low price High price
Low effectiveness
Low accessibility
Slim-Fast Products
Product:
In recent years the Slim Fast, whose main products are meal replacements and snack bars, has
benefited from the surge in demand for slimming food designed specifically to help the
consumer lose weight. However, people have realized you do not necessarily have to eat a
powder mix to stay thin and were switching to reduced-salt, or low calorie food products.
Therefore, Unilever has to find a new solution to improve Slim-Fast product. Slim-Fast
products ranging from snack bars, soups, ready meals to deserts will be offered to healthy
conscious consumers. These products will be based on new slimming innovations, e.g. low-
carbohydrate, low-calories, low-sugar, low-salt products, so that Unilever will be able to
compete with its major competitors in this particular market. Having these real, delicious,
full-filling foods will better than having powder mix. Moreover, Slim Fast will offer a new
50
range of products such as authentic pre-pared ready slimming meals, e.g. products with
different flavour such as Mediterranean, Indian, Chinese flavors etc.
Price:
Penetration pricing policy
The most suitable pricing policy chosen for Slim-Fast in North America is penetration policy,
whereby Unilever will offer this high quality and highly innovated product at relatively
medium price. This enable the company to stabilise on the market, increase market share and
re-gain previously lost customers.
Promotion:
Aggressive advertising campaign using outdoor and transport tools, PR and sale
promotion campaign
The advertisements particularly should be targeted for particular and group of potential
customers. Slim-Fast targeted audience will be middle class audience between 20 and 55
years of age. The advertisement should convince them that Unilever is able to produce
healthy, slimming, quality products at affordable price. The most suitable mix of promotion
tools chosen for these products in North America market are outdoor and transport ads, e.g.
billboards, public transport means etc.
Additionally, another promotional tool used in this campaign will be sale promotion such as
free membership to customers in the local gym when they purchase and collect 25 tokens
from Slim Fast range.
Furthermore, the advertising and sale promotion campaign will be supported by various PR
campaign activities in form of newsletters, news media newspaper coverage of press releases,
printed materials, broadcast media, press contacts, interviews and visits to grab the media
interest and recommended sustain program intensively over the 6-month period starting one
month before the launch of improved Slim-Fast.
All the mentioned campaign tools will help to create awareness, increase the sales and
associate this new range of Slim-Fast with healthy and active life style.
51
Place:
Stick to the same channels of distribution and additional used of new channels of
distribution
It is more convenience for Unilever Company to stay with the same distributor channels such
as food retailers, health and beauty retailers, chemists etc. Additionally, in order to reach the
target market, Slim-Fast products will be retailed in leisure centres, gyms etc.
Product:
Frozen Food products are consumed in the countries where people do not have time to prepare
their meals and they prefer buying ready and quick cooked foods. To pursue this strategy,
Unilever needs to improve product development through producing freshly prepared frozen
food, e.g. ready meals.
The quality of Frozen Foods will be improved through producing fresh and healthy products
(e.g. low-calories, less fat, less salt and less sugar) so that the target audience is reached. To
increase the attractiveness of the Frozen Foods, variety of foods with plenty of different
flavours will be offered to the customers.
Price:
52
As Multiple Perceptual Map revealed Frozen Foods will be offered at medium price, i.e. there
is no increase nor decrease of these products in order to stick to the same profile.
Promotion:
TV, Newspapers, outdoor and transport advertising have been chosen as the most effective
communication channels for Frozen Foods in Europe. These tools will be integrated in such a
way that they send a clear, consistent and compelling message about freshness of the Frozen
Foods to target audience.
Use of sales promotion campaign
The advertising campaign will be supported by periodical sales promotion campaign by using
tools such as discounting, couponning, competition and merchandising.
Place:
Intensive distribution strategy via existing distribution channels
Here the existing food retailers will be used, including major supermarkets chains and small
retail outlets, e.g. Sainsbury’s, Safeway, Asda, Iceland in UK; Metro, Billa, Kaufland in
Germany, Austria and other European countries.
Product:
To change the ingredients of these products
In order to increase sales of Home Care products in African countries, Unilever is advised to
change the ingredients of these products, i.e. use of natural ingredients instead of chemicals.
This is due to the fact that Africans are used to clean by using natural elements.
Strongly brand these products
This option will enable Unilever to increase the sales volume of if the strategy is developed
properly. This activity can help to achieve consumer’s brand awareness and loyalty.
Moreover,the company will have to sustain this brand image and develop the positive brand
awareness in future areas of operation.
53
Price:
Promotion:
Use of heavy sales promotion campaign, advertising through TV, Radio, Transport
and Billboards, and integration of these
In order to communicate the message among target audience, competitors, retailers and
distributors and to generate increased awareness leading to purchase and retention in Africa,
Unilever is advised to use an aggressive promotional campaign through heavy sales
promotion (e.g. discounting, couponing etc.), TV, radio and outdoor advertising. Newspapers
were not among the chosen promotional tools, as they do not reach the target audience.
Place:
Intensive distribution strategy via existing distribution channels and maintaining
strong relationships with them
As Home Care products will be positioned as low price, high accessible and high effectiveness
multi-purpose products in Africa, it is viable and efficient for Unilever Company to use the
existing channels of distribution and strengthen the relationship with them. These channels will
namely include local retailers as they make the products more accessible.
McKinsey’s Seven Ss model is a very good way of representing the internal factors which are
essential in marketing and which can affect the successful implementation of plans. This
54
model (Figure 18) shows the links which, when present in a balanced format, will allow a
marketing plan to be developed and will aid in its implementation.
STRUCTURE
STRATEGY SYSTEMS
SHARED
VALUES
SKILLS STYLE
STAFF
Structure
Following the “Path to Growth” strategy Unilever has been cutting its old portfolio of 1,600
brands down to 400 core brands, which accounted for 10% of the company’s sales, in order to
boost sales and margins. However, appropriate changes in the organisational structure have
not been conducted. Therefore, as Unilever is still aiming at concentrating its marketing and
advertising activities on the 200 product leaders, it is absolutely vital for the company to
adjust and realign its organisational structure according to the new needs. Within the Board
there still will be 2 global division directors for Unilever Bestfoods division and Home and
Personal Care division. They will still have 15 regional presidents responsible for delivering
55
business results in their respective regions. However, the top and middle level managers that
were responsible for the brands and products, which have been or are being cut, will be made
redundant, and some of them will be reassigned to the newly prioritized product groups that
are currently underperforming.
As innovation is being given a priority position, research and development department will
receive more resources, as financial (at the expense of the cost savings that come from the
brand reduction) as human (with fresh ideas and new knowledge). Furthermore, one extra
advisory director will be brought in to Unilever’s governance responsible for innovation and
R&D.
Simpler management structures will also be introduced with fewer hierarchies, and internal
marketing functions will be given more control.
Staff
In order to implement the marketing strategies no major staff increase is necessary. However,
as Unilever’s R&D department needs to be given a boost in gaining a technological
advancement, there is a need to carefully select and employ a number of highly skilled and
innovative specialists in food and home and personal care R&D fields.
Style
The main keys to successful implementation of any plan are the support of top management
and the active involvement of staff in the implementation. A substantial level of staff
involvement will be achieved through employing such main principles of involvement as
empowerment, group responsibility and constructive conflict.
Skills
As more priority is given to Unilever’s innovation and R&D processes by the top
management, the company should constantly explore new innovation opportunities,
promising technological prospects and “learn” continuously. As for the implementation of the
three marketing strategies (Slim-Fast in the North-American market, Frozen Foods in the
European market, and Home Care products in the African market), detailed and
56
comprehensive action plans have been developed. As an example, one of them is considered
below (see Figure 19).
Budget,
Implementation Action Men Time
£000
Preliminary product marketing concept (PMC)
Marketing
design of new and improved Slim-Fast product
department
lines August’03 150
(Marketing
Defining the outline concept, possible level of sales
Manager)
(within wider range), request for R&D work
Preliminary R&D work
Assessment of product flexibility, estimated time and R&D department August’03 1,700
cost of research against plans
Refined PMC Marketing,
This stage will include provisional financial data – assisted by
September’03 210
costings, range of margins at various possible selling appropriate
prices; process and investment data departments
Decision to proceed
Marketing
If the previous stage shows a probability of acceptable
department or
results, the project may proceed without reference to September’03 -
top management
top management for a decision whether to abandon or
as appropriate
continue
Feasibility study and final R&D work
a) Marketing research, such as concept testing Marketing dept. 550
b) Process, product and packaging development R&D dept. 4,300
(If these steps do not indicate any revision of thinking, September’03
e.g. complete rejection of the concept at the marketing
research stage, it becomes possible to move to the
next step)
Marketing project evaluation Marketing and
Includes detailed financial analysis, broad sales and Financial December’03 150
marketing cost estimates departments
Test marketing
Marketing
The previous stage will be repeated using the results of December’03 200
department
the test marketing and updating all forecasts
Pre-launch promotional campaign Marketing and
January’03 3,600
Advertising, PR PR departments
Marketing
Product launch February’03 1,700
department
Post-launch promotional campaign Marketing
February’03 10,400
Advertising, PR, Sponsorship department
Monitoring and control Marketing and January’03 800
other
As
Contingency (10%) appropriate 2,640
appropriate
departments
Total marketing budget (5% of Slim-Fast sales) 26,400
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The total expenditure for marketing Slim-Fast products in North America is expected to be at
£26.4 million, as the total allocated marketing budget was at 5% of the last year’s sales of
Slim-Fast products in the North-American market (£528 million).
Monitoring and control management is the process of ensuring that the human, physical and
technological resources are allocated so as to achieve the overall purposes of an organisation.
The existence of a control process enables management to know time to time where the
organisation stands in relation to predetermined future position. This requires that progress
can be observed, measured and redirected if there are discrepancies between the actual and
desired position.
There are four types of monitoring and control activities that will be employed by Unilever:
1. Profit control
2. Strategic control
3. Efficiency control
4. Marketing control
The main purpose of profit control is to find out whether the company makes profits or losses.
It will measure the profitability of all Unilever’s product sectors (Foods, and Home &
Personal Care), territories (all the geographical regions the company is in), customer groups,
segments and trade channels. In practice, it will involve the application and preparation of
profit and loss statements during time intervals and then acting as it requires increasing
profitability and/or reducing losses.
Strategic control aims to examine whether the corporate strategies are implemented
effectively. The main tool used is Management by Objectives. It includes four steps:
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o The management takes corrective action to close the gaps between goals and
deviations
Strategic control also involves periodically undertaken critical reviews of overall corporate
goals and effectiveness of the corporate strategies. From time to time the company will revise
its strategic approach to the marketplace.
Efficiency control will involve controlling internal organisational efficiencies including the
marketing aspects such as sales force efficiency, advertising efficiency and sales promotion
efficiency. Sales force efficiency will be measured using ratios such as sales/calls ratio.
Advertising and sales promotion efficiency is to be measured by Unilever’s marketing
department using a range of methods including:
• Inquiry calls, which will measure the number of actual responses on the company’s
promotional and PR activities from its potential audience.
• Tracking studies, which will involve interviewing a number of people in order to
measure the awareness level of the company’s products.
Marketing control is concerned with whether the marketing strategies have been implemented
effectively. Here a whole range of tools will be employed including:
• Sales analysis, which will compare actual with target sales. If a negative variance is
identified, product, customer and regional analysis will be carried out to discover
where the shortfall arose. For instance, regional analysis may identify a poorly
performing area sales manager or salesperson. These findings would point the
direction of further investigations to uncover the reasons for such outcomes.
• Market share analysis, which will evaluate Unilever’s performance in comparison to
that of its competitors.
• Customer surveys and tracking studies, which will measure levels of customer
awareness, satisfaction and retention.
Furthermore, a new approach to strategic control has been adapted by the company. The
Balanced Scorecard will provide feedback around both the internal business processes and
external outcomes in order to continuously improve strategic performance and results. The
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Balanced Scorecard will view the company from four perspectives, develop metrics, collect
data and analyse it relative to each of the perspectives (see Figure 20).
The Balance Scorecard presented reflects the interdependence of Unilever’s vision, its
corporate objectives and different performance factors in terms of the four perspectives –
which together determines success or failure.
Corporate
Unilever’s vision Balance Scorecard
objectives
“To maintain the position of Innovation Innovation perspective
the leading global consumer and % revenue from new and improved product lines
goods manufacturer, be “learning” Rate of improvement index
recognised around the world Corporate Staff attitude survey
for its outstanding products ethics Number of employee suggestions
and exceptional commercial towards
performance, thereby bringing employees Internal perspective
substantial and growing and Employee efficiency
benefits to the Unilever – not consumers Productivity
just commercially but also Market share Staff retention
creatively” Profitability Employee satisfaction
Customer perspective
Market share analysis
Customer ranking surveys
Customer satisfaction index
Public surveys
Financial perspective
ROCE
Sales analysis
Cost analysis
Cash flow
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CHAPTER 4. CONCLUSION
The process of developing the 5-year strategic global plan for Unilever has been a process of
in-depth analysis.
The diagnosis involved assessment of external and internal environment, whereby we have
identified main strengths (e.g. multinational character of the company, shortening of product
line, strong growth of some brands, satisfying diverse consumers tastes, strong innovative
activities, company’s reputation, strong adaptation process, responsibility towards
communities, leadership in many products, Company’s growth through takeover, increase in
shareholders value, etc.), weaknesses (e.g. diversity of products, under performance of
company’s divisions, hold back of sales growth of Unilever’s 400 leading brands, 17% drop
in revenues from the core product in Food division, substantial Financial resources are being
ploughed into Asia and Latin America, drop in Unilever’s share price by 8%, weaker liquidity
position, etc.), opportunities (such as surge in demand for slimming food, 85% of future
customers are in developing world, high availability of developments and breakthrough in
technology, growth in population in developing world, servicing the additional groups,
facilitation of trade barriers, development in currency exchange rate, availability of resources,
growing stability of businesses, etc.) and threats (such as present slump in demand in
America, increase in sales of the substitutes, shift in consumer tastes, high bargaining power
of buyers, system of company’s retailers, competitors strong in innovation programs, slow
growth of global economy, turbulence in financial markets, economic and political
uncertainty, high competitive rivalry, potential threats from pressure groups like Greenpeace,
etc.) that have been facing Unilever for some time.
Furthermore, our analyses involved identification of critical success factors that play crucial
role in delivering successful products and services such as successfully implemented
organizational structure and 5 year restructuring program, leadership of Unilever in many
categories, strong customer orientation, recognition of shift in consumer’s tastes, constant
innovation on product or within the brand.
Although, Unilever has enjoyed being the leader, it has been facing numerous problems, such
as underperformance of its some businesses, diversity of products, falling to meet its profit
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forecast in May 2003, sales decline in Slim-Fast product, slum in sales of ice-cream, being
light on innovation, lagged to response to competitive innovation programmes, falling share
price by 8%, consumers turning to alternative diets.
Based on the facts, we have generated different strategies for Unilever’s different divisions and
products. The broad marketing strategy that Unilever should implement is to invest. There are
also more specific marketing strategies; for Slim-Fast such as improve product development,
penetration pricing policy, aggressive advertising, PR and sale promotion campaign,
strengthening of relationship with company’s existent resellers; for frozen food such as
improve product development, average pricing policy, intensive distribution strategy,
integration of most effective promotional tools and use of sales promotion campaign; for home
care products such as changing the ingredients of the products, strongly brand the products,
bargain pricing policy, intensive distribution strategy, and use of heavy sales promotion
campaign, advertising through TV, Radio, Transport and Billboards, and integration of these.
Overall, the strategies have been identified in such a way that they help Unilever to solve its
major problems, grab the opportunities, defend against threats, overcome its weaknesses, and
achieve corporate objectives and marketing objectives.
We have implemented the strategies related to the McKinsey 7S Framework with an example
of Slim-Fast marketing implementation action plan in North America.
In order to monitor and evaluate the process of what is supposed to happen in terms of plan
and what actually does happen, it will be used annual plan control (e.g. use of sales analysis,
market share analysis, financial analysis etc.), profitability control (e.g. use of profit and loss
statement), efficiency control (e.g. control of sales force efficiency, advertising efficiency,
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distribution efficiency etc.) and strategic control (e.g. use of balanced scorecard, marketing
audit, marketing excellence review, ethical and social responsibility review etc.).
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