Strategic Management And Leadership 22/23 BBS_6_SML Assignment Sample

External Factors & Enhancing Business Model: Insights from Unilever's Case Study

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Introduction Of The Unilever Plc Is A Producer And Provider Of Fast-Moving Consumer Goods

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Overview of the company

Unilever Plc is a producer and provider of fast-moving consumer goods. Unilever provides a range of products in its portfolio including food products, personal care products, beauty, and beverages. In addition to this, the company is also producing home care products and other health-related products such as vitamins and supplements. Unilever is a consumer goods company founded in the year 1929 by William lever. The company is operating its business in more than 190 countries, including UK, America, Africa, Asia-Pacific, and the Middle East. The company headquartered is in London, the UK. In 2012, the company was considered as world's biggest consumer goods producer corporation. At that time, Unilever being is an international consumer company with over 400 brands (Unilever, 2022).

Figure 1 Unilever Logo

(Source: Unilever, 2022)

Report structure and key objectives

This report revolves around strategic development and leadership in a company. Strategic development is the method of investigation and recognition of all the strategic options available for the company. And choosing the best suitable option with a decision related to the recourse allocation. The resource allocation should be done in such a manner that optimum use of organizational goals and objectives is possible (Busquet and Hartung, 2017). The main objective of this report is to give an understanding of the strategic management in the companies, for this purpose Unilever case study is done in the report. To understand the external environment of the company PESTEL analysis is done in the report. Porter's 5 force analysis is also done to evaluate the industry in which the company is operating its business. The report also explained the current business model of the company with the help of the value proposition canvas and value chain analysis of the company. In order to achieve the objectives of the report, some recommendations is given in the form of a business development proposal. The answers to the questions is described in such a manner to provide the solutions to the companies external environmental disruptions

Conduct a detailed analysis of the business environment for a company yiu were assigned for this report using microenvironment (PESTEL) and industry (5 forces) analysis

The business environment of Unilever plc

To understand the business or external environment of the Unilever plc the PESTEL analysis is done in this part of the report (Onifade et.al. 2016). PESTEL analysis is done to develop an understanding about the impact of external factors on the growth and success of the company, PESETL stands for political, economic, social, environmental, technological, and legal factors.

PESTEL analysis

  • Political factors- developed countries like the UK have a stable government, a stable government creates a supportive political environment for commercial retail companies like Unilever plc. However, the exit of the UK from the European Union has shown some supply chain issues for the retail industry. In addition to this, new trade regulations imposed by the government after the Brexit deal which will affect Unilever plc directly. These regulations are imposed on imports from European unions in January 2022. The new rules in the after-Brexit era have increased costs and difficulty for Unilever plc. The company operates its business in many countries, it has to follow each country's rules and regulations. These countries include India, Russia, South Africa, China, and many others.
  • Economic factors- Unilever's market environment is getting more competitive day by day, particularly in Western Europe; the main competitor is Procter & gamble (p&g) (Cheng, 2021). There are many FMCG producers which provide a discount and it adversely affects Unilever's revenue and profit in the external environment.
  • Social factor- Unilever plc is supplying its products in more than 100 nations, to create demand for its product it focuses on each country’s social demographics. The company emphasizes on building a strong reputation in the retail industry (Thompson and McLarney, 2017). Unilever plc is working persistently to better hygiene conditions and nutrition for the people in Asia, Latin America, and Africa. The company also employ people from diverse background to maintain diversity in the workplace which is one of the important ways used by Unilever to strengthen its goodwill.
  • Technological factor- Unilever is continuously making technological improvements in production of innovative products. Unilever plc also focuses on developing its digital marketing and selling techniques. The company also uses more automation in its operation when compared to rivals' technology policies. This helps to supply goods promptly to respective store locations.
  • Environmental factor- The United Kingdom has made an agreement which is named as the International Paris agreement which aims to cut down the country's carbon emissions. The country is also a signatory of COP 26, this involves UK's environment plan for 25 years which will have a big impact on retail companies like Unilever plc. The UK government also passed the Environment Act, of 2021 this act sets a limit to environmental pollution related to water pollution, air pollution, waste management, and biodiversity (Birahim, 2020). Unilever plc has to follow the prescribed limits otherwise it will be charged with a heavy fine.
  • Legal factor- Unilever plc has to follow a lot of legal rules and regulations, the company owns more than 400 brands in several industries such as food, personal care, health, etc. It has to follow national and international laws related to copyright, the safety of employees, and laws related to product safety.

Porter’s five forces analysis

Porter’s five forces analysis is one of the famous frameworks for analysis of the industry environment which determines the industry's attractiveness and competition in which the company is working. This analysis is done on basis of five forces that are given below:

The threat of substitute – Moderate

Unilever is facing a moderate threat of substitutes in the retail industry. Unilever’s competitors are spending more money on research and development of the innovative product. So the company needs to know its consumer's needs and wants to produce new products by adopting the desired product specifications (Monem, 2021). To be in the retail industry, the company needs to do Continuous research and development of all products for its customer. Because in today’s era consumer wants to try new and better things and if Unilever will not provide it consumers will substitute its product with the competitors.

Competitive rivalry –high

Unilever is a multinational company that operates its business in many nations. The company also has many competitors in the international market, the list of competitors includes big companies like nestle, Kraft, and Procter & Gamble (P&G) (Hasan, 2015). Competition rivalry for Unilever plc is very high because it includes small companies to big companies. All these rivals try to make a similar and attractive product to the consumers and these companies can influence consumers through various marketing tactics.

The threat of entry – Moderate

As Unilever operates its business worldwide, therefore the threat of new entry also differs in the different markets. In developed countries, large companies similar to Unilever have to build a brand image and reputation, so it will be hard for new companies to enter the market (Maity, 2017). In the case of less developed nation markets, it is easy to enter into the market because there is less cost, as well as a legal requirement, involve Unilever plc has its existence in nearly every market through subsidiaries, branches, and franchises. Thus company’s brand image is an extremely tough barrier in the way of fresh entrants.

Buyer’s power - low

Unilever’s buyers are spread all over the world and are in trillions. Consumers are in large numbers therefore an individual consumer has no power to influence the price of the company's product. The consumers can not pull down the prices of Unilever's products. But the company needs to satisfy the consumer in terms of quality and price of the product otherwise the consumer will swiftly adjust to the substitute products.

Supplier’s power - low

Unilever has the rule of local purchasing and manufacturing which offers it an edge to break the power of its suppliers and make negotiating power weaker at its terms. The company has done numerous blanket agreements with its raw material supplier (Bruijl and Gerard, 2018). It helps the company to gain negotiation power and the supplier provides material at a specific rate and for a particular period. This kind of agreement helps to stop suppliers from changing their supply to the competitors of the company. This also makes sure that the supplier cannot charge higher rates.

Conduct an in-depth analysis of the business model and the current business strategy of the Unilever

The business model and the current business strategy of the Unilever

The word business model refers to the business plan of a company to earn profit. The model includes determining the goods and services a company is planning to sell. It also identifies the target market to sell the product and the expected expenses. Business models are a key element in the success of both fresh and well-known businesses (Massa et.al. 2017). A business strategy refers to the course of action and decisions undertaken, by a company to achieve a strategic goal.

An analysis of the value proposition:

A value proposition is an apparent and brief statement that is a sum up of measurable advantages delivered to the customers when they purchase the company’s goods or services. Value proposition inspires the prospective consumer to purchase the product of Unilever plc and differentiate its product from other similar goods. It explains how the product solves customers’ problems. Unilever has a value proposition, which is visibly understood and broadly acknowledged by the target audience (Skålén et.al. 2015). It gives Unilever a huge competitive advantage over its rivals. Therefore, the value proposition answers what the company offer, the key advantages of the product to the company's users, and why the company is the best option among all. The value proposition is a very important element for the success of any company. Marketing strategy is based on every product in the value proposition, it is one of the tools to build brand dominance and brand awareness. The companies can convert leads into customers by creating a value proposition based on consumers' needs.

Unilever presents itself as quality products at very reasonable prices and this kind of branding forms a key element of its value proposition. The company operates on a wide scale; it helps to produce goods at low prices with good quality. The company also allows entering into the niche market especially in developing nations with the help of its scale. This means that the identical products of Unilever may be seen on shelves in the provision stores in the US and on the roads of Thailand. This exposure provides Unilever with a well-built branding and driving sales. In addition to Unilever's value proposition, the company has possession of numerous brands. For instance, Magnum is an ice cream brand famous for providing premium ice cream at reasonable prices. Alternatively, Knorr is a household items brand that provides products like stock cubes and sauces, at cheap prices. The constant description of Unilever products is they are well designed with high quality and are provided at a cost appropriate to their target consumers and users.

The Value Proposition Canvas

A value proposition canvas is a structure that permits entrepreneurs to set up a product-market fit. It is a framework intended to investigate the connection between diverse customer segments and the solutions a company can provide them (Meng et.al. 2020). The key aim of the canvas is to form goods or services according to the consumer’s requirements.

Value proposition canvas structure

Value proposition canvas consists of two key elements which are the circle and square. Here, the circle represents the consumer’s profile and the square represents a map of a value proposition. The template of the value proposition canvas helps to visualize consumers' needs and describes a reply to these needs on a single page.

Customer Profile

In the above figure the customer profile circle stands for the consumer profile. Generally, here’s the value proposition starting from this circle. The customer profile circle is further separated into three components that are jobs, pains, and gains.

  • Gains – gains refer to the advantages which the consumer anticipates and wants from Unilever products and services. It includes the things which would delight consumers and they may increase the possibility of accepting a value proposition (Pokorná et.al. 2015). Gains comprise the helpful experiences and requirements that the consumers desire to accomplish. Gains can be regular or still existential.
  • Pains – The pains are the all negative experiences encountered by the customer in the process of buying and consuming the product of Unilever. All reasons which prevent consumers from completing a buying process are called pains. The company’s consumers have to face pains which can be divided into harsh and gentle and these are negative experiences a consumer does not want to face. For example, Unilever plc products are not available everywhere. The company needs to find a solution to the current problems faced by the customer.
  • Customer jobs –Jobs refer to the tasks that consumers are trying to do. It can comprise an issue being solved, a task being accomplished, or any other desire they want to satisfy. These tasks are mainly three types that are social, functional, and emotional.
  • Social jobs- are inspired by a person’s societal duty, fear, and optimism the actions consumers have to perform because they are part of society or any particular bond. For instance, a person buys a car to fulfill their social job and the car will be a symbol of the social status of the buyer. Functional jobs- are practical jobs related to a particular practical function. For instance, driving from one city to another city is a functional job.
  • Emotional Jobs-The emotional jobs of every person are different because it comes from personal likes and dislikes, preference, and insecurities. Continuing the same example the feeling of achievement and happiness a person get is an example of the fulfillment of an emotional job.

To address all these customer jobs Unilever needs to make a customer profile for every consumer segment. Identification of jobs needs to be done in each segment in order to handle the pains and gains of the customer profile.

Value Map

Value proposition canvas includes a square, it represents the value map of the company. the value map is divided into three parts as follows:

  • Gain creators – The first part includes the ways a product or service creates consumer gains and adopts more ways to give added value to the consumers. This part of the canvas is very crucial this is where Unilever plc can show how the company’s goods add value to consumers (Osterwalder et.al. 2015). This also shows how a consumer can accomplish its goals by using the products of Unilever plc. The company lists all the things which can or will improve the experience of users.
  • Pain relievers – pain relievers explain how Unilever's product can ease the pain of its consumers. This is an exact description of the product and how the product help in reliving consumer pain. These relievers are based on the consumer profile and each segment of the consumer profile experience different pain. Therefore, each pain will require different pain relievers.
  • Products and services –The next part of the value map in the value proposition canvas is the products and services that can generate gain and alleviate pain. This will be the most important part of creating value for the consumers. Here, Unilever plc lists out the entire product with specified features and services it provides. The company can also list the version of the product it is planning or working to manufacture, for example, Unilever is going to launch a sustainable laundry capsule very soon.

Value chain analysis of Unilever plc

A value chain is a series of activities that a company takes for operating in a particular industry performance in order to deliver a valuable product to the end customer. Being a huge and rising company, Unilever needs constant innovation to manage and improve, its value chain. The main issue in the company’s value chain is waste management (Lewandowski, 2016). For instance, in Peru’s case, there was cost reduction by outsourcing but this practice made the implementation of standard practice very complex. Unilever has improved its value chain by reducing over-employment in the company. It has enhanced efficiency but creates negatives for the company because of imperfect labor relations.

The value chain also includes inbound logistics, Unilever is successfully enhancing its inbound logistics. The company has various reasons but the Palm Oil controversy is the major reason for its quick response to Unilever. Currently, Unilever plc is not able to completely follow the aim stated under its ‘Sustainable Development Report 2009’ (Iddrisu, 2022.). The company aims to improve the environment by creating a good value chain that supports the environment.

Unilever has eliminated mostly unproductive activities and waste in its manufacturing activities and contracts out production activities. In achieving this activity mass production model was the key reason, this model is based on the latest technology available in the market. Unilever is outsourcing in many domain activities such as outbound logistics domain and sales & marketing domain, etc. The company has outsourced too many different domain companies such as brand activation, media planning, advertising bureau, and advertising companies (Rahman et.al. 2021). On the other hand, a joint strategic partnership between these companies and Unilever has improved the quality of results. The inefficiency occurs only in the stage of the job being discarded or postponed. For instance, an idea was presented by an advertising company and Unilever rejected the idea. Another, Inefficiency in this area of the value chain is delay in work, consequently it increase stockpiles of inventory.

Develop strategic proposal for a substantive change to a salient element of the current strategy to cope up with the potentially disruptive changes in the external environment

Strategic proposals

This part of the report provides a strategic proposal for Unilever; it suggests how Unilever can make substantive changes in its current business strategy to deal with the disruptive changes in the company's external environment.

Unilever should use a business strategy that is more proactive in sales and marketing, this can be done by signing up with a distributor and other outsourced companies (Ioannou and Serafeim, 2015). These outsourcing companies include companies that support and make associations for sales and marketing of the company. The proposal recommends that Unilever should track and audit its sources of supply regularly. Unilever should take this step to improve its value chain, this might cause short-term losses but eventually, it will be extremely beneficial.

Another recommendation is about the employees’ skills management, the company should make some educational programs compulsory to maintain employment. The value chain can be improved by making knowledge management groups and related educational programs mandatory (Brauer and Wiersema, 2018). In place of the community of practice as a tool, the company should consider the community of interest in order to creates an approval of the knowledge and management among the staff. As a part of the value chain, The Company should provide enriched roles and assigns alternative roles to the employees in the whole value chain.

The damaged made by the manufacturer itself is supposed to be used as a raw material for other manufacturing procedures. Inactive time can be used in guidance, especially for factory human resources, if it cannot be concentrated right away or not at all. This ideal time can also be utilized to arrange leisure activities for the company’s employees. The company should give Employees a chance to be a part of the decision-making process in the organization. It will help to develop critical thinking skills in the employees and also help top-level managers to understand the ground-level problems in the company.

The company should make a plan to build an overall umbrella brand for various brands of the company with the future aim consolidating these brands under a single name. The company works on the consolidation of three businesses that are Unilever Plc, Unilever NV, and One Unilever. It will provide more clarity in terms of responsibility, leadership, and accountability. This will allow the company to concentrate on the requirement of their consumers, thus more ways for company growth can be created. This step will also help Unilever to gain the ability to increase its scale of operations.

Conclusion

From the above report, it is concluded that strategic management and leadership have a great impact on the success and growth of any company. A strategic management method helps a company and its top level leaders to imagine and plan for the company's future growth. Strategic management creates a path for the company and its employees. The reports highlight how external factors affect the business of multinational FMCG companies like Unilever doing a PESTEL analysis of the company. This analysis discusses that political and social factors have a great impact on the profitability of the company. Industry analysis also concluded that the company operates its business in the industry where the buyer’s and suppliers' bargaining power is low but at the same time competition rivalry is very high.

The report also concluded that the business model and the current business strategy for Unilever are very structured and profitable and also based on outsourcing behaviour. The report also included a value proposition analysis of the company. Value proposition canvas is the company's conclusion that the company should try to match value proposition with each segment of the consumer profile. The company's business model is performing well and resulting in a positive outcome but at the same time company needs to focus on some areas to ensure success in the future. All the recommendations and suggestions are included in the report, the company should try to improve its value chain.

References

Birahim, S.A., 2020. Internal and external factors of Nestle and comparison with Unilever.

Brauer, M. and Wiersema, M., 2018. Analyzing analyst research: A review of past coverage and recommendations for future research. Journal of Management, 44(1), pp.218-248.

Bruijl, D. and Gerard, H.T., 2018. The relevance of Porter's five forces in today's innovative and changing business environment. Available at SSRN 3192207.

Busquet, F. and Hartung, T., 2017. The need for strategic development of safety sciences. Alternatives to Animal Experimentation: ALTEX, 34(1), pp.3-21.

Cheng, Y., 2021, February. Analysis on the Opportunities and Challenges of Unilever’s Differentiated Competition by Using SWOT and PEST. In 6th International Conference on Economics, Management, Law and Education (EMLE 2020) (pp. 280-284). Atlantis Press.

Dnaiella, V., 2020. How to Use Value Proposition Canvas: The Definitive Guide (online).<https://www.digitalnatives.hu/blog/value-proposition-canvas/> accessed on 4 November 2022.

Hasan, M.M., 2015. Marketing Analysis of Unilever. Total Quality Management, 11(1), pp.13-24.

Iddrisu, S., 2022. Sustain or perish: can environmental supply chain strategies predict sustainable performance of manufacturing firms? A third world nation's perspective. Management of Environmental Quality: An International Journal, (ahead-of-print).

Ioannou, I. and Serafeim, G., 2015. The impact of corporate social responsibility on investment recommendations: Analysts' perceptions and shifting institutional logics. Strategic Management Journal, 36(7), pp.1053-1081.

Lewandowski, M., 2016. Designing the business models for circular economy—Towards the conceptual framework. Sustainability, 8(1), p.43.

Maity, S.K., 2017. Role of information and communication technology in natural disaster management in India. International Journal of Innovative Practice and Applied Research (IJIPAR).

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Meng, L., Somenahalli, S. and Berry, S., 2020. Policy implementation of multi-modal (shared) mobility: review of a supply-demand value proposition canvas. Transport Reviews, 40(5), pp.670-684.

Monem, M.A., 2021. Professional experience at Unilever Bangladesh Limited.

Onifade, T.A., Opele, A.M. and Okafor, L.I., 2018. Communication: An effective tool for employee performance in Unilever Nigeria Plc. International Journal of Management Technology, 5(2), pp.16-27.

Osterwalder, A., Pigneur, Y., Bernarda, G. and Smith, A., 2015. Value proposition design: How to create products and services customers want. John Wiley & Sons.

Pokorná, J., Pila?, L., Balcarová, T. and Sergeeva, I., 2015. Value proposition canvas: identification of pains, gains and customer jobs at farmers' markets. AGRIS on-line Papers in Economics and Informatics, 7(665-2016-45080), pp.123-130.

Prezi, 2015. A strategic analysis of Unilver. (online). < https://prezi.com/4lkdpjkxs6wy/a-strategic-analysis-of-unilever/> accessed on 4 November 2022.

Rahman, N.S.F.A., Al Moqbali, R.R.A., Karim, N.H. and Mcdaid, M.P., 2021. VALUE CHAIN ANALYSIS OF WAREHOUSE BUSINESS ACTIVITIES ASSOCIATED WITH GLOBAL AND NATIONAL APPROACHES: A CASE STUDY IN OMAN. Academy of Strategic Management Journal, 20, pp.1-19.

Skålén, P., Gummerus, J., Von Koskull, C. and Magnusson, P.R., 2015. Exploring value propositions and service innovation: a service-dominant logic study. Journal of the Academy of Marketing Science, 43(2), pp.137-158.

Thompson, J. and McLarney, C., 2017. What effects will the strategy changes undertaken by next Plc have on themselves and their competition in the UK Clothing Retail Market?. Journal of Commerce and Management Thought, 8(2), p.234.

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