Introduction
Strategy is an integral aspect of any business, especially in the increasingly competitive landscape. Business strategy is the set of approaches a firm adopts to achieve its core objectives within a given industry or segment (Grant, 2021). Strategy involves key dimensions such as purpose, context, and practice. Unilever emphasizes providing functionally superior products, addressing environmental and social concerns identified by customers, enhancing individuals’ wellbeing and health, coupled with contributing to a more socially inclusive and fairer world (Unilever, 2022). To have a sound strategy, a business should operate in the right context and understand the external environment, which encompasses sociopolitical and economic factors.
An organization’s strategy seeks to achieve desired performance. Elbanna and Naguib (2009) assert that organizational performance lies at the center of any administrative process and structural construct, hence a significant concept in strategic management. Therefore, the strategy undertaken by a business should not only translate into financial gain for the company but also result in non-financial indicators such as customer satisfaction and product quality.
Increasingly, the business strategy also considers the varying competitive environment in which the business operates. The essential issues that every business should manage include business strategy, competition management against industry rivals, and strategy for managing the firm’s entry and exit into various markets (Henry, 2021). This report adopts Unilever as the preferred international business and discusses the sector in which it operates, the past three years’ operating profits, revenue, and general operational activities.
The report also provides an outline of a strategic issue the company recently experienced. This is situated within the organizational context and provides an overview of the strategic decisions that led to the company’s current position. The report also presents a succinct analysis of the reasons the issue carries strategic implications and its effects on stakeholders.
Unilever
Unilever is an international company headquartered in London, United Kingdom. The company was established slightly over a century ago and is currently one of the largest consumer goods firms globally (Unilever, 2023). The business boasts of well-known products used by billions of people worldwide (Unilever, n.d.).
The company operates in the fast-moving consumer goods (FMCG) industry. It operates a broad range of products in the beauty and well-being category, including common brands such as Vaseline, Sunsilk, Liquid I.V., and Dove. Common brands in the personal care category include Axe, Lifebuoy, Lux, and Rexona. Home care products encompass Omo, Comfort, Domestos, and Cif. Moreover, other products include pet food, nutrition, and ice cream.
Unilever has a significant global footprint and reach in all areas of its operations. Precisely, the company’s products are being sold in more than 190 countries. It employs 128,000 staff worldwide, with 55 percent of managers being female (Unilever, n.d.).
The company’s distributors serve more than 4.4 million retail stores and recorded a turnover of €56.9 billion in 2023, with 56 percent of that figure coming from emerging markets (Unilever, n.d.). It is estimated that about 3.49 billion people use Unilever products every day. Therefore, Unilever’s impact on society is significant, as illustrated by its superior figures in its areas of operation.
The firm has a marketing strategy that embraces the tastes and preferences of domestic markets, regardless of region, since global operations make it difficult to adopt different marketing strategies. The company’s strategies are anchored in the market demand, which comprises competition, customer desires, and customer requirements (Henry, 2021). Various parameters govern the business approaches and encompass product differentiation, market differentiation, and cost leadership.
Product differentiation is the process by which a business distinguishes itself from competitors in its industry segment. The method helps the company gain a competitive advantage by deploying unique selling propositions that differentiate its products from competitors’ offerings. Cost leadership entails positioning the business as a more economical provider of products than rivals (Henry, 2021). Conversely, market differentiation is the detailed breakdown and categorization of goods and services for the same customer group.
The company has registered impressive financial performance over the three years under review, as shown in Table 1 below. Significant turnover across all three years reflects the company’s consistent performance, with all regions reporting significant improvement. The company attributes these striking financial figures to various factors, including growth in the priority markets of the U.S., India, and China, which expanded by 3.7%, 13.4%, and 14.3%, respectively (Unilever, 2023). Moreover, the e-commerce arm recorded significant growth of about 44 percent in the same period under review, ahead of international channel growth, resulting in a 13 percent turnover (Unilever, 2023). The company has achieved consistent, notable financial performance over the three years under review.
Table 1: Unilever Three-Year Financial Results
Strategic Business Issue
Balancing Sustainability with Consumer Demands
Despite substantial success over the years, Unilever has faced considerable strategic issues in recent years. The company’s success is anchored in the global economic situation (Cheng, 2021). An economic slump anywhere in the world reduces consumers’ purchasing power, thereby lowering the company’s revenues.
Given its operating nature, if some of its products experience reduced customer demand, cash flow and profits will be affected. Moreover, the company aims to balance sustainability initiatives with consumer demands and the cost pressures on such items (Cheng, 2021). Despite the growing demand for sustainable products, consumers often prioritize factors such as product effectiveness, convenience, and price.
Over the past three years, the company has sought to balance sustainability with consumer demands. Against the backdrop of high-cost inflation and the recent pandemic, the business is on a trajectory to achieve strong sales, as reflected in the 2023 financial figures in Table 1 above (Unilever, 2023). The firm has a strong urge to enhance the performance volumes and continue with the existing competitive advantage.
The main aim of the business is to create an environment for sustainable living. Moreover, the company has a significant, upfront business strategy regarding sustainability issues. This complements the overall business strategy that relates to how the company competes in a given market or industry (Grant, 2021). However, the strategy has created a complex set of encounters despite impressive financial results and environmental and social commitments.
The big question is whether the firm can continue with the subtle balancing measures for the foreseeable future. The group’s chief executive officer noted that the significant progress within the sustainable plan is satisfactory, but there is a limitation in the approach (Unilever, 2022). This suggests that management needs a superior approach to meet and address various targets, such as building a substantial growth portfolio across all five business groups.
Managing sustainability alongside consumer demands and operational costs directly impacts revenue and profits. The plan drives growth, mitigates risks, reduces costs, and attracts talent (Unilever, 2023). Strategic decisions that led to the current position include shifts towards sustainability and changes in the competitive landscape. In recent years, consumers have shifted toward more sustainable products that better meet their preferences.
Unilever, as a significant player in the FMCG sector, has recognized this pattern and positioned itself by balancing sustainable growth with consumer demands while ensuring profitability and affordability (Unilever, 2023). Moreover, the competitive landscape triggered this strategic issue. Unilever operates in a highly competitive sector, where consumers have many products to choose from. Therefore, to maintain this stiff competition, the company should balance sustainability and consumer demands.
Compass for Sustainable Growth
Unilever has four main compasses for balancing sustainable growth. The approaches seek to help balance the much-needed growth, consumer demand, and costs. These encompass building a greater growth portfolio across the five business groups of nutrition, beauty and wellbeing, personal care, and ice cream (Unilever, 2022).
The company also seeks to win the brand by leveraging its purpose, innovation, and superior products. This move is achieved by advancing differentiated science and technology, improving individual health, confidence, and well-being, and contributing to a healthier planet (Reza, 2021). Another compass for sustainable growth is accelerating fundamental growth in markets such as China, India, and the U.S. (Unilever, 2023). This is also achieved by leveraging emerging-market strengths to establish stronger footprints in these areas.
In addition, there is a need to lead in the platforms of the future. This includes accelerating digital commerce and driving category value to win customers. Unilever strives to achieve sustainable growth by creating product and price differentiation in a low-differentiation market for consumers (Unilever, 2022). To identify opportunities and challenges in a sustainable, differentiated competitive strategy, it is essential to understand the company’s external and internal environments. The PESTEL and SWOT models help analyze Unilever’s business environment.
PESTEL Analysis Matrix
Political: High
Currently, the global environment is moderately peaceful except for pockets of conflicts in various parts of the world. Political instability substantially impacts the performance of a business, followed by violence, crime, corruption, and theft (Abdullah et al., 2022). Therefore, the political situation and peace in many countries are comparatively stable, creating a conducive environment for Unilever’s progression.
Moreover, trade within countries is also impacted by the political situation since various nations have different trade policies (Cheng, 2021). For instance, China lowered tariffs on consumer items to expand and meet the demand of consumers. In North America, the U.S. pulled from the Trans-Pacific Partnership trade pact, significantly impacting Unilever’s growth in the United States of America (Cheng, 2021).
In the U.S. and Europe, Unilever is subjected to the U.S. and European Union Food and Drug Administration as well as the laws in regions where its products are sold. For instance, the Norwegian authorities depend on the regulatory policy which enforces strict restrictions on the company’s operation and demands concessions to allow purchases to continue (Cheng, 2021). However, the consolidated worldwide patent law is critical in protecting Unilever and allowing it to develop more products.
Economic: High to Medium
The slump in the worldwide economic situation following the COVID-19 pandemic adversely affected the financial performance of the company. The pandemic cast a terrible and dark shadow for Unilever, especially in 2020 when the demand for company’s products and services reduced significantly (Pandey et al., 2021). The company recorded €51 billion, a slight decrease from the 2019 figures (Unilever, 2023). The surge in COVID-19 also saw many people losing their jobs. This impacts the purchase capability of Unilever products. Moreover, exchange ranges in the countries of operation can also impact the business.
Social: Low
As an individual’s standard of living progresses, the need for high-end cosmetic and grocery products increases. Higher incomes are associated with enhanced nutritional status, medical services, and housing conditions (Wang and Geng, 2019). This matches perfectly with the company’s business categories of nutrition, beauty and wellbeing, and personal care. The company also implements a sustainable living strategy not only to attain positive and sustainable development but also to increase the firm’s positive impact on society.
Technological: Medium to High
The company embraces innovation and actively promotes digital transformation. The company leverages social media platforms and advances in the Internet to promote integration with suppliers and users (Ullah, 2021). This lowers manual integration, enhances data accuracy, and reduces paperwork.
Environmental: Low
The growing number of environmentalists championing and saving the environment is a key opportunity. The company also seeks to substitute fossil-fuel-obtained carbon with recycled or renewable carbon in the laundry and cleaning product formulations in the next six years (Cheng, 2021). It also aims to maintain non-hazardous waste within the landfills in its factories across the world.
Legal: Medium to Low
Strengthening the law regarding international patents and consumers allows the firm to operate in many countries.
SWOT Analysis
Strengths
- Global presence: The company operates in more than 190 countries globally, which offers significant advantages regarding distribution and market reach (Unilever, 2023). The business has a robust presence in emerging markets, which represent about 60 percent of total sales.
- Strong brand portfolio: The company has a solid portfolio and reliable brands, including Axe, Lipton, Hellmann’s, Dove, and Knorr, among others (Unilever, 2023). Moreover, the brands have a high level of recognition and consumer loyalty, helping Unilever to sustain a strong share in its product categories.
- Sustainable practices: Unilever has integrated sustainability as the main part of its business strategy. The firm has also formulated ambitious goals to lower its environmental effects (Unilever, 2023).
- Diversified product portfolio: The firm has a diversified item portfolio that ranges from cleaning agents, beverages, personal care, health and wellbeing, food, and beauty products (Unilever, 2023). This diversification helps the company to avert risks and offers the firm improved revenues.
- Experienced leadership with globalization ideas: Unilever has a strong leadership that propels its strategy (Unilever, 2023). The leadership has been instrumental in implementing decisions that support the growth of the business.
- Localization: Unilever has increased its presence in local markets that offer products that meet customer needs and preferences.
Weaknesses
- Reduced focus on emerging trends: the company has been disparaged for the sluggish development of consumer trends such as inclination towards organic and natural products (Cheng, 2021). The firm has been slower to incorporate these emerging trends than its major rivals, making it disadvantaged in the long run.
- High production costs: the company’s attention to sustainable plans has resulted in increased production costs, which affect profitability.
- Dependence on a few markets: whereas the company has made significant inroads in new markets, it has had to rely on a few markets, including Asia, North America, and Europe (Cheng, 2021). Therefore, any political instability or economic recession in these areas could significantly affect the financial performance of the firm.
- High market competition due to low price: the company faces strong competition not just from rivals but also from their products, which are low priced (Cheng, 2021). This can easily impact the consumers’ purchasing behavior, ultimately affecting the company’s financial performance.
- Imitable products: whereas the company invests in its products, they can be imitated by other businesses (Kissinger, 2023).
Opportunities
- Bankruptcy of local businesses due to COVID-19 impacts: some of the local competitors in respective countries closed or struggled to revive following the harsh effects of the pandemic. This has allowed Unilever products to thrive in the local markets and present the company with better growth opportunities.
- Increasing demand for more sustainable products: consumers are increasingly becoming more conscious of environmental protection, hence the need for sustainable products (Unilever, 2023). The company’s emphasis on sustainability might leverage the new trend and acquire a competitive edge over rivals.
- Venturing into emerging markets: the firm’s strong presence in the evolving markets offers growth opportunities and taps the middle class to buy these products.
- Innovation in product development: the business could tap its research and development abilities to create innovative items that match emerging consumer requirements. Moreover, Unilever can also cooperate with start-ups to push innovation in product development.
Threats
- The growth of local companies: the growth of local firms provides intense competition to Unilever, and this might threaten its market share in the respective domestic markets (Cheng, 2021).
- Global economic slump: this has a net effect on the purchasing power of commodities and can threaten the financial performance of the firm.
- Varying consumer preferences: the preferences of consumers keep on changing and this requires Unilever to uphold the standards dictated by the market. Failure to keep up with the consumers’ changing preferences can cause reduced sales and declined market share (Cheng, 2021).
- Disruption of the supply chain: the firm’s supply chain is intricate and extends across different states, making it susceptible to disruptions such as trade disputes, natural disasters, and labor strikes. Any interruption in the supply chain may lead to delays in production, high costs, and reduced customer satisfaction.
Strategic Implications of the Issue
Balancing sustainability and consumer demand at Unilever has strategic effects that stretch beyond temporary profitability. The strategic approach puts the company in pole position to achieve the desired level of sustainability, especially in the FMCG industry. This not only strengthens the company’s resilience but also provides the impetus to sustain competitive advantage (Henry, 2021). By aligning with sustainability plans and balancing with consumer demands and costs, the strategic issue has implications such as maintaining competitive advantage, mitigating risk, boosting efficiency and innovation, improving brand reputation, and meeting regulatory requirements.
First, there is a strong need to maintain a competitive advantage in the sector of operation. As customer needs shift rapidly toward sustainable products, Unilever must understand this trend and provide products that meet this new demand. This can be achieved by enhancing product differentiation that resonates with consumers’ requirements. For example, the company has ventured into organic products that reverberate with the current customer needs (Unilever, 2023). Moreover, sustainable products can be a unique selling point that not only provides a competitive edge but also attracts environmentally conscious customers, thereby enhancing brand loyalty.
Second, balancing sustainability with consumer demands and costs mitigates business risks. Disregarding sustainability can cause risks to the firm’s operations. For example, social and environmental issues such as strained resources and climate change can disrupt business supply chains, leading to a tarnished brand reputation and financial losses.
Therefore, Unilever can mitigate such risks by incorporating sustainability to cushion the firm from external shocks, build resilience, and safeguard long-term profitability and viability. Third, balancing sustainability with consumer demands and costs can improve overall brand reputation (Henry, 2021). Since consumers are not concerned with product price and quality, they tend to consider the environmental and ethical effects of their purchase decisions.
Therefore, prioritizing sustainability can help Unilever enhance its brand reputation and boost perception among investors, consumers, and stakeholders. Activities undertaken as part of corporate social responsibility can build brand loyalty and trust, thereby boosting long-term profitability and success. Conversely, a lack of risk mitigation strategy can result in revenue losses, penalties from industry regulators, and a decline in market share due to customer losses (Unilever, 2022). Therefore, Unilever needs to ensure a balance between sustainability and consumer demands to avert potential business risks.
In addition, balancing sustainability and consumer demands and costs helps to drive product development and innovation at Unilever. Therefore, balancing sustainability and consumer needs and costs without compromising product quality or affordability enables the firm to stay ahead in the market segment (Unilever, 2022). Moreover, this balancing enables the business to stay ahead in the market and manage future customer demand, helping it maintain a competitive position. On the other hand, a lack of product innovation and development results in the production of items that are not market-oriented.
Impact of the Issue on Stakeholders
Revenue and Profitability
The FMCG industry is highly competitive with many players offering a wide range of products and services to the same customer segment. For instance, in the personal care category, Unilever faces stiff competition from established players such as Colgate-Palmolive and Procter & Gamble. Therefore, a company that lacks a business strategy can face stiff competition, resulting in reduced market share (Grant, 2021). Unilever must balance sustainability, customer needs, and product costs to ensure maximum profitability and sustained revenue growth. For example, in the beauty and wellbeing category, Prestige Beauty recorded a double-digit performance, with solid contributions from Hourglass and Paula’s Choice following its continued expansion into the Chinese market.
Moreover, in health and well-being, I.V. pushed, and Liquiinto entered double figures, expanding the market-anchored, market-based approach to haircare wellness. Therefore, Unilever must balance sustainability with customer needs to ensure continued market success and increase profits and revenue. Customers will receive quality products, while shareholders will realize value from their investments (Unilever, 2023). Failure to balance the strategic issue at hand can result in lost revenue, reduced profitability, declining market share, and low customer loyalty.
Company’s Brand Reputation
Unilever has been in operation for more than 100 years, dealing in a range of products across many countries worldwide. The company emphasizes brand growth by providing functionally superior products built on an advanced, science-based approach and by integrating environmental and social issues (Unilever, 2023). The company registered better product performance in the period under review.
Balancing the strategic issue at hand results in better product innovation, enhanced focus on product superiority, and sustained brand investment. For example, brands such as Rexona, Magnum, Lifebuoy, and OMO registered strong growth, cementing Unilever’s reputation in the highly competitive FMCG sector (Unilever, 2023). The need for sustainability and consumer demand to create superior products that enhance the firm’s brand in the market.
Conclusion
In summary, strategy formulation is critical to any business. Unilever leverages a robust strategy to stay ahead in the highly competitive FMCG sector. With over 100 years in business and operations in more than 190 countries, Unilever understands the importance of strategy in achieving the sustainability it has realized over the years. An analysis of both internal and external business operations reveals the industry’s nature and the company’s capabilities.
PESTEL and SWOT analysis models provide a clear picture of the company and identify challenges and opportunities to ensure sustained growth. Given that balancing sustainability with consumer demands and costs has been one of the company’s bold strategic issues in recent years, the decision must seem to be paying off. The issue has impacts on profitability and revenue growth, maintaining competitive advantage, risk mitigation, boosting efficiency and innovation, and improving brand reputation.
Reference List
Abdullah, M., et al. (2022) ‘Role of the dynamics of political stability in firm performance: Evidence from Bangladesh’, Quantitative Finance and Economics, 6(4), pp.518-536.
Cheng, Y. (2021). ‘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. Dordrecht: Atlantis Press, pp. 280-284.
Denise, M. C., Filho, E. G. and Veronica, E. A. (2018) ‘Organizational performance and strategic inertia‘, Revista De Gestão, 25(1), pp. 25-46.
Elbanna, S. and Naguib, R. (2009) ‘How much does performance matter in strategic decision making‘, International Journal of Productivity and Performance Management, 58(5), pp. 437-459.
Grant, R. M. (2021) Contemporary strategy analysis. Hoboken: John Wiley & Sons.
Henry, A. (2021) Understanding strategic management. Oxford: Oxford University Press.
Kissinger, D. (2023) Unilever SWOT Analysis & recommendations. Panmore Institute.
Pandey, R., et al. (2021) ‘The impacts of Covid-19 on Unilever’, Journal of The Community Development in Asia, 4(1), pp. 34-43.
Reza, M. H. (2020) ‘Marketing strategy and sustainable plan of Unilever‘, International Journal of Scientific Research and Engineering Development, 3(4), pp. 680-692.
Ullah, N. (2021) A comparative analysis between Unilever and Johnson & Johnson.
Unilever. (2022) How we’re driving growth through our five strategic choices.
Unilever. (2023) 2023 full year results.
Unilever. (n.d.) Unilever at a glance.
Wang, J. and Geng, L. (2019) ‘Effects of socioeconomic status on physical and psychological health: lifestyle as a mediator’, International Journal of Environmental Research Public Health, 16(2).