Unilever Strategy Essay Example

and creates nearly 10.000 indirect jobs who work in its third parties, suppliers and distributors. Every day, over 30 million consumers use Unilever Vietnam’s products nationwide, contributing to improve the living condition, health and hygiene of every Vietnamese.

Many of Unilever Vietnam’s brands have become number 1 household brands in Vietnam, including Omo, Sunlight, Dove, Sunsilk, Clear, Lux, Close-up, Lipton, Knorr, Viso, Vaseline, P/S and Surf. Unilever Vietnam will continue to work closely with the consumers, and in partnership with the Vietnamese Government, its partners, customers, suppliers and consumers to reach the final goal: Make every Vietnamese life better.

Vietnam is a developing country with fast pace of changing. The country keeps its socialist regime with Single Communist Party, which remains the stable political statue of the country through years. This increases high government control but less autonomy so that it could only affect more on state-own company than other kinds of company. Government also takes actions on supporting Vietnam via favorable policies such as readjusting salary scale or controlling tightly to reduce corruption and red tape.

Economic

Vietnamese Economy is showing remarkable signs of improvement. They are reforms that bring positive effects on the economic situations in Vietnam namely devaluation and unification of the exchange rate; encouragement of the private sector and creation of a more open economy for international trade and FDI inflows. Since the domestic barrier was dismissed, the open and fast-growing economic environment is attracting more and more companies to invest in and contribute largely to the development of Vietnam.

Social

Vietnam is a potential market for cosmetics and toiletries products. With approximately 70% of

the total population is under 40 years of age which will be a driver of consumer spending in the coming years. In September 2010, Vietnam announced a new official poverty rate of 14.2 percent and national level is targeted to fall by 2 percentage points each year between 2011 and 2015, and by 4 percentage points in the poorest communities (World Bank, 2009). Moreover, the consuming power of over 22,444,322 households (World Bank, 2009) proves strong bargaining power of customers.

Technology

Vietnamese can acquire technology fast and make noticeable improvement on that technology. However, the infrastructure of Vietnam is not adequate to fast changing and may obstruct directly to the effectiveness of the development of technology-based company. Besides, the unexpected power cut also causes many troubles when it prevents both living and working activities.

Environment

Vietnam is known as a country with plentiful of resources. Those are used as the main ingredients for many industries. However, the pollution situation is getting worse that threatens seriously to the supply materials for many related industries.

Legislation

Vietnam offers generously many privileges for investors. It can be proved via the dismissal of domestic trade barrier, the readjustment of interest and exchange rate and the tax and duty policy. Meanwhile, a 5-forces model analysis also give us a closer look about the industrial environment in which Unilever is operating in.

Threat of new entrants

For many years, Unilever’s cosmetics and toiletries have been taking a huge market share in Vietnam. Due to the cost leader strategy and large economies of scale, Unilever has lowered their price which is a considerable advantage

in Vietnamese market. Moreover, the trust of customers in these products is also a barrier for any company to get in.

Threat of substitute products

There are many substitutions in most of the product lines of Unilever. So for Unilever, it’s more likely to lower costs to attract customers to stay with their product, invest to develop substitutes, purchase patents and invest in R&D.

Bargaining power of customers

The Vietnamese customers are quite sensitive to price and information. Just a small rise in the price could lead to a big market loss. However, the price of Unilever products has always been really competitive compared to their competitor. Besides, the reputation of Unilever as a trustworthy corporation has spread out to most Vietnamese people.

Bargaining power of suppliers

Once again, the cost leader strategy and the large economies of scale allow Unilever to absorb greater price increases before it must raise price to customers. Because differentiators charge a premium price, they can more afford to absorb higher costs and customers are willing to pay extra too. So bargaining power of suppliers is low here that give a competitive edge to Unilever Intensity of competitive rivalry.

In the cosmetics and toiletries globally competitive industry, there are no doubt that Unilever’s major rivals over the next few years will be Procter & Gamble and L’Oréal. However, in Vietnamese market, only Procter & Gamble can be considered as a danger for Unilever. Having cross-industry involvement, such as in packaged food, both Unilever and Procter & Gamble have many product lines in common which are competing intensely in Vietnamese market. With the above

industry context, Unilever has found many opportunities as well as threats when doing business in Vietnam. For the opportunities, there are many fields in Vietnamese market that have not been exploited yet.

For example, the population of Vietnam is ageing with a fast speed; the products for ageing population can be a wise choice for Unilever. Furthermore, focus more on branding could also be an opportunity. With a strong brand, Unilever could consolidate their position in the Vietnamese market. On the other hands, the competition in Vietnam in the last few years has become more and more intensive. The competitors like P&G have also been finding out ways to lower their price and paying more attention to the distribution channels. Additionally, the public is also a threat for most of companies. It is easier for people nowadays to access to the information which can easily ruin a company’s reputation if they are found to do something wrong. In such a dynamic environment like Vietnam, Unilever has its own competitive advantages Global scale with Local relevance: Unilever spreads worldwide in the scale of global.

They follow a global strategy called “Unilever Sustainable Living Plan”. However, for each and every market, the strategy is modified and made appropriate changes to fit the requirement of customers. Besides, this system allows the company to independently develop R&D and marketing strategy to meet the specific market’s unique demand. For Vietnamese market, Unilever provides oral care, skin care, hair care, instant tea, food seasoning and laundry detergent that manufacture after long time understanding the need of Vietnam people. Fragmented System: Unilever clearly fragments their product lines and customers. They

take advantage of this simple system with high speed to generate the best serving quality. Fit to compete: Together with the fast changing of technology, Unilever understands the need of bringing their products closer to customers. Their mobility is not only leverage the speed of IT landscape but create an excellent Retail Execution as well. In Vietnam market, they apply this strategy by having agents handing their products to each household in every commune and village in southern of Vietnam.

Capabilities

Marketing: Switching from classic and direct advertising style to metaphor style in the TV ad is a prominent feature in Unilever ads. The advantage of this style is simple, easy to understand and relevant to customers, especially in several large markets. The advertisement of Sunsilk, Clear, Dove now closely follows market development with more attractive plot. Unilever marketers do not merely introduce the company’s products but also pay more attention to other factors to directly influence specific customers, so that customers can remember, recognize, distinguish go for Unilever’s products between a wide range of similar ones from rivals.

Research and development: Along with effective implementation of marketing strategy, Unilever also expands research and development centers to develop new products which serve as the company’s own advantages and business identities but at the same time still attract customers in certain nations and regions. In terms of Vietnamese market, Unilever tried to gain a deep understanding of consumers’ needs localize the products. Sunsilk, for example, contains extracts from locust trees - a popular traditional ingredient used as a substitute for shampoo, and this brand has generated great success that accounts for 80% of

sales of the shampoo brand Sunsilk.

Distribution: Unilever’s national distribution network consists of 150 major distributors and over 200,000 retail outlets. Its current growth rate is about 35-40%. In addition, the company also co-operates with many domestic factories in the production process, raw materials supply and packaging. The business collaboration has helped Unilever Vietnam to save the cost of imported materials a great deal, therefore lowering products’ price and enhancing the competitiveness of the company's products in Vietnamese market. Corporate social responsibility: Late in 2010, President of Global Unilever, Paul Polman announced plans for sustainable development (Unilever Sustainable Living Plan, USLP) to reach the new goal of to double the size of the business after 10 years, while minimize the detrimental impacts on the environment and enhance social benefits.

This is an inevitable business model that Unilever decided to implement so as to adapt to challenges faced by mankind, such as health issues, sanitation, nutrition, clean water, climate change. This program is not only associated with Unilever's corporate social responsibility but also encourage the firm to be more innovative on initiatives to promote efficient use of energy and water.

Core competencies/Competitive advantage

Marketing: The overwhelming media presence is also part of the strategy that comes from Unilever. Accordingly, P&G – Unilever’s biggest competitor, goes for the regional strategy whereas Unilever decides to build their own “scenario” for Vietnamese market. Thus, there will be a difference in promotion budget between the two sides. Specifically, in 2002, in the realm of Vietnam national TV channels, Unilever topped the chart as it spent VND60 billion on advertising, on the other hand, P&G only ranked

third with VND28 billion. And according to the most recent survey by Kantar World panel, in the list of top 20 firms to spend the most on advertising in 2011, the Unilever Best Food & Elida P/S Vietnam., Ltd. had 8th ranking with a budget of $8,621 million; sadly P&G is not present. Moreover, in the list of top 20 industries with the most outstanding budget on advertising in 2011, Unilever items KNORR ranked 2nd (after Dr.Thanh of Tan Hiep Phat), with a total cost of up to $6.94 million, while no items of P&G were in the list.

Corporate Social responsibility: Unilever Vietnam has always taken great efforts not only to succeed its business, but also to become a good corporate citizen toward the society, community and environment. Many social and community programs implemented by Unilever Vietnam and its brands such as “P/S Protects Vietnamese smile”, “Hand-washing with soap for a healthier Vietnam”, “OMO White Shirts for disadvantaged pupils”, “Micro financing for poor women”... have become typical examples of an effective public - private partnership that contributes to improve Vietnamese lives. In 5 year period from 2005 – 2011 alone, Unilever Vietnam, through its Unilever Vietnam Foundation, has invested in socio-community programs under the strategic partnerships with relevant government agencies which focus on 4 main areas: Health and Hygiene with Ministry of Health; Education and Children development with Ministry of Education & Training; Women Empowerment with Vietnam’s Women Union; Sustainable Tea Development with Ministry of Agriculture & Rural Development.

With average double-digit annual growth over the last 16 years, Unilever Vietnam has actually become one of the most successful foreign investors in

Vietnam. Many prestigious awards have been presented to Unilever Vietnam by the Government for its outstanding contribution to social, community development and environmental protection.

Value Chain Analysis

Unilever has an excellent supply chain: fit to compete. The company has a foundation of “Cost driven supply chain” (2009), in a flexible: “Lean & Agile value chain” (11/2010). Unilever also has a factory with the initital investment of $60 billion, operating in Cu Chi, Vietnam, in which the operation s is highly effective. This factory produces any #1 Unilever Vietnam’s brands, such as Omo, Sunlight, Dove, Sunsilk, Close-up, Lipton, Knorr… In distribution channel, there are (1) Modern Distribution channel: convenient stores, super market, one-stop-shops… and (2) General Distribution channel (mainly in rural area): grocery stores, small shops… The company has 150 main distributors and more than 200.000 point of distribution.

Partnership with Suppliers: supplier investment to grow where Unilever grows (> €1.3 Billion supplier capacity investment), with 70 active supplier initiated innovation projects 5. Unilever Sustainable Living Plan (Strategies): less (pollution) for more (profit). The company will use 100% sustainable sourcing of agricultural raw materials in 2020, absolutely reduce CO2 emissions and by the same time improve the loading efficiency in transportations.

Conclusion

In conclusion, Unilever is now following a very clear corporate level strategy: Market Development: moving into different geographic markets Product Development: developing new products (& improve the product significantly). Ex: Sunsilk Co-creation (upgrade from traditional Sunsilk); Dove – variations: soap, bath foam, shampoo, conditioners, deodorant… Horizontal Integration: Merge or partner up with domestic companies (such as Elida P/S when coming to Vietnam market) Unilever also has several business-level strategies

with diversification via related areas .It allows U to create value productively using excess resources Company-wide: Doing business in many countries

Competitive

Investing in many products in portfolios to gain economy of scope Last but not least, Unilever follows “Localized” global strategy. They mainly hires and uses local resources to produce and consume. As a result, Unilever can more unify its operations and focus on establishing a brand image and reputation that is uniform from country to country. No matter where they operate, Unilever is now focusing to engage every activities into the whole picture of corporate’s strategy. Not only establishing an overall plan, the company also finds a synergy while implementing different level of strategy. It’s the reason why Unilever can adapts effectively with the high-changing environment and continuous needs of their beloved customers. Unilever is about to grow more in the next coming years locally and globally.