In the modern era, marketing plays a very important role in growth and development of organization. It can be defined as a process through which businesses increase their sales and profitability by creating brand awareness in the market. Therefore, while developing marketing strategies companies are required to be very careful in selecting tools and techniques. It has been observed that, many businesses in the present scenario seek to expand their operations in international market to increase current market share as well as profitability. In addition to this, while operating in international markets there are various factors which are required to be considered. This report is based on Unilever which is a UK based consumer good producer and supplier. Further, it includes overview of the organization along with its strategic vision, mission and competitive position. Other than this, it also reflects the product strategy which can be adopted by Unilever for its overseas markets. The factors which need to be considered while setting prices of its products in international market are also highlighted in this report. Along with this, the study also explains factors which are to be taken into account for n
Overview of current organization along with its vision mission and competitive position
Unilever is a British-Dutch multinational company which deals in various kinds of consumer goods. It was founded in the year 1930 and is the third largest consumer good company in terms of revenue. Further the organization is one of the oldest multinational companies of the world which operates in more than 190 countries. Other than this, more than 400 brands are owned by the organization (About us, 2015). Its product portfolio includes soaps, shampoos, ice cream and other household care products. The vision of Unilever is to touch the heart and change life of people. On the other hand, its major mission is to add vitality to life of people with the help of providing various types of nutrition, personal and health care brands which makes life of the people good.
Competitive analysis can be defined as one of the most important part of any company's marketing plan. Further, it helps the business to determine how its products and services differ from its competitors. It is a method in which organization uses various kinds of tool and techniques to evaluate existing competition in a particular marketplace. It can be done by using tools such as Porter five forces and SWOT analysis. The competitive analysis of Unilever is provided below as:
Porter five forces analysis
Porter five forces analysis can be termed as one of the simplest yet most effective tool to understand and determine as where the power lies in market. Further, it consists of five main forces which determine the level of competition for businesses. As per the view of Porter, (2008) Unilever not only faces tough competition from market players such as P&G and Nestle but also from various kinds of regional retailers (Porter, 2008). Five force analysis of the organization is discussed below:
Buyer power- 1This force determines the power of buyers in the market and how easy it is for them to drive prices. Further, it is evaluated by total number of buyer present along with the importance of each of them to businesses. According to Narayanan, and Fahey, (2005) Unilever have buyer from all across the world as it operates in more than 190 countries (Narayanan and Fahey, 2005). In addition to this, they are not powerful enough to drive prices of company's products and services. However Grundy, (2006) argued that, even if the buyer are not capable of driving price, it is very easy for them to switch to other brands which are available in market (Grundy, 2006). Therefore, it is required by Unilever to be very careful while setting up price of its products.
Supplier power- This force highlights the power of supplier in market. In accordance with Karagiannopoulos, Georgopoulos and Nikolopoulos, (2005) Unilever has always followed the policy of manufacturing and buying locally (Karagiannopoulos, Georgopoulos and Nikolopoulos, 2005). This has helped the company to reduce power of its supplier and make them weak so that, they cannot negotiate as per their demand. On the other side Bose, (2008) stated that, Unilever has always made agreement with its supplier which highlights that, the products and services will be supplied in a particular time period at a given rate (Bose, 2008). The brand treats supplier just like its customers and always tries in increasing loyalty among them.
Competitive Rivalry- It is the factor which determines the capability and number of competitor of a company. High competition and attractive products offered by them lower down the power of businesses. As per the view point of Porter, (2008) the consumer goods market is a very potential market and Unilever faces intense competition from market players such as Nestle and P&G and Kraft (Porter, 2008). In addition to this, the products provided by these companies are very attractive in terms of price and quality.
Threat of new entry- It can be defined as the ability of new business to enter the market. Narayanan and Fahey, (2005) discussed that, Unilever operates in many markets of the world and thus the threat of new entry varies according to the market (Narayanan and Fahey, 2005). It has been also identified that, in many developed markets the company hold a strong brand image and also high degree of customer loyalty. Therefore, it is not easy for any new firm to enter the market. The cost of setting operations is also very high which discourages organizations to enter the consumer industry.
Threat of substitute- A substitute product can be termed as the one which offers similar benefits which its competitor is providing to people in a market. Threat of substitute is very high as the people in market always seek for new and unique products and services to satisfy their needs and desire. Malhotra, 2008 explained that, all the major competitor of Unilever are spending huge amount of financial resource in research and development to provide innovative products which satisfy customer wants ( Malhotra, 2008).
- Unilever has a global footprint as it operates in more than 190 countries which are scattered all across the globe.
- The company has an effective research and development department which supports in innovating new products at regular interval.
- Strong product portfolio which provides competitive advantage.
- The market in which Unilever operates is highly competitive.
- Substitute of products are easily available and thus, it is not easy to retain customers.
- The health consciousness among customer is increasing day by day thus; the company has new opportunities to develop products and services as per this market segment.
- Company has always taken care of its social and ethical responsibilities therefore, it has opportunities to be termed as a complete sustainable enterprise.
- The economic crises have lower down profits of many FMCG companies.
- Increasing substitute products has become a major threat for Unilever.
Ansoff matrix for market segment
It can be defined as a strategic tool which helps businesses to develop strategies and action plan for expansion and future growth. The Ansoff matrix model for Unilever is mentioned below:
Product development- According to this strategy new product can be developed by Unilever in its existing market. Further, the company can modify its existing products according to the need and demand of customers (Dibb, 2010). This strategy helps in increasing sales and market share in existing markets.
Market penetration- It is the tactic of selling existing products in the existing market (Armstrong and Green, 2007). Strong promotion and marketing can be carried out by Unilever to increase its brand awareness and sales in the existing market.
Market development- Unilever can also sell its existing products in new markets. This will help the company to achieve competitive advantage by exploring some new markets (Proctor, 2014).
Diversification- It is a strategy of selling new products in completely new markets. In order to expand its operations in international market the company can use this strategy.
Why Going International?
The competition among businesses is increasing day by day and most of the companies are finding it very difficult to survive in the market (Zahra, 2005). Therefore, they look to go international to have better growth and profitability. The reason behind expanding operations across domestic market is mentioned below:
Achieving competitive advantage by exploring some new potential markets.
Increasing sales and profitability of business along with market share.
Creating better opportunities for future growth and development.
Appropriate Product Strategy for Overseas Market
Unilever is required to carry out in-depth research in order to sell its products and services effectively in overseas market. As per the view of Luo and Tung, (2007) even if demand exist in market, companies are required to develop an appropriate product strategy so that, it can achieve its long term objectives and penetrate international market in a more effective manner (Luo and Tung, 2007). Further, the international venture can become a complete failure if proper strategy is not developed. In accordance with Katsikeas, Samiee and Theodosiou, (2006) an appropriate product strategy can be developed by knowing the customer of market (Katsikeas, Samiee and Theodosiou, 2006). Thus, while expanding operations in overseas market, Unilever needs to ensure that, it is well aware of the need and demand of customer in market (Ten ways to improve your international marketing strategy, 2015). In addition to this, it is also required by the organization to understand market trends and factors that affect the purchase decision of customers in overseas market. Adler and Gundersen, (2007) has stated that, the knowledge about need and demand of people helps businesses to develop products which can meet and satisfy those demand (Adler, and Gundersen, 2007). Therefore, for developing an appropriate product strategy Unilever is required to know taste and need of customer in overseas market. However Doole and Lowe, (2008) argued that along with customer knowledge companies are also required to develop effective pricing and positioning strategies for international market (Doole and Lowe, 2008). Unilever needs to determine as how it is going to position its products and services. Along with this, the firm also needs to take care that the price should be competitive. Dibb, (2010) has evaluated that; during initial stage business can adopt low price strategy in order to penetrate in the market (Dibb, 2010). Further, this will help in attracting customer and creating brand awareness in the new international market. Unilever needs to ensure that, it takes care of various factors while developing effective product strategies. In addition to this, it includes factors such as analysis of local and international environment, competitor situation and internal situation of the organization. As per the view of Proctor, (2014) most of the international venture of business fails because they are not able to determine appropriate customer need and price elasticity (Proctor, 2014). Thus, it is required by Unilever to ensure that, it is well aware of price elasticity and customer needs in the international market. Other than this, the company can use product strategy such as standardisation or product adaptation. Luo, Y. and Tung, R. l. (2007) has asserted that standardisation of product is a strategy in which same products are developed for different market (Luo and Tung, 2007). One of the main advantages of using such strategy is that, it helps businesses to expand its operations by creating standard product which can be sold in every market. However Terpstra, Foley and Sarathy, (2012) argued that, customer in different market have diverse needs and it is not necessary that the same product can satisfy need and demand of various type of people in the international market (Terpstra, Foley and Sarathy, 2012). On the other hand, it can be stated that Unilever can adopt the strategy of adaptation. The strategy of product adaptation is very beneficial for business as it helps in creating and delivering goods and services as per the need and demand of people in the market.
Cost of localization
Localization can be defined as the strategy in which business use local resources and raw materials to deliver products and services according to need of market. Further, it is a strategy which is completely different form standardization and in this strategy business use same products for all markets (Lorenzen and Frederiksen, 2008). Thus, in localization process, the product and services are delivered according to the nature and need of market. The cost of localization products will be very low as it eliminates tax and duties imposed on export and import. Further, the cost of production also becomes low as Unilever will use local resources and raw material.
Adjustment in product
Unilever is required to make some adjustment in its products and services to make the international venture successful. Further, companies fail when they are not able to analyse need and demand of people in the market. Unilever cannot provide a standard product in all type of market and there are some adjustments which will be required in its products. In addition to this, food products can be manufactured on the basis of taste of customers. As per the view of Keller, Parameswaran and Jacob, (2011) Unilever's cleaning and personal care product can be modified on the basis of external factors and need of people in the market (Keller, Parameswaran and Jacob, 2011).
Key factor which need to be considered while deciding the pricing strategy
Price can be termed as the perceived value of products and services in the mind of customers. Further, it can be defined as one of the most crucial factors which affects success and failure of businesses. In accordance with Anderson and Markides, (2012) organizations are required to be very careful while developing their pricing strategy as the sales and profitability rely heavily on the price of products (Anderson and Markides, 2012). It has been also identified that, business use pricing strategies to accomplish various kind of objectives. In addition to this, some objectives are to make changes in profit margin, increasing market share and sales etc. Unilever is required to be very careful while developing its pricing strategy. The price will directly affect the profit margin per unit and it cannot set high prices for its products and services in new market as it will lower down sales and will also force people to choose products and service of competitors. Pauwels, (2007) has asserted that, there are various factors which impact the pricing strategy and businesses are required to take these factors into consideration (Pauwels, 2007). Further, factor such as level of competition, quality of products and demand of product are some major factors.
As per the view of Kwok and Uncles, (2005) selection of best pricing model not only helps business in increasing their sales and profitability but also assist them to achieve competitive advantage (Kwok and Uncles, 2005). There are various pricing model which can be used by Unilever for its international ventures. Some of the models are mentioned below as:
Cost plus pricing- This model is used by organizations with the objective of increasing profitability. Further, as per this model business add their overall cost and then add a profit percentage on the overall cost which becomes actual price of product (Wheelen and Hunger, 2011). One of the main advantages of using this model is that, price can be easily derived. Further, there are some disadvantages such as it ignores competition as well as replacement cost which are considered as some of the important element of the pricing strategy.
Value based pricing- It can be defined as a model in which price of products and services are determined by their perceived value in minds of customer. Doole and Lowe, (2008) has stated that, the main advantage of using a value based pricing model is that, it helps companies to increase their profitability and enhance degree of their customer satisfaction (Doole and Lowe, 2008). Further, it also encourages customer to repeat purchase as the price charged is justified by the kind of product and services provided to them. However it has been argued that, there are some disadvantages which need to be considered while selecting value based pricing strategy (Pauwels, 2007). This model will be acceptable only when number of customer of business are very less and works for only those small business which are highly specialized.
Fixed pricing- This a model in which fix price is charged for products and services by business. This type of pricing model is more common in business which deals in project related work. Further, such kind of business charge a fix price of every project they undertake. In accordance with Piercy, Cravens and Lane, (2010) the fix price model helps businesses to attract more customers as it provide them with complete kind of assurance regrading delivery of quality products and services (Piercy, Cravens and Lane, 2010). In addition to this, it can be also stated that, fix price model is consistent and after some time people in the market becomes used to the price which are offered by company. One of the main disadvantages of this model is that, it does not take various costs into consideration.
Performance based pricing- It can be defined as the model in which price of product and services are charged on the basis of performance delivered by the company. This model is very rarely used in some specific situation and customers.
Factor affecting the price of products:
Dibb, (2010) has stated that, there are various internal and external factors which affect the pricing strategy of businesses (Dibb, 2010). Further companies are required to analyze and evaluate these factors while developing their price. Internal factors such as cost, objective of business, product life cycle and brand image of company are some of the major elements which need to be taken into account. Unilever is required to take overall cost of production which includes fixed as well as variable cost into consideration while determining the price of its product for international market. However Zahra, (2005) argued that, there are some external factors which directly affects the pricing policy of business (Zahra, 2005). Unilever is required to set price on the basis of external factors such as degree of competition in the international market, government rules and restriction, channel of distribution and economic condition of market.
Other than this, the foreign exchange market also impacts the price of products and services. Further, the fluctuation in internal market directly impacts the pricing policy of companies (Terpstra, Fole and Sarathy, 2012). Unilever is required to take care of such fluctuations and is also required to set its price according to the same. During the time of recession, the company needs to set low prices so that, it can attract customer and maintain its sales volume. Further, a high price strategy in such situation will directly lower down the sales, profitability and market share of the organization.
Use of hedging
Unilever can also use hedging to offset the risk related to any kind of adverse movement in price. In addition to this, hedging will help the company to insure itself against any kind of negative risk which can affect its sales and profitability. Lien, 2005 has stated that the role of hedging is not to eliminate any kind of negative event but it helps in lowering down the impact of event on operations of businesses (Lien, 2005). The use of hedging will help Unilever to lower down risk in one area and thus it can take risk somewhere else. On the other hand, Unilever needs to be aware of the fact that, every hedge has some cost which needs to be paid. Thus, before using any kind of hedging strategy the company needs to identify its benefits as the main objective of heading is not to make any kind of profit but to protect businesses from loss (Brown, Crabb and Haushalter, 2006).
Critical factors for developing new distribution strategy
The role of distribution strategy is to define how a particular business is going to deliver its products and services to customers. Further, while developing any kind of distribution strategy Unilever is required to take various factors into consideration. Some of the factors are mentioned below as:
Nature of products- One of the most important things which need to be considered while determining channel of distribution is the nature of products (Narayanan and Fahey, 2005). It has been observed that, perishable products have a very short life therefore such products are required to be directly sold by producer to customer. On the other hand, technical and customized products can be sold with the help of intermediaries.
Size of business- Size of business also plays a very important role in determining the accurate and most suitable channel of distribution (Malhotra, 2008). In addition to this, the selection of channel also relies on marketing objectives of business.
Use of distribution channel
Distribution channel are important for businesses as they provide a significant link between producer and consumer of products. There are three channel of distribution which can be used by Unilever. The first channel consists of producer, whole-seller, retailer and customer (Proctor, 2014). In addition to this, in such kind of channel products are distributed by producer to whole-seller which then distributes it to retailer and ultimately the goods are supplied to customer by retailer. On the other hand, the second channel consists of only one mediator between producer and consumer which is retailer. These retailers buy large volume form manufacturers and then they supply them to their customers. Other than this, in the third channel of distribution products are supplied directly from producer to the consumer (Luo and Tung, 2007). Further, there is no intermediary between the two and it is also termed as direct marketing channel.
It can be defined as the process in which businesses determine how the financial resources will be arranged and invested. Further, it is one of the important elements which need to be taken into considerations while developing distribution strategy (Katsikeas, Samiee and Theodosiou, 2006). It will help to determine an effective strategy in the given amount of financial resources. In addition to this, deepening upon funds, Unilever can take decision regarding which strategy will be cost effective and will suit the most.
PESTEL analysis is a frame work which helps companies to identify external factors which directly or indirectly affects the operation of businesses. Unilever is required to analyze external factors while developing its distribution strategy (Pauwels, 2007). Some of the important factors which are required to be considered are mentioned below:
Political- It is a factor which determines the degree to which government of the affects the operation of businesses. It includes tax and duties imposed by government on companies. Therefore, while developing distribution strategy for new international venture Unilever is required to take care of political environment of the country in which it is planning to operate.
Economical- It includes element such as inflation and economic conditions of country (Wheelen and Hunger, 2011). Thus, the firm is required to take economic situation into account while developing distribution strategy.
Social- It includes overall social environment of market and it is affected by factors such as demographics and population.
Technological- It can be defined as the rate of technological advancement and up-gradation in the country (Malhotra, 2008). Further, while developing an effective distribution strategy Unilever is required to evaluate the level of technological advancements in its new international venture.
Environmental- The firm is also required to take care of the environment and it needs to ensure that, its distribution channel and strategy will not have any kind of negative impact on environment in which it will operate (Brown, Crabb and Haushalter, 2006).
Legal- These are the factors which highlight the law and regulation as well as provision in a country. Unilever is required to consider all law and rules which are framed by government while developing distribution strategy.
Break even analysis
It can be defined as the way in which companies evaluates what it needs to sell to cover the overall cost of doing business. Further, it is calculated on the basis of fixed cost, variable cost and revenue generated (Anderson and Markides, 2012). Thus, it required by Unilever to carry out break even analysis point at the time of developing distribution strategies of new international ventures. This will help the company to make correct decision regarding which international market should be explored and it will also assist in controlling the overall cost.
From the above report it can be concluded that, Unilever needs to develop effective international marketing strategies. Further, there are various strategies such as Porter five forces, Ansoff matrix and SWOT analysis which can be used by the organization in order to determine market segments for international expansion. Other than this, from the above study it can be also stated that, there are various factors which needs to be taken into consideration while determining pricing strategies in new markets. Unilever is also required to determine cost of localization and adjustment which it will make in its existing products for new markets. In addition to this, it can be also concluded that, the distribution strategy is based on factors such as PESTEL, funding and break even analysis.
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