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Essay: Unilever (Porter’s Five Forces)

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  • Subject area(s): Business essays
  • Reading time: 3 minutes
  • Price: Free download
  • Published: September 21, 2019*
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  • Words: 689 (approx)
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  • Tags: Porter's Five Forces Analysis Examples
  • Unilever (Porter's Five Forces)
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Introduction

Unilever is a transnational company competing in the global consumer market where 2.5 billion people use Unilever products every day (UNILEVER, 2018). Unilever operate in 190 countries with over 400 brands aiming to create sustainable living commonplace (UNILEVER, 2018). Unilever was established on 1 January 1930 with the merger between Dutch company Margarine Unie and British company Lever Brothers (UNILEVER, 2018).

The first part of the report will include critical evaluation of the core elements of Unilever followed by identification of key drivers and the critical success factors for Unilever using porters five forces to do the industry analysis. The second part will identify and evaluate Unilever’s resources, capabilities and performance over past five years and how these factors have contributed to its competitive advantage. Finally ending with a conclusion.

Company/Industry Analysis

Core Elements of Unilever

Brands: Unilever offers 400 brands around the world. Figure one presents some of Unilever’s global brands. Unilever competes in the food and drink, home care, personal care and water purifier markets.

Porter’s Five Forces

Porters Five Force Framework can be used analyse the attractiveness of and industry using the five competitive forces below (Johnson, et al., 2017). The analysis is completed using the framework provided by Dobbs (2014) seen in appendix1.

Competitive Rivalry (High): Unilever faces high competition in the industry in particular other big firms such as Nestle and Proctor & Gamble. Also, as switching cost is low this adds to the competition. Also, the consumer good industry is seeing a steady growth (REUTERS, 2017; EUROMONITOR INTERNATIONAL, 2017; LUCINTEL, 2012; STATISTA 2018). Therefore, Competitive rivalry can be considered an important factor in the industry.

Threat of Buyers(High): Unilever operates all around the world therefore has buyers around the world however their buying power individually is low. Buyers also have high knowledge of the products and its prices and as switching cost is low can easily switch products. Therefore, although individual buying power is low due to high product knowledge and low switching cost buying power is also an important factor.

Threat of Suppliers(Moderate): Unilever uses numerous suppliers around the world however their size and influence in the industry remains moderate. Also, the raw materials used are standardised, so the supplier can be easily replaced.

Threat of New Entrants(Moderate): Again, as Unilever operates globally the threat of new entrants can be varied. In an already developed market the threat of new entrant can be low due to the high capital requirement. Also, Unilever can use economies of scale to lower prices to get rid of the competitor. However, in an emerging market the capital requirement could be low therefore higher threat of new entrants.

Threat of Substitution(Low): The switching costs for consumers is low however there are very few substitutes. Unilever spends a lot of money in research and development, currently has more than 6000 employs working research centres around the world (UNILEVER, 2018).

Unilever is effectively operating globally in the consumer good market. The porter’s five forces analysis indicates that the biggest threat in the industry for Unilever is the competitive rivals and the power of buyers. So therefore, Unilever has to prioritise those two factors while creating a strategic plan. Product innovation is one of the ways for Unilever to create competitive advantage. Innovation is a success feature of companies as it helps complete customer satisfaction and is regarded as a competitive advantage (Reguia, 2014). Product innovation will allow Unilever to create more competitive variants of their products allowing to effectively compete with rivals.

Unilever promotes performance culture with leadership leaning on growth mind-set and consumer and customer focused (KÓS, 2018). This can be translated across to enhance customer relationship to improve the perception of company brands. This can be done through by increasing the quality of customer complaint system and also their request and suggestion. Through the product innovation and higher quality of customer service Unilever can realise their vision and mission statement of meeting everyday needs and sustainable growth (UNILEVER, 2018).

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