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Strategic Analysis of Unilever

Innovation Management Master

Module: Innovation Strategy

By: Roukaya ISSAOUI

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Agenda

• Introduction• 1-Company Overview• Unilever mission and Vision.• 2-Competitive Environment :• Home and personal Care industry• Competitors• Porter 5 forces analysis• Unilever VS Procter and Gamble• Packaged food and beverage Industry• Competitors• Porter 5 forces analysis• Unilever VS Nestlé• 3- Unilever Strategies and moves• 4-Marketing strategy• 5-Innovation strategy • 6-Situation of Unilever and SWOT analysis• 7- Recapitulation

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Introduction

Unilever is one of the world’s top makers of packaged consumer goods operating in 190 countries and have a large brand portfolio of over 400 brands under two divisions : Foods and Home & Personal care.  Unilever is one of the world’s top three food firms with Nestle and Kraft- and the world’s second largest packaged consumer goods company –behind Procter & Gamble. The main success factor of the company is the constant focus on innovative product developments

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Company Overview

Legal Structure

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Company Overview

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Company Overview

Management: leadership executive diagram

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Unilever Business

Activities Home care, Personal Care, Food and refreshment

Brands >400 ,14 of which generate sales in excess of €1 billion a year.

Employees >174,000

International 190 countries

Customer 2 billions worldwide

Emerging Market 57% of the business

Financial key indicators

Market Capitalization 124.59B

Turn over ( euro) 49.797 million ( -0.3%)

Net Profit ( euro) 5,263 million (+0.9%)

Core earnings per share ( euro) 1.58 ( +0.3%)

Free Cash flow ( euro) 3.9 billion ( 4.3 billion in 2012)

Non financial indicator

R&D annual investment 1 billion euro/ year

Rank innovative company list of Forbes 63

Diversity workforce 58% male, 42% female

Safety 1.03 total recordable accident frequency rate

Engagement score 78%

Company Overview

Financial and non financial KPI’s (2013)

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Mission and Vision

Mission of the company OUR PURPOSE is TO MAKE SUSTAINABLE LIVING COMMONPLACEWe work to create a better future every day, with brands and services that help people feel good, look good and get more out of life.

Corporate purpose of the companyOUR VISION: the compass strategy“We will lead for responsible growth, inspiring people to take small everyday actions that will add up to a big difference. We will grow by winning shares and building markets everywhere.”.

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The competitive Environment

• Household industry ;laundry detergent, cleaners…

• Personal care; hair care, cosmetics, toothpaste

Home & personal

care

• Food: packaged meals, dairy…

• Refreshment: beverage, ice cream

Food &Beverage

Strategic Groups

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... 5 forces Analysis

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Home and Personal Care Industry 5 forces Analysis

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Home and Personal Care Industry: Competitors

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Unilever Procter and Gamble

Biggest Brands Dove, Axe, Rexona, Vaseline, Lifebuoy, Signal, Lux, Sunsilk, Clear, Surf, OMO, CIF, Domestos, Comfort, Lipton and Knorr

Head & Shoulder, Olay, Pantene, Wella Braun, Gillette, Crest, Oral-B, Ariel, Duracell, Tide and Pampers.

Turnover $ 66.7 $ 83.7 bn

Global Market share / activity

Men’s grooming 12.7% (Axe, Dove)Bath 20.8% ( Dove, Lux)Deodorants 33.8% ( Rexona, Axe)

Men’s grooming 33% ( Gilette)Laundry 26% ( tide and ariel)Hair Care: 19.6% ( H&S)

Market Place (2012) 55% in emerging market 45% in developed markets

37% in emerging markets 63% in developed markets

Strategy Sustainable Innovation+ ++ selective acquisition+ +

Acquisition +++Innovation ++

Unilever vs Procter and Gamble

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Food and Beverage Industry 5 forces Analysis

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Food and Beverage Industry: Competitors

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Food and Beverage Industry: Unilever vs Nestlé corp

Unilever Nestlé corporation

Biggest Brands Knorr, Magnum, Flora, Ben & Jerry’s, Rama ,blue Band

Nescafé, Maggi, Nestlé Nan ( infant nutrition), Kitkat, Nespresso, Stouffers, Häagen-Dazs Light ice creams

Turn over 2013 49.797 million euro 92.158 million euro

Market Place 190 countriesEmerging market +++

130 countriesEmerging market +++

Innovation Strategy 1 billion/ year on R&DSustainable innovation ++Selective acquisition++

1.5 billion/year on R&DSustainable innovation+++Selective acquisition++

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Oxfam ranking list of sustainable companies (2013)

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3- Unilever strategies and moves

The Business Model of Unilever :Sustainability duty and an opportunity to do

business

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Profitable volume Growth: is the growth in physical volume of sales it’s mean more consumers buy more product which leads to build a brand equity which is the mean target of Unilever, this is driven by investment in innovation and marketing the brands.

Cost Leverage + efficiency: the volume growth allows to optimize infrastructure and reduce average cost per unit which improve profitability and more investment in the business

Innovation and Marketing Investment: driving by improving efficiency and growing of investment ability, new and improved products are the result of investment in R&D and, together with effective marketing, strengthen the brand equity

How does Unilever drive profitability from this business model?

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4-Marketing strategy

Building brand equityThe aim objective of Unilever is building brand equity, according to the business Dictionary “the brand equity is a brand's power derived from the name recognition that it has earned over time, which translates into higher sales volume and higher profit margins against competing brands”. Unilever’s strategy is to connect brands with people’s live and needs by creating Brand with Purpose.Brand with purpose via programAs a marketing strategy to win market share in emerging market, Unilever associate programs and purpose to their brands which identify and respond to the local need of people, for example in Africa in a region with vit A deficient children, Rama and Blue Band margarines are fortified with 7vitamines including vit A. Brand with purpose strategy is another competitive advantage of Unilever to establish strong Brand Equity.

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leverage bigger brands (The top brands makes up more than 54% of Unilever business)

Since the arrival of Paul Polman in 2009 Unilever is engaged in a process of brand rationalization as it reduces its large portfolio by removing 30% of the number of references in 2013 to focus on the 15 billionaires brands

4-Marketing strategy

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New channel winning in the Market place:• Investing in marketing and advertising is also a competitive advantage of Unilever

(Unilever earned the title of Most Awarded Advertiser at the 60th Cannes Lions International Festival of Creativity, bringing home a total of 44 awards)

• Unilever explore new media opportunities and partnerships to help the reach more consumers.

• To wide their ability of going to market and to reach fast and more consumers, Unilever has developed new channels such as out of home, direct selling, home vending, e-commerce… and segmented the market.

4-Marketing strategy

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The innovation strategy:

Unilever innovates broadly in science and technology, in deep consumer understanding of people’s habits, tastes and behaviors and innovation also covers areas such as design, packaging, marketing and advertising.3 pillar of the innovation strategy:

strategic science group launched 2013:• Unilever has over 20,000 registered patents, sets aside more than $1

billion annually for research and development. Unilever has six strategic R&D laboratories and 31 major development centres

Some recent sustainable innovation examples include:• An upside-down roll-on deodorant that uses 18% less plastic in each pack.• Pureit, a battery operated home water purification device which gives households in India access to clean, pure drinking water at low cost.• Small and Mighty laundry liquids which, because of their size and concentration, reduce CO2, water usage and transportation costs.

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open innovation:• Unilever has been in using open innovation for years, and in

2009 established an open innovation unit to work with outside partners.

• Unilever is looking outside their walls for sustainable innovation , they launched an online platform offering experts the opportunity to help the company find the technical solutions it needs.

• Unilever has also published the key areas in which it wants to innovate such as better packaging, safe drinking water and sustainable washing…

The innovation strategy:

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New business unit• Unilever is collaborating with start up which can grow to become the

future of Unilever.  • The New business unit is constantly looking for developing new

technologies, business models and partnerships which can help stretch Unilever beyond the company’s core capabilitiesFor example; Unilever launched its Go Global start-up hunt , Unilever’s

senior vice president of marketing Marc Mathieu said the initiative aims to help the company build on its status as a “pioneer in marketing”.“Start-ups

are very nimble, agile and very much able to take risks to invent new marketing platforms…

• Unilever has launched also an incubator for breakthrough ideas holder The Unilever Incubator is a corporate hot-house for exploring brilliant ideas

The innovation strategy:

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SWOT Analysis

Strengths: ( main competitive advantages): operational and cost efficiency : building strong network of distribution ( performing Supply chain) and reduce cost by outsourcing operation

superior value to consumer via brand purpose ( sustainable innovation linked to local need )

consumer connectivity : they penetrate consumer life they are aware of their needs

Well established in emerging market: 50 years in Brazil, China and India Use of creative advertising and promotions on website and commercials ( pioneer in Digital business)

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SWOT Analysis

Weakness: Organizational structure: 2 Unilever: Unilever NV (Netherlands) and Unilever PLC (UK) may limit flexibility.

Focusing on Emerging Market may slow down the business growth ( Emerging countries are not economically and politically stable)

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Opportunities: Demographics

• Products appeal to wide range of population• Integration of international employees bring broad

cultural and business experience in all processeTechnology

Already using high technology such as digital businessNew communication technology to more efficient supply chain

EnvironmentMaximize recycled packing materialsProcesses environmentally friendly Products are biodegradable

SWOT Analysis

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ThreatsEconomic

Internal turmoil in third world countriesVentures in developing countries are jointly owned

Politics: Non stable politic situation in some country of emerging market Environment

Increased regulations

SWOT Analysis

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Conclusion

Since 2010, Unilever start the Unilever Sustainable Plan and it becameThe spirit of its corporate strategy: to double size the business whilst reduce its environmental impact and increase social impact.

Unilever invest in Sustainable Innovation: they believe that innovation is the motor to connect Unilever product to consumer life (reach up premium consumer, reach down: poor communities, reach wide: to be the first to understand consumer and meet his need) : this is a competitive advantage to reduce the gap between Unilever and their big competitors

Unilever is one of the first companies to look outside their walls by giving the opportunity to expert and start ups to collaborate and share Unilever Vision.

Unilever also invest huge amount on Marketing to reduce the power of substitution.

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