Unilevers Background The Fast Moving Consumer Goods (FMCG) environment is rapidly changing.

Especially, the increasing popularity of line extensions seems to depend on advantages inherent in brand leveraging. FMCG manufacturers go into R&D in order to come up with the product that best satisfy consumers because customers become more critical about attaching themselves to a particular brand. They will also like to buy less expensive product due to current economic tide. Unilever is one of the biggest Fast Moving Consumer Good (FMCG) companies in the world.
40 Brands Rp. 3,387 Billion Net income

8 Factories

Unilever Indonesia
385 Disributor s

78 years in Indonesia

4,796 employees

Unilever is a british-dutch multinational consumer goods company. It is the most leading brand in Indonesia for sector FMCG. Line of business of Unilever are: manufacturing, marketing and distribution of consumer goods including soaps, detergents, margarine, dairy based foods, ice cream, cosmetic products, tea based beverages, and fruit juice. This company is well known for the merger and acquisition strategy (M&A) to develop and growing its brand. The purpose of this strategy is to meet the everyday needs of people. While doing so, the company ended up with 40 brands in Indonesia only (Exhibit 1). Globally, Unilever held more than 400 brands. In Indonesia, Unilever exists from 78 years ago since 5 December 1933 (see Exhibit 2 for history of Unilever). In the end of 2010, Unilever already have high net sales about Rp. 19.7 trillion and net income Rp. 3.4 trillion (Exhibit 3). The company is one of the largest non-state owned enterprises companies in Indonesia. Unilever has

4796 employees scattered around this country. The company also has 385 distributors and 8 owned factories. Unilever has a mission to add value to life of both its present and potential customers. Beside from business use, Unilever is also famous because of its concern in social responsibility issue. The company has created community engagement and brand social mission programmes in 2010 to develop partnership for health and economic growth for communities in Indonesia. Business Model

Merger & Acquisition

Operational Excellence

Global Brand, Local Product

Sustainability Development

Merger and acquisition Operational excellence Global brand with a taste of local product Sustainability development

INDUSTRY ANALYSIS Market Size Porters Five Forces

Bargaining power of supplies - Low

Threat of substitute Product - High

Intensity of rivalry - High Bargaining power of buyers - Medium Threat of new entrant - Low

This model is based on five important elements of an organisation and uses both internal as well as external competences and threats faced by a business organisation. These five elements including: Bargaining Power of Buyers: Medium

Unilevers buyers are scattered all around Indonesia and they are in millions. In true sense they are not so powerful to pull prices down. But on the other hand it is easier for the customers to switch to a competitor. So, Unilever has to be very precautious in deciding about prices and keep the customers satisfied. Intensity of Rivalry: High In consumer products business Unilever has a large number of competitors and these competitors are in reality very strong. They range from small local corner shop retailer to big giants like P&G, KAO and Wings Group. These competitors almost provide equally attractive products and services and sometimes better. These competitors have the power to attract and influence the customers by more attractive substitute, prices and marketing techniques. Threat of Substitutive Product: High Continuous research and development in the consumer and household products has brought about a revolution in the consumer market and today customers like to try something new and better. This trend has reduced the customer loyalty and product lifecycle. Unilever is under continuous threat of substitute products and its competitors are already spending huge sums on R&D and new product development. Unilever has to be very adoptive and closer to its customers so as to get what exactly its customers want. Threat of New Entrant: Low As Unilever operates in different geographical markets so threat of new entrants varies in different markets. In well-developed countries where big players like Unilever have a very strong hold and brand image, it is very hard for a new entrant to enter the market because of higher cost to set up a business. On the other hand in less developed markets, it is easier to enter as legal requirements and capital needed is not as much as in a developed market. Unilever has its presence almost in every market either through its subsidiaries, branches or franchises. But its brand image is a strong barrier in the way of new entrants. Bargaining Power of Supplier: Low Unilever has a policy of local buying and local manufacturing. Which provides itself an edge to break power of its suppliers and make them weaker to negotiate at its own terms. Most of time Unilever has blanket agreements with its suppliers to provide for a certain period of time at a certain rate. This strategy help to prevent suppliers from switching to other competitors and charge higher rates.

SWOT Analysis SWOT analysis is a sistematic method to understand the shape of threat and opportunities in industry, hence find the existing problem. From this approach, company would determine effective strategy to gain opportunities using companys strength, overcome threat, and minimize existing weaknesses. Strength Leader in consumer goods sector in Indonesia based on the sales and market share. Increasing market size for important products category such as skincare, savoury, and ice cream. Intimate relationship with suppliers and distributors. Unilever treat its suppliers fairly in purpose to create loyalty among them like customers Unilever has extensive distribution channel, spread across the country. Therefore for rural area n Indonesia, Unilever could deliver its products. Efective promotion srategy. Based on one marketing magazine, Unilever is one of companies that had large budget on advertising. Weaknesses Matrix structure, Unilever organization is based on products division (Exhibit 4). It is difficult for company to do coordination and communication between departments. It also has conflict resolution between support system departments (HRD, finance) with product line department. Large number of employee. Bureaucracy system, Unilever Indonesia waited order from the headquarters before made a decisison. Slow internal consolidation for making a decision. Majority of Unilevers products have low entry barrier. Good economic stability, proved by Indonesias economic growth that reach 6.3%. This number is above some well-developed countries. Strong economic growth on non-Java region like Sumatera, Kalimantan, Sulawesi, and Papua.

Opportunities

High dependance of consumer on some consumer goods brands. This is reflected on consumer loyalty on some brands consumer goods products such as Pepsodent and Buavita.

Market potential is quite large; approximately 250 million people live in Indonesia. These people are attractive target market for consumer goods product.

High satisfaction of consumers, proved by Indonesia Customer Satisfaction Award (ICSA) 2010 and Indonesia Most Trusted Company Award 2010, both from SWA Sembada Magazine.

Threat Rising price of important commodities like palm oil, coconut-sugar, and petroleum based commodities as an impact of increase on oil price, chemical material, and other material. Instability of Rupiah value against foreign exchange. Bad infrastructure for public road, made it expensive to distribute products. Threat from energy supplies since inconsistent electricity supply from PLN. Threat from lower price subtitute products, from competitors products and also from Chinese knock-off.

PESTEL Analysis Political Environment Stability of politic in Indonesia is still in question. After reformation 1998, Indonesia has change president four times. However, after a period of leadership of Susilo Bambang Yudhoyono (2004-present), Indonesia has reached stability on economic and political climate. Coruption, colution, and nepotism case in government is declining. But, this practice still exists and become common norm when dealt with government. Economic Environment Economic growth in Indonesia is above average of South East Asia for year 2011. Indonesia growth rate topped 6.3%, while Singapore only reached 5.6%, and Vietnam 5.9% (Source: The Jakarta Post). Thus, this made Indonesia become an attractive destination for investment activities.

Gross Domestic Product (GDP) Indonesia has increase significantly into reached US$3000 per capita in 2010. Increased 28.8% from 2009 (Source: International Monetary Fund). Henceforth, purchasing power of society has increased significantly.

Socio-Cultural Environment Society conciousnes for healthy living is increasing. Thus, people tend buying personal healthcare product and toileteries more. Middle class is growing from year to year because GDP increase. The new middle class still in shock and awe about their condition. When they used in new middle class environment, they tend to spend more. Technological Environment IT spending on FMCG industry has risen significantly, especially in the area of e-business. This spending has an impact to brand image, cost saving, and quality of the products. Study shows that lack of technical capability in the R&D function, not sufficient funding to develop new products, and lateness to roll out a products prove may adversely impact its cash flow, turnover, profit margin, and affect reputation. Environtment Green living and eco-friendly product still popular, this trend tends become bigger from year to year. Deforestation and illegal logging in Indonesia become a polemic. This is a problem since a lot of company depended on Indonesia forest, which called the worlds lung. Law and Regulation Legal and judicial law in Indonesia is still not in mature state. For some law and regulation, Indonesia still uses old laws from dutch-colonial era. It gets worse, since coruption, colution, and nepotisme are common practice in court law. This could be a hazard and precaution for multi-national companies (MNCs) to do business activities in Indonesia.

Competitors PT. Kao Procter and Gamble Wings Group