Professional Documents
Culture Documents
Submitted to the Business School In partial fulfilment of the requirements for the degree of
Executive Summary
This report was formulated based on a case study about Unilever and its downturn in 2004. In order to identify the critical factors that affect the company performance, a internal analysis to identify the strengths and weaknesses and also a external analysis was carried to identify the opportunities and threats. In the third section reasons for Unilevers downturn in 2004 was evaluated. This was evaluated usi ng information about financial and other performance characteristics and also by using strategic management theories and strategies. The strategic moves of Unilever and Proctor and Gamble were identified in order to identify the best company which has the most effective strategic approach. Motives behind Proctor and Gambles acquisition of Gillette were discussed to identify the short-term and long-term benefits. And also the future of Unilever was evaluated to give several recommendations about the effectiveness of the courses of action of the company.
Acknowledgement
I take this opportunity to thank my Lecturer Mr. Marlon Gunasekara for the guidance given to complete this assignment in time. Lab Assistants, Librarians and others who have supported me in many ways are also given gratitude for providing me necessary support. I also wish to thank my parents and friends for all the support and kind assistance extended by them.
ii
Table of content
EXECUTIVE SUMMARY .................................................................................... I ACKNOWLEDGEMENT ................................................................................... II TABLE OF CONTENT ...................................................................................... III LIST OF TABLES .............................................................................................. VI LIST OF FIGURES .......................................................................................... VII LIST OF ABBREVIATIONS ............................................................................. IX CHAPTER ONE.................................................................................................... 1 INTRODUCTION ................................................................................................. 1 INTRODUCTION..................................................................................................... 2 CHAPTER TWO .................................................................................................. 3 ANALYSIS OF UNILEVER ................................................................................. 3 2.0 ANALYSIS OF UNILEVER ................................................................................. 4 2.1 CLIMATE ANALYSIS ........................................................................................ 4 2.1.1 PESTN Analysis ..................................................................................... 6 2.2 COMPETITOR ANALYSIS .................................................................................. 9 2.3 CUSTOMER ANALYSIS ................................................................................... 12 2.4 COMPANY ANALYSIS .................................................................................... 13 2.4.1 Product Portfolio Analysis ................................................................... 15 2.5 SWOT ANALYSIS ......................................................................................... 17 2.5.1 SWOT analysis ..................................................................................... 17 2.7 CRITICAL FACTOR ANALYSIS ........................................................................ 21
iii
CHAPTER THREE ............................................................................................ 23 REASONS BEHIND UNILEVERS DOWNTURN IN 2004 ............................ 23 3.1 FINANCIAL ................................................................................................... 24 3.1.1 Cross Trend Analysis ........................................................................... 26 3.1.2 Analysis on Shares ............................................................................... 29 3.2 NON-FINANCIAL ........................................................................................... 31 CHAPTER FOUR ............................................................................................... 34 STRATEGIC MOVES IN CAPTURING CONSUMER MARKETS............... 34 4.1UNILEVER ..................................................................................................... 35 4.2 PROCTOR AND GAMBLE ................................................................................ 37 CHAPTER FIVE ................................................................................................. 39 MOTIVES BEHIND ACQUISITION OF GILLETTE ..................................... 39 5.1 MOTIVES OF ACQUISITION OF GILLETTE ........................................................ 40 CHAPTER 06 ...................................................................................................... 42 EVALUATE FUTURE OF UNILEVER ............................................................ 42 6.0 EVALUATE FUTURE OF UNILEVER ...................................................... 43 8.0 REFERENCING AND BIBLIOGRAPHY ................................................... 45 9.0 APPENDICES ............................................................................................. 46 APPENDICES A PORTERS FIVE FORCES IN DIFFERENT ANGEL .... 46 APPENDICES B OTHER SWOT FACTORS OF UNILEVER ...................................... 47 APPENDICES C RATIO ANALYSIS ...................................................................... 48 APPENDICES D PROCESS OF TAKING STRATEGIES ............................................. 50
iv
List of Tables
Table 1: PESTN analysis ......................................................................................... 6 Table 2: Climatic Analysis (Weighted Average Factor Rating Method) ................... 8 Table 3: Competitor Analysis ................................................................................ 10 Table 4: Customer Analysis................................................................................... 12 Table 5: Company Analysis................................................................................... 14 Table 6: SWOT ..................................................................................................... 17 Table 7: Critical Unfavorable Factors .................................................................... 21 Table 8: Critical Factor Analysis - Unfavorable factors ......................................... 21 Table 9: Critical Favorable Factors ........................................................................ 22 Table 10: Critical Factor Analysis Favorable ...................................................... 22 Table 11: Strategies used by Unilever .................................................................... 35 Table 12: Strategies used by P&G ......................................................................... 37 Table 13: Benefits of Acquisition of Gillette ......................................................... 41
vi
List of Figures
Figure 1: Logo of Unilever ...................................................................................... 2 Figure 2: 4C Analysis (Kenichi Ohemae) ................................................................ 4 Figure 3: Business Environment .............................................................................. 5 Figure 4: Analysing the Global Environment ........................................................... 6 Figure 5: Porter's Five Forces .................................................................................. 9 Figure 6: AIDA Model .......................................................................................... 12 Figure 7: Stage of Brands in PLC - Unilever ......................................................... 13 Figure 8: GE Matrix for Unilever .......................................................................... 15 Figure 9: GE Matrix for P&G ................................................................................ 16 Figure 10: SWOT Analysis ................................................................................... 17 Figure 11: Advertising and Promotion Expenditure ............................................... 24 Figure 12: Group Turnover of Unilever ................................................................. 24 Figure 13: Net Profit Growth ................................................................................. 25 Figure 14: Sales Growth & Operating Profit in Unilever - According to Unilever .. 25 Figure 15: Total Assets.......................................................................................... 26 Figure 16: Quick Ratio .......................................................................................... 26 Figure 17: Current Ratio ........................................................................................ 27 Figure 18: Asset to Sales Ratio .............................................................................. 27 Figure 19: ROI and Net Profit Ratios..................................................................... 28 Figure 20: Profit Margins in Unilever .................................................................... 28 Figure 21: Trend Analysis ..................................................................................... 29 Figure 22: Market Capitalization ........................................................................... 29 Figure 23: Total Shareholder Return ...................................................................... 30 Figure 24: Reduction of Shares in the Market ........................................................ 30
vii
Figure 25: BCG Matrix for Unilever...................................................................... 31 Figure 26: Balance Scorecard Approach ................................................................ 32 Figure 27: Value Chain Analysis ........................................................................... 33
viii
List of abbreviations
FMCG SWOT MNC PESTN AIDA PLC GE CFA P&G ASR ROI BCG Fast Moving Consumer Goods Strengths, weaknesses, opportunities, and threats Multi National Company Political, economical, social, technological and natural Attention, Interest, Desire and action Product Life Cycle General Electric Critical Factor Analysis Proctor and Gamble Asset to sales ratio Return on Investment Boston Consulting Group
ix
Introduction
Unilever was incorporated in late 1930s as a simple merger of soap and margarine. However as a result of business success today Unilever operates in over hundred countries with more than 174000 employees under its management. Also the success has helped the company to have a strong brand portfolio of over 400 brands with two global divisions namely Foods and Home & Personal which comes under FMCG industry. The main success factor of the company is that, Unilevers constant focus on innovative product developments.
Figure 1: Logo of Unilever Mission of the company Our mission is to add Vitality to life. We meet everyday needs for nutrition; hygiene and personal care with brands that help people looks good, feel and get more out of life.
Corporate purpose of the company The corporate purpose of Unilever states that the only way to achieve sustainable growth and long-term value creation is to adopt the highest standards of corporate behaviour towards all their stakeholders. It further states that to succeed it requires the highest standards of corporate behaviour towards everyone they work with, the communities they touch, and the environment on which they have an impact. (Source: www.unilever.com)
Company
Climat e
(Products)
Climat e Strategic Analysis of the Business Environment
Customer
(Markets)
Competitor
(Industry)
Climat e
Figure 2: 4C Analysis (Kenichi Ohemae) 4C model is one of the most effective methods that can be utilized for analysing the internal and external environments out of which opportunities; threats, weaknesses and strengths can be identified. Along with the SWOT analysis of Unilever, critical factors of each phenomenon have to be identified.
GLOBAL ENVIRONMENT
SOCIAL ENV.
Figure 3: Business Environment In Unilever, the external environmental analysis would be carried out first where the global, social and task environments are looked in to.
CONTROLLABLE
EXTERNAL ENV.
2.1.1 PESTN Analysis The global environment explained in the above figure will be discussed here. P P N E
T T
S S
Figure 4: Analysing the Global Environment Table 1: PESTN analysis POLITICAL global peace situation was not that stable corporate taxes were high around the glob Labor related restrictions and tough laws. consumer protection laws were really strong there were many trade agreements further liberalization of economies
ECONOMICAL there was still the effects of world recession even though it was at the recovery stage Accelerating Inflation of the world economy ( Prices will increase) reduced purchasing power parity ( directly affect to sales) many countries faced low GDP and less economic growth since economies trying to recover, its a good sign exchange rate issues improved globalization and urbanization ( course for high demand)
increase in woman work force ( course for high demand) Openness and Liberalization. country risk trends have been going down
SOCIAL
acceptance of fast foods concern on diet foods & low fat products concern on environmental friendly products social awareness of products ( slim products - customers has decided to not to use them and to exercise instead) many ethnic groups who have separate wants and Unilever could targets them separately
TECHNICAL
UNILEVER always grasp new technology and improves the efficiency safety and design through technology trustworthy researches done trusted products could be delivered technologies always costs
NATURAL
Based on the understanding of the above PESTN factors, the following Climatic Analysis is carried out.
Table 2: Climatic Analysis (Weighted Average Factor Rating Method) Factor Weight Likert scale Score Unfavorable Favorable 1 2 3 4 5 5 5 2 3 4 4 3 4 5 4 3 2 3 4 4 3 4 5 4 3 37 Weighted score 1 0.1 0.75 0.2 0.4 0.15 0.2 0.5 0.4 0.15 3.85
1. Political 2. Legal 3. Economic 4. Financial 5. Social 6. Cultural 7. Demographic 8. Technological 9. Technical 10. Natural Overall score
Table 3: Competitor Analysis Factor Weight Likert scale Unfavorable Favorable 1 2 3 4 5 4 5 4 5 3 Score Weighted score
competition with industry number of firms in industry strengths of the leading firms Market size and growth rate Exit Barriers creativity and innovative drive Sub total Threat of Substitutes Number of substitutes Closeness of the substitute Strength of the substitute Buyers favorable attitude PLC of the industry product Sub total Bargaining Power of Buyer Number of buyers / users Switching cost to the buyer Fragmentation of buyers Significance of the product Strength of the buyer Sub total
4 5 4 5 3 21 1 2 2 3 5 13
0.2 0.5 0.32 0.25 0.36 1.63 0.02 0.1 0.08 0.06 0.1 0.36
10
Bargaining Power of Supplier Concentration of suppliers Significance of switching costs Importance of raw materials Number of competitive suppliers Extent of supplier Fragmentation Sub total Threat of New Entrance Attractiveness of the market Extent of Brand Loyalty Entry and operating cost Patent protection Strength of the new entrant Sub total
10%
1% 3% 3% 2% 1% 1 2 3
4 4
4 4 3 2 1 14
Grand Total
100%
87
3.64
11
Market size Level of market saturation market growth rate market profitability market trends and discontinuities customer expectations level of familiarity Level of Favorability Level of Satisfaction Loyalty status Overall score
When regarding Customers as a main factor, considering AIDA model is of vital advantage. According to above facts level of familiarity is 0.25. However getting attention of customers, make customers interest on products and make desire within them is also important in keeping and grabbing customers. The ultimate motive is to have loyal customers which were recognized as high (0.25) in Unilever.
12
Introductory Stage
Growth Stage
Maturity Stage
Decline Stage
Time
Figure 7: Stage of Brands in PLC - Unilever Above PLC exhibit the Unilever position in relation to brand and its maturity in its lifecycle. It presents an idea of Unilever. However in order to maintain the company, brands and market; following analysis has to be carried-out.
The analysis is based on individual factor analysis which is vital in preparation of this analysis.
13
Table 5: Company Analysis Weight Factor Leadership Culture Structure System Physical Resources Financial Resources Location People Policies
Procedures
Score
Weighted score
Overall Score
4 4 3 2 4 4 5 5 4 3 38
0.8 0.4 0.27 0.14 0.6 0.6 0.3 0.45 0.16 0.15 3.87
14
H i g h
Business Strength
M e d I u m
L o w
15
High
Low
H i g h
Business Strength
M e d I u m
L o w
16
Internal
Strengths
Opportunities
S O
Weaknesses
W T
Threats
Strengths
Figure 10: SWOT Analysis SWOT analysis of Unilever could be carried out from the results gained by the previous analysis conducted. 2.5.1 SWOT analysis Table 6: SWOT Type Strengths Market size Unilever posses 40-45% of market share over its operating countries by 2004 (compared to P&G). This makes it is one of the leaders in the industry. Only P&G is the possible competitor to the Unilever. Thus the market share of Unilever considered being one of its main strengths. Its being identified in above analysis as well. Level of familiarity Familiarity of Unilever products is really high. Sometimes consumers dont know it is Unilever, yet it is known as its sub brand or the brand category. This way the product familiarity is high and many people in the world uses at least one product of them daily. Description
External
17
Brand loyalty and loyalty status of Unilever consumers are also high. Many users of those products do not change their brand. Especially products like personal care are not subjected to be switching behaviour. Thus this turns to be strength.
The Company has more than 400 brands which operate under two main divisions, Food and Home & personal care. As mentioned in the case study each division has separate strengths. According to the case, Bestfoods is capable of offering different tailor made products to different markets where as Knorr is the widespread brand in Unilever.
Case study reveals that in top 100 managers, there are 33 nationalities. Even there are five nationalities in executive board. The composition of the top management also represents 50% out of developing nations and 40% of women. This is a strength as this diversify staff may have better understanding on their regions and areas. Weaknesses
According to the case, the causes bashing downfall of sales in 2002 was the structure of the company. The team of top management and officers count to be 40 with two heads from parent companies which ultimately resulted in added cost of maintaining them and non focused goals for the company.
Poor Performance
Although company performance was good, there were some brands which was not doing that well in the market which were supposed to perform fine. According to case study, even though the set target was 10%, some of leading brands only could attain 4-5%.
18
Unilever comprises of several brands which consist of contradictory brands resulting duplication of effort and money. Becel and Flora are such competing margarine products that Unilever has.
High cost
Even though Unilever has 1600 brands, only core (400) brands gain 90% of sales. Thus the advertising and other expenditure is wasted on other 1200 products where as the return was only 10% of total income. Opportunities
The globalization and urbanization lead to separate lifestyles which open market to the companies like Unilever to target on. Therefore the common and high needs such as instant foods can be introduced to the market.
Linearization of economies has been an advantage to MNCs. Therefore Unilever can enter in to such countries with economic liberalisation. Trade agreements also assist companies to enter in to other new markets that direct access is prohibited. Thus this would count as an opportunity to Unilever.
The world is experiencing increase in women workforce. Though it leads to some social issues, it is an opportunity for Unilever as they can fill some gaps created by this new trend. Fast food is such product successfully implemented to fulfil this gap. Threats
Competition
Competition is one of the main threats that many companies would have to face. Unilever has to face huge competition as its competitor is very strong. Further more Unilever has many other sub competitors who provide substitutes to their products and the closeness of such products are also high.
19
New entrance
The only direct competitor for Unilever is P&G. since both are giant companies. Entrance to the industry is much harder. Yet there is a possibility that new entrance may come as just a product. For instance, Knorr is well established soup cube. There may be a new entrance with the same product to the market.
Social awareness of products is being increasing. Customers are also information seeking. Therefore the market is well informed about products. Hence customers know what is really happening. That is the reason that case explains about customers going away from meal replacements and embracing exercising and healthy diets.
Economic situation
The economy was under recession in the given time period. The inflation was rising and Purchasing Power of customers has been decreasing. Thus the sales of the products will be affected. Household items will not be affected as those are daily consumed produces. However personal care products would be affected by this recession. Thus the company has to prepare for facing this challenge and to overcome it.
20
Economic Social strengths of the leading firms Closeness of the substitute Strength of the buyer Significance of switching costs
3 5 5 4 4 4
These factors are the most dangerous factors that are faced by Unilever. Unless these factors are considered critical and strategise on those to overcome threats, Unilever will be unsuccessful in future. Thus a critical factor analysis (CFA) is carried out. Table 8: Critical Factor Analysis - Unfavorable factors
Factor weight Score Weight score
Economic Social strengths of the leading firms Closeness of the substitute Strength of the buyer Significance of switching costs
3 5 5 4 4 4
Out of those Economic situations, Social status and Closeness of the substitutes are the most critical factors that Unilever faces.
21
However there are factors upon which Unilever must capitalize and to gain more success. Table 9: Critical Favorable Factors
Factor weight Score
Leadership market trends and discontinuities Physical Resources customer expectations Financial Resources creativity and innovative drive Technical Culture People Entry and operating cost Attractiveness of the market
4 5 5 4 3 2 5 4 4 5 4
As it is mentioned these must be capitalize in gaining the market, thus a CFA is carried out. Table 10: Critical Factor Analysis Favorable
Factor weight Score Weight score
Leadership market trends and discontinuities Physical Resources customer expectations Financial Resources creativity and innovative drive Technical Culture People Entry and operating cost Attractiveness of the market
4 5 5 4 3 2 5 4 4 5 4
0.4 0.35 0.25 0.48 0.27 0.16 0.35 0.32 0.48 0.5 0.48
4.04
As a result Leadership, Customer expectations, People and Attractiveness of the market has been identified as Critical factors. Thus strategies must be laid on enhancing those strengths and minimizing the threats identified in Table 8. 22
23
3.1 Financial
Unilever was enduring severe competition by its main competitor P&G through price war in laundry and personal care sector in India and Europe. However the threat of loosing market share was conquered in 2004 at the cost of promotion. Thus profitability reduced drastically.
(Source: 165821.pdf)
http://www.unilever.com/images/ir_Charts%201998%202008_tcm13-
As a result profitability fell up to 16%. According to information provided in the case study; profitability of Unilever can be illustrated as follows.
Group Trunover
60000 50000 40000 30000 20000 10000 0 2000 2001 unilever 2002 P&G 2003
24
Figure 13: Net Profit Growth Above graphs explains that the Unilever has been performing well, yet the trend exhibit a reduction of sales. Thus it can be predicted that the sales of 2004 will be reduced (figures are not given in case study). Following is the real sales drop in 2004. Sales Growth Operating Profit
(Source: http://www.unilever.com/images/ir_Charts%201998%202008_tcm13165821.pdf) Figure 14: Sales Growth & Operating Profit in Unilever - According to Unilever
25
3.1.1 Cross Trend Analysis When compared to Unilever with P&G, Unilever is lagging in many areas during 2004. For instance Unilever has experience reduction of total assets, quick ratio, Current ratio and Asset to sales ratios. Those will be demonstrated in following graphs.
Total Assests
unilever 57472 52766 44598 40776 34366 34387 43706 37968 P&G
2000
2001
2002
2003
Quick Ratio
80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 2000 2001 Unilever 2002 P&G 2003
26
Reduction of quick ration affects companys liquidity. Thus Unilever has faced liquidity issues in this time and this also counted in reduction of profit.
Current Ratio
1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 2000 2001 Unilever 2002 P&G 2003
Figure 17: Current Ratio The current ratio is also getting reduced with the time which leads Unilever from preventing meeting its short term obligations. Hence this also can be recognized as a factor for a low profit. Asset to sales ratio (ASR) stands for efficiency of
Unilever
P&G
27
ROI
0.14 0.12 0.1 0.08 0.06 0.04 0.02 0 2000 2001 Unilever 2002 P&G 2003
Unilever
Figure 19: ROI and Net Profit Ratios According to facts provided in the case ROI and Net profit ratio seems to be mounting, yet when comparing to 2004 figures, the trend is deviating to unfavourable area. With the downturn exhibit in Figure 19 and 13; ROI and Net Profit Ratio gets reduced.
28
The following Trend analysis exhibit the increment of ratios in 2003. However all these figures present unfavorable figures in 2004 with the downturn of Unilever.
2002
Figure 21: Trend Analysis 3.1.2 Analysis on Shares Unilever was experiencing dramatic reduction in market capitalization. This was mainly because of the reduction of the return on shares in the market. All ratios are available in the Appendix C.
29
(Source: http://www.unilever.com/images/ir_Charts%201998%202008_tcm13165821.pdf) Figure 23: Total Shareholder Return The downturn of returns from 2003 to 2003 caused the reduction of shares in the market
(Source: http://www.unilever.com/investorrelations/share_price/default.aspx)
Figure 24: Reduction of Shares in the Market Thus the share base of Unilever affected in 2004, this could be considered as one of the main factors that geared the downturn in Unilever in 2004. 30
3.2 Non-Financial
The portfolio of Unilever comprise with 1600 brands which couldnt be handled efficiently. This itself adds cost to company. However in identifying this inefficiency, Unilever reduced its brand portfolio to 400. This conversation cost and customer attitude on this reduction may affect its sales. This was backed by the case as it mentions that t he Unilever is boxed itself with too many targets which cold cause 0% growth instead of anticipated 3%. Thus an initial change was needed. Another factor that caused inefficiency and losses is the structure inherited. Mr. FitzGerald also accepts that the strategy was not delivered due to unwieldy structure. Simultaneously, the cost of structure was also a burden. Dual chairmanship and high number of senior managers also a burden to Unilever. Another obvious factor about Unilever is their cash cows. In the BCG matrix analysis, cash cows were identified as follows.
31
Those brands are of importance for the identification of the brand by customers and it makes money too. However cash-cows consume some additional cost and reducing profit margins due to not-expanding. This was one of the main causes for the downturn in 2004. Moreover, by that time Unilever possessed about 1200 dogs. Those were also a burden to company which counted in 2004 downturn. In GE matrix (Figure 8) there were some brands which have less attractiveness and less business strengths. Continuing those brands with less return is completely burden to Unilever. (e.g.: Cif) When evaluating the downturn of Unilever, Balance scorecard approach is also vital. Financial aspects under this method were discussed in earlier chapter and were identified to be reasons for the downturn. However non-financial factors would be discussed in this chapter.
(Source: http://www.avisys.co.in/bsc.html) Figure 26: Balance Scorecard Approach With the support of the case study, it can be identified that Unilever is adopting internal business process and learning strategies after it faces the downturn. Nevertheless Unilever could adopt these approaches with proactive approach and gain the 3% growth that is mentioned by Mr. Cescau. 32
Unilever is a worldwide organization that integrates the functions to one value added process. In meeting customer needs, Unilever tends to follow both international and local operations that would lead to better progress. This way Unilever could achieve both local and international values. Creation of value is the path to growth where all Unilever brands were treated in terms of productivity and operations. However the application of this was not present prior to 2004. And also the supply chain can be narrowed down in order to achieve more growth.
33
34
4.1Unilever
Since Unilever experienced downturn in 2004, company took measures for gaining its position back. After going through evaluation process (appendix D) Unilever has revolutionized many of its strategies. Table 11: Strategies used by Unilever UNILEVER
Strategy
Refocusing on Main 200 Brands
Description
When realized that being too broad is costly, Unilever decides to focus on the core brands which accounted for 90% of its sales. This is wise as the expenditure on other 1000 brands is a waste due to fewer returns. However due to this change more advertising could be done on main brands and could be gain high profits and margins
This is a decision of vast importance that a company would rarely take. The decision leads to save a lot of money that were spent on gaining 10% of total revenue. However this may bring in some black point to Unilever.
Acquisition of BestFood
Unilever's Main focus was to narrow down its brands, at a glance, the acquisition of Bestfoods seems like expanding. However motive behind this actuation is not to expand but to welcome some well-known brands such as Hellmanns and Ragu. The acquisition maintains the narrow focus of Unilever and strengthen brand portfolio. This merger did not open markets to Unilever as these markets were the markets that were Unilever operating in. but many tax advantages could be gained through this.
35
Using the money gained from closing down these factories, plant facilities of Asia and Lathing America could be increased where sales are maximum. This was very effective as it is identified earlier Unilever had less assets and reduced liquidity at this time.
Even though both parent companies act alike, those were two different companies. Thus issues arise. Strategies were also hampered in delivering as the structure was improper. Thus this merger would reduce structural issues.
Dual chairmanship is also an issue as decision makings is some wt difficult. Moreover its costly to Unilever. Thus it will be replaced by a chief chairman and a non-executive chairman who would be more convenient for decision making.
While these strategies were adopted by Unilever, P&G is also adhering for some strategies. The strategies of P&G were adopted by carrying out its SWOT analysis (Appendix E). Those strategies are shown below.
36
37
One of the other factors used by Unilever is to reduce brands where as P&G tends to increase its day by day. Although these strategies are contradictory, it works well in both organizations, basically due to strong leadership.
38
39
40
Table 13: Benefits of Acquisition of Gillette Short Term Benefits Long Term Benefits Cost savings Availability of new markets Knowledge acquisition Expanding business contacts New distribution Channels (Gillette's) Product development Easy access to the business sector Shard risk Due to above mentioned motives and benefits, acquisition of Gillette position P&G in a supreme state. However this acquisition turned P&G the market leader.
41
42
current strategy of Unilever can be implemented in a way that the company can achieve more profits.
44
(Gunasekara. M (2009).)
46
47
Unilever
2002 2001 2000 2003
P&G
2002 2001 2000
0.132191 6.47%
0.089015 4.43%
0.056845 3.26%
0.03621 2.22%
0.118656 12.61%
0.106729 11.96%
0.084974 10.82%
0.103157 7.45%
48
Equity Ratio Acid Test Ratio Days Sales Uncollected Debt Ratio Return on Common Equity Return on Equity
14.45%
49
Strategic Direction
Strategic Direction
Strategic Analysis
SWOT Strategy Formulation Critical SWOT factor Strategy Evaluation and Selection Strategy Implementation
Corporate Level
SAFE MODEL
(Gunasekara. M (2009).) 50
51