Value Chain Model for Analyzing Internal Environment of Unilever

This study explores the importance of the value chain model in analyzing the internal environment of Unilever. It discusses the primary and secondary activities of the company and identifies its strengths, weaknesses, opportunities, and threats. The value chain model helps Unilever in taking competitive advantages and becoming a market leader.

Business Environment

Table of Contents
Table of Contents...........................................................................................................................2
INTRODUCTION...........................................................................................................................3
Value chain model proposed by Porter.......................................................................................3
Background of Unilever..............................................................................................................4
Value chain model for examining internal environment.............................................................5
Reflection of usefulness of value chain model...........................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Business environment has made up of internal and external factors that impacts on the
performance of an organization in both positive and in a negative manner (Deasy and et.al.,
2016). This study is based on Unilever consumer goods company. This study is going to show
some importance of value chain model which helps the company in creating value for its
customers and taking competitive advantages. Further, it will also show some internal
environmental factors such as company's own strengths, weaknesses which are being analysed
with the help of value chain model. By identifying all factors and their impacts, company make
some changes in its strategies accordingly.
Value chain model proposed by Porter
Value chain model is mainly focused on transformation process of input into output by
making up sub systems and making this critical process easier. By implementing this model
suggested by Porter, company can add value and control all activities like maintaining balance
between demand and supply to reduce cost. For transformation process and changing input into
output all organizations including Unilever requires to have effective resources such as: Labour,
money, materials, equipments etc. The main aim of value chain model is to increase quality of
production process and determining costs which affects profits. According to Porter (1985), there
are some primary activities by which Unilever can make its production process easy and
effective such as:
Inbound logistic: It includes all those activities which is related to receive and store
inputs. For making this function successful, company tries to maintain an effective relationship
with suppliers.
Operations: It includes all those activities which help the company in transforming raw
materials or inputs into final products.
Outbound logistics: It includes all activities which are being performed by manager to
collect, store as well as distribute output.

Marketing and sales: After producing effective products, it is important to make aware
to customers about products. So, it includes all those activities by which marketer introduce
products and features to customers (Simatupang, Piboonrungroj and Williams, 2017).
Services: It includes all those activities which are required to keep products and service
working effectively after selling products to customers.
Secondary activities
Procurement: It refers acquisition and receive of raw materials or inputs or resources.
HRM: HRM consists of all activities which are related to employees like hiring,
recruiting, training, motivation, compensation and termination if required.
Technological development: It is all related to technologies such as hardware, software,
technical knowledge and processes given to employees and brought by hiring skilled workforce.
Infrastructure: It includes all resources and activities which supports an organization in
smoothing functions and activities and also prevents them from lawsuits and problems. For
example: finance, planning, legal, accounting, governmental relations etc.
So, from the above discussed activities and model it can be said that, Unilever can
analyse important activities and by giving prioritizing to them it can save time and cost of the
production process. By analysing importance activities and performing them it can take
competitive advantages and also become the market leader. This model helps companies in
breaking down organization's activities for making appropriate changes (Lindgren, 2016).
Background of Unilever
Unilever is a British Dutch transnational consumer goods company whose headquarter is
in London, UK. This company was founded by William Lever in the year of 1929. It has
varieties of products which is being offered across worldwide as it offers food and beverages,
cleaning products, beauty and personal care products. It is considered as the Europe's 7th most
valuable company (Bourgeois and et.al., 2017). It is the most popular retail as it is the oldest
multinational and expanded its business to serve across 190 countries. It owns approximate 410
brands and generated revenue of approximate 53.7 Billion euros in the year of 2017. It is a dual
listed company and both companies operate as a single company having one board of director.
The main speciality and characteristics which males it able to take competitive advantages is it

has an effective technical staff which helps it out in getting relevant data by research and
development. Its facilities related to research and development has in the UK, Netherlands, India
and China. It is a primary listed on London stock exchange. Today it is one of the largest retailer
having approximate 163,000 employees. In the strategic context and sustainability it is stated that
it has reduced Carbon intensity of its energy use up to approximate 39% between the year of
1995 and 2010. It uses several effective strategies which makes it able to attract wider range of
customers by analysing all factors and their impacts (Murphy and Murphy, 2018). It also makes
an effective use of Porter's 5 forces analysis model which helps it out in analysing its actual
position in the market and intensity of the competition in the industry in which it operates. It has
several strengths which also makes it able to become the market leader and having a great image
in the eyes of customers.
Value chain model for examining internal environment
With the help of Porter value chain model an organization can analyse its all environmental
factors and analyse all those factors with the main aim of taking competitive advantages. Internal
environmental factors includes company’s strengths, weaknesses, opportunities and threats
which all are either related to primary activities of porter’s value chain or with the secondary
activities (McMurrian and Matulich, 2016). Internal environmental analysis is the first step of
scanning. Some internal environment which company can analyse with the help of value chain
model is employees interaction and relationship with other employees and their colleagues,
managers, and manager’s interaction with suppliers, customers etc.
Some internal factors which are being identified are:
Strengths: The main strength of Unilever is it has increased selling and marketing
activities efficiencies and expenses by approximate 12.5% to rp6.6 trillion and it shows that it
has given priority to primary function of marketing and sales as per the value chain model. It has
diversified products range by which it has taken distinct competitive advantage over its nearest
and important competitor: proctor and Gambler and the main reason were its effective and
flexible pricing. This strength also shows that it has made tremendous growth and has taken
competitive advantages on the basis of cost which is the primary benefit and importance of
porter’s value chain model.
Weaknesses: The main weakness of this company is it has no direct connection with its
customers which can become the reason of decreased sales. This weakness shows that it needs to

more focus on marketing function or primary function as per the porter’s value chain model. It
has made growth in marketing but still there are some customers who feel that it does not contact
with them directly and it is also being analysed by VCM.
Opportunities: The main opportunity is it can attract wider range of customers as it
continuous focus on innovation and research and development. This opportunity is also being
analysed by dividing functions into 2 parts. As per the porter’s value chain model technology and
research and development is secondary activity in which it performed excellent job. It has also
analysed that its customers are more satisfied than other competitors as they are loyal and stay
with this company and it happened because of its flexible pricing (Prajogo, Oke and Olhager,
2016).
Threats: There are several substitute products in the market which have same features
and which can decrease its sales. This analyse shows that it needs to more focus on infrastructure
and technological secondary functions as per the Porter’s 5value chain model. Governmental
laws and regulations are also challenging and the big threat for this company which put pressure
on it to make changes in its strategies.
Here are some activities of Unilever as per the Porter’s value chain model:
Primary activities:
Inbound logistic: It is stated that Unilever has string relations with its suppliers which
helps it out in getting storing and distributing products. For making this activity successful it
requires to focus on every aspect of transformation of raw materials into finished goods in
efficient manner.
Operations: It is stared that Unilever is ready to process its input into output. It mainly
focuses on machining, packaging testing etc. It believes that this is the most important function
as it can help it out in taking competitive advantages.
Outbound logistic: It includes activities of delivering products to customers with the
help of different intermediaries. For this, it focuses on material handling, warehousing,
transporting and delivering products to customers by hiring great suppliers.
Marketing and sales: Unilever consider this function important and for this, it focuses
on promotional activities, pricing, channel distribution. Its pricing strategy is the main key of its
success of the business and its function as well.
Supportive functions

Firm infrastructure: This function of Unilever include: quality management, financing,
planning and strategic management. Controlling of this activity is in the hand of Unilever.
HRM: Unilever is expertise in this function as it recruits, select, provide training and
motivation to employees effectively. It is secondary function but Unilever consider it primary
and most important function.
Technological development: It has not skilled workforce in technological which is the
main weakness of this company. So, it needs to use advanced technology for taking competitive
advantages.
So, from the above it can be said that Porter’s value chain model and division of
functions help this company in analysing all internal factors and its own strengths and
weaknesses (Mårtensson and Westerberg, 2016). It has also suggested this company about
improvement in which it is not good and in which activity it requires to focus more.
Reflection of usefulness of value chain model
In the context of value chain model i can say that it is an effective and useful model that is
beneficial for all sizes of company. With the help of this model, companies can take
competitive advantages as they are required to divide their functions into primary and
secondary section as per the importance and priorities. For example: as per the porter’s
value chain model there are total 9 functions which each company has to perform. In all
those function 5 functions are being divided and categorized in primary function such as:
inbound logistic, outbound logistic, operations, marketing and services. On the other hand
some activities are being categorized into secondary activities which include: HRM,
technological development and infrastructure. The main aim of dividing all functions into
2 parts is to make the company and employees aware about the importance of some
activities. It makes them aware and allows them to complete and perform primary activities
rather secondary. I believe that value chain model not only divides function into categories
but also helps company in analysing its internal environment and identify its own
strengths, weaknesses, opportunities and threats by which it can make the market leader
and can also take competitive advantages opportunity (Shurkina and et.al., 2015).

In addition, I can also say that value chain analysis model has several benefits which
include: company can identify customers’ value creating activities and those activities of
the company which gives value to its potential customers. By getting this information, it
can make itself able to focus on all those activities and satisfy customers needs and
demands. Company can also compete on the basis of cost as well as also analyse sources of
costs. By focusing on all activities and allotting one specialize to each activity, company
can boost profits and increase revenue which directly impacts on its brand image and
reputation. It also makes employees able to make an effective products planning, research
and development. By dividing functions into categories, employees get to know that what
they need to do actually and in which activity. They do not get confused and perform each
activity with concentration (Ho and et.al., 2018). I can also say that with the help of value
chain model and analysing all internal factors, company can make itself able to better
manage and track in service products configuration changes by making an effective
coordination among field service and customer support. This post sale services increase
loyalty and trust of customers and they are more likely to stay with the company.
CONCLUSION
From the above study it has been summarized that value chain model played a vital role
as it helped out companies in taking competitive advantages. As per the porter's value chain
model, companies identified primary and secondary activities of its business that helped out them
in converting its inputs into outputs in an efficient manner. Further, it has also shown its
importance as it supported an organization in analysing its internal environmental factors. By
analysing internal environmental factors it examines its actual position in the market and its
strengths by which it takes competitive advantages.

REFERENCES
Books & Journals
Bourgeois III, L.J. and et.al., 2017. Ben & Jerry's and Unilever: The Bohemian and the
Behemoth. Darden Business Publishing Cases, pp.1-11.
Deasy, S. and et.al., 2016. Controlling use of a business environment on a mobile device. U.S.
Patent 9,247,042.
Ho, K.L.P. and et.al., 2018. Exploring market orientation, innovation, and financial performance
in agricultural value chains in emerging economies. Journal of Innovation &
Knowledge. 3(3). pp.154-163.
Lindgren, P., 2016. The business model ecosystem. Journal of Multi Business Model Innovation
and Technology. 4(2). pp.1-50.
Mårtensson, K. and Westerberg, K., 2016. Corporate environmental strategies towards
sustainable development. Business Strategy and the Environment. 25(1). pp.1-9.
McMurrian, R.C. and Matulich, E., 2016. Building customer value and profitability with
business ethics. Journal of Business & Economics Research (JBER). 14(3). pp.83-90.
Murphy, P.E. and Murphy, C.E., 2018. Sustainable Living: Unilever. In Progressive Business
Models (pp. 263-286). Palgrave Macmillan, Cham.
Prajogo, D., Oke, A. and Olhager, J., 2016. Supply chain processes: Linking supply logistics
integration, supply performance, lean processes and competitive performance.
International Journal of Operations & Production Management. 36(2). pp.220-238.
Shurkina, E.Y. and et.al., 2015. Designing a model of interaction of economic resources in the
quantization conditions of economic area. Mediterranean Journal of Social Sciences.
6(2 S3). p.129.
Simatupang, T.M., Piboonrungroj, P. and Williams, S.J., 2017. The emergence of value chain
thinking. International Journal of value chain management. 8(1). pp.40-57.
Online

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https://www.ifm.eng.cam.ac.uk/research/dstools/value-chain-/>