Table of Contents INTRODUCTION..........................................................................................................................1 TASK 1............................................................................................................................................1 PESTLE Analysis to assess potential scenarios for your organisation......................................1 Identifying the organisational capabilities by using appropriate frameworks............................3 Five Forces model to analyse the competitive environment......................................................4 SWOT analysis of Unilever........................................................................................................5 TASK 2............................................................................................................................................6 Evaluation of strategic directions available to Unilever.............................................................7 Justification and recommendation of growth strategies..............................................................8 Strategic management plan.........................................................................................................8 CONCLUSION................................................................................................................................9 REFERENCES..............................................................................................................................10
INTRODUCTION Business strategy comprises of long range sketch of desired direction and destination of organisation.Itcanbeunderstoodascourseofactionwhichhelpsanorganisationin achievement of its specific business objectives. It plays an major role in planning, environmental research and inexamining organisational strength and weaknesses. This report is based on Unilever which is a British Dutchtransnational consumer goods company. Its products include food and beverage, cleaning agent, beauty product and personal care products. This report will analyse theimpact and influence of business strategy on Unilever. It will also examine the organisational internal environment in relation to the organisational capabilities through SWOT and organisational external environmentthrough PESTEL analysis. For analysing competitive environment porter five force model is used in this report. Then the last part of the report will use appropriate theories and concepts to analyse strategic direction. TASK 1 PESTLE Analysis to assess potential scenarios for your organisation. PESTLE analysis is a tool to used by companies to take decisions by analysing how much external factors are affecting it. It consist of political, economical, social,technological, environmental and legal factors(Akter and et. al., 2016). Unilever UK's consumer good company also apply this tool to their company for knowing about the impact of these external factors-: ï‚·Political-this factor helps to know about the impact of government intervention in the company. Unilever is working in different countries and every country's political factor affect the company. Like companyhad some regulatory restriction by food and drug administration in USA but this impacted Unilever completely by putting restrictions on imports & exports for so many countries. This restrictions has reduced the sale of the company as well as the revenue. ï‚·Economical-these factors include inflation rate, exchange rate, economic growth rate, unemployment rate etc. In case of Unilever, inflation rate of UK has been reduced which lowers down the purchasing power of its people and now it is affecting the business of Unilever becauseit has reduced the sale of the company by increasing the price of the product. 1
ï‚·Social-this factor is about how the consumer behaviour, culture, attitude,education level etc.affect the company. Now days people are getting much more conscious about their beauty and skin, they prefer to use those products which make them look good and feel good. This social factor impacted the company and they took a decision to make products which is in demand by the customers & which make them satisfied. This has increased the demand of their product as well as the sale of the company. This factor has positive impact on company because it make them bring something new in its product which attract customers more(Bansal and DesJardine, 2014). ï‚·Technological-this is the factor related to technology and how it is impacting the company. Technology automation has a good effect on company because it is making them more competitive to their competitors. Unilever has higher level of automation which help them in supplying their products to the store very quickly. It save their time and reduces their unwanted expenses. Technological development also help them to sale their products online which is a good method for the company to increase its sale and revenue. ï‚·Legal-these are the factor which comprises health and safety law, employment law, copyright, patent, discrimination law etc. Unilever is working in different areas in different countries which make it hard for company to follow the laws. So this factor is impacting company not in a good way. Like when they want do bring something new or advancement into their production process they need to have a regulatory approval which in return delay decision making as well as business growth because it takes a long time for approval. ï‚·Environmental-this factor means climatic condition, weather condition and whole surrounding. It is affecting company in a good way because Unilever is producing safe and eco friendly products for customers. They are using this method for packaging also by using renewable resources in it. Company has been promoting sustainable and renewable resources in making their products because of which it is able to increase its sale and attract more customers as people are becoming more environment friendly these days. 2
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Identifying the organisational capabilities by using appropriate frameworks VRIO Model It is an tool which is being used by different organisation to identify and analyse its internal resources in comparison to its capabilities. It is designed to help organisation uncover and protect the resources and capabilities that have the ability to give them a long term competitive advantage. The term VRIO stands for value, rarity, imitability and organisation. These terms can be further elaborated below: ï‚·Valuable: This step help in finding that whether a particular resource will be valuable or will it be able to add value to firm in future by exploring different opportunities while defendingthreats.IftheresourcesofUnileverarevaluablethentheywillhelp organisation to get benefit which will help organisation in gaining competitive edge over other competitors(Cavusgil and et. al., 2014).It is important for organisation to continually review the value of resources because constantly changing environment can harm them. It may decrease their value over time. ï‚·Rare: Resources which can only be acquired by few companies are referred to as rare resources.Rareresourcesgrantcompetitiveadvantagetotheorganisation.The competitive advantage they provide are valuable and it normally sustains for a shorter duration of time. As rivalry will immediately try to imitate the resources and by using identical resources they will try to hamper the organisations superior performance. Firm should not neglect the resources that are valuable because losing valuable resources would effect an organisation as they are essential for survival of organisation to stay in the market. ï‚·Imitability: In order to imitate resources organization needs money. Imitating resources is a costly affair it can be done in two different wayssuch as direct imitation and substitution.In this Unilever can attain a sustained competing advantage with its valuable, rare and costly to imitate resources. ï‚·Organisation: In order to gain advantage of different resources companies needs to value them. Organisation must be able to manage its different organisational processes in an effective way that will help them to fully utilise organisational rare resources.(Eaton 3
and Kilby, 2015).Which will help them to gain a competitive edge over its competitors through proper and optimum utilization of its valuable and rare resources. Organisational capabilities is a company's ability to manage its resources in such a way that they help organisation to gain a competitive edge over its competitors. The company will analysebusiness ability in relation to its ability to meet customer demand. companies unique capabilities will help to prevent replication by competitors. Unilever will manage its valuable resources in a effective ways in order to use them in way that it will provide them a competitive edge over other competitors. Five Forces model to analyse the competitive environment. Porter Five Force model is used to understand how the five competitive forces affecting the competition in an industry. Five forces of porter's model is bargaining power of suppliers, bargaining power of buyers these two are the vertical forces while threat of new entrants, industry rivalry & threat of substitute, these are the horizontal competitive forces. Unilever is a consumer goods industry so this model help understand the level of competition in it. ï‚·Bargaining power of buyers-Buyers have strong force in consumer goods industry. This is because switching cost is low in this industry (very strong reason), as there are so many company selling almost same products as Unilever so customers can easily shift to other company. Other reason is buyers have good information about product, company, price and it substitutes which again make their bargaining power more(Yuliansyah, Rammal and Rose 2016). Other factor is small size of individual buyer, this is the weak force which make bargaining power of customers low. ï‚·Bargaining power of suppliers-It has a moderate force on competitiveness of the industry because there are moderate size of individual supplier which can not much affect the supplies of Unilever(Higgins, Omer,and Phillips, 2015). Every company in this industry is buying raw material from numerous suppliers which makes their bargaining power moderate. Moderate population of suppliers also has moderate effect on bargaining power of suppliers. ï‚·Threat of new entrants-This factor has weak force on industry because there are so many companies which are working in it from a long time one of them is Unilever and it has their fixed customers who trust the brand and will not shift to other brands. So in this 4
case switching cost is not very high which make the entry of new entrant a weak force. Other factor is high cost of brand development, companies already working in consumer good industry have a strong brand development which create a tuff competition of survival for new entries. ï‚·Threat of substitution-This has a weak force on consumer good industry because there are very fewsubstitute available in the market. Customers of Unilever have low switching cost which is a strong force for the company to survive in the market without any threat. For example it will be easy for customers to get close up tooth paste from the grocery store than to get a substitute like home made organic paste. ï‚·Competitive rivalry-Competition has a strong force on consumer good industry because there are number of companies working in this industry and they have a good brand development which create a cut throat competition for Unilever to maintain its position in the market. Other factor is low switching cost which has a strong force on the Unilever because every company in this industry is producing almost same products which attract customers to switch from one company to other(Leonidou and et. al., 2017).High aggressiveness is also a strong factor for competition in consumer goods industry. For example if Unilever is reducing the price of its toothpaste to attract more consumers, their competitors will also follow the same plan and reduce the price of their products to maintain the competition in the market. SWOT analysis of Unilever It is a technique which help company to understand their strength, weakness (these two are internal to the company) opportunity and threat (are external in nature). Just like every company, Unilever also apply this technique into their business. ï‚·Strength-It is a good factor of any company which make them strong competition for others. Unilever has a strong brand recognition in the market which is an advantage for the company as it is able to maintain its competitiveness in the market. Other than this company hasa broad product mix which is also the strength of the company, because it capture different segments with large customer base(Wheelen and et. al., 2017). Unilever even have strong global market presence which make it a globalised company and increases its revenue because when company working on such a big platform its profit level increases with the increase in sale. 5
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ï‚·Weakness-These are the factors which is important for company to understand so that timely they can take some measures to improve it. Like in case of Unilever, their products are of imitable in nature which other companies can easily copy and can bring same product in the market, It increases the competition in the market. Other weakness of Unilever is limited business diversification i.e. it is producing lot of products but in same sector or industry, they are less diversified which always create a risk for the company. They should also work in sectors other than consumer goods and cosmetics. Company is so much dependent on retailers they do not have any other way of selling their products like online stores etc. which reduces the sale of company. ï‚·Opportunity-it is about what company can achieve from outside the organisation . There are some opportunities available for Unilever which it can grab, like business diversification(Mi, 2015). Company can diversify itself by entering into the different segments of the market for example company can start its clothing stores, can sell sports item or can produce accessories for both girls & boys. This will increase market share of the company and also increase its customers. Another opportunity for Unilever is product innovation for health because people are getting very much health conscious these days so this will help the company to target those customers. Company can even opt for the market development and improving its advertising methods it will also act as the opportunity for the company and By doing so it can reach to the every customer and attract them to buy their products. ï‚·Threat-these are dangerous for companies because it decreases the revenue of the company. Unilever too have some threats like tough competitive rivalry, it is the biggest threat for the company because Unilever is a very big and renounced company and it has number of rivals to pull it down(Razak and et. al., 2016). Other threats are product imitation in which rival companies copy strategy of Unilever to reach at their point. Increasing popularity of retailers' house brands which is not in favour of the company because in this situation retailers try to advertise and sell their home brand product more in comparison to Unilever's product. 6
TASK 2 Evaluation of strategic directions available to Unilever Ansoff modelwas developed by H.Igor Ansoff which was published in Harvard business review 1957. It helps an organisation to focus on its present as well as potential products. This model is essential for strategic marketing planning which is used by organisations to grow revenue through development of new products and services or by tapping new markets. It is used to evaluate opportunities for companies in different areas through which they can increase sales throughalternative combinations for new market. Unilever will use this model in order to determine its product and market strategy so that it can increase its market share and through its product offerings. Market penetration:It happens when existing products are marketed in a way to that it increases the market share of the firm. Organisation can adopt this strategy because it involves minimal risk as the firm is already presented in the market on a large scaleall it has to do is to increase its marketing efforts and increase its market share(Veit and et. al.,2014). Aggressive efforts increases the company's ability to capture customers from other competitors. Product development:This strategy is involved with introduction of new products that will address consumer needs more efficiently. The firm develops a new product to cater to its existing market. It requires extensive research and development which will help the organisation to expand its product range. When organisation have a strong understanding of their current market then only they are being able to provide innovative solutions to meet their current needs. As organisation is providing new product offering to customers it will be able to influence a larger number of audience. Market development:In this strategy company will focus on entering into new market with their existing product. It focusses on expanding into new markets that will include expanding into new geographies, customer segments and regions etc. It will help organisation to cater the needs of those market sectors which have not been addressed by the companies so far. Organisation will foster certain marketing campaign that will highlight different potential benefit to potential customers in order to create brand awareness and for influencing new market customers(Rosemann and vom Brocke, 2015). As the organisation already have significant presence in every consumer goods across different segments. Thus this strategy will serve as a intensive growth strategy that will act as a supporting role in organisations business. 7
Diversification:In this market development strategy in which corporate enters in a new market segment in which it does not operate, currently while creating new product to cater new market. It helps organisational business to grow by opening new possibilities for the business. By adoption of this strategy organisation not only diversifies its product offering in the target market but also expands its business horizons. Unilever will launch entirely new or new version of Unilever's personal care product over time in order to increase its market share. Customer tent to be attracted towards innovative product which will help company to increase their market share. Justification and recommendation of growth strategies From the above analysis Unilever will adopt market development strategy which involves entering in new market or market segments for example in Afghanistan . Organisation can grow by marketing of its current product into market segment that have not been taped yet by the organisation. As the company already have presence in the every consumer goods market segment entering into a new market will help the organisation to grow its existing market share (Rugman and Verbeke, 2017). In this strategy organisation will focus on market development through implementation of several marketing campaign in order to enlighten the potential benefit of its current product to the new market segment. Strategic management plan Strategicmanagementplanisadocumentwhichisbeingusedtocommunicate organisation goals, priorities, configure resource and operation strength .In order to ensure that everybody in the organisation is working towards the achievement of common goals. It involves organizations goals analyses in relation to the action required to achieve those goals and other element developed during the planning process. Organisation will develop strategic management plan to get an overview of the market it is entering through marketing development strategy. SMART Objective:To increase its sales by 10% in the new market segment Vision:organisation vision is to create a better future every day by inspiring people and developing new ways of doing business. Mission:To add vitality to life. Market analysis: It is a basic analysis of market in quantitative and qualitative terms. Organisation will look into the size of market both in terms of value and volume and will also analyse certain other concernsuch as customer segment and buying pattern, number of 8
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competitor existing in the industry etc. Organisation will do this in order to get easy entry in the new market segment(Sia, Soh, and Weill, 2016). Organisation will have to analyse market into following way: Segmentation: It involves analysing what kind of customers exists in the market and also about their need preference.It refers to the process of creating small groups or segment of customers within a large market to bring out the similarities between their needs and interests. Targeting: It is the stage which involve use of various marketing plan and schemes by organisation in to order to target their products among the various segments. Once segmentation is done organisation needs to develop different marketing strategies and promotional schemes according to the taste of different individuals of particular segments. Positioning: It is the last stage which comprises of organisation deciding on its target market, which involves organisations efforts to create an image of its products in the minds of its customers Through effective positing organisation can create a effective first image of their product in the mind of customers. CONCLUSION From the above report it has been concluded that company have to conduct internal analysis on a daily basis because it assist them to find out their strengths and weakness which could help themto perform better in the market. Apart from this, company have to scan the external environment and then change their operations accordingly because it can not be controlled by them. Organisation also need to analyse its competitiveness in the market periodically to that it can maintain its position in there. At last, VRIO is a essential framework for company as it assist them to find out their internal capabilities and how they could use to enhance their productivity and efficiency level. 9
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