Strategic Management Report on Hindustan Unilever Limited

Strategic Management Report on
Hindustan Unilever Limited (HUL)

Table of Contents
INTRODUCTION...........................................................................................................................1
SCENARIO PLANNING................................................................................................................1
1. Setting the scene.................................................................................................................1
2. Environmental analysis......................................................................................................2
External Analysis...............................................................................................................3
Internal Analysis................................................................................................................4
3. Industry analysis.................................................................................................................5
Porter Five Forces..............................................................................................................6
4. Generating strategic options...............................................................................................8
5. Evaluating and choosing between strategic options...........................................................8
6. Presenting strategic recommendations...............................................................................9
7. Conclusion (10 marks).......................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Strategic management is defined as the planning done by an organisation to achieve the
goals and objectives of the company (Srinivasan, 2014). This is an important process for every
organisation operating within the corporate world. It allows the companies to elevate their global
market positioning as well as market share by exploiting their strengths in the best manner. Now,
the following is a strategic management report prepared for Hindustan Unilever Limited to reach
to the most suitable strategy that can be recommended. The report is carried out by a 7 Step
Scenario Planning Method.
SCENARIO PLANNING
1. Setting the scene
Hindustan Unilever Limited (HUL) is a consumer goods corporation, having its
headquarters situated at Mumbai, India. This is a subsidiary organisation of Unilever. The
offerings of this corporation include beverages, food items, cleaning items, kitchen products,
personal care items, water purifiers, and other consumer goods. Hindustan Unilever Limited was
formed in the year 1931 in the form of Hindustan Vanaspati Manufacturing Co. Post the
execution of merger of several constituent groups in the year 1956, the organisation was renamed
as Hindustan Lever Limited. Finally, in the June month of 2007, the company was renamed as
Hindustan Unilever Limited (HUL). This company includes a portfolio of over 44 brands in 14
different categories. It has over 8 million outlets across India which depicts the scale at which the
entity is operating in the market place (Hindustan Unilever Limited, 2020).
The vision of HUL is to grow their business while simultaneously decoupling their
environmental footprints from business growth and accelerating the affirmative social impact
(Hindustan Unilever Limited, 2020).
HUL has an employee base of over 21000 with the overall gross sales being INR 38,273
Crores as of the FY 2019-20 (Hindustan Unilever Limited, 2020).
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Figure 1: Financial Performance of HUL in 2019-20
(Source: Hindustan Unilever Limited, 2020)
As per the interpretation of the above graph, Hindustan Unilever Limited (HUL) earned
net revenues of INR 38,785 Crores and Earnings Before Interest Tax and Amortisation
(EBIDTA) of INR 9,600 Crores during the FY 2019-20. The basic EPS was INR 31.13 for the
respective year as against INR 27.89 of the previous year. This implies substantial improvement
in the financial performance of HUL in one financial year (Hindustan Unilever Limited, 2020).
2. Environmental analysis
Environment analysis, more commonly referred to as environmental screening, is a
process by which an organisation examine the business environment. This helps the organisation
in determining the potential opportunities and threats that may fall on its pathway. Concerning
this, it is well known that environmental analysis is of mainly two types, named, external
environmental analysis and internal environmental analysis. The management of Hindustan
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Unilever Limited is considering carrying out both analyses to determine the strategic positioning
of the firm in the Indian market place.
External Analysis
External analysis is a process by which an entity screens its external business environment
to identify the positives and negatives linked to the extrinsic factors. The external analysis of
Hindustan Unilever Limited has been conducted by applying PESTLE analysis.
Political
The merger of HUL with Tata Oil Mills and Lakme assisted Hindustan Unilever Limited
in gaining access to new areas such as food oil and cosmetics. The political regulations of India
have helped the company over time to carry out expansion into new product segments. HUL has
also carried out a merger with Kimberly Clark Corporation which further assisted them to tap
into the segment of personal hygiene (Ahmadian and Khosrowpour, 2017).
Economic
The whole world got hit by the economic crisis years ago. This impacted the business of
HUL in many of the countries; however, it was still earning profits in the market of India.
Further, India is a market whereby the people are loyal and thus exhibit loyalty towards one
brand for the long run. This helps the company in increasing its profit margins and revenues
(Trigeorgis and Reuer, 2017).
Social
Hindustan Unilever Limited is a brand which is synonymous with loyalty and trust for the
people of India. This is mainly because the brand guarantees the provision of good quality
products at fair prices. HUL keeps on carrying out market research to make sure that its products
and operations are aligned with the market place and the latest consumer demands (Ahmadian
and Khosrowpour, 2017).
Technological
The evolution of technology over time has helped Hindustan Unilever Limited to
streamline business operations and attain business efficiency. HUL leverages the Big Data
Analytics to analyse the data of its customers and come up with offerings that can satisfy their
demands.
Legal
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HUL makes sure that it complies with the laws and legislation of the market in which it
operates. Concerning this, it is inferred that the legal compliance assists Hindustan Unilever
Limited in saving it from the legal adversities in the long term. The occurrence of any legal non-
compliance will result in dampening of the global brand image of the corporation in the market
place.
Environmental
Over time, Hindustan Unilever Limited has taken several environmental initiatives to
contribute to sustainability. Concerning this, some of the sustainability initiatives of this firm are
known to be the provision of opportunities to women, sustainable sourcing of materials, water-
smart solutions, innovative plastic packaging, and so forth (Hindustan Unilever Limited, 2020).
All of these initiatives contribute to strengthening the positioning of HUL in the global market
place.
Internal Analysis
The management of HUL has applied SWOT analysis for screening the internal business
environment.
Strengths Weaknesses
 HUL provides 1.3 billion people with
quality products and services.
 They are a market leader and they make
use of selective targeting strategies like
a market leader.
 The HUL is continuously working on
their R&D department for bringing in
continuous improvisations within their
offerings.
 They offer assorted product lines to
their customers and they hold higher
market shares within diverse product
categories.
 Competitor emphasizes on peculiar
products but HUL on different
categories which decrease their market
shares.
 Confused positioning can be created
due to a broad portfolio. The price
positioning within some categories
leads to low price competition such as
Amul (Suganthi, 2016).
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 Through high infiltration in the market,
HUL had figured out how to hold their
high piece of the overall industry in
various item classifications.
Opportunities Threats
 Expansion of brand by penetration
within rural markets and transition of
unorganized done will lead them to
expand their customer goods market.
 The individuals are aware as well as
conscious related to making use of the
advertisement which results in an
enhancement in the use of products
offered by them (Raj and Aithal, 2018).
 There is a political scenario, controlled
inflation and literacy rate lead to an
increase within disposable income
which further leads to upsurge demands
along with altering lifestyle.
 With an increase in national and local
players, it is becoming difficult for
firms to differentiate from one other.
There also leads to counterfeit that
destroys brand image within the
market.
 With an increase in prices of
commodities, this will lead to further
enhancement within the prices.
Moreover, an increase within the price
will lead to a decline in margins, sales,
and brand switching.
 There is a highly diversified customer
goods market in which brands offer
distinctive sorts of benefits, it becomes
critical for customers to stick to a
peculiar brand which leads to brand
switching in which power is with
customers to switch.
3. Industry analysis
Industrial analysis is a process which underpins the assessment of a business sector to
determine the relative position of a company within the industry (Schilling and Shankar, 2019).
This is an important process for an organisation which allows the firm to examine the key market
players and their competitive strategies.
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Porter Five Forces
Michael Porter’s Five Forces Framework is an industrial framework which is used by the
companies for analyzing the rivalry in the market place (Dälken, 2014). This model determines
the intensity of competition, industry attractiveness and the key market players. Concerning this,
the management of Hindustan Unilever Limited (HUL) has applied this model to carry out the
industrial analysis and gain knowledge of its position as against the rival firms within the same
industry.
Industrial rivalry (High)
This factor determines the extent of competition prevailing within a specific business
sector. Concerning this, it is identified that Hindustan Unilever Limited faces immense rivalry
within the FMCG sector owing to the existence of rivals such as Patanjali, Proctor & Gamble,
Colgate Palmolive, and so forth. This increases the extent of industrial rivalry for HUL, posing a
direct risk to the market positioning of the company (Porter Analysis, 2020). To deal with this,
the organisation can leverage a differentiation strategy which allows the firm to produce
offerings that are somewhat different from those offered by the rivals in the marketplace.
Figure 2: Competitors of HUL
(Source: Money Control, 2020)
Threat of New Entrants (Low)
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This factor examines the extent to which the entry of new companies in the market can
undermine the current market positioning of existing firms. Concerning this, it is identified that
the threat of new entrants is low for HUL. This is mainly because the respective FMCG
organisation has its established base of customers who have trust in the brand. These customers
do not intend to shift to other brands, especially the new market entrants because of quality
consideration (Porter Analysis, 2020). Further, it becomes difficult for the new entrants to deal
with the high cost of brand development and high economies of scale in the fast-moving
consumer goods industry.
Threat of Substitutes (Moderate)
This factor assesses the extent to which the presence of an alternative in the market can
pose threat to the offerings of a company. Concerning this, it is acknowledged that the threat of
substitutes for HUL is moderate. This is mainly because the company has developed its loyal
customer base which is not ready to switch to substitutes. Also, the entity offers products at fair
prices, which increase the affordability of its offerings for the people. However, the presence of
some key market players like P&G, Patanjali, and so on, increases the threat to reach to a
moderate extent (Porter Analysis, 2020).
Bargaining Power of Suppliers (Low)
This factor defines the extent to which the vendors can bargain the price of the raw
materials provided by them to the firm against money. Relating this to Hindustan Unilever
Limited, it is inferred that the bargaining power of suppliers for this company is low. This is
mainly the entity has been running in the market for over 80 years now. This has increased the
networking of the company to a level that it can easily switch the suppliers with the next best
alternative (Porter Analysis, 2020). This implies that this FMCG organisation has the option to
source raw materials from the vendor who is ready to offer good quality materials at fair prices.
Bargaining Power of Buyers (Moderate - High)
This factor demonstrates the degree of power held by the buyers concerning the execution
of the switch between the alternatives of the organisational offerings. Concerning this, it is
ascertained that the bargaining power of buyers for Hindustan Unilever Limited is moderate to
high (Porter Analysis, 2020). Now, there are mainly two kinds of customers, namely, price-
sensitive and quality sensitive. The price-sensitive customers may consider making the switch to
other brands in case they find that the offerings of other rival brands are relatively cheaper than
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Hindustan Unilever Limited. The bargaining power of buyers increases in the case of such
customers. However, the quality sensitive customers trust Hindustan Unilever Limited as a brand
and thus do not consider the option of making a switch to an alternative brand. This is so because
they cannot sacrifice the quality for the price. The bargaining power of buyers in the case of such
customers for HUL is moderate.
4. Generating strategic options
It is imperative for an organisation to constantly examine, evaluate and review the
strategic options to select and apply the most suitable onto the company. Concerning this, the
management of HUL is also considering adopting a strategic option by looking upon some
possible alternatives. For this purpose, it has planned to make use of the Ansoff Matrix. This is a
strategic management model which consists of four quadrants. These four quadrants serve as the
four strategies out of which one can be adopted by an organisation based on its scale, size and
nature of operations (Bogers and et. al., 2019). Now, the four quadrants of this model are,
namely, Market Penetration, Market Development, Product Development and Diversification.
5. Evaluating and choosing between strategic options
The alternatives presented in Ansoff Model are presented as follows:-
Market Penetration: This is a strategy whereby an entity provides existent products in
existing markets (Zhao and et. al., 2017). Concerning this, the adoption of this strategy will be
fruitful for HUL as it will assist the enterprise in increasing its market share in the current
markets.
Market Development: This is a strategy that is focussed on the launch of existing
products into new markets. The application of this strategy by HUL would imply an increment in
the reach of the company’s offerings in the public at large. This will indicate an increment in the
overall revenues and profits (Ahmadian and Khosrowpour, 2017).
Product Development: This strategy emphasizes upon the launch of new products in
current markets (Durand, Grant and Madsen, 2017). The adoption of this strategic option by
Hindustan Unilever Limited will imply a consequent increase in the loyalty of the customers as
they will be provided with something unique that can satisfy their demands.
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Diversification: This strategy is focussed on launch of new products into the new markets
(Bogers and et. al., 2019). The selection of this strategy will imply extensive risk for the
company as the product may also have the probability of failing in the new territory.
6. Presenting strategic recommendations
It is recommended that Hindustan Unilever Limited can opt for a market penetration
strategy as this will lead them to have better market shares. This will aid them within an increase
in users and reduce competition by rendering a competitive edge. By making use of this strategy,
HUL will be able to emphasize either price penetration or reduction that will lead them to
captivate an ample of customers towards their offerings, and further sales volume will be
increased. Moreover, market penetration creates goodwill within the marketplace and efficiency
can be maintained. It is suggested that constant market research is carried out by HUL through
which they can analyze altering requirements of the organization and accordingly bringing in
products so that their probable needs can be addressed effectively.
7. Conclusion
It has been analyzed that strategic management is a critical aspect that firms need to take
into consideration to ensure that they can succeed within the evolving marketplace. For this, it is
important to analyze internal along with external factors which will lead them to acknowledge
their strengths, weaknesses, and conditions that prevail within the market. By doing so, firms can
formulate strategies accordingly and formulate their brand positioning. This will further lead
them to have high sales and overall profitability.
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REFERENCES
Books and Journals
Ahmadian, A. and Khosrowpour, S., 2017. Corporate social responsibility: Past, present, and
success strategy for the future. Journal of Service Science (JSS), 10(1), pp.1-12.
doi.org/10.19030/jss.v10i1.10063
Bogers, M., Chesbrough, H., Heaton, S. and Teece, D.J., 2019. Strategic management of open
innovation: A dynamic capabilities perspective. California Management Review, 62(1), pp.77-
94. doi.org/10.1177/0008125619885150
Bogers, M., Chesbrough, H., Heaton, S. and Teece, D.J., 2019. Strategic management of open
innovation: A dynamic capabilities perspective. California Management Review, 62(1), pp.77-
94.
Dälken, F., 2014. Are Porter’s five competitive forces still applicable? A critical examination
concerning the relevance for today’s business (Bachelor's thesis, University of Twente).
Durand, R., Grant, R.M. and Madsen, T.L., 2017. The expanding domain of strategic
management research and the quest for integration. Strategic Management Journal, 38(1), pp.4-
16.
Raj, K. and Aithal, P.S., 2018. A ‘Desi’Multinational–A Case Study of Hindustan Unilever
Limited. International Journal of Case Studies in Business, IT and Education (IJCSBE), 2(1),
pp.1-12.
Schilling, M.A. and Shankar, R., 2019. Strategic management of technological innovation.
McGraw-Hill Education.
Srinivasan, R., 2014. Strategic management: the Indian context. PHI Learning Pvt. Ltd..
Suganthi, V., 2016. Marketing strategy of FMCG product: A case study of Hindustan Unilever
limited. Marketing, 1(9).
Trigeorgis, L. and Reuer, J.J., 2017. Real options theory in strategic management. Strategic
Management Journal, 38(1), pp.42-63.
Zhao, E.Y., Fisher, G., Lounsbury, M. and Miller, D., 2017. Optimal distinctiveness: Broadening
the interface between institutional theory and strategic management. Strategic Management
Journal, 38(1), pp.93-113.
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Online
Hindustan Unilever Limited. (2020). Hindustan Unilever Limited Integrated Annual Report
2019-20. Retrieved From https://www.hul.co.in/Images/annual-report-2019-20_tcm1255-
552034_1_en.pdf
Hindustan Unilever Limited. (2020). Introduction to HUL. Retrieved From
https://www.hul.co.in/about/who-we-are/introduction-to-hindustan-unilever/
Hindustan Unilever Limited. (2020). Our vision. Retrieved From
https://www.hul.co.in/about/who-we-are/our-vision/
Hindustan Unilever Limited. (2020). Sustainable Living. Retrieved From
https://www.hul.co.in/sustainable-living/
Money Control. (2020). Hindustan Unilever. Competition. Retrieved From
https://www.moneycontrol.com/competition/hindustanunilever/comparison/hu#hu
Porter Analysis. (2020). Porter Five Forces Analysis of HUL. Retrieved From
https://www.porteranalysis.com/porter-five-forces-analysis-of-hul/
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