Unilever: International Market Entry Strategy for Agribusiness Sector

This report discusses Unilever's plan to expand its operations in the Indian market through the introduction of a new product. It explains the importance of the agribusiness sector in Australia and specifies the most appropriate and inappropriate modes of entry for the company. The report also provides recommendations for the company's future operations.

[Strategic Managemnt]

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Executive Summary
Agribusiness sector has emerged as a pillar that provides strong support to the economy of
Australia by making its contribution towards the GDP. The Agribusiness sector generates
employment and business opportunities for the residents of Australia. This report focuses on
the company Unilever for the purpose of explaining the importance of the agribusiness sector.
Unilever is a company that deals in the Food, Personal Care, Home Care and Refreshments
products and is planning the expansion of its operations in the Indian market through the
introduction of new product. This report specifies the most appropriate mode of entry and
inappropriate mode of entry in the Indian market. Moreover, recommendations have been
made that will assist the company in its operations in the future such as business
diversification, price differentiation, improving customer experience, etc.

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Contents
Introduction................................................................................................................................3
Australian Food-focused Agribusiness sector............................................................................3
Company overview....................................................................................................................4
International opportunity for Unilever.......................................................................................5
International Strategies...............................................................................................................5
Appropriate modes of entry in the international market............................................................6
Green Field Investment..........................................................................................................7
Acquisition.............................................................................................................................8
Inappropriate modes of entry in international market 300.........................................................8
Joint venture...........................................................................................................................8
Strategic Alliance...................................................................................................................8
Recommendations......................................................................................................................9
Conclusion................................................................................................................................10
References................................................................................................................................11

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Introduction
A market entry strategy is needed by every company for the purpose of delivering its goods
and services to a new target market. In present conditions, the Government of Australia have
started focusing on the Agribusiness sector because the sector is providing benefits to the
economy of the country through employment generation and business opportunities. To
understand the positive impact of the agribusiness in this report Unilever is been selected.
Unilever is a British based company that deals in Food, Personal Care, Home Care and
Refreshment products. The business of the company is spread across the globe. Now for
expansion, the company wants to introduce their new product in the Indian market. This
report describes the international opportunities and international strategies that are available
for Unilever. In addition, the report contains the most suitable and unsuitable entry modes for
the company. At the end of this report, some recommendations have also been made.
Australian Food-focused Agribusiness sector
The Agribusiness sector of Australia is the country’s industry pillars. In the present time the
media, business dialogues and governments have again put their focus on the agribusiness
sector by trusting that it will be continued staple the prosperity of Australia (Agribusiness
Australia, 2018). The growth prospects of the agribusiness are creating a community
optimism to develop new technologies, create jobs and open the new market. Australia’s
present fragmented approach toward agribusiness opportunities will lead to massive
emotional, cultural and financial loss due to which they have started preventing this sector.
The Australian Food and Agribusiness sector involves food-related items such as food
processing, agricultural production and major inputs related to these activities. The Australian
Food and Agribusiness sector is divided into two sub-parts:

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• Agribusiness: It includes all agricultural activities that are directly related to the food
production
• Food Products: It includes all beverage manufacturing and food processing activities
(Department of Industry, Innovation and Science, 2018).
The Australian Food and Agribusiness sector is contributing to the economy of Australia
through employment, business and service opportunities. Australian Food and Agribusiness
sector provided employment to around 522000 persons in 2015. Approx. 178500 businesses
are trading in the agribusiness sector of Australia. Australian Food and Agribusiness sector
contributed around 3.35 to the total GDP (Department of Industry, Innovation and Science,
2018). The labour productivity has increased at an annual rate of 2.4% and industry value
added has increased at an annual rate of 1% over the past five years. Australia is the largest
exporter of the food and agribusiness products and half of its agricultural products are
exported by the country (Department of Industry, Innovation and Science, 2018).
Company overview
Unilever is the Britain based company having its headquarters situated in London, U.K. and
Netherlands. William Lever, Samuel Van Den Bergh, James Darcy Lever and Leverhulme
founded the company in 1929. The company mainly deals in consumer goods and has divided
its products into four main divisions such as Food, Personal Care, Home Care and
Refreshments (Unilever, 2018a). It is the world’s oldest multinational company and therefore
has been able to ensure the availability of its products in almost every part of the world. The
company produces over 400 products and its leading products are Surf, Sunsilk, Rexona,
Magnum, Lux, Lipton, Knorr, Hellmann’s, Heart brand ice cream, Omo, Dove and Axe. The
company is having its research and development centres at United States, India, China and
Netherlands. In 2017, Unilever has earned net income of US $ 7.561 billion with net revenue

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of US $ 62.622 billion (Unilever, 2017d). The company had a total turnover of US$ 49.797
billion out of which 18% was earned from home care, 19% from Refreshment, 27% from
Foods and 36% from Personal care (Unilever, 2018b)
International opportunity for Unilever
The operations of the company are spread over 190 countries of the world. For business
expansion or for international opportunities, the company can introduce those products which
are not available in the existing market. The company can introduce Weis frozen fruit dessert
in the Indian market because the product has not been introduced by the company in the
Indian market. With the help of the introduction of new product in the Indian market, they
will get the opportunities for bringing their product in the international market. For expansion
of the established brand like Unilever, this strategy is best for the business expansion.
Weis is an Australian brand that is owned by the Unilever. Weis is known for their bar-
shaped fruit ice creams popularly known as Weis bars. Les Weis developed Weis Fruito bar
in 1957. In 2017, the owner of Weis sold the company to Unilever (Unilever, 2018c). Now
the company is planning to expand its operations in the Indian market through the
introduction of Weis as a new product.
International Strategies
Some international Strategies that can be used by the company while introducing new
product in the international market are:
Multi-domestic Strategy
In Multi-domestic Strategy, the company tries to understand the preference and wants of the
particular country and accordingly make changes in the product before introducing it in the

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market (Holmes, et.al. 2018). For the introduction of Weis in the Indian market, the company
needs to understand the taste and preferences of the Indian targeted customers and
accordingly have to make changes in the ice cream taste and texture.
Global Strategy
The company can use the global strategy which will not require any changes to be made in
the product. The company can introduce the same domestic product in the international
market. If a company adopt a global strategy then it does not need to make any changes in the
product (Holmes, et.al. 2018). However, if a company wants then it can make some minor
changes in the products. Global strategy emphasises on the need to gain economies of scale
by way of specifically offering the same product in every market.
Transnational Strategy
The transnational strategy is a mixture of multi-domestic strategy and global strategy or in
other words, it is a middle ground between multi-domestic strategy and global strategy
(Holmes, et.al. 2018). In this, the company tries to make a balance between the desire of the
local and international customers. This strategy is adopted by various big multinationals for
the successful launch of their product in other country.
Appropriate modes of entry in the international market
Indian Government and Foreign Direct Investment Policies
In 2011, the Circular 1 of the Department of Industrial Policy and Promotion was released.
The Circular states that from now onwards, 100% FDI has been allowed on the production
and development of horticulture, floriculture, planting material, seeds, and cultivation of
vegetables and mushrooms. Pisciculture, aquaculture and services related to agro and allied

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sectors have also been covered under the norm of 100% FDI. Tea sector has also been
brought to 100% norm (Ghosh and Roy, 2018).
The Ministry of Food Processing Industries of India made out all their efforts to encourage
investment across the value chain. The industry has engaged around 1.77 million people with
a fixed capital of $ 29.7 billion and aggregate output of around $ 144.6 billion in Food
Processing units (Ghosh and Roy, 2018). Major Food divisions such as fresh produce, dairy
products, food grocery, spices and perishables have a share of 6%, 8%, 15.6%, 16% and
34.7% in FDI (Ghosh and Roy, 2018).
Unilever is the big name in the customer goods and has full ability to set up their business or
products in the international market. The most appropriate method which can be adopted by
Unilever for entering into a new international market is Green Field Investment.
Green Field Investment
Greenfield investment is a kind of foreign direct investment method with the help of which
the parent company can establish its operations in a foreign country. This method of the
foreign direct investment is usually used in developing countries. In this mode of entry, the
multinational companies construct new facilities as well as create new jobs in that particular
country. The companies who adopt the green Field investment mode of entry will get the
benefits like tax breaks to form the government of particular company (Ashraf and Herzer,
2014). Greenfield investment is a complex task and it includes potential cost but it provides a
full control to the company over the operation, management, supply chain and other functions
related to the product. In addition, the returns in form of revenue need not be shared by the
company with the third party. The Greenfield investment includes high risk as it involves
huge cost but Unilever will not face such problem because it is already having an established
name in Indian Market.

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Acquisition
Acquisition is a mode of entry that is beneficial for those companies that are already having
their business in the country. Acquisition has become an important most popular way of an
entry in the international market these days (Hennart and Slangen, 2015. The trend of
acquisition has increased because it is a way to get market power. The market power the
market shares get affected. The acquisition involves low risk in comparison to Greenfield
investment as its outcomes can be measured easily. In case of Acquisition, the ownership of
business organizations or companies are consolidated or transferred to other entities. It can be
used by Unilever for the purpose of increasing its market power.
Inappropriate modes of entry in international market 300
For Unilever the most inappropriate modes of entry into Indian market are:
Joint venture
Joint venture is the business arrangement between two or more parties who agree to pool
their share risk and revenues to accomplish a specific task. In a joint venture, each party is
responsible for cost association, losses and profits (Speckbacher, Neumann and Hoffmann,
2015). Joint Venture is an inappropriate mode of entry because it divides the ownership of
the business between the venture parties and the profits are also split between them. Unilever
is a well-known brand that is why they did not require support from other parties.
Strategic Alliance
Strategic alliance is also a business arrangement between two parties who are ready to share
the risks and profits related to the specific task but the strategic alliance is less binding than a
joint venture. In a Strategic alliance, the parties pool their resources to create a separate
business entity. The strategic alliance is also not an appropriate mode of entry for Unilever

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and the reason is same that is for a joint venture (Speckbacher, Neumann and Hoffmann,
2015). Strategic alliance may include less involvement of parties, they work as a separate
business entity but they share risks and profits. Due to its brand image, Unilever did not
require support for the third party.
Recommendations
Business Diversification: Unilever is the leading brand that deals in the consumer goods. The
company expanded its product in every part of the world. The company have adopted a
product diversification strategy for the expansion of their business. It is recommended to the
company that they should adopt a business diversification strategy for expansion (Alessandri
and Seth, 2014). Business diversification will provide better chances to the company to
expand their business through new product.
Price differentiation: It is recommended to Unilever that they can use a price differentiation
strategy when they enter into the new market. With the help of price differentiation, the
company can charge different prices from the different buyer for the same quantity and
quality of a product (Vogel and Paul, 2015). The value of money is different in every country
and by considering this fact it is recommended that the company should use price
differentiation strategy.
Consider exchange rate and economic crisis: It is recommended that the company should
consider the exchange rates and economic crises of the country in which they have introduced
their product because the fluctuation in the economy of the country and in the exchange rate
will provide a negative impact on the operation of the company.
Improve customer experience: The ultimate target of the company is the satisfaction of the
customers. It is recommended to the company that they should provide an excellent

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experience to the customers when they purchase the product of the company. The experience
will help attract the customers more towards the products and they will buy the product
frequently.
Conclusion
To conclude, Unilever is the well-known and well-established brand across the world,
customers are aware of the brand name. For the success of every business, expansion strategy
is very much suitable for expansion in this report the company is introducing their new
product in the Indian market that is not available in the market before. For the purpose of
entering into the Indian market, the suitable entry modes will be Greenfield investment and
Acquisition. These modes will assist the company in easy establishment of their product in
the Indian market and will further provide complete control over the business activities.

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References
Agribusiness Australia. (2018) About us [Online] Available from:
https://www.agribusiness.asn.au/about-us/overview [Accessed on: 28-09-2018].
Alessandri, T.M. and Seth, A., (2014) The effects of managerial ownership on international
and business diversification: Balancing incentives and risks. Strategic Management Journal,
35(13), pp.2064-2075.
Ashraf, A. and Herzer, D., (2014) The effects of greenfield investment and M&As on
domestic investment in developing countries. Applied Economics Letters, 21(14), pp.997-
1000.
Department of Industry, Innovation and Science. (2018) Food and Agribusiness Industry
[Online] Available from:
https://archive.industry.gov.au/industry/IndustrySectors/FoodManufacturingIndustry/Pages/
default.aspx [Accessed on: 28-09-2018].
Ghosh, M. and Roy, R.P., (2018) FDI, Technology Imports and R&D in Indian
Manufacturing: Revisited. In Globalisation of Technology pp. 127-149. Springer, Singapore.
Hennart, J.F. and Slangen, A.H., (2015) Yes, we really do need more entry mode studies! A
commentary on Shaver. Journal of International Business Studies, 46(1), pp.114-122.
Holmes Jr, R.M., Hoskisson, R.E., Kim, H., Wan, W.P. and Holcomb, T.R., (2018)
International strategy and business groups: A review and future research agenda. Journal of
world business, 53(2), pp.134-150.

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Speckbacher, G., Neumann, K. and Hoffmann, W.H., (2015) Resource relatedness and the
mode of entry into new businesses: internal resource accumulation vs. access by collaborative
arrangement. Strategic Management Journal, 36(11), pp.1675-1687.
Unilever. (2017d) Annual Report and Accounts 2017 Highlights [Online] Available from:
https://www.unilever.com/investor-relations/annual-report-and-accounts/ [Accessed on: 28-
09-2018].
Unilever. (2018a) About [Online] Available from: https://www.unilever.com/about/who-we-
are/about-Unilever/ [Accessed on: 28-09-2018].
Unilever. (2018b) Our strategy [Online] Available from:
https://www.unilever.com/about/who-we-are/our-strategy/ [Accessed on: 28-09-2018].
Unilever. (2018c) History [Online] Available from: https://www.unilever.com/about/who-
we-are/our-history/unilever-archives.html [Accessed on: 28-09-2018].
Vogel, J. and Paul, M., (2015) One firm, one product, two prices: Channel-based price
differentiation and customer retention. Journal of Retailing and Consumer Services, 27,
pp.126-139.