Advanced Management Accounting: A Strategic Report on Unilever

This report provides a comprehensive analysis of Unilever's advanced management accounting practices. It begins with a business description, followed by a SWOT analysis and a review of Unilever's financial performance, noting a recent dip in profits attributed to increased competition and the COVID-19 pandemic. The report examines opportunities like globalization and expansion in emerging markets, alongside threats such as deflation and local competition. Porter's Five Forces model is applied to assess the competitive landscape. A strategy report suggests improvements in organizational capacity, internal processes, customer relations, and financial management to boost profitability. Finally, a balanced scorecard outlines specific objectives, measures, targets, and initiatives for financial improvement, emphasizing supplier negotiations, expenditure control, and marketing strategies. Desklib provides access to similar solved assignments and study resources for students.

Advance Management
Accounting AMA

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Provide a description about the business.....................................................................................3
Summary of strengths and weakness of firm along with analysing its financial performance.. .3
Provide a summary on opportunities and threats of company along with examining Porter's
Five forces...................................................................................................................................5
Strategy report.............................................................................................................................7
.....................................................................................................................................................7
Balance Scorecard.......................................................................................................................9
Perspective.......................................................................................................................................9
Objectives........................................................................................................................................9
Measures..........................................................................................................................................9
Targets.............................................................................................................................................9
Initiatives Action.............................................................................................................................9
Financial..........................................................................................................................................9
Improving net profit margin............................................................................................................9
Change in NP%................................................................................................................................9
+3% in 2021.....................................................................................................................................9
 Negotiating with suppliers........................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Management accounting refers to the planning, organising and implementing all the
actions of firm properly. Looking it at advance level means to conduct all its function with deep
insight and conducting evaluation and control of performance (AlSiadi, 2019). The company
chosen for this report is Unilever, a UK based multinational consumer goods firm. It prepares a
strategic report about the description of the firm along with analysing its strengths and
weaknesses along with evaluating its financial performance. Further, it discuss about the
opportunities and threats of firm in addition to analysing Porters 5 forces.
MAIN BODY
Provide a description about the business.
Unilever is a multinational firm dealing in various consumer goods. It mainly deals in
three categories of products- Beauty and personal care, food and refreshment and home care
goods. It own more then 400 brands and earns a turnover of around 51 billion euros. The firm
was founded on 2 September 1929 with the merging of margarine producer of Dutch naming
Margarine Unie and Lever Brothers who prepares soap in Britain. It serves in almost whole
world.
Firm has to vision to a common place for sustainable living. According to them, this is
the best way through which their business can grow for longer term. The mission statement of
Unilever says that in order to add vitality in life, they fulfill the daily needs of hygiene, nutrition
and personal care which helps people in feeling good, looking great and extracting more joy out
of life (Anwar and al–Musawi, 2018).
Summary of strengths and weakness of firm along with analysing its financial performance.
Strengths are the capabilities of a person or firm that helps in tackling all the problems and
generating higher amount of profits. Whereas weaknesses are the low points which becomes
hindrance for firm in earning the revenue.
Strengths and weakness of Unilever
Strengths
 Unilever operates in around 190 countries which means it has global footprint with top
brands.

 The portfolio of brand is very broad and deep. This makes it unique in the eyes of
customers and market.
 It contributes in raising the economies of scale and finds it as its biggest strength.
 It spent lot of amount on the research and development which helps in cutting down the
edges and preparing high quality products.
Weakness
 Unilever faces a lot of challenge from big companies like P&G and nestle. Also, the local
players tends to dominate the market (Krishnan, 2020).
 The goods produced by Unilever has perfect substitutes and that too in emerging markets
of Asia and Africa, where people are still using traditional and natural products.
Year on Year Performance
Year 2020 Movement Year
2019
Movement Year
2018
€m €m % €m €m % €m
Health and
Hygiene
625 10 1.63 615 45 7.89 570
Nutrition 61.00% 0.05 8.93 56.00% 0.08 16.67 48.00%
Operating profit 8303 -405 -4.65 8708 -3931 -31.1 12639
Turnover 50724 -1256 -2.42 51980 998 1.96 50982
Net profit 126 13 11.5 113 -306 -73.03 419
Earnings per
share
2.12 -0.02 -0.93 2.14 -1.35 -38.68 3.49

From the above report, it is found that the profits of Unilever has reduced since the last
two years. It operating profit is decreasing with a rate of 31% in 2019 and 4.65% in 2020. The
net profits of firm reduced by 73 % in 2019 and regained by only 13% in 2020 in comparison to
2019. this was still far less than 2018 profits. The sale of firm also reduced in 2020 by around
2.5%. Unilever is doing good when looking at its improvement in relation to its responsibility
towards health and hygiene and nutrition. Main reason behind the negative movement of all
these figures is outbreak of Covid and daily changes in the economic environment (Olczak and
Roberts, 2020).
Provide a summary on opportunities and threats of company along with examining Porter's Five
forces.
Opportunities are the chances through which a firm can take advantage of the situation
for the benefit of organisation. Whereas threats are the hurdles which can stop a business to grow
or to grab the chances prevailing in market.
Opportunities
 With globalization and advancement in media at global level, customers are attracting
towards western lifestyle. This is a good chance for Unilever to tap the market which
wants to be a part of this western culture.
 Recently, Unilever has grabbed around trillions of customers in India and China. They
can increase their consumer base in these countries by advertising more and attracting
new people towards its products (Scott, 2019).
 Today, people are more considered towards their health. So, the company can grab
customers with its existing product line of health care products.
Threats
 The crises of deflation and pandemic has affected the company to a great extent.
Decrease in the disposable income of people is making them buy less and buying less for
saving money.
 Many of the CSR activities of Unilever are on target of criticism and now the firm has to
be more particular about its acts.
 Unilever faces a big threat from local products and small producers who tries to capture
the market.

Porter’s Five Forces Model
It is a framework that helps in examining the competition level of the various forces by
analysing their power.
 Competitive Rivalry in Market- Unilever is facing high level of competition. This is
because of raise in the demand and supplies of commodities for satisfying their basic
needs. Their are lot of producers dealing in same products.
 Threat of Substitutes- Company deals in almost all types of goods and also provides
best quality. This reduces the chances of customers moving to other brand. So its power
is low.
 The Threat of New Entrants- Entry of new retailers in this industry is always low
because though there are many firms already existing but it demand lot of investment for
entering into this industry and that too at such large scale.
 Bargaining Power of Buyers- The power of this force is high. There are many vendors
dealing in this industry (Uyar, 2021). Also, they offer discounts and offers for attracting
more customers. So, the threat of buyers is also high.
 Bargaining power of Suppliers- Power of these parties is low as there are many
suppliers in the market. So, they do not make much effect on the firms. Thus their power
is moderate to low.
So, the firm should try its best to grab the opportunities available in market while keeping in
mind that they do not affect the workings of Tesco. It should also know that all the forces which
are presently having weak force at present and become stronger in long run.

Strategy report
At present, the profits of firm are decreasing, the main reason behind this is high competition,
lower economy and outbreak of pandemic. For tackling this situation, it is important for Unilever
to try at all levels. Here is a strategic report through which the firm can make its profits.
 Organisational capacity- Here, it is need of improving the skills of employees and making
effective use of tools and technology. This can be done with the help of making use of
strength of knowledge.
 Internal process- after making efficient use of resources, then comes the internal
processing of increasing efficiency in processes. This will help in decreasing the time
period of completing the task of production and various other tasks.
 Customers- Now, it is the time to focus on customers. By reducing the time of
production, Unilever can decrease the waiting time for consumers. This will help in

retending its customers. This is a challenge for the business as there are lots of
competitors who uses various tactics to attract them.
 Financials- Then comes the last stage of financials. At this stage various steps taken will
help in increasing the profits of firm. By improving the efficiency of processes, it can
reduce the cost of production which would directly increase the profits of business. On
the other hand by increasing customer retention, it can increase its revenue which will
also rise its earnings.

Balance Scorecard
Perspective Objectives Measures Targets Initiatives Action
Financial Improving net
profit margin
Change in NP
%
+3% in 2021
+5% in 2022
+10% in
2023
 Negotiating
with suppliers
 Controlling
over
expenditure
 Marketing for
increasing
sales
Objective is to increase profits.
Performance can be measured by comparing it with previous year figures.
The Target is to increase profits by 3% in 2021, 5% in 2022 and 10% in
2023.
This can be done by negotiating with customers, controlling expenses and
marketing.

CONCLUSION
From the above analysis, it can be concluded that by analysing the products and firm with
the help of various tools like SWOT companies can generate information about its strengths and
weaknesses. They can know which forces are negatively impacting its profits and what are the
opportunities available to it. By reviewing the financial perform, companies can know its actual
position in comparison to its competitors.

REFERENCES
Books and Journals
AlSiadi, M.T., 2019. Integration Between the Methods of Modern Management Accounting
According to the ERP System to Achieve the Competitive Advantage Suggested Model
Applying it in the limited liability Company Aljazera for ice Cream and Milk 2018-
2019. TANMIAT AL-RAFIDAIN, 38(124 following).
Anwar, I. and al–Musawi, A.N., 2018. The Effectiveness of Employing Environmental
Management Accounting Information's for Implement Cleaner Production
Strategy/Applied Study in AL Kufa Cement Plant. Al Kut Journal of Economics
Administrative Sciences, 1(29).
Krishnan, R., 2020. Across the Great Divide: Bridging the Gap between Economics-and
Sociology-Based Research on Management Accounting. Journal of Management
Accounting Research. 32(2). pp.21-25.
Olczak, W. and Roberts, R.W., 2020. Promoting a stronger ethical focus in management
accounting research and practice. In The Routledge Handbook of Accounting Ethics (pp.
186-203). Routledge.
Scott, P., 2019. Introduction to Management Accounting. Oxford University Press, USA.
Uyar, M., 2021. The Management Accounting System and Enterprise Innovation Ability.
In Empowering Businesses With Collaborative Enterprise Architecture
Frameworks (pp. 129-157). IGI Global.