Growth Record of Unilever
This report aims at analysing the overall management and strategies of the chosen company Unilever Plc., towards tackling climate emergency. This paper will analyse the overall growth record of the chosen company over last 10 years. This paper will also analyse and discuss the overall degree of the company’s diversification and vertical integration. Moreover, this report will also recognise and explain the most crucial activities for long run sustainability, turnover and profitability. This report will also assess and discuss the potential of this firm for external growth. In addition to that, this paper will also explain the overall organisational culture as well structure of the selected firm and the extent to which they are line up with its overall sustainability goals. Furthermore, this paper will also describe the overall role of innovation in this firm, the overall sources of innovation as well as the ways in which innovation can be leveraged by a firm so as to deal with the major challenges of the society.
Unilever Plc. is the multinational consumer good corporation of the United Kingdom which was incorporated in the year 1929. The headquarters of this organisation is located in London, United Kingdom (Nazarova 2015). The product range of this company incorporates wellbeing vitamins, coffee, tea, food, ice cream, cleaning agents, air purifiers, beauty products, condiments, supplements and minerals, pet food, breakfast cereal, personal care, beauty products, water and toothpaste.
It is evident from the reports published by this company during these 10 years that this company significantly strived the growth process and has been able to build up an effective competitive position in the market. In the financial year 2021, it has been seen that the acceleration of its overall operational performance continued significantly. This company was able to deliver fastest underlying sales growth for 9 years that is 4.5 per cent for the entire year with 1.6 per cent from its volume. This company plans to boost up its overall growth process by accelerating the brand as well as category position in the regions in which it observes crucial potential incorporating India, China and the United States. It has been known that these nations altogether demonstrates approximately 35 per cent of its turnover currently. This company basically focuses on the broad differentiation strategy as its generic strategic for its competitive advantage. The major emphasis of such strategy is its focus on the characteristics which makes the product of the firm stand out in front of its key competitors. The company strive much external growth.
Diversification can be defined as the method which minimises risk by distributing investments across different industries, financial instruments and such other categories. It generally desires to enhance the overall returns by investing in distinct areas which would each respond differently to same type of event (Lakada, Lapian and Tumiwa 2017). Diversification generally incorporates entry into the fields in which both markets and products are crucially different than those of the company’s initial base. Vertical integration can be defined as the expansion strategy in which a firm takes the control over 1 or more phases in the overall distribution or production process of the product (Murphy and Murphy 2018). Both the aforementioned strategies are generally undertaken by the firm so as to consolidate its overall position among the competitors. While vertical integration generally involves the firm moving into the new part of the value chain which it is already within. On the other hand, diversification needs moving into a whole new type of value chain. Most of the companies accomplish this via acquisition or merger, while others expand into a whole new industry without any involvement of another company (Nacchia and Massaro 2017).
Degree of Diversification and Vertical Integration
It has been observed that during 60s and 70s, this firm rapidly expanded its overall operations via horizontal and vertical integration which emerges as the diversified conglomerate by early 1980s. In this firm, diversification into distinct businesses was prompted in a way or another by prevailing business lines. For example, oil seeds crushed for the utilisation in soap and margarine businesses which yielded by-product recognised as cattle cake that led the firm into animal feed businesses. Additionally, by-products like fatty acids and glycerine developed from processing oil for utilisation in the manufacture of soap and margarine, prompted its entry into the chemical businesses. Many of its people were involved in slaughtering of the animals, some of whose elements led to sausages and pies of this company. This company owned its respective packaging and transported the products on its respective barges and trucks. It has its own distribution chain which shipped its frozen goods to the retailers. This company conducts its own respective market research firm and advertising agency. Such businesses were generally the product of existing rational calculations and certain remained successful and profitable operations, however by 1970s times had significantly changed. This company found itself burdened, particularly in Europe, with higher cost structure, and the task of administering businesses far uninvolved from branding and manufacturing of consumer packaged products. Thus, there was existing legacy of horizontal and vertical integration in the past that enabled this firm owning most of the parts of value chain.
Subsequently, the management of this company was able to the distinction between the markets while the competitors look after the similarities. It was considered as the legitimate for each element of this company so as to pursue opportunities related to diversification with restricted considerations for the overall corporate capabilities or priorities. The company pursued certain research projects with little dialogue with marketing function. Though, this company had powerfully networked senior managers, tradition of the decentralised authority developed in certain respects one of the least cohesive big businesses around the globe and the one where introducing priorities in distribution of the resources was quite difficult.
Unilever Sustainability: The Unilever Corporation is determined to build a sustainable environment through its purpose-led, future fits business model. The company is focused on delivering the superior performance. The Unilever Company carries out several activities to maintain the turnover, profitability and the long-term sustainability of the company. The company is expanding its business all around the world to ensure high growth of sales turnover and build a strong brand. The company has more than 400 brands, which are on a mission to offer superior products while doing well for planet and people. According to the annual report of 2021, the company has 13 brands with the turnover of over £1 billion in 2021. All these brands form the part of top 50 consumer goods brands all over the world. The company has been able to generate the sales growth of 4.5% when compared to the previous year of £50.7 billion. The last year sales turnover of the company is £52.4 billion.
Essential Activities for Long run Sustainability, Profitability and Turnover
Turnover Growth Strategies: The Company utilizes several approaches to improve their turnover. It adopts market penetration as the primary strategy for intensive growth of the company. Under this strategy, the company focuses on increasing its sales volume for generating higher revenue for the firm. One of the best strategies that are used by the Unilever is to integrate the global strategies with the local communities to attract customers who are attracted towards the product which is famous globally. The activities performed by the Unilever to increase its turnover include elimination of competition through merger and acquisition, understanding the needs of the customer base, improving the customer services, offering sales promotions and discounts, investing resources to increase the sales volume and the use of incentives. The main products and services include food, breakfast cereal, water and air purifiers, coffee, tea, minerals and supplements, personal care, pet food, toothpaste, soap, cleaning agents and the beauty products.
Improving Profitability: The success of the enterprise is highly dependent on its ability to earn profits. The Unilever’s profitability and growth is determined through its portfolio of divisions, channels and geographies and how it changes over time. The optimal strategic investment is one of the main reasons for the maintenance of profitability position of the company. The organizational strategies of Unilever are designed to ensure that the resources that have long-term potential are prioritized (Zou 2021). The company emphasizes on the generic strategy of focusing on the product characteristics that makes the company’s product different and superior to that of competitors (Perez 2020).
Long-term Sustainability: In order to achieve the long-term sustainability, the company has set itself the three main goals which include: to improve the livelihoods of people involved in supply chain management of the company; to enable more than one billion people to improve their wellbeing through better quality products; and to reduce the environmental footprint of the group product. The company has been able to achieve long-term sustainability through the implementation of Sustainable Living Plan (Lawrence, Rasche and Kenny 2019). It also enables the entity in expanding its product share market and increased profits (Dmitrievna 2021). For instance, through hand-washing awareness, the lifebuoy soap is achieving the double-digit growth.
External growth is the strategy used by a company to grow by using the resources and capacities that are external to it instead of using its own resources (Alaaraj, Mohamed and Bustamam 2018). There are multiple reasons for the use of this strategy by organisations that can range from profit maximisation to achieving organisational objectives. The different forms of external growth options that are available to a firm are mergers, acquisitions, joint ventures and alliances, which can extend the business either vertically, horizontally or conglomerate. Unilever plc. is a conglomerate already dealing with a variety of products. As per the annual report of Unilever plc. (2022) the organisation is focused on building and growing its business consistently and with a sustainable future. It has been fighting for controlling climate change and its impact on the environment due to its activities through the various measures taken from time to time.
Unilever plc. has a strong and growing market in the USA, China and India, where it can capture more market share and leverage its existing market to grow its business. The organisation has the potential to grow inorganically through available options in the specified markets. It has in the past acquired numerous companies to grow its business and move into new markets. It is well capitalised to grow its business through external growth means. As per the credit rating agency S&P Global the firm has been rated “A+”, which states that the company is financially stable to borrow money from the market and support its external growth (Cbonds.com 2021).
There are multiple options for growth for Unilever plc like the merger, acquisition, joint venture and alliance. The main objective of the business is to grow with a sustainable future leaving the least impact on the environment. This makes the options clearer for Unilever as its needs to be in control of the operations to achieve its sustainability goals (Dupont-Nivet 2017). In case the firm chooses strategic alliance as a mode to grow, then there are two possibilities to form a joint venture or make a contract without the involvement of equity. In either of the cases, both the parties have equal control of the new organisation or business and both need to be on the same terms to operate efficiently (The Wall Street Journal 2019). This can be challenging for the organisation with its objectives of leading the sector in terms of sustainability as the other firm might not look forward to the same objective. The other option is to grow via acquisition or merger. In these cases, there is a transfer of ownership from one party to another. In an acquisition deal, one organisation takes over the other organisation’s business and has full control over it. While in a merger, there is a combination of two organisations to form a new one in which both the parties have controlling power (Harroch 2018). Unilever plc. is best suited with the option to acquire the smaller companies that it needs to grow its business. This will ensure the company has full control over its operations and can freely work towards achieving its objectives.
The disadvantage with the option to acquire a firm is the requirement of capital, as the company will have to buy the business in order to have full ownership. This will cause the company to take up debt and pay interest on the borrowed amount. Apart from this, there are challenges like the agreement of the other firm to sell its business to Unilever. In the other cases of external growth, there is a benefit of synergy as there is the involvement of the expertise and experience of the other organisation in the market or product to be dealt with, but in the acquisition, there is no such advantage.
Organisational structure can be defined as policies, rules and norms developed by a firm so as to attain the objectives. It is generally a system which demonstrates the ways in which some activities are governed so as to attain the targets of the firm. Such activities can incorporate responsibility, roles and rules. The organisation structure also evaluate the ways in which information flows between different levels in a firm. Thus, in simple words, the organisational structure describes the ways in which activities like task supervision, coordination, and allocation are governed toward attainment of the organisational aims. Organisational culture incorporates attitudes, behaviour and value of the workforce. In other words, organisational culture refers the set of practices, expectations and values which inform and directed the actions of each team member. The corporate structure of this company is generally responsible for assuring adequate assistance for the product creation in the international business of the firm. The overall corporate structure or the organisational structure is usually a design which describes systems and arrangements utilised to develop as well as interconnect several organisational elements like teams and offices. The organisational structure of this firm adapt to the alterations in the international market and consumer good industry. Currently, this firm maintains the structure which deals with its corporate requirements with regards to administering the product types all around the globe. As the leader of consumer goods, this company has the organisational structure which assists the diversified international operations. With a viable organisational structure which allows vibrant product development, this firm retains its position as among the biggest consumer goods firm around the globe. This design of the organisational structure assures the continuous success of this firm in spite of complexity of its overall international operations. This company has product type divisional organisational structure. The entire firm is categorised into elements on the basis of their respective product focus. The major features of this company’s overall organisational structure are product type distribution, corporate executive groups, and geographical divisions (Rath and Tripathy 2015). The major benefit of this organisational structure of the firm is that it assists product development as well as innovation in sustainable manner so as to reduce the impact of its operations on the environment or rather on the climate. Furthermore, such corporate structure also allows the firm to distinguish its goods despites the huge size of its international operations (Chelangat 2017).
The organisational culture of this firm focuses on performance that is it concentrates on the significance of the employee output. Such organisational culture generally demonstrates the significance of the measures or criteria utilised to evaluate the needed output as well as the adequacy of such output (Alfoldi McGaughey and Clegg 2017). The organisational culture demonstrates certain features like emphasizes on the quality of the output, overall performance of individual as well as entire firm, and the efficiency. Thus, it can be said the culture of this firm emphasizes on the quality and performance and this culture has enabled the company to achieve the success which it pursues currently. Such culture of the firm instils high quality and performance in the overall work ethics of the workforce to enhancing the business output. Thus, such organisational culture enables the company to carry out its operations effectively by eliminating wastage of resources which ultimately effects its overall sustainability. Moreover, it enables the employees to understand how they are effecting the society or the environment which ultimately helps them to perform their tasks sustainably.
It has been observed that this firm is being innovating itself for the last 100 years and it majorly innovates itself for the sake of society, planet and most importantly people. The company observed that scientific research and science are important so as to upgrade the understanding and knowledge of the ways in which personal care, beauty, home, nutrition, and food products can be beneficial for the consumer wellbeing, confidence and health (Eneroth and Munday 2018). These people are also determining the ways in which it can improve the economic, societal and environmental effects of its products. Moreover, it has been seen that this company has the portfolio of above 20000 patents, digital modelling, data, robotics and AI which is blended with the intellectual property and the overall expertise of above 500 research and development professional in more than 60 nations across the globe. This indicates that it is adding to such number at the rate of hundreds of the patents in a year that is a major driver of the business growth. The company has many scientists and effective research. Some of its research into human microbiome is for 20 years. The company is looking forward for many collaborations so as to deal with international challenges like climate change. Getting associated with the academia and smartest firms enables it to explore, build up and scale the technologies which help change for the better.
Conclusion
From the above discussion, it can be concluded that this company has been employing effective growth strategy which has enabled it to achieve success in its market. Moreover, it has also utilised certain degree of diversification as well as vertical integration so as to remain competitive in this competitive environment. It was also known that there were certain essential activities of this firm in terms of long run sustainability, profitability and turnover. It was also found that this company has been continuously innovating itself so as to remain vibrant in its market
References
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