Strategies And Impacts Of Unilever

Categorizing Strategic Influences

Strategic decisions taken in boardrooms in order to strengthen market position globally or to adapt to macroeconomic changes have strong influences on the operations of multinational companies. The moves have rippling effects on multiple stakeholders ranging from investors, customers, the management of the companies concerned and even their competitors. The paper would delve into the three articles reporting three strategic decisions taken by the apex management of the British-Dutch multinational company, Unilever. The first article would be from the English daily, The Guardian titled ‘How Unilever foiled Kraft Heinz’s £115bn takeover bid’ shows how Unilever resisted a takeover deal by its American competitor, Krafts, once again exhibiting formidable market position globally (Davies, 2018). The second article has been sourced from the English Daily, The Independent titled, ‘Marmite owner to make all plastic packaging fully reusable or recyclable by 2025’ which points of the sustainable product line strategy of the British-Dutch consumer goods giant  (Rodionova, 2018). The third articled reported by international news channel CNBC titled ‘UPDATE 3-Unilever in pole position to swallow GSK’s Indian Horlicks business – sources’ reports Unilever’s acquisition and merger prowess combined with its marketing prowess can even give stronger rivals Nestle and Coca Cola a run for market position. Unilever emerged as the top of GSK India’s bid to divest in its Horlicks business in India leaving Nestle, the largest food company in the world behind (Wu & Gruber, 2018). The paper would explore the outcomes of these strategies of Unilever on its business operations.

The aim of this report is to visit three strategic decisions taken by the management of Unilever and their impacts on the business of the British-Dutch company. The first shows that financial power of Unilever and its tremendous resistance power that ultimately foiled the American multinational food marketing giant, Kraft Food’s attempt to acquire it, which itself testifies the stronger position of the former (Davies, 2018). The second article throws light on the sustainable product strategies of Unilever and its aim to reduce reduce plastic contents in its products including packages by 2025 (Rodionova, 2018). The third and the final article shows Unilever acquisition power when the company toppled its stronger rival Nestle to acquire the Horlicks business of GSK in India (Wu & Gruber, 2018). The third article does not only show the power of Unilever but its subsidiaries.

The three strategies taken by the management of Unilever actually re-affirm the top market position of the British-Dutch company in the global market. The first strategy which led to Kraft Food abandoning its decision to take over Unilever actually showed the company’s power to resist any intervention of its competitors in its operations and decision making (Davies, 2018). The strategy belongs to a financial strategy category in which Unilever succeeded holding on its global position. This success of Unilever would have several positive implications on the company and its stakeholders. The first positive implication of the strategy is that Unilever reassured its investors the security of its investments and its power to give them high returns on their investments. The outcome of this reassurance of Unilever to shareholders was increased investment in its shares which is evident from the steeply rising share indices of Unilever on the London Stock Exchange as shown in the graph below. Dou et al.(2016) points out that increase in investments from investors can be interpreted as increasing financial strength of the company.

Unilever’s Global Market Position

                                         Figure 1. Stock price Unilever on London Stock Exchange

                                                  (Source: Londonstockexchange.com, 2018)

The second implication of this growing financial position of Unilever can be reflected in the next strategy which involves the company making decisions to reduce the plastic contents in its products by 2025 (Rodionova, 2018). The second strategy belong the category of sustainability strategies which obviously require immense capital allocation towards renewing its manufacturing and supply chain strategies. The company would also require to withdraw products containing plastic beads and introduce organic counterparts of these products. This would require extensive innovation and R&D, obviously require enhanced support of shareholders, which again points out to the first implication. The third strategy of Unilever in which the company defeated its comparatively stronger competitor Nestle in bidding for GSK’s Indian business of Horlicks can be viewed can as the company’s allocation of capital to strengthen its sustainable product line in order to offer customers more value creating products (Wu & Gruber, 2018). It can be interpreted from the product line strategy of Unilever that the company is not only capable of foiling acquisition attempts but also giving larger companies tough competition in acquiring brands (Fernandes, 2016).

The three strategic decisions discussed above would lead to the strengthening of the brand value of Unilever. The rejection of Unilever’s offer of acquisition actually showed the brand value of the company. The company was able to strengthen its brand value further by taking a resolution to reduce plastic content in its products. The third decision of Unilever to bid for Horlicks in India and its victory as the top bidder leaving Nestle behind actually supports the second strategy since Horlicks is made from natural ingredients like malt and barley (Ten Klooster & de Koeijer, 2016). Thus, if Unilever succeeds acquiring Horlicks it would add to the strategic change towards marketing of more products with natural ingredients giving tough competition to Bournvita of Mondelez International and Milo of Nestle (Nestle.com, 2018). This means that Unilever would be able to market of the top market position of Horlicks in India and earn high profits, thus cementing its position in Asia. In other words, the three strategies would drive the company towards high limits of sustainability. While the first strategy enforces financial sustainability, the second and third strategies enforce environment and competitive sustainability (Magnier & Schoormans, 2015).

It can pointed out that the above decisions of Unilever clearly shows a strategy of the apex management of Unilever which accounts for its global competitive advantage-empowering its subsidiaries. Koveshnikov, Ehrnrooth and Vaara (2017) mention that multinational companies often empower their subsidiaries to lesser extent in order to retain its supreme power of the apex management bodies over the operations. However, Demirbag, Tatoglu and Wilkinson (2016) contradicts this statement and point that empowerment of subsidiaries instead of weakening the apex management enable stronger operations in the host markets, thus enhancing the global operations of the multinational companies altogether. An analysis of these strategies clearly shows that Unilever follows the second ideology.  This is because as far as foiling acquisition attempt of Krafts is concerned, the triumph of Unilever can actually be credited to its American subsidiary. This means that in the US, Unilever holds such position in spite of being a British-Dutch company that Kraft, which is a resident company to the US was compelled to make an attempt to takeover Unilever to manage the growing power of the former (Unileverusa.com, 2018). Again it can be pointed out that the management’s decision of reduction of plastic component in its products would require wastage management and biodegradable management operations from the subsidiaries as well. The third strategy of acquisition for Horlicks in India actually shows that Hindustan Unilever, Indian arm of the MNC is powerful enough to compete against Nestle and GSK. This clearly shows that the key to the global power of Unilever rests with empowering of its subsidiaries.

Unilever can take several strategies to strengthen its business operations in three areas of business pointed out above namely, financial, marketing and sustainability. The project would start from December 3, 2018 and would involve all the subsidiaries of Unilever. The aim of the project would be global position strengthening strategies of Unilever. The strategies would be inspired by the three main discussed above namely, foiling of takeover attempts by other firms, reducing plastic content in packaging and acquiring of more sustainable brands (Appendix). The actions which Unilever should undertake are as follows:

Conclusion:

It can be concluded that Unilever is able to form strong strategies which have strong impact on the entire global operations. The recommendations can be made against the discussion conducted above which would strengthen the market position of the company. The above analysis clearly shows that market environment of Unilever is extremely competitive. This means that company should take more aggressive decisions by collaborating with its subsidiaries as well.

The following are recommendations which the apex management of Unilever should consider:

Unilever should strengthen its weak subsidiaries, especially in poorer host countries like South Africa and Egypt. This would enhance its competitive strengths in the global market altogether.

The company in pursuit of its second strategy should introduce more organic products using natural ingredients. This would empower the sustainability goals of the company.  

References:

Davies, R. (2018). Theguardian.com. Retrieved from https://www.theguardian.com/business/2017/feb/20/how-unilever-foiled-kraft-heinzs-115m-takeover-bid-warren-buffett

Demirbag, M., Tatoglu, E., & Wilkinson, A. (2016). Adoption of High?Performance Work Systems by Local Subsidiaries of Developed Country and Turkish MNEs and Indigenous Firms in Turkey. Human Resource Management, 55(6), 1001-1024.

Dou, Y., Hope, O. K., Thomas, W. B., & Zou, Y. (2016). Individual Large Shareholders, Earnings Management, and Capital?Market Consequences. Journal of Business Finance & Accounting, 43(7-8), 872-902.

Fernandes, M. M. A. (2016). Mergers & acquisitions: acquisition of Boulder Brands by Hain Celestial Group(Doctoral dissertation).

Koveshnikov, A., Ehrnrooth, M., & Vaara, E. (2017). Headquarter-subsidiary relations in the multinational corporation as a discursive struggle. In Multinational corporations and organization theory: Post millennium perspectives (pp. 233-264). Emerald Publishing Limited.

Londonstockexchange.com. (2018). Retrieved from https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary-chart.html?fourWayKey=GB00B10RZP78GBGBXSET1

Magnier, L., & Schoormans, J. (2015). Consumer reactions to sustainable packaging: The interplay of visual appearance, verbal claim and environmental concern. Journal of Environmental Psychology, 44, 53-62.

Nestle.com. (2018). Retrieved from https://www.nestle.com/brands/allbrands/milo_foodservice

Rodionova, Z. (2018). TheIndependent.com. Retrieved from https://www.independent.co.uk/news/business/news/unilever-marmite-dove-lynx-plastic-recyclable-2025-environment-a7530266.html

Ten Klooster, R., & de Koeijer, B. (2016, June). Utilising the potential of design briefs in sustainable packaging development. In IAPRI World Conference on Packaging (Vol. 14).

Unileverusa.com. (2018). Retrieved from https://www.unileverusa.com/

Wu, K., & Gruber, A. (2018). CNBC.com. Retrieved from https://www.cnbc.com/2018/11/28/reuters-america-update-3-unilever-in-pole-position-to-swallow-gsks-indian-horlicks-business–sources.html

Order an Essay Now & Get These Features For Free:

Turnitin Report

Formatting

Title Page

Citation

Outline

Place an Order