As living standards improved, the need for necessities is expected to increase. The population, given stronger purchasing power, will consider goods that are of better quality and branded items will become more popular. The population will also become more health and hygiene conscious, driving greater consumption of personal care items. These consequences are all very favourable from Unilever's perspective. Social – most of the emerging economies have concerns over the ever-increasing population.
Overpopulation does create certain issues affecting economic growth as it will contribute to unemployment rate and become a burden to the government as it suggests more capital to be invested in maintaining the necessary benefits for the citizens. However, population can suggest the highest potential consumption volume to be consumed. It could derive into helpful figures revealing the company's current market share and are indicative in setting sales targets. At present, Unilever's food businesses are generating i?? 22 billion in which emerging economies constitute 30%.
Technological – technological advancements make communications more convenient than ever before. People from emerging economies can easily gain access to information available on the internet. Better product knowledge will be developed over time, allowing them to make more appropriate choice addressed to their needs. Information and communication technologies are also important to Unilever. Timeless communication over the internet and video conferencing provide a worldwide platform for exchange of information which is definitely an advantage in terms of market research and improving decision making processes.
Given each country has issues inherited from its historical background, variations in practices and cultural impact, it is impossible to have two identical economies. However, the macro-environments of developing countries proved possible similarities, which in fact make strategic planning for global operations more efficient. Degree of Globalization Globalization provides companies with access to wider markets; on the other hand, consumers are benefit from greater product choices by removing boundaries between nations for transaction and trading purposes.
It is an integration of domestic economies into an international economy through the trading of goods and services, investments and the flow of capital from one country to another and is seen as a key force in promoting worldwide economic development as well as the national economic growth. The ever-advancing communication technologies offering companies the potential to gain global reaching their operations, have also encouraged globalization. Global businesses often operate at one of the four basic levels of globalization: Multidomestic – the first level of globalization.
Businesses at this level consist of several independent units that operate in various countries, where communication between these units are minimal. International – the second level of globalization. Businesses at this level have headquarters based in one country and branch off in other countries. Most international companies are likely to impose the rules and regulations in the home country on other branches and show little concern in local cultures. The third level is transnational. Companies at this level have some sort of integrated business units in other countries.
They tend to make greater effort to address local needs and appreciate cultural difference. Truly global is the fourth level of globalization. The truly global companies see the world as one single market and believe that an overall strategy would be compatible for their worldwide operations, and loosely differentiated strategies and products to ensure global achievements. Unilever is undergoing a transition from being a transnational company to a truly global company. This can be proved by its current streamlining of management and restructuring of company's portfolio together with Cescau's new definition of the company, 'One Unilever'.
The reforms under Cescau's management show the effort of unifying the company, where it will rely on 'one formulation, one packaging design, and one marketing strategy' as compared to its previous fragmentation approach. Researchers believed that truly global is the ideal form of globalization, however, it is also the most difficult to sustain due to limited monitoring and controlling because of the distance between branches. STRATEGIC DEVELOPMENT & ACQUISITIONS OF UNILEVER Unilever's strategic development in the past decade can be summarised based on several key acquisitions and the removal of businesses that are not as profitable.
Key acquisitions include Bestfoods, which is the second largest cash acquisitions of the company in history, Amora-Maille, Ben & Jerry's and Slim. Fast Foods. The portfolio, which originally consists of 1600 brands, has been reduced to 900 brands. i?? 6. 3 billion was injected to the company as a result of the sales of businesses without acceptable growth. The objective of the restructuring of portfolio led by the company's Chief Executive Patrick Cescau, is to ensure that constant focus is being placed on the company's core categories, i. e. food products as well as household and personal care items.
Skin and body, hair and deodorant businesses gained impressive growth figures, constitute i?? 2 billion in addition. This significant increase was largely attributed branded personal care items including Lux, Rexona and Dove. Together with the streamlining of management and corporate restructuring, resulting greater clarity of leadership, simplification of operations and removal of unnecessary complexity. The restructuring activities from various perspectives worked alongside to improve the company's performance while reducing operation costs at the same time.
Apart from modifying the internal structure, Unilever, as to address the increasing public awareness of health and the associated change in diets, has introduced its first functional food – cholesterol-lowering spreads, which has gained recognition from FDA and EU. Since this initiation of health promotion, Unilever has continuously launched various Health Institutions in different countries across the world. It also introduced the Nutrition Enhancement Programme, assessing the levels of trans fats, saturated fats, sodium and sugars in 16,000 products and modify products as necessary.
In 2004, a new brand was developed and launched together with the new company logo of Unilever. The new Unilever logo was designed with the aim of promoting the new brand image, with core focuses on the diversity of its products, people as well as the company itself. Under the theory of comparative advantage, Peng (2001: 34-42) suggested that, a country or organization will specialize in producing products that it can easily manufacture, due to the advantage that it has over its competitors.
Even if the company has no absolute advantage, the theory states that it should at least identify the products which it has relative advantage and specialise in manufacture them. Unilever Indonesia has a comparative advantage in that, hard-working labour is sufficiently supplied with relatively cheap labour costs where Unilever has no reason for not taking full advantage of the situation offered. In fact, Unilever has setup manufacturing plant in Indonesia and used it to not just produce goods for the local market, but to produce for exportation purposes to other countries in Asia.
This clearly demonstrates the application of the comparative advantage theory. Under the absolute advantage theory, a country or organization should produce what it is best at. Casson (1999: 35-52), suggested that, to some people, this approach is not practical in real life. Unilever has produced household goods for many years. Branded detergent, for example 'Lifebouy' are well known throughout the world. Since Unilever has specialised in this class of products for a long time, it can be said to have absolute advantage.
This is the reason Unilever enters markets with new brands and they end up taking over competitors' brands and dominating the market. Unilever's 'Clear' is clearly an example of such. 'Head & Shoulders' was unchallenged in the antidandruff category in Philippines until 'Clear' came into the market and has very quickly overtaken this leading brand of P&G. According to the globalisation theory, basic commodities have a global market and that products are differentiated due to cultural and legal differences among countries.
The theory goes on to the differences in cultural and economic institutions do exist and fragmentations are resulted. Hindustan Unilever is the largest company in India that produces consumer goods, as well as being the biggest advertiser of Unilever products in India. Its major strategy is product differentiation, through manufacture of products that suit the needs of different social classes. For example, when detergents are categorized according to how wealthy the users are. This is in line with the sophisticated globalisation theory, and products are differentiated to meet the economic needs of the diverse society.
In Indonesia, there is 'micro-marketing,' and Unilever markets hair conditioner in Makafar, with strong emphasis on the use of sea minerals as one of the ingredients; while in Jakarta, the compositions have insignificant impact to the demand of it. This supports the sophisticated globalisation thesis which says that fragmented markets are eventually realised. The globalisation theory also suggested that extraordinary rise in trade and investments resulting in a globalized economy is expected after the World War II.
Unilever operates in almost all countries across the world and managed to penetrate new markets successfully. From Africa, Asia, Europe, North and South America and the Middle East, most Unilever products are known. It has contributed a lot towards economies of countries it operates in. For example, in South Africa, direct jobs attributed to Unilever are 3000 and indirect ones were 100,000 (Steib 2008: 10). It is also clear that 0. 8% of employment opportunities, and 0. 9% of GDP in South Africa is attributable to Unilever. Unilever is one among many multi-nationals that contributed investments to many countries.
These trends point to the truth about the globalisation theory and the massive increase in investment since WWII. According to the international theory, the global economy consists of sets of interconnections between markets and countries and multi-nationals, linking the bits and pieces together to form the global economy as a whole. Unilever has recently re-launched 'Clear' to compete with P&G. This shampoo has done very well in the markets that it was launched and was introduced to seven different markets, in the first half of 2007.
Unilever decided to introduce 'Clear' to the Western markets. It will be the first product of its kind ever to be brought to the Western markets where research and creation took place outside the typical Western laboratories, but in the developing countries. In the event if 'Clear' was well accepted by the Western markets, the recognition gained would be remarkable to the transitions of developing countries. This shows consistency with the international theory that multi-nationals link up the different parts of the world.
The factor endowment theory states that a country or organization should export products which compositions are extensively abundant and import products made scarce resources. Unilever came about as a result of a merger between Lever Brothers and Margarine Unie. The common interest that both companies possessed was palm oil. They setup overseas plantations to grow palm oil immediately after partnership and importing the palm oil to their countries. This is consistent with the endowment theory as palm oil is a scarce resource in both of these countries.