Essay: Unilever

Question:

Discuss about the Effects of Outsourcing and Devolvement.

The identified report has been prepared with the objective of analysing the internal and external environment of Unilever in Singapore.  In fast moving consumer goods industry, Unilever is one of the most famous leading suppliers ("Unilever Singapore", 2017). Already Unilever has created its presence in more than 180 countries with world’s most loved and well-known brands (Anderson, & Woolley, 2012). The brands are Dove, Lipton and Wall’s so on. Unilever products are used by 2.5 billion people every day with the expectation of looking good, feeling good and getting more out of their usual life. Unilever successfully meets every day needs of its consumers for hygiene, personal care and nutrition. Unilever’s aim is to grow its business with positive environmental and social impact.

The main corporate focus of Singapore Unilever states that for achieving success one aspect is playing a significant role in its business activities. The aspect explains utmost standards of corporate behaviour are a must required thing towards every person the company works with, the company touches including towards environment on which the company has a great impact on its activities (Eiselé, Wong, & Carlile, 2014). Moreover, Singapore Unilever continues to work with ambitious aims i.e. halving the Company’s environmental impact, improving the wellbeing and health of more than 1 billion people and boosting the livelihoods of overall millions.

PESTEL is a tool that analyses the Political, Economical, Social, Technological, Environmental and Legal factors present in the external environment of any particular aspect.

Political, government actions and changes have a considerable amount of impact on the activities of a business organisation. The elements such as trading tariffs, restriction on trade, government policies including price control, taxation and visa requirements are given most emphasis while doing an analysis of the political factors associated with Singapore market (Rotha?rmel, 2017). Approximately fifty years ago Unilever had established its existence in Singapore with edible food items and detergent business. In Singapore political risks are quite low. As per the findings of Political and Economic Risk Consultancy (PERC) being a democratic country, Singapore enjoys lowest political risk factors (Eiselé, Wong, & Carlile, 2014). The presence of political stability in Singapore provides Unilever with the opportunities to grow and expand free business relations.

Singapore’s economy is a vibrant and free-market type in nature. Economic factors are mainly associated with the analysis of economic growth level, interest rates, local citizens’ wealth, current inflation rate and the exchange rate of currency. In the existence of economic stability of Singapore, Unilever Company can expect growth of its business in terms of the fast moving consumer goods market value and size. High growth, economic stability and increasing wage rate of Singapore provide positive aspects to Unilever’s business (Huang, Jia, & Wyer, 2016). The aspects are more profit from increasing sales, overcoming the threats of increasing costs, highlighting opportunities and future scopes for further development etc.

Traditional values and cultures are maintained by the families of residence of Singapore. Actually social factors deal with the analysis of gender distribution, age, fashion interests, literacy rate, population growth and cultural norms of a particular area where the concerned organisation operates its business activities (Boyle, & Ottensmeyer, 2015). In Singapore, the literacy rate is very high. The residents of Singapore work hard to fulfil their materialism desire. These socio-cultural trends majorly affect Unilever’s macro-environmental business activities of Singapore. According to the culture, traits, preference, tastes and habits of the people of Singapore, Unilever develops and modifies its products to satisfy the needs of its customers (Huang, Jia, & Wyer, 2016).

PESTEL Analysis

Singapore’s IT infrastructure is commendable. Technological factors are generally concerned with technological environment and advancement. In Singapore’s technological advancement, premise internet plays an important role in increasing the ease of communication and connectivity. Unilever always shows dependency on the available technologies for supporting its business of consumer goods (Boyle, & Ottensmeyer, 2015). The factors which are present both in opportunities and threats of the technological premise are given more priority. The factors are increasing business automation, increasing R&D investments and declining cost of shipping based on the technological efficiencies. Increasing business automation with proper distribution and supply chain efficiencies are great opportunities for Singapore Unilever for achieving the business goals (Key, & Czaplewski, 2017).

Ecological conditions and trends have a huge influence on the macro environment of Unilever in Singapore. Ecological factors present in Singapore significantly affect Unilever’s business of consumer goods.  The factors are such as increasing interest in business ecology, rising business efforts given for sustainability and alarming increase in the complexity of the environmental programs (Anderson, & Woolley, 2012).  In Singapore, Unilever’s operational strategy must think about the internal business process and product innovation for the purpose of practising less negative impact of business on the environment. These types of effort can increase Unilever’s capability to satisfy the complex environmental factors.

Unilever in Singapore identifies the impacts of legal rules and systems on the macro-environment of its business. Singapore’s Unilever has a scope of strengthening its brand loyalty and corporate image through matching the environmental regulation with the strategies of corporate social responsibilities. The other opportunities of Unilever in Singapore are strengthening the laws related to international patent and a consumer right (Kohli, 2017). An opportunity is created by the strength of law of consumer right to the company that it can improve the qualities of customer services including the quality and the standards of its products.

Unilever in Singapore effectively competes with the whole world’s consumer goods market. For the purpose of understanding the impacts of all the external factors present in a firm’s environment, Michael Porter’s Five Forces Analysis is used by the business organisations as a management and control tool. The intensities of five forces which are affecting the business activities of Unilever in Singapore can be segregate in three division i.e. strong force, moderate force and weak force (McGee, 2014). The strong forces are competition or competitive rivalry and buyers or consumers bargaining power. The moderate force is bargaining power of the suppliers. Substitution or threat of substitute and threat of new entry are considered as the weak force.

In the present competitive business environment of Singapore, competition is taken as a major force which affects Unilever’s industry to a large extent. This particular section of Five Forces analysis plays a vital role in identifying all the external factors which present the impacts of companies on each other (Anderson, & Woolley, 2012). Increasing number of firms, increasing aggressiveness of the firms and low switching costs are imposing strong forces on Unilever in Singapore.

Political Factors

Low costs of switching brands and availability of high-quality information are the major external factors which lead Unilever towards the strong force of bargaining power of the consumers to existing in consumers’ goods market of Singapore. The presence of low switching costs provides ease to the consumers for switching from the Unilever’s products to the other companies’ substitute products (Boyle, & Ottensmeyer, 2015). Besides, the buyers of consumer goods market in Singapore have a huge access to the high level of quality information i.e. online information available regarding the goods. This indicates the bargaining power of buyers is a major force that affects consumer goods business of Unilever in Singapore.  

Singapore Unilever’s supplier's bargaining power is a moderate force which has a great impact on the supply level available to the firm (Laursen, & Andersen, 2016). The influences of the suppliers are analysed in details in this section of the Five Force analysis.  The moderate forces of this section are the moderate size of the individual suppliers, the moderate population of the suppliers and overall supply capability of the suppliers is also moderate.  A moderate population of the suppliers allows them to impose extensively but restricted influence on Singapore Unilever (Eiselé, Wong, & Carlile, 2014). Though the bargaining power of the suppliers is significant but it imposes moderate impact in the Unilever’s consumer goods environment at Singapore.

Substitutes have the power that can reduce Singapore Unilever’s strength and revenues come from the consumer goods business industry. Low switching costs are major strong forces and low availability of substitutes along with low concern of price ratio of substitutes are the weak forces which are responsible for the threat of substitution (Slater, Hult, & Olson, 2010). Most of the Unilever products’ substitutes in Singapore have a low performance with the insignificant difference in costs while comparing with the other readily available consumer goods. This particular fact attracts more effectively the consumers towards Unilever products rather than the substitutes available in consumer goods market of Singapore.

Unilever in Singapore competes with many established firms as well as the newcomer firms of consumer goods market. High cost involved in brand development and a high proportion of economies of scale are the external factors that weaken the existing and future threats of new entries against Unilever (Amelia, 2014). At the same time, low cost of switching brands enables the new entrants for imposing strong force in opposition to Unilever in Singapore. Based on this particular section of Porter’s Five Force analysis, the threats of new entrants can be considered as a minor external force of the Unilever’s business environment in Singapore.

Through the identification of target market segmentation in the Singapore, the company must introduce latest products and brands as per the suitability of the company. Effective and timely extension of new brands will lead Unilever’s sales maintaining its established position in the consumer goods market of Singapore (Seltene, & Brunel, 2017). Also, such decision-making will improve the external business environment present in Unilever’s consumer goods business in Singapore.

Economic Factors

The first management recommendation is about the aspects which will help in strengthening the customer development department of Unilever in Singapore. As one of the major and biggest departments of Singapore Unilever is customer development department, effective and timely maintenance of the department must be done by the management (Reichel, & Lazarova, 2013). Through ensuring the continuous availability of demanding consumer goods and satisfying the consumers with reasonable price, Unilever will be able to maintain permanently its brand loyalty of the customers (Ansoff, 2014). In Singapore, Unilever must maintain a healthy consumer-seller relationship to keep away the other substitutes from the preference of the customers.

The supply chain department of Unilever in Singapore comprises some areas such as planning for shipments and production, negotiation with the suppliers, enforcement of the contracts with the suppliers. In addition, the department is also concerned about monitoring the level of customer services and satisfactions of the company’s products (Ansoff, 2014). The Singapore Unilever must develop and implement effective plans which will help in maximising the delivery of the products to the customers as fast as possible to avoid the threats of switching brands. This will also help Unilever in maintain a sound relationship with the suppliers of Singapore’s consumer goods market.

The marketing department has two major factors which have a great impact on the business activities of Unilever in Singapore’s consumer goods market. The factors are brand building and brand development. In Singapore’s consumer goods market Unilever must consider the facts i.e. consumers’ demand oriented production, proper maintenance of accountability and responsibility of promotional activities and respect the thoughts and preferences of the consumers (Hitt, Ireland, & Hoskisson, 2017). Marketing is something through which a company can reach to the potential and existing customers of its products. By keeping the levels of effectiveness of marketing actions high, Unilever will be able to maintain its brand image in the consumer goods business of Singapore.

Conclusion

In the conclusion of the whole discussion, it can be stated that the generic strategies developed from Porter’s model can be used for ensuring business growth and flexibility of Singapore Unilever. Porte’s Five Forces analysis of Unilever of Singapore highlights the bargaining power of consumers and competitive rivalry as the major issues which have high intensity of affecting the company’s external business environment. Unilever in its Singapore business market must strengthen its competitive advantages through continuous product innovation. One of the most important findings of Porte’s Five Forces analysis is Unilever must improve its consumer relation for the purpose attracting and retaining more customers.

The tactic will also help Singapore Unilever to maintain the reputation even in the presence of its major competitive firms of Singapore’s consumer goods market. The strategic analysis of Unilever of Singapore identifies numerous threats and opportunities on which Unilever must give more emphasis. The analysis will assure the growth, development and worldwide expansion of Unilever in the consumer goods business. Singapore Unilever must look up the sustainability issues so that the organisation can properly address the opportunities concerning business sustainability. Discussed issues based on Porter’s model and PESTEL analysis of Singapore Unilever indicates the necessity of focusing on business sustainability and innovation.

References

Amelia, N. (2014). Consumer's brand preference over cyber brand and extension brand. International Journal Of Trade And Global Markets, 7(3), 175.

Anderson, J., & Woolley, M. (2012). Towards Strategic Sourcing: The Unilever Experience. Business Strategy Review, 13(2), 65-73.

Ansoff, H. (2014). Strategic management (1st ed.). Palgrave Macmillan.

Boyle, M., & Ottensmeyer, E. (2015). Solving business problems through the creative power of the arts: catalyzing change at Unilever. Journal Of Business Strategy, 26(5), 14-21.

Eiselé, J., Wong, T., & Carlile, M. (2014). Celebrating 10 years of partnership between FDI and Unilever. International Dental Journal, 64, 35-37.

Hitt, M., Ireland, R., & Hoskisson, R. (2017). Strategic management (1st ed.). Boston, MA: Cengage Learning.

Huang, Y., Jia, Y., & Wyer, R. (2016). The Effects of Physical Distance from a Brand Extension on the Impact of Brand-Extension Fit. Psychology & Marketing, 34(1), 59-69.

Key, T., & Czaplewski, A. (2017). Upstream social marketing strategy: An integrated marketing communications approach. Business Horizons, 60(3), 325-333.

Kohli, C. (2017). Branding consumer goods: insights from theory and practice. Journal Of Consumer Marketing, 14(3), 206-219.

Laursen, L., & Andersen, P. (2016). Supplier involvement in NPD: A quasi-experiment at Unilever. Industrial Marketing Management, 58, 162-171.

McGee, J. (2014). Strategic management (1st ed.). Chichester: Wiley.

Reichel, A., & Lazarova, M. (2013). The Effects of Outsourcing and Devolvement on the Strategic Position of HR Departments. Human Resource Management, 52(6), 923-946.

Rotha?rmel, F. (2017). Strategic management (1st ed.). New York, NY: McGraw-Hill Education.

Seltene, M., & Brunel, O. (2017). Brand extension: the moderating role of the category to which the brand extension is found. Journal Of Product & Brand Management, 17(6), 393-402.

Slater, S., Hult, G., & Olson, E. (2010). Factors influencing the relative importance of marketing strategy creativity and marketing strategy implementation effectiveness. Industrial Marketing Management, 39(4), 551-559.

Unilever Singapore. (2017). Unilever Singapore. Retrieved May 2017, from https://www.unilever.com.sg/