Background of Unilever Pakistan Ltd Co.

Unilever Pakistan Ltd., a subsidiary of the Unilever Group is operating in

Pakistan since 1948. The Company’s main business lines are Soaps and

Detergents, Personal Products, Cooking Oils and Fats, Packed Teas, and Ice

Creams. Unilever has a long list of brands such as Surf, Vim, Rin, Lifebuoy,

Sunlight, Lux, Rexona, Sunsilk, Close-Up, Blue-Band, Dalda, Planta, Lipton’s

Yellow Label, Taaza and Richbru, Brook Bond’s Supreme and Kenya Mixture

etc. which are common household names in Pakistan.

The Company’s factory at Rahim Yar Khan was one of the first industrial units to

be constructed after the creation of Pakistan. As the consumer base expanded

over the years and the Company entered into new product lines like Personal

Products and Margarine, it invested further in the installation of modern

manufacturing facilities including a factory at Karachi. Today, the Company is

using latest state-of-the-art technology for producing high quality products.

In 1995, the Company established a new factory near Lahore to manufacture the

Wall’s range of ice creams, which have become popular within a short time. In

1996, the present group – Unilever UK acquired the Polka Group that produced

ice creams. In 1999, Pakistan industrial promoters (Private) Limited, owners of

‘Polka’ brands of Ice Cream was merged with Lever.

In order to leverage the synergies of Unilever’s international brand strength,

market edge and corporate image, Lever Brothers Pakistan Ltd. changed its

name to Unilever Pakistan Ltd., in August 2002.

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Mission Statement:

We are the leading consumer products company in Pakistan, a

multinational with deep roots in the country.

We attract and develop highly talented people, who are excited,

empowered and committed to deliver double-digit growth.

We serve the everyday needs of all consumers everywhere for foods,

hygiene and beauty through branded products and services that deliver the

best quality and value.

We strive to remain an ever simple and enterprising business.

We use our superior consumer understanding to produce breakthrough

innovations in brands and channels.

Our brands capture the hearts of consumers through outstanding

communication.

Through managing a responsive supply chain, we maximise value from

Suppliers to Customers.

We are exemplary through our commitment to Business Ethics, Safety,

Health, Environment and involvement in the Community.

Vision Statement:

Touching hearts, changing lives.

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Introduction - Unilever Pakistan

Incorporated in 1948, we, Unilever Pakistan Limited, are one of the most

prominent multinationals in the country today. We are proud of being a part of

Pakistan’s history, contributing towards the growth and prosperity of the nation,

providing 150 million people with a better future, a better tomorrow. Our passion

for understanding people's concerns and desires, our ability to create products

that fulfill those needs and our skills in getting those products to market drives

our growing success - and has made us one of the world’s leading consumer

goods companies.

The present company has come about through the original Lever Brothers

merging with Lipton (1988), Brooke Bond (1997), Polka Ice Cream (1998),

presently we are operationally merged with Best Foods since 2001. 1982 saw the

introduction of personal products and 1994 the setting up of the Wall’s ice-cream

business, which was a green field exercise.

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Objectives

Top Priority – Fulfilment of customer’s needs:

“Unilever aims to continuously improve the environmental performance of

their process and their brands to achieve sustainable profitable growth as

their consumer expects them to fulfil their needs with brands that have low

environmental impact.”

To be honest, transparent and ethical in our dealings at all times. Our vision,

mission, values and code of Business Principles are the principal beliefs of our

Company. They must be known, owned and lived by all. We are ambassadors of

Unilever Pakistan both inside and outside of the work place. We take pride in

always speaking positively of our Company. We take care of our personal image,

work environment and assets. We respect individual differences and provide

equal opportunity regardless of gender, ethnic or social background. We are all

professionals; we will treat each other and our external contacts with respect,

regardless of grade or job title.

To win the hearts and minds of consumers. The consumer is the heart and

soul of our business. We obsessively search for new ideas by tuning into what

they feel, what they want and, what they need. Wherever you are, anyone you

meet, is a potential Unilever consumer. Treat them with respect. We ensure

superior quality products and services aiming for zero complaints. Everyone is

empowered to stop poor quality reaching the consumer. Never lose a consumer.

Own the problem, with them back and ensure they feel positively treated.

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To deliver what they promise. We are responsible for communicating business

objectives to our employees. We all must be clear about business priorities.

Never be afraid to ask. We respect time, we do what we say, and we finish what

we start enthusiastically to achieve growth.

To become empowered leaders who are inspired by new challenges and

have a bias for action. We shall succeed through brilliant teamwork. We

support each other to meet Company and individual needs. Self-development is

everyone’s responsibility. Performance Development Plan is completed for

everyone in our business. We practice open and honest feedback. Each one of

us is a leader – we live and lead by example.

To believe in trust, truth and outstanding teamwork. They value a creative

and fun environment. We encourage empowerment and risk taking. Everyone

will participate in generating new ideas, identifying improvements and be part of

the solution. We contribute to a stimulating environment alive with creativity,

energy and fun. We celebrate and reward success. We relentlessly simplify our

business and processes. We say no to anything not clearly aligned to our

strategy.

They care about and actively contribute to the community in which they

live. We are good corporate citizens - we care for the environment. We do not

waste resources and materials. We help communities through active involvement

in projects that improve quality of life. Think safety first. We are responsible for

creating a safe, secure and accident free workplace for ourselves and others. We

are aware of all emergency procedures and report safety risks immediately.

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STRATEGIES

Product Development

Unilever continuously work on improving product qualities and features to

capture the market.

It analyzes the demand to check whether the product is profitable or not

so that if the product is not it should be discontinued.

It keeps an eye on the competitor’s products in order to become the

market leader of certain product.

Corporate Strategies

Leader in the consumer goods market.

Managing govt relations to influence duty on imports of raw materials and

countering smuggling of competitors goods

Human Resource Strategies.

Managing employee recruitment and placement to put the right person for

the right job.

Replacement Planning.

Employee rotation in the department.

Employee training.

Remuneration survey for salary adjustments of employees.

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FINANCE STRATEGIES

Maintain company finance operations with in the resources

Maintain working capital keeping stock debtors low.

Adhere strictly to the ICAP accounting practices and laws

Tax management to gain legitimate advantages lessening the burden

Ensure internal control through internal audit

Introduction of IT and implementation

Ensure sales revenue generation meet targets

Maintenance of purchasing function

ACQUISITIONS & MERGERS

Lever has successfully completed an acquisition of Pakistan Industrial

promotional (pvt) limited, manufacturers of polka in 1999.

The company completed an merger with Brooke Bond (BB) Pakistan last

year, where each BB shareholder received one lever share for every 4.3

BB shares .The merger has resulted in consolidation of distribution

channels, thus, reducing operating costs for the company.

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SWOT ANALYSIS OF THE COMPANY

OPPORTUNITY ANALYSIS

P&G have a lot of opportunities to develop. It has 4 strong points to develop such

as

Dedicated and talented human resources.

Reputation for honesty that won the trust and respect of the suppliers and

customer.

Prudent and conservative management.

Substantial marketing

ENVIRONMENT – OPPURTUNITIES AND THREATS

Environmental factors play a very important role in the development of the

company.

LEGAL, POLITICAL, AND REGULARLY FACTORS.

Legal, Political, And Regularly Factors have a big impact on policies marketing

strategies of P&G. P&G is a global company spread over 24 countries, therefore

tax, import, export policies of each govt. of each country is very different. In each

country P&G have own policies to match with legal of the host countries. This is a

threat for P&G.

OPPURTUNITIES

The rapid expanding urban population is the key opportunity.

Awareness growing in rural areas due to education children with family

members abroad sending foreign income.

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THREATS

P& G is the significant multinational threats with presences in soap,

detergents and personal products.

Purchasing power can affect demand due to depressed economy resulting

in inflation.

SOCIAL AND CULTURAL FACTORS

Social and cultural factors are both opportunities and threats for P&G. As we

know P&G has a lot of brands, they expertise in both consumer and industrial

sector so they need a huge of employee. How to find brand manager in each

country who can exploit utility of labour force in each country where the company

has a brand? P&G has got that goal. Now P&G is the best place for worker

employee enjoyed working for P&G and it’s an opportunity for them.

COMPETITIVE FACTORS

Competition between companies is a big threat for any company including P&G.

as we know, P&G has produced lot of products in different segments such as

performance segment, price segments, mildness segments which other

companies producing similarly.

P& G manufactured 90 consumer and industrial products in the United States

and sold the leading brands in 14 of the 24 consumer’s product categories in

which the company competed. it is very clear that competitive factors are big

threats for P&G.

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TECHNOLOGICAL FACTORS.

Technology is very changeable; technology will be an opportunity of company if

company catches up with the new technology. Quick changing of technology is

also a threat for companies in contrary. It is very clear in P&G . for example P&G

are very strong in manufacturing detergents liquid including hand washing up

liquids, by the time, technology is very changeable; it changes the way of

washing up. Scientist have invented mordent washing up machines, which

consumers do not care about the mildness of product of their hand. As a result,

washing detergent liquid would be threatened. It is the reason why P&G are very

interested in research and development field. They spend heavily on R&D. P&G

have six major research centres, four of which located in United States.

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EFE MATRIX

Key External Factors Weight Rating Weighted Score

Opportunities

Hygiene Consciousness 0.2 4 0.8

Increasing Population 0.15 3 0.45

Innovation (R&D) 0.10 2 0.2

Product Diversification 0.10 4 0.4

Explore New Markets 0.05 4 0.2

Threats

Product smuggling 0.15 1 0.15

Increase demand for Antibacterial Soaps 0.05 3 0.15

Counterfeit Products 0.10 3 0.3

International Trends 0.05 3 0.15

Local Competition 0.05 4 0.2

Total 1.00 3.10

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STRENGTHS

Research and development and financial support from parent Unilever.

Strong brand names. most of the brands for e.g. (detergent are now used

generically to present product.

Sound and experienced management.

Excellent marketing department assisted by a highly regarded marketing

research unit.

Merger with Brooke bond was expected to result in cost saving and spur

earnings growth and its working as per expectations.

WEAKNESSES

About 80% of raw material is imported for the manufacturing of the

consumer goods. Raw material constitutes about 85% of manufacturing

cost, leaving Levers margin exposed to rupee devaluation.

Rampant smuggling of tea and detergents has seriously affected levers

sale and earning. Unless the govt. takes serious steps to curb smuggling

growth in sales and earning will continued to be significantly restrained.

Low liquidity of stock due to higher prices.

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IFE MATRIX

Key Internal Factors Weight Rating Weighted Score

Strengths

Number of Products 0.1 4 0.4

Advance Technology 0.05 4 0.2

Supply Chain Management 0.05 3 0.15

Financial Backing 0.2 4 0.8

Experience Top Management 0.2 3 0.6

Weakness

Tall Organization Structure 0.1 2 0.2

High Operating Expenses 0.05 2 0.1

High Cost of Production 0.05 2 0.1

Increasing Number of Small Competitors 0.1 2 0.2

Unbranded Products 0.1 1 0.1

Total 1.00 2.85

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TOWS ANALYSIS

THE TOWS

MATRIX

Strength-S Weaknesses-WNumber of Products Tall Organization

StructureAdvance Technology High Operating ExpensesSupply Chain Management

High Cost of Production

Financial Backing Increasing Number of Small Competitors

Experience Top Management

Unbranded Products

Opportunities-O SO Strategies WO StrategiesHygiene Consciousness Create awareness

among customers about hygiene.

Initiate catering new markets and new segments

Increasing Population Accommodate rural demand by your supply network

Accommodate local demand by joint ventures

Innovation (R&D) Launch new products for lower class

Product DiversificationExplore New Markets

Threats-T ST Strategies WT StrategiesTall Organization Structure

Control Cost Make creative and competitive strategies

High Operating Expenses Cost reductionHigh Cost of ProductionIncreasing Number of Small CompetitorsUnbranded Products

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SPACE MATRIX

Financial Strength

1. Net revenue 2.52. Net income 2.5

Total 5.0 Average 2.5

Industry Strength

1. Competition due to substitute products 4.02. Customer Loyalty 2.0

Total 6.0 Average 3

Competitive Advantage

1. Largely customer base -1.02. Strong Marketing and management -1.0

Total -2.0 Average -1.0

Environmental Stability:

1. Less developed countries facing high inflation -2.0 Total -2.0 Average -1.0

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SPACE MATRIX

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BCG MATRIX

RELATIVE MARKET SHARE POSITION IN THE INDUSTRY

High1.0

Medium0.50

Low0.0

?

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High +20

Medium 0

Low -20

Home & Personal care

Ice Cream Oil Products

?INDUSTRY SALES GROETH RATE (%)

Detergents

GRAND STRATEGY MATRIX

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QSPM

Key FactorIntegration Intensive

Weight AS TAS AS TASOpportunities:

Hygiene Consciousness 0.2 - - 2 0.20Increasing Population 0.15 2 0.30 2 0.40Innovation (R&D) 0.10 3 0.30 2 0.20Product Diversification 0.10 4 0.40 3 0.30Explore New Markets 0.05 - - 1 0.05

Threats:

Tall Organization Structure

0.15 1 0.15 1 0.15

High Operating Expenses

0.05 1 0.05 2 0.10

High Cost of Production 0.10 3 0.30 - -Increasing Number of Small Competitors

0.05 4 0.20 2 0.4

Unbranded Products 0.05 4 0.20 - -Total 1.00 3.85 5.15

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Key FactorIntegration Intensive

Weight AS TAS AS TASStrengths:

Number of Products 0.1 2 0.20 3 0.30Advance Technology 0.05 3 0.15 3 0.15Supply Chain Management

0.05 2 0.10 3 0.15

Financial Backing 0.2 3 0.60 4 0.80Experience Top Management

0.2 - - 3 0.60

Weaknesses:

Tall Organization Structure

0.1 3 0.30 2 0.20

High Operating Expenses

0.05 2 0.10 3 0.15

High Cost of Production 0.05 - - 2 0.10Increasing Number of Small Competitors

0.1 3 0.30 - -

Unbranded Products 0.1 2 0.20 2 0.15Total 1.00 1.95 2.65

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Task environment

Threats of New Entrants

Barriers To Entry:

Before offering any new product, Unilever check the competitors as to what they

are doing in the market and they also check with the consumers; whether they

like the competitor’s product or not, have the product being a success or a

failure. If it was successful, then Unilever should try to introduce and launch a

similar product in the market, but if it was a failure, then they should try to enter

into new markets and segments.

There are two situations, which Unilever might be faced with:

The product has already been launched by the competitor; in this case the

strategies used by the marketing department will be different. In this case,

Unilever will check the response of the competitor’s products, whether thay have

been successful in the market or not, and what was the response of the

consumers, etc. For example, Tapal recently offered Tapal Green Tea, by seeing

the market’s response as well as the consumer’s response, Unilever also

launched Green Tea, while maintaining a good quality tea.

Company’s own Innovation; in this case, if Unilever wants to launch some new

product in the market, and is the first to offer, then they arrange some focus

groups to get the reaction of the customers, and also introduce the product in

samples, again to get the response of the consumers in large numbers in the

market.

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Potential or Imminent New Entrants:

In the Tea Industry, a new entrant coming in is Tetley, which is introduced by the

Lexon Group of Companies. Lexon Group is quite a big group, and cannot be

avoided at present. At the moment, Tetley has only been launched in Karachi,

and their advertising is low in frequency as well, maybe due to less resources

and also due to the fact that it has just entered the market, and is thus in the

introductory stage in the product life cycle. Its growth opportunity is very large as

it is backed by a big group, and thus it’s presence in the market should not be

avoided.

In the Ice Cream industry, a new entrant has just emerged, called HICO.

Although it’s small in size, and has only been launched in Lahore at the moment,

but it can be very tough and again its growth opportunity is very large as well.

Although HICO has not advertised as yet, but it is receiving a very good

response from the consumers.

New Entrants Competitive Strategies:

The new entrants have focused on major cities of the country, i.e. focusing city

wise and in urban areas of Pakistan first. At the moment, they have very limited

strategies and low advertisements due to limited resources and links as they are

still in the introductory stage in the PLC. But they may have more potential in

growing due to the strong backing of Lexon Group for Tetley. These both haven’t

done or applied any aggressive strategies as yet but it still cannot be avoided.

In the future, HICO might, for example, introduce new flavours, might offer lower

priced ice creams, etc. What Unilever failed to achieve successfully, HICO might

try to avail and focus on that opportunity and might become successful at it.

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Bargaining Power of Customers

Customers:

Most of their customers are from lower class, middle class and high class in both

rural and urban areas of the country. They try to focus everyone and try to cater

to everyone’s needs and wants. The rural areas are larger in size and number,

and there are about 65% of the people living in major cities of Pakistan.

Customer’s Relative Bargaining Power:

No bargaining power is given to the consumers, as the products are retail priced

based. Three factors are very important in setting the price of the product:

customers, competitors and profit. They first check with consumers what they

perceive the price to be, then they see the competitors - how they have priced

the product and then they see how much profit they will be making at that certain

price.

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Threats of substitute product & services

Substitutes & Alternatives:

Lipton & Supreme

CloseUp & Pepsodent

They both may have competition against each other, but the profits and revenues

generated will be for the benefit of the company, i.e. in both the cases the

company’s revenue will increase, and only problem for the respected brand

managers of the products. Larger sales volume of one brand will balance the

lower sales volume of the other brand.

Among the ice cream segment, Wall’s substitutes in the market may be Kulfi,

either in a cup, stick or in a wrapping paper, offered in many Sweet Shops as

well as Ice Cream Carts (Mithai Shops located throughout the major cities and

Pakistan as well as rural areas).

Among the detergent’s segment, many rural and urban women at homes use

normal and locally made washing soaps to wash off their clothings. Many rural

women do not use washing powders as detergents due to the high price of

washing powder.

Among the toothpaste segment, many people use Miswaak to keep their teeth

clean and fresh throughout the day. Or they may even use tooth powder such as

Dentonic rather than using toothpaste.

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Penetration:

As a whole, Unilever’s penetration is large / huge. Consumers buy products with

confidence due to the association of consumers with the Unilever since 1947 and

the customer goodwill maintained throughout these years.

These substitutes are already in the market and have made their mark as good

substitutes to the products of Unilever, and they have a good position at the

moment in the current market, and thus have already penetrated.

Substitutes As An Opportunity For Diversification:

Company’s products are all diversified. If the sales volume of Tea segment goes

up, and the sales volume of Ice Cream goes down, then the revenues are

balanced out or are covered up and in this way, the lower sales volume segment

gets support with the revenues generated.

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EVALUATING THE BUSINESS STRAGEY

Performance Test:

Unilever main competitor is P& G its financial position is good, the market

position is average and technological performance is also average.

Consistency Test

a. Buyer power and trends in demand for product is expected to change in five

years, although Unilever strategy is consistent, but it may need some changes.

b. Substitutes or alternatives would increase as buying power changes and

new taste are developed with changing lifestyle. Unilever strategy is consistent

in this case.

c. Likely Entrants would also increase but Unilever believes it cannot affect

their market share as they have a strong position in mind of consumers.

d. Competitors are going to increase but Unilever does a continuous effort to

stratify their customer needs and demands.

e. Supplier Power would increase in five years but Unilever strategy is

consistent with local supplier and international supplier.

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Internal Resources & Capabilities

Unilever Human resource department make sure that they hire the right person

for the right job at the right time. It hires qualified people and are giving training

and does career development for employees.

Unilever has to keep pace with the changes in technology and therefore are on a

road of continuous improvement.

Unilever is a well reputation the market, having offices internationally and

occupying a strong position in the minds of consumers.

Competitive Advantage

Economic Advantage: P&G make sure that its products are available at all

outlets. It is also occupies a major market share.

Disadvantage: P&G has a weak cost structure and not occupies a strong image

like Unilever.

Human ResourceAdvantage: P&G also believes in teamwork, and continuously

boost the morale of their employees.

Disadvantage: P&G has a formal culture atmosphere.

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Conclusion & Recommendation

After the analysis of the IEFM and EFEM, we see that the company is

above average. With respect to SPACE and GRAND matrix analysis,

Unilever is placed in aggressive quadrant and it can follow any of the

strategies e.g. market penetration, forward integration, backward

integration etc.

According to the analysis in QSPM, we would like Unilever to pursue

Cost Reduction strategy which is a market development strategy.

Although the current business strategy of Unilever is Product

Development as they are bringing different product like Green Tea in

the market. They are also modifying their products for e.g. Lipton in

new round tea bags and Lux by adding a different ingredient.

Business Action Plan:

1. Reduce packaging expenses by 5%.

2. Reduce international purchases of raw material cost by 5% as

Unilever purchases 90% raw material from international

suppliers.

3. Reduce retailer’s commission cost by 2%.

4. Reduce transportation cost by 3%.

5. Reduce inventory-holding cost by 2%.

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Time Frame:

1. Reduce packaging expenses by 5% by June 2005

2. Reduce raw material cost by 3% by May 2006

3. Reduce retailers commission cost by 2% by February 2005

4. Reduce transportation cost by 3% by September 2006.

5. Reduce inventory holding cost by 2% November 2005.

Responsibility

1. Reduction of packaging expenses is responsibility of packaging

department and purchasing department.

2. Reduction of international purchases of raw material is

responsibility of purchasing department.

3. Reduce retailers commission cost by is responsibility of

distribution department.

6. Reduce transportation cost by 3% is responsibility of

distribution department.

7. Reduce inventory-holding cost by 2% % is responsibility of

distribution department.

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