Contemporary entrepreneurs operate in a world with stiff competition, speedy innovations, threats from new entrants, and ever-changing consumer demands. For marketers in incumbent companies, the struggle is to enhance efficiency and retain loyal customers while attracting new ones (Schindehutte and Morris, 2010). Firms must continually implement a unique value-creating strategy that cannot be duplicated by other companies, to achieve sustainable competitive advantage (SCA) (Hoffman, 2000). The objective of this paper is to identify and analyze the competitive position of Unilever Company focusing on the sustainability of its market and its major rivals.
Unilever in Brief
Unilever is a multinational organization that specializes in fast-moving consumer goods (FMCG). The company was established in 1930, following a merger of “Dutch company Margarine Unie and the British soapmaker Lever Brothers” (Jansen, 2018, p.2). The foundation occurred during the great depression, but the company managed to survive even the Second World War, and its aftermath. By the end of the 2019 financial year, the company was operating in more than 190 countries with more than 2.5 billion customers (Unilever, 2020). Although the company still sells several products, it has streamlined its goods to specialize in beauty and personal care, nutrition, and home care. This is captured in Unilever’s mission, “to meet everyday needs for nutrition, hygiene and personal care with brands that help people look good, feel good and get more out of life” (Jansen, 2018, p.2). The growth of the company continues to accelerate due to its aggressive and sustainable market strategy.
Unilever’s Competitive Position Relative to Other Brands
The place that a company or its services and products occupy with a specific market niche is its competitive position. According to West et al. (2015), firms have options of pursuing either defensive or offensive strategies to either maintain or increase their share. Different factors such as economies of scale, innovativeness, and intensity of rivalry influence the place that a company occupies. Unilever is a market leader in FMCG in 52 markets with many acquisitions including Welly, Smartypants, Liquid I.V., and Lenor among others (Unilever, 2020). The corporate strategy of the company has positively influenced the growth of the company both in the local region and markets where it has internationalized like Asian countries and Africa.
Segmenting Consumer Market
Unilever has used different strategies to achieve its current market share. Notably, the market segmentation is a sub-division of the market into homogeneous and distinct groups of clients in which each of the categories can be conceivably chosen as a target to be satisfied with a distinct strategy (West et al., 2015). The products and services must be aimed to reach and meet the current needs of the clients. According to Unilever (2020), the company invests in the market environment that it has built and is confident it has a higher competitive advantage. Unilever has segmented its market across regions including Europe, Asia, Latin America, and Africa. Marketers in each region respond to the demand using different generic strategies such as cost leadership in Africa and premium pricing in Europe.
Many large and small enterprises have ventured into consumer-packaged goods (CPG) because it has a high demand, and can be sold out quickly. According to Zhang and Fan (2020), Unilever has many competitors key among them being L’Oreal and P&G. The updated products of P&G meet the basic clothing and fashion needs of the female consumers. Resultantly, Unilever is required to innovate new designs to remain competitive within that market environment. Moreover, states that in the United States, P&G products are ranked higher by consumers (Tien, 2019). However, Unilever has performed far better than its competitors in the developing regions. In 2010 Unilever’s contribution to the developing markets was 53% whereas that of P&G, in the same year was 34% (Tien, 2019, p.5). The implication is that Unilever remains the market leader while P&G is an aggressive participant that is striving to increase its share.
Strategies for Unilever’s Sustainable Competitive Advantage
Remaining a leader in a competitive market environment requires an organization to have superior resources and skills. Unilever has been in existence for more than a century and has grown to its present state of 25 million retail sales, and 60% turnover markets (Unilever, 2020). Rowe and Barnes (1998) proposed four of the ingredients needed while building a progressive business including client retention, locking in customers, database marketing as well as strong and positive interactions. In recent years, it has also become apparent that for any organization to be successful, it must focus on corporate social responsibility (CSR). The emphasis of such a model is on the financial health of the company, conservation of the planet, and good relationship with people.
Unilever’s competitive advantage is based on its purpose, which is achieving sustainable living. According to Reza (2020), 2.5 billion people use the company’s products daily. The red queen theory proposes that “it takes all the running you can do, to keep in the same place” (West et al., 2015, p. 258). To remain the market leader, Unilever repositioned itself several times, and it currently has a value proposition driven by three goals including sourcing 100% of the agricultural raw products, minimizing the negative impact of its products by half, and improving the health and well-being of people (Jansen, 2018). The plan drives growth, mitigates risks, and attracts a talented workforce. Unilever has branded itself as a company focused not only to remain profitable but also relevant to the communities that it serves.
The ever-changing consumer needs have made most companies work hard to innovate flexible products and on-demand. According to Unilever (2020), the company keeps track of consumer sentiments through its data centers globally. The implication is that they learn about the changing attitudes, and behavior of the target market and strive to satisfy them. Given its segmentation strategy and innovativeness, the company can meet the various needs of target clients. Unilever’s products are also well-differentiated from that of competitors, including P&G and L’Oreal, because of their mark of conservation and better living. The belief in a “strong brand with a purpose” made the company achieve more than €1 billion from 12 of its new products in 2019 (Unilever, 2020). The company’s FMCG brands are also considered to have top quality because of constant changes to meet the expectations of buyers.
Threats and Recommended Strategies
Stiff Rivalry and Market Saturation
Many companies have ventured into FMCG thus, the threat of new entrants, as well as the existing competition from well-established companies, is high. Some of these organizations have economies of scale and are well differentiated. For example, PepsiCo specializes in food and beverages, Johnson & Johnson- in beauty and pharmaceutical products, and Colgate Palmolive- in personal products. A corporate branding strategy is often used by multinational companies to attract new buyers and maintain the loyalty of regular customers (Balmer and Gray, 2003). Unilever has a disadvantage because it has not specialized in a single line of products. Moreover, the company is facing challenges because the market for FMCG is saturated due to many players but the same number of clients (Sinulingga, 2019). With many options to choose from buyer bargaining power has also increased which means that there is a demand for good quality at affordable prices.
The solution is to constantly monitor the trends of the external market environment, and continue tracking changes in customer attitude and behavior to innovate products that are well-differentiated and needed in the market. Unilever should also adopt a flexible model through stakeholder mapping, to enhance sustainability. For instance, the finance department can be given the responsibility of illustrating expenditure on all people (customers, suppliers, employees, and shareholders) on a map before deciding on the most appropriate business framework to adopt. Sinulingga (2019) also proposes that the company should have regular updates of the forecast to “rebalance investment priorities” (p.51). Unilever should also consider internationalizing in new markets to expand its economies of scale and increase revenues. Combined, these strategies will ensure that Unilever retains its position as a leader in FMCG.
Demand for Environmental Conservation
Unilever has been trying to lower the negative impact that its products have on the ecosystem. However, according to Siddique and Sultana (2018), “Unilever’s greenhouse gas (GHG) impact per consumer use had increased by 4% since 2010, and consumer water use impact had been reduced by only 2%” (p.7). Some countries have introduced laws to increase taxes on products that are considered harmful to the environment, thus increasing expenditure. Unilever is also experiencing challenges in changing the attitude and behavior of the consumers. For instance, 68% of GHG emission occurs when the products are in the hands of consumers (Siddique and Sultana, 2018). Unilever, which brands itself as sustainable and focuses on CSR reports of failure to lower the greenhouse effect gives it a bad reputation.
The recommendation for this challenge is to provide a value proposition to consumers so that those who are trying to conserve the environment are rewarded. For example, Unilever can decide to be awarding customers who return plastic carrier bags for manufacturing. Since the consumer decision-making process is influenced by getting the most value for their expenditures, the rewards will motivate them to take initiatives that are sustainable including reusing plastic papers. Additionally, Unilever will benefit because of the good image to the public and community, thus enhancing its brand name.
Sustainable marketing is an important component in achieving a better competitive niche. Since its foundation, Unilever has continually grown to become a multinational corporation operating across multiple geographical segments including Europe, Asia, Latin America, and Africa. The company is still a world leader in FMCG but there is intense competition from other brands such as P&G. Resultantly, the company has had to maintain its strong brand, adopt CSR, segment its market and reposition its strategy to suit the changing demand. Nevertheless, there is still a threat from rivals and concern for environmental conservation that is derailing Unilever’s marketing strategy. The focus should be to adopt a flexible business model in innovation and investment to enhance its profitability.
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