Custom Orientation and Expansion Strategy essay paper sample
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Unilever is one of the world’s largest makers of packaged consumer goods like deodorants, soap, margarine, fragrances, tea and frozen food. It supplies its products to over 150 countries in the world. The company has a wide and constantly growing global reach. However, despite the size of this corporation, the real visibility of Unilever is low. The anonymity of the company hides its significance and its size. The company does not retail products under its own name. Instead, the company prefers to use many brand names to generate an illusion of diversity. The company has diverse brand names for its products, which it promotes through massive advertising and marketing campaigns (Corporate Watch, 2012).
Unilever Corporation adopts an ethnocentric form of international orientation in its operations. The company has global brand architecture for its products. Unilever trades its products with the same harmonization and positioning in certain countries. The company utilizes a combination of both: global and local products endorsed by a certain country or regional branding centre, all of which share a common logo (Corporate Watch, 2012).
The company has strong brands with a rich tradition. This brand history makes up Unilever's comparative advantage in its marketing and international orientation strategy. Some of the products made by the company are strongly culturally embedded, while other products are national and international brands in many countries. This helps Unilever products proliferate in many countries. Rich heritage and popularity of the company’s product dominate international markets (Corporate Watch, 2012).
Beginning year 1999, Unilever changed its focus of evelopment from developing many products (over 1600) to promoting fewer and stronger brands for better growth of the company. The firm decided to concentrate on brand development and innovation of focused portfolio of 400 strong brands as part of its growth strategy. The new path of growth adopted by the company also included a series of organizational changes and restructurings to improve profit margin of the company in ten years (Eric, 2012).
Another strategy that the company has adopted is involvement in electronic commerce. Unilever made a decision to use the Internet to improve its business transactions and introduce online selling throughout the supply chain. By the year 2000 Unilever spent 130 million pounds to promote electronic business. In the year 2010 Unilever embarked on a strategy of reestablishing growth in its Western European markets. The company announced the acquisition of Sara Lee personal care brands to strengthen its position as a lead provider of care products. It also made a decision to expand its food packaging divisions in Western Europe (Szalai, 2010).
By expanding its operations in Western Europe Unilever benefited from expanding its food division into prospective food categories in the region like dairy products and processed food. More presence of Unilever in Western Europe also presented the company with a big market for its products. Sixty percent of Unilever sales in year 2010 in Western Europe were from dairy products. The company expanded its scale of operations in the high margin categories that could offer it opportunities for more growth. Unilever also aimed at targeting the chilled foods division in Italy because of numerous opportunities available in this region (Szalai, 2010).
Unilever intended to expand its operations and geographical reach to markets like France, Italy, and Germany to add dynamism to its performance. Its powerful advertising potential, good distribution channels and good reputation provided the firm with necessary incentives needed to penetrate the Western Europe market. Unilever seems to choose countries it invests in depending on the potential of that country to grow in the future. For example, in 2010 the company announced its sale of the Italian food division because of the challenges in generating growth in this market (Szalai, 2010).
For Unilever to succeed in its operations in Western Europe, the firm needs to focus its effort on certain areas and high margin categories that offer the company a good foundation for growth. Chilled processed food is one area the firm should focus on in Western Europe. The growth of Western Europe market is fueled by growth in Italy, France, and Germany. The expansion of Unilever operations in Western Europe can add some dynamism to the performance of the company in stagnating western European market (Szalai, 2010).
Unilever has a strong legacy of horizontal and vertical integration. The company still owns a huge part of the value chain. Its chain of operations in some divisions of the company starts from extraction of raw materials and ends with consumption of the finished product by the consumer. Unilever also makes its own packaging materials and transports its own products. The company owns a greater part of the distribution chain that delivers products to its retailers. The high cost of maintaining such value chain is part of the reasons why the firm had to restructure in year 1990 to a more decentralized and leaner organization (Szalai, 2010).