PESTEL/PEST Analysis of Hindustan

Unilever (HUL)
Hindustan Unilever is one of the fastest growing companies in India. It is
present in India even before independence. With headquarter in Mumbai; it
has more than 18000 employees and over 1800 business partners. It owns
famous brands like Lux, Pond’s, Vaseline, Lipton, Pureit etc in India. It owns
29 manufacturing facilities and has revenue of around Rs. 30170 Crore (INR)
in 2014-15. It is no. 1 in homecare, hair care, laundry care and skin care but
no. 2 in oral care and beverages. The products are aggressively marketed
and known to be used by two out of three Indians. (HUL, 2015)

Political
India’s deregulatory environment has helped MNCs in India to expand into
various products and services, after 1991 HUL also took advantage of this
situation and merged with Tata Oil Mills Company and Lakme Limited
enabling HUL to enter new markets of cosmetics and food oil of which it was
not part before and wanted to enter. Later on in 1994 it took over Kimberly
Clark Corporation in order to take over marketing of Huggies diapers and
Kotex sanitary pads. HUL does not support any political party or government
by funding its operations since it is a business entity and wants to restrict its
operations to that field only, also it knows how sensitive people of India are in
terms of political alliances. However, such MNCs, due to large funds reserved
for helping the government in improving the livelihood of people they
sometimes tend to exert pressure on government to pass out a certain law
that’s favoring them. (BUSINESS OVERVIEW OF HINDUSTAN UNILEVER)

Economic
In 2009 when the whole world faced a major economic crisis, Asian countries
were least hit due to their not-so-strong reliance on interest based
investments. When Unilever was making in most of the countries abroad it
remained profitable in India although profits declined. Raw material sourcing is
the first step of supply chain and fluctuation in them could disturb the pricing
of the products. The brands that Unilever sells are everyday products so
people are sensitive to their pricing and constant price changes can put them
off. Chemicals and palm oil are the major raw material used and inflation
keeps eating the bottom line for soaps and detergents which are formed from
these raw materials. India stands on lowest level when it comes to per capita
consumption on personal care products; HUL has been trying to change that
perception for years. In India HUL faces direct competition not only by MNCs
but also local producers who are successful to the extent that it is almost
impossible to break their market share and loyalty. (Wikinvest)

Social
HUL launched program “Shakti” for women in rural areas to empower them
and make them independent, earning their own livelihood and spending that
income on improving lifestyle of whole family. The project started off with one
woman being selected from each village as “Shakti woman” who would buy
Unilever products from company representatives at a discount and sell these
products for a profit at her own village. Another initiative by HUL includes
increasing awareness among villagers about the importance of cleanliness
through Lifebuoy Hand washing Programme since 2010. Through Pureit it is
providing clean drinking water to millions of people. It has also controlled
environmental pollution by curtailing CO2 emissions, reducing waste products
and usage of water. HUL also promotes Equal Employment Opportunity to all
and encourage women to be a part workforce even after marriage and
children and make it easy for them to maintain a balance in their worklife and
household responsibilities, by opening daycares at offices, providing flexi
timings and work home facility.

Technological
For HUL technological development in India means more connectivity to
people. Now there are apps available which would inform the consumers
when their favorite brands are being restocked at their nearest supermarkets.
For HUL it has become easier to manage its large supply network and monitor
the inventory situation. Factories have been installed with automated
operations which have eliminated the errors that manual work could produce
and also increased the productivity and efficiency.

Environmental
HUL has been in highlight for breaching environmental laws of dumping
hazardous chemical on a nearby land endangering lives of citizens and
employees. This incident happened at Kodaikanal factory where Unilever was
accused of dumping and selling scrap of glass material containing Mercury,
when this was brought under light, HUL not only closed down the factory but
also launched investigation and tried to trace all the material that has been
sold to the dealer. The results of investigation showed that illegal selling of
scrap Mercury did take place which is the breach in code of conduct however
the manufacturing process itself was safe as was duly audited by both the
company and relevant authority. The company then had to clean all the scrap
waste from the soil and offered to stop the contaminated water from down the
valley through placement of silt traps. They took permission from both Indian
and U.S. government to transport back the waste material to U.S. for further
processing. (Kodaikanal, India, 2015)

Law/Legal
HUL makes sure it adheres to all local laws of the state in which it is
operating. For example in Gujarat due to floods and drought the government
put restrictions on prices of all goods and services available in order to
provide some relief to people, HUL could not increase price of its brands
despite of high cost of production. Moreover at some states there are certain
environmental laws which must be followed and HUL has to abide by those.
Basic laws are more or less the same with slight variations and Unilever has
to make sure that it does not violate any laws due to negligence, thinking that
same laws will be applied everywhere.

Bibliography
BUSINESS OVERVIEW OF HINDUSTAN UNILEVER. (n.d.). Retrieved
December 15, 2015, from UK Essays:
http://www.ukessays.com/essays/marketing/business-overview-of-hindustan-
unilever-marketing-essay.php

HUL. (2015). Hindustan Unilever Limited Factsheet . Retrieved December 15,

2015, from HUL: https://www.hul.co.in/Images/hul-factsheet_tcm1255-
436331_en.pdf

Kodaikanal, India. (2015, August). Retrieved December 15, 2015, from

Unilever: https://www.unilever.com/sustainable-living/what-matters-to-
you/kodaikanal-india.html
Strengths in the SWOT analysis of Hindustan Unilever ( HUL )

1) Brand visibility – From soap to mineral water, HUL is shaping the life of 1.3
billion people daily. Being in consumer goods market with its 20 consumer categories
such as soap, tea, detergents, shampoo etc. & each having large assortments, helped
HUL in occupying the large shelf space of Grocery /departmental stores which itself
explains the acceptance/demand of their products in the market.

2) Market leader in consumer goods: According to Nielsen data 2 out of three Indian
consumers use HUL products. HUL used selective targeting strategy to emerge as a
market leader in the Indian market.

3) Innovative FMCG Company: Hindustan Unilever Research center (HURC),Mumbai

& Unilever Research India, Bangalore ,both research facilities were bought together in a
single site in Bangalore in 2006.Employees in this facility continuously working &
developing innovations in products & manufacturing processes which is helping the HUL
to set it as front-runner in the consumer goods market.

4) Extensive & integrated distribution system: HUL’s brands are now household name
which is only possible due to its 4 tier distribution system namely

 a) Direct Coverage through common stockist within a town of population

under 50000 people.
 b) Indirect coverage: Villages closer to larger urban markets have been
targeted.
 c) Streamline: Leveraging the rural wholesale market to reach markets
inaccessible by road.
 d) Project SHATKI AMMA: It targeted the very small villages (2000
population) & tapped into pre-existing women’s SHG (self-help
groups). Markets have been segmented based on their accessibility &
business potential.

5) High Brand awareness: By signing popular celebrities for the advertisements of their
products HUL has created positive word of mouth over the ages which helped them in
social acceptance of their products intelligently targeted & meant for different income
groups.

6) Product line: It offers product categories namely oral care, personal care, household
surface, fabric care and pet nutrition etc. having deep assortments across the product
categories.
7) Financial position: Having more than 80 years of experience in the consumer goods
market & backed by Unilever who owns 67% controlling share in HUL, It is financially
strong.

8) Market share: Through high penetration in the market, HUL had managed to hold their
high market share in different product categories.

9) Share of Wallet: Whether one buys surf /wheel /Rin detergent it will go to HUL’s
pockets. HUL strategy to offer different products for different income groups (selective
targeting) has been successful in having share of wallet of a consumer.

Weaknesses in the SWOT analysis of Hindustan Unilever ( HUL )

1) Decreasing Market share: Competitors focusing on a particular product & eating up

HUL’s share, like Ghadi & Nirma detergent eating up HUL’s wheel detergent market
share.

2) Large number of brands in different product categories: Sometimes having broad

brand portfolio can lead to confused positioning. Price positioning in some categories
allows for low price competition like AMUL captured Kwality’s market share.
Opportunities in the SWOT analysis of Hindustan Unilever ( HUL )

1) Expanding market: By penetrating more in the rural markets through its project Shakti
AMMA and transition of unorganized business to organized one will lead to further
expansion of the consumer goods market.

2) Awareness in usage rate of consumer goods: People getting more aware and
conscious about the usage may be through advertising /word of mouth /doctor
prescription ,is resulting in increase in usage rate of the these products.

3) Increasing Income levels: Due to stable political scenario, improved literacy rate &
controlled inflation, disposable income of the people is increasing thereby resulting into
upsurge in demand & changing their lifestyle.

Threats in the SWOT analysis of Hindustan Unilever ( HUL )

1) Competition in the market: With increasing number of local & national players it’s
becoming very hard for the companies to differentiate themselves from others. There is
also threat from counterfeit products destroying its brand image in the market.

2) Price of commodities: Increasing price of commodities will result in further increase

in the price. Further increase in price will result in decrease in sales, margins & brand
switching.

3) Buyers power: With highly diversified consumer goods market where there are lots of
brands claiming different sorts of benefits, it’s very difficult for consumers to stick to a
particular brand & hence results into brand switching where consumer got power to select
a brand based on several factors like availability, reference group recommendation,
preference & price.

Political factors: European and American laws

Unilever is subject to the regulatory restrictions and guidelines pronounced by
the European Commission and the Food and Drug Administration in the United
States of America. If they were unable to comply, the company would face legal
issues — civil and criminal — and risk fines. It could go so far that those in
charge could be imprisoned.
The firm is also liable to all local and regional laws (within Europe) and any
global rules set in each country the company’s products are distributed in.
These countries include India, South Africa, Russia, China, and several others.

Restrictions regarding imports, exports, or trade laws could hinder the success
of Unilever going forward.

Economic factors: Competition is ready

The state of the economy means consumers are less likely to buy expensive
products. Cheaper, quality goods are in demand. Companies are rising to
compete against Unilever in the EU, particularly in locations like France.

Consumers directly affect the products Unilever supplies. If the products aren’t
in demand, Unilever’s cash flow and profits will be negatively affected. Luckily,
since Unilever is in various markets if one suffers, another one may prosper.

Unfortunately, that means they’re at the mercy of inflation and consumer whims.
Social factors: Heavy emphasis on image
With so many brands, Unilever has decided to focus on developing a strong
reputation. They emphasize issues related to social and environmental factors.
Considering many of Unilever’s products focus on personal care and well-being,
the company expresses a strong desire to help people feel and look good, while
also living the life they deserve. Even their marketing, particularly with Dove,
focuses on helping women feel their best from the inside out.

Technological factors: Automation is key

Unilever is consistently producing new products and selling them online in their
respective brand’s locations. The company emphasizes developing its digital
marketing and selling methods.

Unilever also has a higher level of automation, especially compared to its

competitors; allowing to supply products to store locations quickly. Otherwise,
they may see negative cash flow, profit, or a hit to their reputation that they’ve
spent so much time and funds on.
Legal factors: It never ends
As a consumer goods company, Unilever is subjected to many laws and
legalities. They own over 400 brands in food, health, personal care and several
other industries.

Each brand and location of stores are subject to follow copyright, product
safety, laws regarding health and safety of employees, and taxes —
international and regional.
Environmental factors: A friend to the Earth
Unilever promotes sustainable and renewable resources. Their products are
designed to be safe for consumers in every location they distribute. The
materials are eco-friendly, from packaging to design.
They want to be seen as an environmentally friendly organization and have
worked for nearly the last decade to do so.

In conclusion…
Unilever abides by many laws and regulations from countries all over the globe.
They are big on positive image, helping consumers live better lives, and
meeting demands for products.

However, consumers are on the lookout for cheaper products, and the
competition knows.

Additionally, Unilever dedicates resources to being eco-friendly and utilizes

their power to adapt to automated technology so they can send products out
faster than the competition.