Sarmiento, Vincent I.

BSBA Marketing 3I

PMC-MM 6

Assignment 1

UNILEVER COMPANY

1. Threat of the New Entrants - Unilever competes with established firms as

well as new firms in the consumer goods market. This section of the Five
Forces analysis considers the influence of new firms on the industry
environment. The following external factors create the weak force of the
threat of new entrants against Unilever:

a. Low switching costs (strong force)

b. High cost of brand development (weak force)
c. High economies of scale (weak force)

The low switching costs enable new entrants to impose a strong force
against Unilever. For example, consumers can easily decide to try new
products from new firms. However, it is costly to build strong brands like
Unilever’s. This external factor weakens the intensity of the threat of new
entrants against the company. Also, Unilever takes advantage of high
economies of scale, which support competitive pricing and high
organizational efficiencies that new firms typically lack. As a result, the
company remains strong despite new entrants. Based on this section of the
Five Forces analysis, the threat of new entry is a minor concern in
Unilever’s industry environment.
2. Threat of Substitute Product - When a new product or service meets a
similar customer needs in different ways, industry profitability suffers. For
example, services like Dropbox and Google Drive are substitute to storage
hardware drives. The threat of a substitute product or service is high if it
offers a value proposition that is uniquely different from present offerings
of the industry.

HOW UNILEVER PLC CAN TACKLE THE THREAT OF SUBSTITUTE

PRODUCTS/SERVICES

a. By being service oriented rather than just product oriented.

b. By understanding the core need of the customer rather than what the
customer is buying.
c. By increasing the switching cost for the customers.

3. Bargaining Power of Supplier - Supplier’s impact Unilever’s industry

environment by affecting the level of supply available to firms. This section
of the Five Forces analysis presents the influence of suppliers on
companies. The following are the external factors that contribute to the
moderate force of the bargaining power of suppliers on Unilever:

a. Moderate size of individual suppliers (moderate force)

b. Moderate population of suppliers (moderate force)
c. Moderate overall supply (moderate force)

While Unilever has large suppliers like foreign firms that supply paper and
oil, the average supplier is moderate in size. This external factor imposes a
moderate intensity force on the consumer goods industry environment. In
addition, the moderate population of suppliers enables them to impose
significant but limited influence on firms like Unilever. Similarly, the
moderate level of the overall supply adds to such significant but limited
influence of suppliers. For example, any supplier’s change in production
 level leads to significant but limited change in the availability of raw
materials used in Unilever’s business. Other firms in the industry are
similarly affected. As shown in this section of the Five Forces analysis of
Unilever, the bargaining power of suppliers is a significant but moderate
consideration in the consumer goods industry environment.

4. Bargaining Power of Buyer - Unilever’s business and industry environment

depend on the response of consumers to its products. The influence of
buyers on business performance is considered in this section of the Five
Forces analysis. Unilever must address the following external factors that
lead to the strong force of the bargaining power of customers:

a. Low switching costs (strong force)

b. High quality of information (strong force)
c. Small size of individual buyers (weak force)

The low switching costs make it easy for consumers to transfer from
Unilever’s products to other companies’ products. This external factor
contributes to the strong intensity of the bargaining power of buyers. In
addition, consumers have access to high quality of information about
consumer goods, making it even easier for them to decide when
transferring from Unilever to other providers. For example, buyers can
compare products based on online information. The small size of an
individual consumer’s purchases has minimal impact on Unilever’s profits.
However, the low switching costs and high quality of information outweigh
this third external factor in the industry environment. Based on this section
of the Five Forces analysis, the bargaining power of customers is one of the
strongest forces affecting Unilever’s consumer goods business.
 SWOT ANALYSIS

1. STRENGHTS - Unilever’s organizational and business strengths are

identified in this section of the SWOT analysis. Strengths are internal
strategic factors based on the company’s conditions, such as human
resources, production processes, organizational structure and investments.
The following strengths are significant in Unilever’s consumer goods
business:

a. Strong brands
b. Broad product mix
c. Economies of scale
d. Strong global market presence

Unilever has some of the strongest brands in the consumer goods industry.
This strength enables the company to penetrate markets and effectively
compete against other firms. The broad product mix shows the extent of
Unilever’s business growth. For example, the company has increased its
product portfolio through years of mergers and acquisitions, leading to
organizational growth and corresponding increases in revenues. On the
other hand, economies of scale support production efficiency necessary for
competitive pricing strategies, as shown in Unilever’s marketing mix.
Through years of international expansion, the company has also increased
its market presence, which is a strength that reinforces brand popularity.
The internal strategic factors in this section of Unilever’s SWOT analysis
show strengths that the company can use to sustain global growth and
success in the consumer goods market.
2. WEAKNESSES - Despite its strong market position, Unilever has weaknesses
that limit its potential growth. This section of the SWOT analysis presents
the internal strategic factors that impose barriers to organizational and
business development. Unilever must address the following weaknesses:

a. Imitable products
b. Limited business diversification
c. Dependence on retailers

3. OPPORTUNITIES - Unilever must take advantage of growth opportunities in

consumer goods markets around the world. This section of the SWOT
analysis determines such opportunities or external strategic factors that
can facilitate business development. The following opportunities are
significant in Unilever’s external environment:

a. Business diversification
b. Product innovation for health
c. Business enhancement for environmental conservation
d. Market development

Unilever has opportunities to diversify by entering businesses outside the

consumer goods industry. Diversification reduces market-based risks and
improves business resilience. On the other hand, product innovation can
increase Unilever’s product attractiveness by addressing the needs of
increasingly health-conscious consumers. Similarly, the company has an
opportunity to make its business more sustainable and environmentally
friendly to attract and retain environmentally conscious consumers. In
addition, market development can grow Unilever’s business by increasing
revenues from the sale of its current products in new market segments. For
example, the company can market its Lipton products as health drinks for
consumers with special diets. The external strategic factors in this section
 of Unilever’s SWOT analysis point to major opportunities to grow the
business despite its weaknesses.

4. THREATS - A variety of external factors can limit or reduce Unilever’s

business performance. The SWOT Analysis model considers these external
factors as threats that the company must strategically tackle. The following
are the threats relevant to Unilever’s consumer goods business:

a. Tough competitive rivalry

b. Product imitation
c. Increasing popularity of retailer’s house brands

Unilever faces tough competition, which is a threat based on the strengths

of other firms in the industry. Competitors threaten to reduce the
company’s market share and corresponding financial performance. Product
imitation is also a major threat against Unilever. For example, local firms
can develop products highly similar to Unilever’s. Also, retailers impose a
threat by selling their own brands. These brands are known as house
brands, store brands or generic brands. For example, Costco uses Kirkland
Signature as a house brand, and Walmart has its own house brands that
directly compete against Unilever’s products. Based on the external
strategic factors in this section of the SWOT analysis of Unilever, strategies
must focus on improving the company’s