Competitive Rivalry or Competition with Unilever (Strong Force) 

Competition is a major force in Unilever’s industry environment. This section of the Five
Forces analysis identifies the external factors that present the impact of firms on each other.
The strong force of competitive rivalry against Unilever is based on the following external
factors and their intensities:
• High number of firms (strong force)
• High aggressiveness of firms (strong force)
• Low switching costs (strong force)
There are many firms operating in the consumer goods industry. This external factor imposes
a strong force on Unilever. In addition, these firms are generally aggressive, further adding to
the intensity of competition. Unilever also experiences tough competition because of low
switching costs. For example, it is easy for consumers to switch from one firm to another.
Thus, a high level of competition is shown in this section of Unilever’s Five Forces analysis,
highlighting the need to consider competitive rivalry as a high-priority force in the
company’s industry environment.

Bargaining Power of Unilever’s Customers/Buyers (Strong Force)

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:
• Low switching costs (strong force)
• High quality of information (strong force)
• 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.

Bargaining Power of Unilever’s Suppliers (Moderate Force)

Suppliers 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:
• Moderate size of individual suppliers (moderate force)
• Moderate population of suppliers (moderate force)
• 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.

Threat of Substitutes or Substitution (Weak Force)

Substitutes can reduce Unilever’s revenues and the strength of firms in the consumer goods
industry environment. The impact of substitution is determined in this section of the Five
Forces analysis. In Unilever’s case, the following external factors are responsible for the
weak force of the threat of substitution:
• Low switching costs (strong force)
• Low substitute availability (weak force)
• Low performance to price ratio of substitutes (weak force)
The low switching costs enable consumers to easily use substitutes to Unilever’s products.
This external factor imposes a strong force on the company and the consumer goods industry
environment. However, the overall impact of substitution is weakened because of the low
availability of substitutes. For example, it is easier to access Unilever’s Close-Up toothpaste
from grocery stores than to obtain substitutes like homemade organic dentifrice. In relation,
most substitutes have low performance with minimal or insignificant cost difference when
compared to consumer goods readily available in the market. This condition makes
Unilever’s products more attractive than substitutes, thereby further weakening the intensity
of the threat of substitution. This section of Unilever’s Five Forces analysis shows that the
threat of substitutes is a minor issue in the business.

Threat of New Entrants or New Entry (Weak Force)

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:
• Low switching costs (strong force)
• High cost of brand development (weak force)
• 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.

SWOT ANALYSIS

STRENGTH
1. Strong brand equity
2. It has over 18000 employees
3. Reach of 6.4 million retail outlets
4. Own R&D centres in India
5. Over 700 million Indian consumers

WEAKNESSES
1. Presence of other strong FMCG brands
2. HUL faced controversies Opportunities

OPPORTUNITIES
1. Mergers and acquisitions to strengthen the brand
2. Increasing purchasing power of people 

THREATS
1. Intense and increasing competition amongst other FMCG companies
2. FDI in retail thereby allowing international brands
3. Competition from unbranded and local products can hurt Hindustan Unilever's market
competitors.
TOWS MATRIX

SO STRATEGIES
1. HUL can tap rural markets and increase penetration in urban areas as HUL distributed
through a network of about 7,000 redistribution stockists covering about one million
retail outlets. The distribution network directly covers the entire urban population.
2. Mergers and acquisitions to strengthen the brand like taking over of Tomco, Kothari
general foods, Lakme etc.

WO STRATEGIES
1. Market share is limited due to presence of other strong FMCG brands though
Increasing purchasing power of people thereby increasing demand. 

ST STRATEGIES

1. HUL is a part of the Unilever group, hence strong brand equity which makes HUL
superior than competitors.
2. 2. Hindustan Unilever has a reach of 6.4 million retail outlets which includes direct
reach to over 1.5 million retail outlets, which is much more compared to competitors.

WT STRATEGIES

1. HUL should work on controversies like skin lightening creams, pollution etc & to make
customers believe in HUL products & Competition from unbranded and local products
can hurt Hindustan Unilever's market, so company should also consider that facts.