Situational Analysis of Uniliver

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Situational analysis involves the evaluation of an organisations internal and external environment so as to identify core capabilities. According to the American Marketing Association (AMA), situational analysis can be described as the step by step collection and study of past and present organisational data with view of identifying core trends that influence the organisation’s overall performance (Steenburgh & Avery, 2010). The most popular tools for doing situational analysis include SWOT, PESTLE, 5Cs, and Porters five forces analysis. As indicated earlier, this section will only utilise SWOT and PESTLE.

SWOTSWOT is a market strategy evaluation tool that gives an organisation a clear glimpse of its internal strengths and weaknesses as well as the external opportunities and threats. Mostly, SWOT analysis gives a company the opportunity to determine where its marketing strategies are performing well and well (Porters, 2008).

StrengthsUnilever boasts for being the first toothpaste manufacturer to use the gel technology. This pioneering technology strengthened the company’s global presence (Zisa, 2011). The company also manufactures complementary products such as mouth was and toothbrushes – these products establish and enhance existing markets for close-up toothpaste (Ariyawansa, 2009). The company also employs, appealing adverting and branding campaigns in marketing its close-up toothpastes.

WeaknessesMost Unilever products including close-up are only available in urban areas (Zisa, 2011). This makes it very hard for potential consumers living in rural areas to access Unilever products easily as they have to travel to urban areas to acquire them. In addition, the company lags behind in terms of innovation when compared to leading consumer goods manufacturers such as Procter & Gamble (Graul et al, 2006).

OpportunitiesThe company can easily expand into emerging markets in segments hitherto considered inconsequential in the UK such as the young population below 6 years of age (Yip, 2011). Unilever can position itself as provider of two in one or even three in one oral health products manufacturer (Graul et al, 2006). Additionally, Unilever stands to gain an upper hand courtesy of the innovations made in the realms of mechanical engineering and information technology (Zisa, 2011).

ThreatsThere are many brands of toothpastes and it makes very hard for consumers to stick to one brand in the long-term. This problem is coupled by the fact that many people living in the rural areas prefer using traditional oral health products such as twigs and salt (Graul et al, 2006). Again, the barriers to entry in the oral health industry are very low due to the fact the initial capital investments are usually low (Ariyawansa, 2009).

PESTLEPESTLE analysis is an external environment analysis tool that helps strategists to identify the overall positioning of a company relative to its external environment. This tool checks for opportunities in the external environment that a company can exploit as well as threats that hinder the achievement of the set strategic goals (Steenburgh & Avery, 2010). It covers political, economic, social, technological, legal and environmental factors.

Political Environment

Unilever operates in a relatively stable political environment and therefore can make large investments with the fear of political uncertainty – there have been smooth transitions from one political regime to another without major economic impacts being felt (Knight, 2012). This is because the UK has a good political climate tailored around the principles of capitalism that allows businesses the chance to maximise their returns with minimal political influence (Office for Budget Responsibilities, 2012). However, Unilever should be wary of the strong pro-consumer stance adopted by the UK politicians especially in matters pertaining to consumer product prices.

Economic EnvironmentThe UK has suffered an increase in recession-like scenarios such as high inflation rates and high interest rates in recent times. This has greatly reduced consumer purchasing power at a time that many households are still recovering from the effects of the 2008/09 global recession (Zisa, 2011). Large consumer goods manufacturers such as Unilever are on the receiving end as their sales have stagnated. Moreover, both the pound and the euro have been weakened – this puts Unilever at a risk especially on its cross-border business transactions (Office for Budget Responsibility, 2012).

Socio-cultural Environment

There is a growing awareness on the need for health and personal care especially among the young population in the UK as it gives them the confidence to express themselves freely. A study by Ingham and Angleton (2006) shows that young population is more likely to visit a health site to seek for health tips on how to live healthy than the older generation. Unilever can capitalise on this to develop new toothpastes that enhance fresh breath as well as white, shiny and strong teeth.

Technological EnvironmentThere are a lot of R&D activities going in both public and private sectors meant to nurture talent and to incubate ideas which would otherwise be very hard to implement in the business world because of the risks involved (Zisa, 2011). In pursuit of its mission to deliver vitality to its customers, Unilever appointed a R&D director in 2008 to oversee a team of over 600 professionals and a budget of more than 1000 million Euros (Ariyawansa, 2009).

Legal EnvironmentThe UK tax regime is friendly for EU companies and unfriendly towards non-EU organisations. Being an EU organisation, Unilever pays low taxes compared to its non-EU competitors such as Procter & Gamble (Knight, 2012). The UK and the EU have very strict employment legislations which discourage large multinationals such as Unilever, known for their unethical business practices from mistreating their employees (Office for Budget Responsibility, 2012.

EnvironmentalUnilever operates in an environmental-sensitive business climate. The UK government is determined to trim the overall national carbon footprint (Knight, 2012). On this regard as well as on the realisation that it relies on the natural environment for major suppliers, Unilever adopted a pilot programme aimed at reducing water wastage and carbon emission as well as overall material wastage in 2008 (Ariyawansa, 2009; Zisa, 2011).

Competitive Edge (USP)Unilever competitive edge is based on the Leadership for Growth Profile (LGP) model as well as its strategy to operate “locally” in all its markets. The LGP model is meant to impart competency through nurturing talents (Ariyawansa, 2009). On the other hand, the company can be termed as multi-local multinational company because it adopts its operations to suit local market needs in all the markets it operates in (Zisa, 2011).

It is arguable that a resource-based competency programme in a multinational organisation such as Unilever should be based on resources such as human behaviour and response to organisational stimuli (Barney, 1995). Specifically, Unilever builds core competencies by encouraging organisational learning that equips employees with strong values that are very hard to be copied by competitors (Unilever, 2012). According to Bartlett and Ghoshal (2002) as well as Hamel and Prahalad (1994), such organisational learning is the most important tool for building competitive advantage.

This strong market-specific organisational learning culture has enabled the company to realise immense growth in the recent years – a sales turnover of US$ 46.467 billion in 2011 (Unilever, 2012) compared to Procter & Gamble’s US$ 82.55 billion in the same year (Procter & Gamble, 2012). Market growth for its competitors has continued to increase but on a steady rate an indicator that the oral health industry is not very much consolidated – the top four oral health manufacturers serve only 30 percent of the global market (Zisa, 2011).

ReferencesAriyawansa, D. (2009). Management report on Unilever and Procter & Gamble case study. Colombo: Asia Pacific Institute of Information Technology.

Graul, L.A., Henricks, S., Olp, S. & Strohecker, C. (2006). Procter & Gamble, Unilever and the personal products industry. Maryland: Global Strategy Advisers.

Ingham, R. & Angleton, P. (2006). Promoting young people’s sexual health: International perspectives. London: Routledge.

Knight, J. (2012). Making everything easier: British politics for dummies. London: John Wiley & Sons.

Porter, M. (2008). The five competitive forces that shape strategy. The Harvard Business Review.

Steenburgh, T. & Avery, J. (2010). Marketing analysis toolkit: Situation analysis case Harvard Business Review.

Unilever PLC (2012). Annual reports and accounts 2011. Unilever PLC. [Online]. Available at: http://www.unilever.com/investorrelations/annual_reports/AnnualReportandAccounts2011/Downloadcentre.aspx/ (accessed August 1, 2012).

Zisa, L. (2011). An analysis of Unilever’s legal form, financial performance and business strategy. Seminar Paper. Grin Verlag.