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POLYTECHNIC OF NAMIBIA

SCHOOL OF MANAGEMENT SCIENCES

DEPARTMENT OF MARKETING AND LOGISTICS

MARKETING SECTION

STRATEGIC MARKETING MANAGEMENT: ANALYSIS ... & DECISION MAKING

BACHELOR OF MARKETING & HONOURS PROGRAMMES-21 BMRK & 08HMAR

SUBJECT CODE: SMG811S

DATE: June 2014

DURATION: 2% Hours

MARKS: 100%

EXAMINERS: Mr. V. Somosu & Ms. C. Chipeio

MODERATOR: Prof. A. Ghamsari

15T OPPORTUNITY QUESTION PAPER

(This Question Paper consists of 3 pages including this front page, but the appendix)

INSTRUCTIONS

Answer all questions and sections in this question paper

Use the case-study given to you earlier which is also provided as appendix A (17 pages in all) to this question paper as your guide to answer section A

Be as precise as possible in your answer by going straight to the point.

Read each question very carefully for a proper understanding of it before attempting it.

The use of calculator is allowed

Please note that there is no box to think outside of!!

AN OPEN BOOK EXAMINATION!!!

SMG811S 15T OPPORTUNITY-EXAM-2014-QUESTION PAPER 2/3

SECTION A: CASE ANALYSIS QUESTIONS-UN/LEVER BD MARKS

Additional lnforma"tion about Unilever

Gary Scattergood, Food Manufacture, May 2013 Manufacturing giant Unilever is to begin trialling dual-fuel technology for its fleet of vehicles in a bid to slash carbon emissions and cut costs, while also pressing for more collaboration between food firms to reduce the number of vehicles on the road .

The projects are part of Unilever's Sustainable Living Plan, its 1 0-year blueprint to double the size of the business, while reducing its environmental impact. Its year two update published on April 22"d, showed that the company cut carbon dioxide emissions by 10% during 2012 and has now eliminated 1 Mt of carbon dioxide from its manufacturing and logistics operations since 2008.

Lorraine Amos, supply chain/logistics project manager for Unilever UK and Ireland, said the firm's main focus over the past two years had been on filling trucks more efficiently so there were fewer and fuller shipments including storing food products next to homecare goods when it had proved safe to do so.

During the next 12 months, however, the firm's focus will turn towards new technology and dual trials where vehicles can run on petrol and liquefied petroleum gas. "We are looking at a number of new technologies," she said. "This will get a minimum of 10% reduction in the amount of fuel and if you add that up by the number of trucks we have on the road, you'll start seeing a big impact. "

Almost 70% of Unilever UK and Ireland's plan to improve carbon efficiency for 2013-15 is driven by landfill and network design.

Amos said that the increasing focus on sustainability and changes in retailer requirements were also providing greater opportunities for food and drink manufacturers to work together to pool deliveries, provided retailers and th ird-party logistics providers helped facilitate such agreements. "Our flexible network is enabling us to work with one of our major retailers and other manufacturers in order to combine daily retailer orders into one consolidated load," she said .

Back in 2007, Food Manufacture reported on a similar collaboration between Nestle and competitor United Biscuits, and collaboration between Unilever and Kimberly Clarke in The Netherlands.

Unilever's latest scheme sees DHL deliver goods from its Bawtry warehouse where it is combined with products from other manufacturers. This replaces the need for several separate deliveries.

Amos added: "there are further opportunities for collaboration and working together in terms of logistics, proved there is the will."

Unilever has now set targets for its logistics partners to find ways of using its network with other firms to further improve sustainability and drive down costs. Adapted from 2013 William Reed Business Media Ltd

Important hints: You are self-employed marketing consultant who has been hired by Unilever. You have been asked to undertake a strategic marketing audit to analyse their current market position in order to understand Unilever's options/alternatives for growth and profitability. You have been given responsibility or remit/job to consider Unilever's current strategic position and the key issues that may impact upon Unilever in developing its future vision and mission.

Finally, you will need to consider the financial implications and impact of Corporate Social Responsibility (CSR) on how Uni/ever engages with its stakeho/ders whilst striving to deliver its strategy and maintain its global presence.

With reference to the case study, your previously prepared efforts/readings on the case at hand (Unilever) and the additional information include in this examination paper, you have been asked to produce a report that addresses the following tasks/questions.

SMG811S 15T OPPORTUNITY-EXAM-2014-QUESTION PAPER 3/3

Question 1:

Critically evaluate Unilever's current strategic position (using any two relevant theoretical frameworks from: SWOT, PESTLE, PIMS, the McKinsey 7S (seven-S) framework etc.) and key factors that will contribute to the future growth and profitability of the company. 20

Question 2:

Critically analyse how Unilever should manage its stakeholders as a means of achieving growth and profitability. 20

Question 3:

Critically assess the impact of Corporate Social Responsibility (CSR) on Unilever, and explain how the organisational culture can contribute to Unilever's success in the future. 20

Question 4:

With the aid of any relevant theoretical framework/model: the Asset-Based Competency Marketing, TOWS analysis, generic strategies, alternative directions/methods, McKinsey and General Electric 'industry attractiveness' and 'business strengths' etc., recommend, with justification, one strategic option or market-based strategy that you think Unilever should adopt to ensure its future success. 20

SECTION B: GENERAL QUESTION NOT RELATING TO THE CASE-STUDY 20MARKS

Question 5:

The table below depicts the market for small urban cars. Using the table below:

I. Briefly explain with relevant examples what meant by "the marketing mix concept often interact on the three (3) different degrees". 8

11. The managers at A-One wants to know their firm's market share relative (in revenue and unit sales) to the market leader- explain the likely reason(s) for any difference in both results in revenue and unit sales if any 12

Table 2.1 Market for Small Urban Cars

Units Sold (Thousands) Revenue (Thousands)

Zipper 25 €375)000

Twister 10.0 €200)000

A-One 7.5 €187)500

Bowlz 5 €125)000

Chi en 2.5 €50)000

Market Total 50.0 €937;soo

Culled from Farris, Bendle, Pfeifer and Reibstein-Marketing metrics: The definitive ... :t'd Edition, 2012

f ' I ' -

Professional Diploma in Marketing

Unilever

I ntrod uctio n

Unilever is one of the world's super companies. According to its own website, someone somewhere chooses a Unilever product 160 million times a day. Unilever products are sold in 'over 190 countries' (out of the 196 countries in the world). This translates into 2 billion consumers around the world using a Unilever product on any given day. In total, there are 170 billion Unilever products purchased each year. In order to support such a massive undertaking, Unilever employs 171,000 members of staff (2011 Annual Report).

The Unilever Group (Unilever) joins together two principal (parent) public limited companies operating as a single entity: Unilever NV, registered in the Netherlands, and Unilever plc, registered in England and Wales. Additionally, it has listings of shares on Euronext Amsterdam and the New York Stock Exchange. The two companies have the same directors. In addition, Unilever holds a number of other companies and collectively, as the Unilever Group, operates as a single economic body reporting consolidated financial statements. Its mission, as stated in the company's 2011 Annual Report, is as follows:

We work to create a better future every day. We help people feel good, look good and get more out of life with brands and services that are good for them and good for others. We will inspire people to take small, everyday actions that can add up to a big difference for the world. We will develop new ways of doing business with the aim of doubling the size of our company while reducing our environmental impact. (Source: 2011 Annual Report).

Unilever owns many of the world's best-known brands in the fast-moving consumer goods market. Many of them are the sector leaders. The company competes in 11 categories and is global leader in seven of them. In fact, in more than three-quarters of its business, it has the leading or second placed brand. Its top 12 brands each enjoy annual sales of €1 billion or more. These comprise:

• Axe/Lynx (deodorants and shower gels) • Blue Band (nutritional margarine, cheese spreads and cream alternatives) • Dove (beauty soaps, moisturisers, shampoos, conditioners, antiperspirants and

deodorants) • Becei/Fiora (healthy low fat spreads and health drinks) • Heartbrand (ice creams) • Hellmann's (mayonnaise and mustard) • Knorr (soups, stock cubes and sauces) • Lipton (teas and infusions) • Lux (beauty soaps) • Omo (detergents and fabric conditioners) • Rexona (deodorants) • Sunsilk (shampoos and conditioners).

Altogether its top 20 brands account for 70% of all Unilever's sales.

Despite is staggering size, its goal is to grow by 100% whilst reducing its environmental footprint through its Sustainable Living Plan. Its priorities for growth are for increasing market share and expanding volumes in all regions and categories. Growth in the emerging markets forms a significant part of this plan. Much of Unilever's growth over the years is attributable to acquisitions. In 2009 and 2010, a further €4.6 billion of acquisitions were undertaken or announced, including the takeover of the Sara Lee personal care business for €2. 7 billion.

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Delivering Customer Value Through Marketing Case Study June 2013 and September 2013

This continued during 2011 with the acquisition, amongst others, of Alberta Culver, a hair product manufacturer with brands including TRESemme. Unilever also disposed of Sanex (soaps) during the year. Brands and innovation form the essential components of Unilever's approach. The company's aim is to be 'bigger, better and faster' than anyone else, leveraging its technology, channels of distribution and economies of scale. it strives to use innovations in one product to support advancement in another. For example, the technology for whitening fabrics in detergents is fundamentally the same as the one Unilever uses in its toothpaste.

The performance of Unilever during 2011 was affected by turbulence and instability in global markets. Demand in the Eurozone remained virtually static due to the difficulties over the Euro currency, whilst trading in North America was also sluggish, increasing at a slower rate than previously expected. Growth in the total value of sales in Western Europe was only 0.7%, whilst overall sales by volume actually decreased by 1.2%. The economic situation also added costs to supplies and production. Commodity price increases added €2.4 billion of costs. Consequently, growth in the developed economies fell to 0.8%. However, in the emerging economies (especially India, China, Turkey and South Africa, in which regions percentage growth remained in double digits), Unilever enjoyed continued growth, although it is in these markets that it experiences the greatest levels of competition. Overall in 2011, its sales grew by 6.5%, with 11.5% growth in the emerging economies, which account for more than half (54%) of its total turnover.

History of Unilever

As a conglomerate there are several strands to the history of Unilever. The company has roots in both the UK and the Netherlands. Perhaps its most recognisable origins lie in the 1880s in the north of England, where a grocery wholesaler belonging to the Lever family, run by William Lever, started to manufacture Sunlight Soap, designed for washing clothes. Lever & Co was established for this purpose in 1884. Unlike most traditional soaps of the time it contained pine kernel oil, which meant that it would lather more readily. What also made it stand out was its brightly coloured packaging and the fact that its creators had given it a brand name, Sunlight, a rarity for such a product. By 1887, the company was already making 450 tons of Sunlight Soap a week. William Lever purchased a large site in Liverpool which he named Port Sunlight and where he built factories and houses for his workers and their families. In 1890, the firm became incorporated as Lever Brothers Ltd. lt was based upon its mission, allied to its product Sunlight Soap:

to make cleanliness commonplace; to lessen work for women; to foster health and contribute to personal attractiveness, that life may be more enjoyable and rewarding for the people who use our products.

The product was ground-breaking for its day and the company that went on to become Unilever embraced philanthropic ideals to support the cause of its workers and their families, helping make advances in society through better hygiene and nutrition, enriching commonplace food stuffs with vitamins and making soaps and detergents available for all. These same principles are present in the company's approach to corporate social responsibility today, with products that include laundry agents requiring less water and minimal packaging, and food that is healthy, easily prepared and affordable.

Extending its range to personal hygiene in 1894 the firm launched Lifebuoy Soap and become a public limited company. In 1899 it improved upon Sunlight by introducing Sunlight Flakes, subsequently known as Lux Flakes. Other products followed quickly. For example, Vim, a household scouring agent, was launched in 1904. By this stage the company was extending its reach overseas. it became incorporated in South Africa and rapidly expanded into Europe, Australia, the United States and the Pacific Rim.

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In 1907, Lever Brothers, as it was then known, was accused in the press of restricting the manufacture of the raw materials needed for soap and putting up prices. lt won substantial damages against the newspaper, but this was an indication of how powerful the company had already become that it should be subject to criticism and professional jealousy. lt also highlighted how important it would be to secure stable sources of raw materials without being at the mercy of supplier monopolies. Lever Brothers started to acquire interests in palm oil production and form trade associations with other firms with a common interest in whale oil, fats and other raw materials.

By 1914, those companies under the control of Lever Brothers were manufacturing 135,000 tons of soap per year. In 1917 it acquired Pears Soap and also moved into margarine production, drawing upon similar raw materials as those needed for soap.

The 1920s saw further expansion through acquisitions and diversification, including the takeover of Walls to produce sausages and ice cream. By 1929, the company was responsible for 60% of the UK's soap output, and it became Unilever as the result of an amalgamation with a margarine manufacturer.

The economic hardships of the 1930s forced a period of rationalisation and cutbacks for Unilever. During this time it reduced its 50 soap manufacturing interests in order to focus on key brands. The Second World War had a major impact on the business, with some of its interests being lost altogether. Soap and margarine were regarded as essential products and Unilever supported the war effort by providing free soap and Lifebuoy vans that delivered much needed mobile hot showers around the UK.

In 1943 Unilever acquired Batchelor's, a manufacturer of freeze-dried food products. After the war it was able to reconnect with most of its interests overseas, but it continued to operate on a decentralised structure.

The 1950s and 1960s provided an opportunity for rapid growth in a period of post-war economic boom. Innovative products such as Sunsilk shampoo, Gibbs SR toothpaste and fish fingers were launched. UK commercial TV introduced a new channel for promotion in 1955. Unilever further diversified into market research, packaging and advertising services.

The 1970s proved to be more challenging for the world economy generally in the face of an oil crisis. However Unilever continued its expansion. By the start of the 1980s it was the 26th largest business in the world. lt went on acquiring big names including Brook Bond tea, Cheseburgh-Pond's in the US (owner of Ponds and Vaseline), Calvin Klein, Elizabeth Arden and Faberge.

After such growth and expansion, Unilever went through a phase of restructuring and consolidation in the 1990s, reducing the categories in which it competed from 50 to 13. Many brands were sold or withdrawn and four core business divisions were created:

• Home Care

• Personal Care

• Foods

• Speciality Chemicals.

This last has more recently been replaced by refreshments.

Unilever in the 21st century

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The last ten years have perhaps been the most dramatic in the long history of Unilever. Following the changes effected in the previous decade, there has been further organisational upheaval, coupled with a major initiative to reduce environmental impact. There have been more acquisitions and further rationalisation, especially in production and manufacturing. In 2001, it cut the number of its brands from 1,600 to 900, and in the following year 87 businesses were sold off, raising proceeds of €6.3 billion. Attempts have been made to ensure that all of Unilever's subsidiaries are aligned to a single strategy.

Its unifying strategy has been revised and updated and is now summarised by the following aim:

to meet everyday needs for nutrition, hygiene and personal care with brands that help people look good, feel good and get more out of life.

The company recognises the major changes that have taken place in the way consumers shop: not just how they go about it but the social, environmental and ethical factors that influence their decision making. Unilever has responded by strengthening its commitment to sustainable policies. lt also sponsors educational campaigns such as its hygiene programme in rural communities in India. lt has made a commitment to switching to sustainable sources of palm oil by 2015 and to environmentally friendly methods of tea production by the same date. In 2008, Unilever became the first company to be named the leader in the food sector of the Dow Jones sustainability index for the tenth year in a row.

Business strategy

Unilever developed a document called Compass, which it launched in 2009. In it, the company expresses its business strategy for its employees and others who may hold a stake, such as investors and customers. At the heart of this is the aim to create a better life for customers and their communities. Unilever works closely with suppliers, retailers and consumers to ensure that the central message and core values of the company are delivered at a local level throughout the world. 'Achieving significant growth objectives while decoupling growth from environmental impact is a bold but challenging vision,' says Unilever CEO Paul Polman. 'Not many companies have yet taken it on. But I believe it's the only viable vision. One that builds on Unilever's long-term heritage and achievement, while supporting a responsible future.' (Compass, 2009)

The company has five key priorities:

• a better future for children, which is supported by brands such as toothpastes Signal and Close-Up encouraging children to brush regularly, and adverts for detergents Omo and Persil declaring that dirt is good, as mud and grass stains are signs of an active, healthy childhood and can be easily removed

• a healthier future, with products like Flora and Becel margarine reducing cholesterol levels, and a campaign for Lifebuoy soap promoting hygiene which has reached more than 70 million people in rural India

• a more confident future, with advertising campaigns for products like Dove using 'real women' instead of models

• a better future for the planet, with Unilever's Cleaner Planet Plan together with its leading detergents encouraging consumers to make critical changes to how they wash their clothes and so reduce water and energy consumption

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Professional Diplorna in Marketing

• a better future for farming and farmers, as Unilever relies increasingly on using ingredients that have been independently certified as sustainable.

Brand management and development

Unilever is very aware of the importance and value of its brands and invests heavily in their protection and development. lt spent €6.1 billion on marketing and promotion in 2011. The company has a programme for ongoing innovation, improvement and expansion. According to its 2011 Annual Report 'the product is the hero', and this begins with careful testing at a local level against the brands of its competitors. 'Whether it's toothpaste in India, tea bags in Russia, laundry liquids in Turkey or bouillon in South Africa, we want to find out what consumers desire from our products, whether they prefer them and why.'

Research and development, and the agility to enable rapid introduction, are very important parts of the business strategy. For example, new molecular technology makes it possible for its deodorant Rexona to deliver fragrance through the day as it responds to the motion of the wearer. Another element in its strategy is making sure that wherever possible the organisation as a whole takes advantage of new breakthroughs. This has resulted, for example, in using the same molecular technology in its detergent Skip. A combination of better marketing, better innovation and expansion into new markets forms the backbone to its strategy and has led to Dove being Unilever's first €3 billion personal care brand.

With such a large global presence, Unilever focuses on responding to a growing world population and seeking advantage a=rdingly. Its approach is summarised as reaching up (ensuring it has premium brands for more affluent consumers), reaching down (addressing the needs of those consumers with lower incomes) and reaching wide (reaching out to new market segments).

Unilever performance

Despite world economic conditions, Unilever enjoyed a successful financial year in 2011. During the year it was able to make cost savings of €1.5 billion (with savings of €1.4 billion the year before). In 2010, it launched over 100 of its brands into new markets and was able to demonstrate continuing improvements in the speed with which new items start generating income. The proportion of income generated from new products launched in the last two years exceeded 30% in 2011. One of its new products, Axe Excite, was launched in over 100 separate markets in just over a year. In 2010, in terms of volumes of sales it had its largest growth for over 30 years, although this slowed fairly significantly in 2011. Growth in volume was 5.8% in 2010 for the year, compared with 2.3% in 2009 and only 0.1% in 2008. However, growth slowed to 1.6% in 2011. Nevertheless, growth was sustained in nearly all of the geographical regions in which it has a presence (which is nearly everywhere in the world) and in most of its categories. Growth was particularly strong in Asia, Africa, and Central and Eastern Europe. These regions, together with Latin America, constitute more than half of Unilever's total business. Overall, 54% of its income comes from emerging markets, and this figure is as follows.

• In the Americas, volume growth was 0.4% in 2011 (compared with 4.8% in 2010) and total turnover €15.3 billion (compared with €14.6 billion in 201 0).

• In Western Europe, volume declined by 1.2% in 2011 (compared with growth of 1.4% in 2010), with total turnover of€12.3 billion (compared with €12.0 billion in 201 0).

• In Asia, Africa and Central and Eastern Europe, volume growth was 4.2% in 2011 (compared with 10.2% in 2010) and turnover was €19.0 billion in 2011 (compared with €17.7 billion in 2010).

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Delivering Customer Value Through Marketing Case Study June 2013 and September 20'13

The company continued with its programme of select acquisitions and divestments. In 2010, acquisitions included the Sara Lee Personal Care range (including Radox). lt also disposed of business that collectively had a turnover of €600 million, including its interests in frozen food in Italy.

Key financial performance indicators 2011

Underlying sales growth for 2011 was 6.5% (compared with 4.1% in 201 0), being a combination of price growth (4.8%) and volume growth (1.6%, compared with 5.8% in 201 0). 11.5% of the growth emanated from emerging economies. Overall turnover grew to €46.5 billion.

• In personal care, underlying sales growth was 8.2% in 2011 and turnover was €15.5 billion.

• In refreshments, underlying sales growth was 4.9% and turnover was €8.8 billion. • In home care, underlying sales growth was 8.1% and turnover was €8.2 billion. • In foods, underlying sales growth was 4.9% and turnover was €14.0 billion.

Unilever corporate social responsibility

In 2010, the company launched its Sustainable Living Plan. This is expressly designed to temper the bold expansionist aims and ensure that growth comes with due care and responsibility. The aim is to minimise environmental impact and maximise social benefits. The company has long expressed interests in sustainability and ethical principles. lt has run educational programmes in hygiene and nutrition, for example. In its food products it has made great strides in reducing saturated fats, sugar and salt. it has also been reducing C02

emissions, water usage and wastage.

Its vision is to double the size of Unilever while reducing its environmental footprint, and these two elements are closely connected. In its view it can only achieve such growth by operating sustainably. Sustainable growth is defined by Unilever as growth that:

• is consistent • is competitive • is profitable • meets major social and environmental needs.

The core of the Sustainable Living Plan rests on three targets for 2020:

• We will help more than a billion people take action to improve their health and well-being • We will halve the environmental impact of the making and use of our products • We will source 100% of agricultural raw materials sustainably.

Within the detail of the plan there are 60 targets, and success hinges upon innovation and technology. The business model underpinning the plan focuses on:

• great brands- these are brands the consumers can trust to be responsibly produced and designed to enhance lifestyles and so command great loyalty and affinity

• business performance- this is driven by the strength of brands and relies upon sustainability, which Unilever regards as being part of its unique selling point

• great people- the employees at Unilever are regarded as being of central importance to the delivery of its objectives and so there is a focus on recruitment, reward and talent management

• sustainable living- Unilever is happy to recognise the competitive advantage of being regarded as helping people live more sustainably through their choices of products.

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Unilever has continued to make progress on its environmental targets. For example, the amount of water it uses in production has fallen steadily. In 2009, the amount of water required per tonne of production was 2.81 cubic metres. In 2010, this fell to 2.68. For 2011 , this figure stood at 2.48. Similarly, the amount of wastage produced has also fallen from 6.52 kg per tonne of production to 6.46 kg. In 2009, the amount of C02 released from the energy consumed per tonne of production was 142.6 kg, and in 2010, it was 133.59 kg. In 2011 , this fell further, to 117.41 kg. Total production waste per tonne of production was 4.77 kg in 2011, down from 6.48 kg the year before.

For its ambitions with regard to corporate social responsibility, Unilever sets itself a number of key performance indicators. For example, the number of people reached via its Lifebuoy handwashing programmes promoting good hygiene was 34.5 million in 2011 (compared with 13.5 million in 2010). Also, the percentage of its products that meet the target of an equivalent of 5g of salt a day was 61% in 2011 (compared with 60% the year before). Gains have been made not just in the production process but in how consumers use products. For example, Comfort One Rinse reduces the amount of water needed by two thirds. This is particularly beneficial for those who do their laundry by hand in a bucket, which is true for large numbers of Unilever's customers. lt could result in a saving of 30 litres of water each time. The use of Lifebuoy soap is being promoted to fight global killers such as diarrhoea and acute respiratory infections. Planned projects target up to 1 billion people whose lives may be improved by 2015 by using Lifebuoy soap.

Other Unilever products and brands contributing to sustainable grow1h include: Pureit, a chemical capable of making water safe to drink without having to use energy to heat it or deliver it under pressure; Knorr meals, which are cheap, nutritious and easily prepared with minimum energy input; Lipton, which draws all of its tea leaves from sustainable sources and takes active measures to improve the livelihood of the workers and their environment; and Dove beauty and personal care products, which promote better hygiene.

Working with retailers

Unilever continues to embrace the fundamentals of good business in aiming to deliver to the customer the right product at the right time. lt is well aware that retail ing is largely dominated by a relatively small handful of very big players. Global retailers of fast-moving consumer goods like Walmart, Tesco and Carrefour have their own challenging targets for expansion. Unilever offers support to enable them to expand successfully into new locations. Unilever has created what it calls Customer Insight and Innovation Centres. These are designed to help retailers adopt new approaches to point of sale displays and in store promotions. Unilever is able to advise retailers on the characteristics of certain markets and so maximise their impact. This model, first trialled in New Jersey in the US, has now been exported to London, Paris, Singapore, Shanghai and Sao Paulo.

Unilever measures 'on-shelf availability', indicating how effectively its products are made available by retailers in a timely and accessible manner. Unilever assists retailers with process re-engineering, to improve the speed and effectiveness of getting products on the shelves for customers to buy. According to its own figures, Unilever's on-shelf availability has increased to 92% as a result of these initiatives. Tesco recognised Unilever's assistance by naming the company international supplier of the year 2010/11 .

Unilever advertising and promotions

In 2010, Unilever spent €6 billion on advertising and promotions, making it the second biggest advertiser in the world. This induded sponsoring a TV series in China using its brand Clear shampoo. This won the company vast exposure to a key target audience at over 85%

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Delivering Customer Value Through Marlo;eling Case Study June 2013 and September 2013

less than the cost of conventional means. Due to cost constraints in 2011 , this figure was increased by only €150 mill ion, although this continues to be regarded as an essential investment for the long-term.

This investment is so substantial that the company is very keen to measure the return it gets, and sets great store by marketing metrics. it exercises great care in mounting its campaigns. it has developed its own analytical models. During 2010, it held more than 500 additional pre-tests in advertising compared with 2009, and doubled the number of marketing initiatives that it was monitoring closely.

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Professional Diploma In Marketing

Unilever supply chain strategy

In trying to deliver its products quickly to its customers and launch new ones rapidly, Unilever is dependent on speedy and highly adaptable supply chains. Over the last few years, the company has paid particular attention to simplifying its chains and to ensuring swift and high quality delivery. lt has a single global supply strategy and global procurement strategy which operates with a very flat structure and allows for quick decision making and greater responsiveness to changing needs. lt is also more economical.

One of its current projects is its European Supply Chain Responsiveness Programme. lt is aiming for improvements of an average of 50% more rapid delivery of its top products, using alternative sourcing, collaborating with key suppliers, harnessing new technolog ies and securing greater efficiencies in production. Given its success in Europe, it now has plans to adopt similar strategies in the rest of the world.

Consumers have responded to Unilever's efforts. In 2011 , consumer complaints per million units fell by 19% (following a decrease of 11 % the year before) and what it terms 'product quality incidents' fell by more than 50%. The company made direct use of feedback. For example, in response to feedback regarding Lifebuoy soap, Unilever has changed the fragrance and shape of the bar. This has led to a 0.8% increase in its share of the global skin cleansing market.

Unilever staffing

The 171 ,000 members of staff are split among geographical regions as follows:

Asia, Africa, and Central and Eastern Europe 58% • The Americas 25% • Western Europe 17%.

With its ambition to double its size, Unilever is aware of the need to develop its human resources to support such growth. In some locations it is already the case that markets are doubling in size every five to six years. lt is therefore imperative to have a supply of talented staff to be able to cope with this. Under its 'talent and organisation readiness programme' Unilever has adopted a common global approach for recruiting and developing staff, with a focus on:

talent skills organisation

• culture.

Existing staff are assessed for their capabilit ies and potential for promotion. Around the world Unilever has won many best employer awards. Internally, staff have recognised improvements to the levels of engagement and support, and respond positively to staff surveys.

Staff generally, but especially in marketing, are expected to have very good knowledge of the local environment in which they work. Diversity across the organisation that reflects the customer base is an important consideration. The number of women in senior positions has increased from 23% in 2007 to 28% in 201 1. 25% of the directors on the board are women (and for non-executive directors this is 30%). The company also boasts improvements in the ethnic mix of senior position holders.

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Risks to Unilever

In 2011 Un ilever's activity was directly affected by social and political uprisings in the Middle East, floods in Thailand and earthquakes in both Japan and New Zealand. In assessing its risks in its Annual Report, Uni lever considered that market cond itions in 2011 had been 'challenging' and that this was likely to continue through 201 2. The biggest impact was felt in developed markets, where trends have been flat or declining , while emerging markets continued to show growth. The projection for 2012, however, was that key markets (China, India and Brazil) could show signs of a slowdown .

The stability of currency is an important consideration for Unilever, and 2011 exhibited volatility and instability. Uncertainty over the Eurozone and the possibility of countries withdrawing from the euro were highlighted as risks for 2012. A complete breakdown of the euro could lead to large-scale economic decline, not just in Europe but globally as well.

A further consideration was the possibility of terrorist activity or political unrest undermining economic activity.

Overall in Unilever's assessment, the environment in which it operates is competitive and will probably remain so. Its local and global competitors seem likely to increase their activities in emerging markets. Competition is expected both on price and innovation, although Unilever feels ready to withstand this because of its flexibility and responsiveness. lt is set on pursuing a strategy of increasing volumes while improving margins and cash flow. Continued growth in emerging markets forms a major part of its future plans and long-term resilience.

Unilever's Annual Reports describe the key risks which, according to its own assessment, the company faces and must address.

Customer preference

Unilever is reliant on consumers selecting its brands in preference to those of its competitors. Tastes may change and Unilever has to innovate to maintain brand value and identity. Its research and development function identifies trends and anticipates future preferences, for which it formulates new products.

Competition

Unilever has many competitors, including many of its retailers- such as supermarkets- that offer own-brand goods. lt has to maintain close monitoring of the market to protect its segments and identify new opportunities.

Unilever competes across a wide range of markets, most of them highly competitive, some of them volatile and all of them requ iring close monitoring. The company's strategy often involves strategic alliances and partnerships. Market share may fall in response to local or global conditions and activities by competitors. Emerging markets tend to be more liable to variation. Market risks are reduced by careful selection of segments before attempted entry. Unilever looks for markets where it has the greatest chance of having and maintaining competitive advantage. Because it has plenty of experience of working in developing and emerging markets, it is accustomed to dealing with changes in conditions.

Portfolio management

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Unilever manages a large and varied portfolio, which is one of its strengths. it has a strategy for maximising the potential of its brands and for acquisitions that bolster and refresh its portfolio.

Sustainability

Long-term growth depends on being able to sustain activity. Unilever has set itself the goal of doubling in size but reducing its overall environmental impact. Its strategy for this is set out in the Unilever Sustainable Living Plan, in which there are green and social targets.

Unilever sets very high standards for itself for social responsibility, including social and environmental issues. The Sustainable Living Plan is very high profile. Unilever prides itself on its safety record for its employees and customers. As a result, it faces potential reputational risks if it falls short of these professed standards. it has made a concerted effort over recent years to ensure that all of its brands now include a visible Unilever logo, making it easier to identify it as the overarching company name that reassures consumers. However this also increases the potential for damage between brands if one is found to be inferior.

The publicly announced targets for corporate social responsibility are backed up by robust policies, with careful monitoring to ensure they are effective. There is a Sustainable Development Group of external specialists that provide oversight and guidance to Unilever, and the board pays close attention to progress being made.

Customer relationships

Unilever needs to maintain strong relationships with its customers (retailers and distributors). it mitigates risk in this regard by making trading agreements with a wide variety of customers and ensuring a high level of customer service.

Unilever faces risks associated with being unable to develop and maintain beneficial relationships with its customers, and failing to remain competitive in the context of increased consolidation in the market and a continuing rise in discounters. Without being able to get its products presented to consumers, Unilever will Jose sales. Furthermore, the consolidation of customers, through mergers among supermarkets for example, increases the power of the customer and reduces the power of the supplier (namely Unilever).

In order to address this risk Unilever aims to develop long-term relationships and to work closely with customers in a way that is mutually advantageous. This involves having joint business plans and shared investment programmes, as well as devising the most appropriate relationships for the particular environment and culture.

People

Like most organisations, Unilever needs skilled staff. it often experiences competition for talented workers. To remain competitive and operationally sound, Unilever needs to attract, develop and retain the right skills within the organisation. High levels of staff turnover could be disruptive and failure to recruit the talent required could severely weaken its ability to deliver its strategy. Therefore it pays close attention to its human resourcing requirements and provides development schemes and other incentives to ensure it attracts and retains the talent it requires.

Each part of the business has a dedicated resource committee responsible for monitoring skills, providing opportunities internally for development and career progression, and harnessing talent and leadership. Staff feedback is collected routinely and all employees have regular performance reviews and appraisals.

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Supply chain

There are many sources of possible disruption to Unilever's supply chains, including natural disasters, industrial action, financial failure of third parties, and accidents. it relies on effective contingency planning and maintaining good relations with a range of suppliers.

Operations risk

In order to meet its customers' needs, Unilever is dependent upon the success of its operations. This in turn also relies on third party services, supplies of raw materials and distribution channels. it is also dependent upon effective operations that are safe and reliable with minimal outages. Costs must be maintained at a level where operations remain competitive. Prices of labour, power, services and materials may be outside the company's direct control. Other factors, like the weather, industrial action, economic crises, civil unrest and natural disasters, can impact upon Unilever's ability to operate.

The company monitors the availability of materials very closely. it maintains accurate forecasts of likely demand and matches these with inventory and supplies. it has in place contingency plans that enable it to draw resources from alternative suppliers if necessary, as well as being able to switch production to other sites. Operational risk management is embedded in its routine management processes.

Systems and infonnation

The company has a growing reliance on IT systems and the effective management of information. it uses electronic communication with all of its key stakeholders, and needs to be able to depend on reliable infrastructure. There are many possible threats to information flow that need to be controlled with constant vigilance.

Business transformation

Unilever is continually changing through acquisitions and disposals. it drives improvement and innovation through a series of projects. Each of these carries risks.

As mergers and acquisitions continue to form a significant part of Unilever's strategy, it is important that due care and attention is taken in order to realise the intended benefits. Failure to be diligent may damage existing business concerns, increase costs and destabilise operations. Integrating products, staff and other resources into an existing business requires careful planning and implementation. Otherwise, both new and current employees may become unsettled and dissatisfied.

All such undertakings are overseen by a member of the senior executive and monitored closely by the board. A detailed project plan with clear objectives is a standard requirement. The implementation is expected to include a communications and risk management plan.

External economic and political risks and natural disasters

The scale and scope of Unilever's activities and interests bring it into contact with many different economies, political systems and environments. Weaknesses or failures in these can create operational difficulties for the company, with a knock-on effect on supply to customers. Its size is its biggest buffer against these risks, as it is unlikely that it will be affected across all of its infrastructure and operations by such factors. Nevertheless, it keeps

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close awareness of prevailing conditions and has highly sophisticated contingency plans in place.

Demand may fall as a result of the economic downturn and customers may be unable to pay. In addition, this may create difficulties in Unilever's own cash flow and put pressure upon its ability to pay its suppliers. The balance sheet reflects the value of some of its major brands, which could be dented by falling demand. Access to credit can become more difficult, which could affect both suppliers and customers, restricting supply to manufacturing and squeezing effective demllnd.

To mitigate against these risks, Unilever relies in part on the sheer diversity of its global reach, its brands and its dominance of markets. Economic conditions are monitored carefully and its portfolio Is adapted accordingly, assisted by the company's ability to respond quickly. lt keeps careful control of its debtors and reviews the viability of its suppliers on a regular basis.

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Eurozone risk

The importance of Europe to Unilever as both customer and supplier, coupled with the large-scale economic turbulence the Eurozone is experiencing, means that it has been identified as a separate strategic risk. lt has to take seriously the recent downturn in growth in most of the reg ion, the possibility of individual countries withdrawing from the euro and the chance that the currency as a whole may fail. Unilever has significant investments in Europe which it wishes to maintain, but it is also looking carefully to evaluate and minimise it exposure to the current risks.

Financial

Unilever faces risks associated with currency and interest rate changes. lt runs the risk of being unable to meet its tax and pension liabilities, or not meeting its short-term requirements for liquidity. The company has to operate across a wide spectrum of tax jurisdictions and economic environments. Failure to do so effectively could result in adverse performance and shortages in cash flows. lt has significant liabilities in respect of tax and pensions that it must be able to meet. Unilever has an A 1/A+ credit rating, which it strives to maintain. lt uses its credit facilities to counteract any shortfalls in revenues and offset any market volatility. Its banking exposures are monitored and managed on a daily basis. Forward contracts are used to set exchange rates in advance, so as to remove uncertainties. Pension funds are managed through a very diverse investment portfolio

Ethical

Unilever's Code of Business Principles sets out its expectations for the behaviour not only of Its staff but all those it has dealings with. lt recognises that its reputation and brands are Its most valuable assets and these can be damaged irreparably through conduct that falls below the expectations customers, regulators and the public at large have of it lt investigates claims of unethical behaviour carefully and keeps under review the training, awareness-raising and other resources it needs to deploy to ensure the highest standards are maintained.

Legal, regulatory and other

Mandatory requirements vary considerably around the world and are subject to change. Failure to be in compliance could result in legal actions being brought against the company, as well as incurring legal costs and reputational damage. lt may also prevent the company from operating as intended. Legislation impacts on nearly all aspects of business activity, including trademarks, patents, copyrights, labour laws, health and safety, taxation, import/export and consumer rights. Accidental infringement could be detrimental to Unilever.

Unilever makes use of expert legal counsel to keep it advised of regulation and legislation. Staff are required to seek legal advice when embarking upon any activity in a given jurisdiction.

Brands and innovations risks

Given the strategic importance of Its brands as one of the chief ways of maintaining competitive advantage, and the need to introduce innovative products speedily, Unilever acknowledges that threats to these constitute major sources of risk. A lack of funding or technical expertise in research and development may jeopardise its ability to innovate. lt also requires skills in project management in order to deliver these to market

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Consequently, Unilever continues to monitor the market, using market research, feedback and insights to inform new product development. lt also uses well developed processes to exploit its expertise and accelerate their roll-out.

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Other risks

Unilever is exposed to a wide range of other risks arising from uncertainties and both internal and external factors. Some of these may be unforeseeable at present. Accordingly, risk analysis and management are embedded within corporate governance of the organisation with a need for continuous vigilance.

Unilever competition

Unilever operates in highly competitive markets. On a global scale there are few organisations that can compete with Unilever's size and diversity. However, Nestle, Henkel and Procter & Gamble are examples of companies that compete in many of the same markets. In addition, there are many companies that challenge Unilever in individual segments.

Hen kef

Henkel AG & Co is a multinational company based in Germany that operates across 125 countries in three main segments:

• laundry and home care (29% of sales) cosmetics and toiletries (22% of sales)

• adhesives, technologies (49% of sales).

Its leading brands include Persil washing powder, Schwarzkopf hair care products, Loctite glue and UniBond adhesives and sealants. According to its 2010 annual report, it generated €15.1 billion through sales and its adjusted operating profit was €1.9 billion. lt has over 48,000 employees and total assets of €17.5 billion.

Procter & Gamble

Procter & Gamble has consumers in over 180 countries and around 4.4 billion people use its brands, from a world population of seven billion. lt main areas of operation are classified as (with% share of net sales for 2011):

• beauty (24%) • grooming (9%) • health care (14%)

snacks and pet care (4%) • fabric care and home care (30%) • baby care and family care (19%).

24 of its brands each generate more than USD 1 billion per year. Its well-known brands in beauty and grooming include Dolce & Gabbana, Gillette, Head & Shoulders, Lacoste, Max Factor, Olay and Pantene. In household care it owns Ariel, Bold, Bounce, Daz, Duracell, Fairy, Lenor, Pampers and Pringles, among others. For the financial year 2011, it reported total net sales of USD 82.6 billion.

Nestle

In 2011, Nestle had sales of CHF 83.6 billion and an operating profit of CHF 12.5 billion. Nestle's range of products by sales comprise:

• powdered and liquid beverages (CHF 18.2 billion) • water (CHF 6.5 billion)

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• milk products and ice cream (CHF 16.4 billion) • nutrition and healthcare (CHF 9.7 billion) • prepared dishes and cooking aids (CHF 13.9 billion) • confectionery (CHF 9.1 billion) • pet care (CHF 9.8 billion).

In geographical terms the distribution of activity is:

• Europe 31% • Americas 45% • Asia, Oceania and Africa 24%.

Unilever outlook

In looking ahead to 2012, the Annual Report notes that the company does not anticipate any significant changes to market conditions, although present features of the economy will continue to exert their influence. lt is likely that there will be ongoing economic weaknesses globally, reducing disposable income available to consumers and potentially adding to rising unemployment already experienced in some regions. However, these considerations do not apply to emerging markets, although the rate of growth may slow. In its analysis, Unilever considers that Western Europe is likely to face the greatest impact of poor industrial growth, reductions in public spending, increases in personal taxation, moderately high inflation and only limited rises in pay. Consequently, growth here for Unilever is likely to be low.

Inflation may also have an impact on the cost of supplies and may lead to higher prices. However Unilever considers that it is well placed to weather these conditions with its superior economies of scale and tight control on supply chains. In any case, competition is likely to remain intense. Competitors will continue to challenge Unilever in all its segments. This may come in the form of competition on price but is also likely to include innovation as the basis for attempting to differentiate their products from Unilever's. Once again, Unilever believes its advances in its rate of innovation and speed from testing to supermarket shelves put it in a very strong position.

Generally these conditions favour Unilever's strategy of volume growth while maintaining very close control of costs. In this it can exploit its leadership positions in many markets with high levels of brand loyalty.

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