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Principles of Economics/PPF

The PPFThe Production possibilities curve or frontier (PPF) is a

graphical means of depicting the concept of diminishing returns and opportunity costs. The basic quandary here is how to use a limited (hence, scarce) set of resources to satisfy infinite wants by as much as possible.

A single PPF curve is for an unchanging set of resources. If the resources change, so does the PPF. Insufficient resources for a second product mean a vertical/horizontal curve; insufficient resources for a single product means a curve that lies on the origin (these are trivial cases).

A two-dimensional PPF works with two products, each of them taking an axis (which one doesn't matter). The curve, or frontier, is formed from all the possible combinations of resources that produce the most products. The definition of most products is indeterminate due to the subjective value associated with both; hence, the curve of points. All points along the curve are productively efficient, but depending on society's goals, only one point will be allocatively efficient.

All points outside of the curve are unattainable (because they require more resources than are available) without trade with an external producer (such as is the case with international trade). All points within the curve are attainable but productively inefficient.

The Basic Frontier

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For smaller entities such as individuals, the PPF curve will be almost exactly a straight line (at least for the majority of goods), which will reflect the budget constraints. However, for large entities that make a noticeable difference on the quantity of resources available, diminishing returns become apparent. Here is the PPF curve for such an entity. Note that at high values of either good, much of the other good must be sacrificed for a bit more of that one good.

Shifts in the FrontierWhen a change in the economy causes more or less of a good to

be produced when others are held constant, that is considered a shift in the one good's production possibility. The positive version shifts the frontier outward along the axis the good is placed at, so here an increase in good 1's production possibility stretches the PPF along the x axis. It is possible for that to actually increase production of good 2, depending on how society apportions its resources.

Growth in the Frontier

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General economic growth increases all of the available goods (both in this case). The growth does not have to be proportionate, nor even hold the same shape, as this graph demonstrates.

Flattening of the PPF

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When a technological advance makes it relatively easier to exchange between two goods, a flattening of the PPF occurs as is demonstrated in the graph. When a firm takes a smaller percentage of industry market share, its PPF also flattens because its actions have a less significant effect on the total resource/good supply to the point that it has to exert fewer and fewer sacrifices of one good to obtain the next unit of the other good. It should also be easy to imagine situations when the opposite is true.

Production-possibility frontierIn economics, a production-possibility frontier (PPF), sometimes

called a production-possibility curve or product transformation curve, is a graph that shows the different rates of production of two goods and/or services that an economy can produce efficiently during a specified period of time with a limited quantity of productive resources, or factors of production. The PPF shows the maximum amount of one commodity that can be obtained for any specified production level of the other commodity (or composite of all other commodities), given the society's technology and the amount of factors of production available.

Though they are normally drawn as concave (bulging out) from the origin, PPFs can also be represented as linear (straight) or bulging in toward the origin, depending on a number of factors. A PPF can be used to represent a number of economic concepts, such as scarcity of resources (i.e., the fundamental economic problem all societies face), opportunity cost (or marginal rate of transformation), productive efficiency, allocative efficiency, and economies of scale. In addition, an outward shift of the PPF results from growth of the availability of inputs such as physical capital or labor, or technological progress in our knowledge of how to transform inputs into outputs. Such a shift allows economic growth of an economy already operating at full capacity (on the PPF), which means that more of both outputs can be produced during the specified period of time without reducing the output of either good. Conversely, the PPF will shift inward if the labor force shrinks, the supply of raw materials is depleted, or a natural disaster decreases the stock of physical capital. However, most economic contractions reflect not that less can be produced, but that the economy has started operating below the frontier—typically both labor and physical capital

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are underemployed. The combination represented by the point on the PPF where an economy operates shows the priorities or choices of the economy, such as the choice between producing relatively more capital goods and relatively fewer consumer goods, or vice versa.

Indicators Efficiency

An example PPF with illustrative points markedMain articles: Productive efficiency and Allocative efficiency

A PPF shows all possible combinations of two goods that can be produced simultaneously during a given period of time, ceteris paribus. Commonly, it takes the form of the curve on the right. For an economy to increase the quantity of one good produced, production of the other good must be sacrificed. Here, butter production must be sacrificed in order to produce more guns. PPFs represent how much of the latter must be sacrificed for a given increase in production of the former.

Such a two-good world is a theoretical simplification, necessary for graphical analysis. If one good is of primary interest, all others can be represented as a composite good. In addition, the model can be generalised to the n-good case using mathematics.

Assuming that the supply of the economy's factors of production does not increase, making more butter requires that resources be

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redirected from making "guns" to making "butter". If production is efficient, the economy can choose between combinations (i.e. points) on the PPF: B if guns are to be prioritised, C if more butter is needed, D if an intermediate mix is required, and so forth.

Hence, all points on the curve are points of maximum productive efficiency (i.e., no more output can be achieved from the given inputs); all points inside the frontier (such as A) are feasible but productively inefficient; all points outside the curve (such as X) are infeasible with the given resources and thus unattainable in the short run. A point on the curve satisfies allocative efficiency, also called Pareto efficiency, if, for given preferences and distribution of income, no movement along the curve or redistribution of income there could raise utility of someone without lowering the utility of someone else.

Opportunity Cost

Increasing butter from A to B carries little opportunity cost, but for C to D the cost is great.

Main article: Opportunity cost If there is no increase in productive resources, increasing

production of a first good entails decreasing production of a second, because resources must be transferred to the first and away from the second. Points along the curve describe the trade-off between the goods. The sacrifice in the production of the second good is called the opportunity cost (because increasing production of the first good entails

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losing the opportunity to produce some amount of the second). Opportunity cost is measured in the number of units of the second good forgone for one or more units of the first good.

In the context of a PPF, opportunity cost is directly related to the shape of the curve (see below). Unless a straight-line PPF is used, opportunity cost will vary depending on the start and end point. In the diagram on the right, producing 10 more packets of butter, at a low level of butter production, costs the opportunity of 5 guns (as with a movement from A to B). At point C, the economy is already close to its maximum potiential butter output. To produce 10 more packets of butter, 50 guns must be sacrificed (as with a movement from C to D). The ratio of opportunity costs is determined by the marginal rate of transformation.

Marginal Rate of Transformation

Marginal rate of transformation increases when the transition is made from AA to BB.

The slope of the production-possibility frontier (PPF) at any given point is called the marginal rate of transformation (MRT). It describes numerically the rate at which output of one good can be transformed (by re-allocation of production resources) into output of the other. It is also called the (marginal) "opportunity cost" of a commodity, that is, it is the opportunity cost of X in terms of Y at the margin. It

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measures how much of good Y is given up for one more unit of good X or vice versa. Since the shape of a PPF is commonly drawn as concave from the origin to represent increasing opportunity cost with increased output of a good. Thus, MRT increases in absolute size as one moves from the top left of the PPF to the bottom right of the PPF.

The marginal rate of transformation can be expressed in terms of either commodity. The marginal opportunity costs of guns in terms of butter is simply the reciprocal of the marginal opportunity cost of butter in terms of guns. If, for example, the (absolute) slope at point BB in the diagram is equal to 2, then, in order to produce one more packet of butter, the production of 2 guns must be sacrificed. If at AA, the marginal opportunity cost of butter in terms of guns is equal to 0.25, then, the sacrifice of one gun could produce four packets of butter, and the opportunity cost of guns in terms of butter is 4.

ShapeThe production-possibility frontier can be constructed from the

contract curve in an Edgeworth production box diagram of factor intensity. The example used above (which demonstrates increasing opportunity costs, with a curve concave from the origin) is the most common form of PPF. It represents a disparity in the factor intensities and technologies of the two production sectors. That is, as an economy specializes more and more into one product (e.g., moving from point B to point D), the opportunity cost of producing that product increases, because we are using more and more resources that are less efficient in producing it. With increasing production of butter, workers from the gun industry will move to it. At first, the least qualified (or most general) gun workers will be transferred into making more butter, and moving these workers has little impact on the opportunity cost of increasing butter production: the loss in gun production will be small. But the cost of producing successive units of butter will increase as resources that are more and more specialised in gun production are moved into the butter industry.

If opportunity costs are constant, a straight-line (linear) PPF is produced. This case reflects a situation where resources are not specialised and can be substituted for each other with no added cost. Products requiring similar resources (bread and pastry, for instance) will have an almost straight PPF, hence almost constant opportunity costs.

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More specifically, with constant returns to scale, there are two opportunities for a linear PPF: firstly, if there was only one factor of

production to consider, or secondly, if the factor intensity ratios in the two sectors were constant at all points on the production-possibilities curve. With varying returns to scale, however, it may not be entirely linear in either case.

With economies of scale, the PPF would appear bowed in ("inverted") toward the origin, with opportunity costs falling as more is produced of each respective product. Here greater specialization in producing successive units of a good drives down its opportunity cost (say from mass production methods or specialization of labor).

Position

An unbiased expansion in a PPFThe two main determinants of the position of the PPF at any given

time are the state of technology and management expertise (which are

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reflected in the available production functions) and the available quantities and productivity of factors of production. Only points on or within a PPF are actually possible to achieve in the short run. In the long run, if technology improves or if the productivity or supply of factors of production increases, the economy's capacity to produce both goods increases, i.e., economic growth occurs. This increase is shown by a shift of the production-possibility frontier to the right (outward). Conversely, a natural, military or ecological disaster might move the PPF to the left (inward), reflecting a reduction in an economy's total productive capacity.[1] Thus all points on or within the curve are part of the production set, i.e., combinations of goods that the economy could potentially produce.

If the two production goods depicted are capital investment (to increase future production possibilities) or current consumption goods, the PPF can represent, how the higher investment this year, the more the PPF would shift out in following years. It can also represent how a technological progress that more favors production possibilities of one good, say Guns, shifts the PPF outwards more along the Gun axis, "biasing" production possibilities in that direction. Similarly, if one good makes relatively more use of say capital and if capital grows faster than other factors, growth possibilities might be biased in favor of the capital-intensive good.

SCARCITYScarcity is the fundamental economic problem of having

seemingly unlimited human needs and wants, in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs. Alternatively, scarcity implies that not all of society's goals can be pursued at the same time; trade-offs are made of one good against others. In an influential 1932 essay, Lionel Robbins defined economics as "the science which studies human behavior as a relationship between ends and scarce means which have alternative uses."

In biology, scarcity can refer to the uncommonness or rarity of certain species. Such species are often protected by local, national or international law in order to prevent.

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Scarcity in EconomicsGoods (and services) that are scarce are called economic goods (or

simply goods if their scarcity is presumed). Other goods are called free

goods if they are desired but in such abundance that they are not scarce, such as air and seawater. Too much of something freely available can informally be referred to as a bad, but then its absence can be classified as a good, thus, a mown lawn, clean air, etc.

Economists study (among other things) how societies perform the allocation of these resources — along with how societies often fail to attain optimality and are instead inefficient.

For example, fruits such as strawberries are scarce on occasion because they grow only at certain times of the year. When the supply of strawberries is lower, they are scarce, or not always available. If enough people want strawberries when none are available, then the demand increases. And this demand is high not because the price is high but because the supply is low.

Certain goods are likely to remain inherently scarce by definition or by design; examples include land and positional goods such as awards generated by honor systems, fame, and membership of elites. These things are said to derive all or most of their value from their scarcity. Even in a theoretical post scarcity society, certain goods, such as desirable land and original art pieces, would most likely remain scarce. But these may be seen as examples of artificial scarcity, reflecting societal institutions. That is, the resource cost of giving someone the title of "knight of the realm" is much less than the value that individuals attach to that title.

Productive Efficiency

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An example PPF: points B, C and D are all productively efficient, but an economy at A would not be.

Productive efficiency can also be illustrated by the intersection MC=A(T)C.Productive efficiency (also known as technical efficiency) occurs when the economy is utilizing all of its resources efficiently, producing most output from least input. The concept is illustrated on a production possibility frontier (PPF) where all points on the curve are points of maximum productive efficiency (i.e., no more output can be achieved from the given inputs). An equilibrium may be productively efficient without being allocatively efficient i.e. it may result in a distribution of goods where social welfare is not maximized.

This takes place when production of one good is achieved at the lowest cost possible, given the production of the other good(s). Equivalently, it is when the highest possible output of one good is produced, given the production level of the other good(s). In long-run

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equilibrium for perfectly competitive markets, this is where average cost is at the base on the average (total) cost curve i.e. where MC=A(T)C.

Productive efficiency requires that all firms operate using best-practice technological and managerial processes. By improving these processes, an economy or business can extend its production possibility frontier outward and increase efficiency further.

Due to the nature of monopolistic companies, they will choose to produce at profit maximizing levels (where MC=MR). They may not be productively efficient, because of X-inefficiency, whereby companies operating in a monopoly have less of an incentive to maximize profits due to lack of competition. However, due to economies of scale it can become possible for monopolistic companies to produce at MC=MR with a lower price to the consumer than perfectly competitive companies producing at MC=A(T)C.

INPUT-OUTPUTA generic term for a tangible good or an intangible service that is

the end result of the production/resource transformation process. This notion of output, which also goes by the alias product, usually surfaces in the context of analyzing the short-run production of a firm. The short-run relation between a variable input and output is of particular interest because it reveals the law of diminishing marginal returns. This law indicates that additional quantities of a variable input, when added to a fixed input, have decreasing marginal products, or marginal returns.

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INPUT-OUTPUT MODELIn economics, an input-output model uses a matrix

representation of a nation's (or a region's) economy to predict the effect of changes in one industry on others and by consumers, government, and foreign suppliers on the economy.

While most uses of the input-output analysis focuses on the matrix set of inter industry exchanges, the actual focus of the analysis from the perspective of most national statistical agencies, which produce the tables, is the benchmarking of gross domestic product. Input-output tables therefore are an instrumental part of national accounts. As suggested above, the core input-output table reports only intermediate goods and services that are exchanged among industries. But an array of row vectors, typically aligned below this matrix, record non-industrial inputs by industry like payments for labor; indirect business taxes; dividends, interest, and rents; capital consumption allowances (depreciation); other property-type income (like profits); and purchases from foreign suppliers (imports). At a national level, although excluding the imports, when summed this is called "gross product originating" or "gross domestic product by industry." Another array of column vectors is called "final demand" or "gross product product consumed." This displays columns of spending by households, governments, changes in industry stocks, and industries on investment, as well as net exports. (See also Gross domestic product.) In any case, by employing the results of an economic census which asks for the sales, payrolls, and material/equipment/service input of each establishment, statistical agencies back into estimates of industry-level profits and investments using the input-output matrix as a sort of double-accounting framework.

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PRACTICAL STUDY

UNILEVER PAKISTAN (PVT) LIMITED

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INTRODUCTION & HISTORY By far the largest consumer products company in Pakistan,

Unilever Pakistan Limited (UPL) is a part of the consumer products giant Unilever. UPL was established some fifty years ago in the then newly created Pakistan. The town of Rahim Yar Khan was the site chosen for setting up a vegetable oil factory in 1948 and that is where the first UPL manufacturing facility developed.

MISSION Unilever's mission is to add vitality to life. We meet everyday

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

COREVALUES

NOW A FORCE TO BE RECKONED WITH

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Impeccable IntegrityWe are honest, transparent and ethical in our dealing at all times.

Demonstrating a passion for winningWe deliver what we promise.

Wowing our consumer and customerWe win the hearts and minds of our consumer and customer.

Bringing out the best in all of usWe are empowered Leaders, who are inspired by new challenges and have a bias for action.

Living an enterprise cultureWe believe in trust, truth and outstanding team work. We value a creative and fun environment. Making a better world

We care about and actively contribute to community in which we live.

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Today, Unilever Pakistan is a force to reckon with. Its contribution to Pakistan's economic development cannot be overestimated. Now operating six factories at different locations around the country, the company contributes a significant proportion of the country's taxes.

It employs a large number of local managers and workers. It provides a pool of well-trained and highly motivated manpower to other segments and has introduced new and innovative technologies into the country.

BRANDS UPL enjoys a leading position in most of its core Home and

Personal Care and Foods categories, e.g. Personal Wash, Personal Care, Laundry, Beverages (Tea) and Ice Cream. The company operates through 4 regional offices, as well as 4 wholly owned and 6 third party manufacturing sites across Pakistan.

1. Food brands 2. Personal care brands 3. Home care brands

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COMPANY INFORMATION Board of DirectorsEhsan Ali Malik - Chairman & Chief ExecutiveMr. Imran Hussain - Executive Director / CFOMr. M. Qayser Alam - Executive DirectorMr. Noeman Shirazi - Executive DirectorMs. Shazia Syed - Executive DirectorMr. Zaffar A. Khan - Non- Executive DirectorMr. Khalid Rafi - Non- Executive Director

UNILEVER’S STRATEGY To fulfill our commitments, we have a strategy in place supported

by company-wide governance and management structures.

OUR VALUES Over 100 years ago, our founders not only created some of the

world's first consumer brands, but also built businesses with strong values and a mission to act on social issues.

We continue to build on this heritage. A commitment to sustainable development and responsible business practice is embedded in our Vitality Mission and Corporate Purpose.

Sustainable development is about meeting the needs of society today without compromising the ability of future generations to survive and prosper. This has become the overarching goal for governments and responsible businesses worldwide.

PPF OF UNILEVER

PRODUCTION POSSIBILITY FRONTIER (PPF) Unilever can produce two or more outputs or can produce output in

two or more periods, a production possibility frontier can describe the possible combinations of output that can be attained for a given set of inputs.

FOOD SCARCITY

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TRENDS, CHALLENGES, SOLUTIONS Food scarcity is set to define food production in the coming

decades, putting food security issues at the top of the global agenda. The demand for food is growing, due in particular to two factors: population and income growth. However, supply growth is likely to lag, because of, for example, slowing agricultural yields, limited land availability and the increasing demand for biofuels, all of which leads to competition for available land. Also, in recent months, the phenomenon of land-grabbing – the buying-up of agricultural land by foreign investors – has intensified, and this is likely to exacerbate supply concerns.

It is clear that, if there is to be enough food to feed the growing population, agricultural production has to increase.

Consumption patterns also need to change: the reduction of meat intake, for example, is to be encouraged. These political and social issues can lead to business opportunities in the domain of fertilisers, biotechnology and irrigation. In parallel, conventional intensive farming methods, which can cause environmental damage, should motivate the move towards more sustainable agricultural systems.

While the concept of ‘sustainable agriculture’ can be viewed from a number of perspectives, there is consensus that it should represent an agricultural system which, productive and efficient, also safeguards the environment. While there is no single solution to ensure food security in a sustainable manner, a combination of sustainable farming practices has to be employed to increase food supplies while at the same time protecting the natural resources on which they depend.

WHAT EXACTLY IS FOOD SCARCITY?

DEFINING FOOD SCARCITY • The world’s population is set to almost double between now and 2050, which will inevitably place considerable pressure on food supplies. Concurrently, more affluent societies and the shift towards increased meat consumption are placing increased stress on agricultural production.• The ability to supply food is being hampered by a number of factors. Current agricultural land is facing degradation (due to industrial pollution) and, therefore, decreased yields. Potential farmland for

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expanding agricultural production is increasingly being restricted due to competing land uses such as biofuel production, urbanisation and, in the longer term, climate change. The inefficiency of agricultural distribution systems is further compounding the supply-side issues.

WHY IS FOOD DEMAND INCREASING? According to the UN, the global population, growing by about 75 million every year, has increased nearly fourfold in the past 100 years, is projected to reach 9.2 billion by 2050. The largest population increases are projected to occur in Asia (particularly in China, India and Southeast Asia), which is expected to account for approximately 60% of the world’s population by 2050. Population growth is also projected to occur mostly in urban areas; by 2030, 60% of the world‘s population is expected to live in urban areas, compared to current levels of 50%. Alongside growing populations, the rising incomes of a large proportion of the world’s population also needs to be recognised. As populations become more affluent, the consumption of food per capita increases, as does the uptake in global calorie consumption per capita. This is also correlated with higher meat intake. Global meat consumption is expected to grow by 2% annually until 2015, especially in the developing countries, where eating meat is seen as a sign of wealth and prosperity.

IS FOOD SUPPLY SLOWING DOWN? A number of factors have also been identified that directly result in

decreased future food availability/supply: limited land availability, the growth of agriculture-based biofuels (which compete with the land used for food crops), inefficient food distribution systems and the potential impact of climate change onagriculture.

GLOBAL IMPACT OF FOOD SCARCITY • In recent years, decreased food availability has resulted in an increase in global food price inflation, exacerbating malnutrition across developing countries.• In a bid to ensure the security of food supplies, significant environmental stresses

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are being placed on agricultural ecosystems. The impact of widespread deforestation and excessive water extraction are a growing cause for concern

PRODUCTIVE EFFICIENCY Informance International, a leader in manufacturing business and

enterprise manufacturing intelligence solutions, announced March 8 that Unilever, one of the world's largest consumer packaged goods companies, has chosen to expand the deployment of the Informance software solution across all of its plants in the Americas. The deployment is part of Unilever's Total Productive Maintenance program (TPM) aimed at enhancing manufacturing performance in efficiency and quality across the region.

The move toward a standardized approach to drive and sustain manufacturing operations performance is the next chapter in the long-time relationship between Unilever and Informance. Unilever's expansion into additional plants, including those in the ice cream business, brings to 21 the number of plants utilizing this technology and includes Informance's software-as-a-service (SaaS) hosted solution. The system and software allows manufacturers to leverage real-time performance intelligence in order to assess improvement opportunities, align plant tactics with corporate strategies, and exercise the most efficient use of the information to sustain the effects of operational excellence activities.

Consumer goods manufacturers are constantly looking at improving efficiencies across their supply chains. Global manufacturers report that simple OEE tools are not adequate to drive the improvement agenda, and leading manufacturers look to solutions that deliver facts, pervasive visibility, and maximum knowledge transfer, along with real-time data to drive their efficiency and optimization plans.

Informance is already a leading provider of Manufacturing Intelligence solutions, leading the market in offering Enterprise Manufacturing Intelligence (EMI) Software as A Services (SaaS) subscription solutions. "This on-site hosted model has enormous benefits for Unilever for deploying on a regional scale," said John Oskin, executive vice president of Informance. "Informance Advisory Services, coupled with a quick deployment model, will enable us to accelerate the impact on their operations."

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INPUT AND OUTPUT Unilever South Africa's direct impacts are those felt by its 3,000

suppliers and their 20,000 employees due to the company's purchases of goods and services from them; its indirect impacts are those felt by its suppliers' suppliers owing to the orders they receive; and its induced impacts incorporate the overall demand for goods and services made by the employees of ULSA, its suppliers, and its suppliers' suppliers based on their consumption expenditures out of wages paid.The analysis shows that, in 2005, ULSA and its employees were directly or indirectly responsible for generating output of more than R32 billion (US$ 5 billion) and, in the process, supporting approximately 100,000 jobs throughout the South African economy.

This means that for every job directly based at ULSA, another 22 workers depended upon the company for some part of their livelihood. In total this represents 0.8% of total South African employment.

The report shows that the majority of these jobs are located in the retail trade sector of the economy, i.e., the network of distributors, wholesalers and retailers that ULSA depends on to get its products to the consumer.

The ongoing modernization of the retail trade sector raises the potential that the number of traditional retail outlets may diminish over time, along with the jobs and incomes they support.

Similarly, many of the jobs that are associated with ULSA are located throughout the company's supply chain, which suggests that maintaining the competitiveness of South African suppliers is also essential from the perspective of employment and income generation.

ULSA sources from more than 3,000 suppliers and half of its R4.5 billion (US$ 700 million) purchasing expenditure goes to those in South Africa.

ULSA is responsible for a number of other important economic effects as well. The direct, indirect, and induced effects of ULSA operations on government tax revenues, for example, total some R4 billion (US$ 633 million), equivalent to almost 0.9% of all government revenue.

The input-output analysis shows that ULSA's contribution to value added throughout the economy amounted to R12.5 billion in 2005 (US$

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2 billion), or around 0.9% of the country's gross domestic product (GDP). The GDP multiplier indicates that for every R100 of ULSA sales revenue, R145 is added to the country's GDP.

Social and environmental impacts of Unilever South AfricaIn addition to the economic analysis, the report provides an

overview of some of the broader social and environmental impacts of ULSA, both in its operations and along its value chain.

As an employer, ULSA pays wages and provides comprehensive benefits that include medical care (including for HIV/AIDS) and a private pension scheme.

S.W.O.T ANALYSIS STRENGTHS

Unilever Brothers Pakistan Limited is one of the largest organizations in Pakistan.

Company has advance technology and well skilled professionals.

The target market is educated, professionals and belongs to premium and middle class.

Participative management style Very good distribution network all over Pakistan, in all

major and small cities. Strong finances in past years

WEAKNESSES Quality control problem Competitor has strong promotional activities. Imported brands also available in the market. Customers are offered better alternatives by the

competition.

OPPORTUNITIES Population expanding at a rapid rate. Consumers are becoming more quality conscious Customer base is increasing with effective marketing.

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Baby shampoo is another area where Unilever Brothers can make huge gains.

Developing Markets.

THREATS Political and Economic factors. High rate of competition. Local and Foreign competition.

CONCLUSION In conclusion, Unilever has a host of good brands, some

competitive advantages in the consumer products, a management that is improving operations costs and represent a discount to the current market price, however not enough discount to warrant a purchase at this time. So I will wait to see management future actions in selling lower margin products and monitor its price if the market gives me an opportunity to make a good purchase.

Organisations needs to promote their product or services in order to establish a foothold, increase market share and compete, the choice of promotion depends upon various factors internal as well as external.

A successful product or service means nothing unless the benefit of such a service can be communicated clearly to the target market. An organisations promotional strategy can consist of: Advertising, Public relations, Sales promotion, Personal selling, Direct Mail.

RECOMMENDATIONS Unilever, Pakistan realizes the huge potential of the rural

markets, i.e. 72% of the total population, but has not yet developed a successful strategy to penetrate this market. The success of Unilevers Hindustan should be emulated, which has successfully captured the rural market by two key strategies; firstly, by developing a strong distribution infrastructure and secondly, by adapting the packaging and pricing to this market.

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Unilever should increase the buying of raw materials from local markets so that it does not have to suffer excessively from devaluation and continuous increase in tariff rates. This would also negate the adverse affect on sales volume due to smuggled foreign product.

Unilever should introduce a smaller (100 ml) pack of Surf Excel in order to capture the lower income segment.

Unilever should enter into WEB Marketing. The Legacy Soccer Foundation sponsored mainly by Unilevers,

should be emulated by Unilevers Pakistan in the area of cricket since it is the most popular sport in Pakistan.

REFERENCES www.MBA.net www.unilever.com

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