Unilever has been licensed by Henkel limited to manufacture, distribute and market their Persil detergent brand. The company enjoys a relatively large market share, although it faces strict competition from Procter & Gamble for the £3 billion cleaning products market in the UK. Unilever has been in existence since 1929 and is the third largest consumer products seller in the world. A SWOT and PESTLE analysis of the company reveals that they have the same characteristics as and are faced by the same situations as other large multinationals. Unilever enjoys the sheer size, geographical spread, and access to human capital that is synonymous with such a large corporation. Likewise, this size acts as a strength and as a weakness because the company has to many brands to focus on at the same time, keeping in mind that they face great competition in their industry. They also have to keep up with the changing social, political, economic, and technological outlooks of their vast markets.

The company can be able to keep up an even overtake their competition in the detergents market by conducting a product rebrand and targeting the largest market segment that their product might have access to in this time – generation X. Members of generation X, especially new parents can be coarsed into taking up Persil as their new detergent by using a marketing plan that is built on an improvement of their current 4P’s approach to the marketing strategy.

Table of Contents

Introduction. 4
Situational Analysis. 5
External Environment. 5
PESTLE Analysis. 5
Political 5
Economics. 6
Social 6
Technological 7
Legal 8
Environmental 8
Internal Environment Audit. 8
SWOT Analysis. 9
Strengths. 9
Weakness. 9
Opportunities. 10
Threats. 11
Unilever’s Competitive Edge Analysis. 12
Financial Performance. 12
Recommendations for Persil Detergent 14
Segmentation. 14
Targeting. 15
Marketing Mix. 15
Product 15
Price. 15
Promotion. 16
Place. 16
Conclusion. 16

Introduction

The detergent market in the UK is highly competitive especially between Unilever and P&G through the Bold, Persil, and Ariel brands. The two companies are major multinationals, and in this case, Unilever is the most unique due to the presence of their headquarters in two European countries. This cleaning products market is estimated to be worth at least £3 billion in the UK (Jones, 2002).  However, Unilever is falling behind the competition in this market and it is in need of a change of the marketing strategy. This paper will analyse the current market situation of the company as well as its competitive analysis. Furthermore, this data will be used as a basis for developing recommendations for Unilever in order to catch up to the competition.

Situational Analysis

A situational analysis outlines a comprehensive audit of Unilever’s assets as well as the environment. The main features of this audit are the internal and external environment. The internal environment audit focuses on the possessions of the company including the profit margins, sales, and portfolio. The SWOT analysis is one of the most effective internal environment audit tools. On the hand, the external environment is more concerned with the competition, consumers, and environmental, social, technological, and political factors affecting business. In the following analysis, the tools are applied to Unilever (McLaney, 2006).

External Environment

PESTLE Analysis

The PESTLE audit below makes an analysis of the various Legal, Environmental, Social, Economic, Technological, and Political dynamics that affect the operations of Unilever

Political

Unilever has headquarters in Amsterdam and London. The governments in both countries are in a flux state. The government in Britain is the first that coalition since the post-war period. In the Netherlands, coalitions are the norm. The two dynamic political systems have a diverse effect on the businesses. As a case in point, the VAT in the Netherlands has been changed thrice since 2010 due to political instigations (Taylor-Gooby and Stoker, 2011).
The Netherlands and UK are members of the EU. This membership allows the harmonization of certain trade rules and trade barrier removals. However, there is a growing impetus in both countries pushing for the countries to leave the EU. The Dutch Prime Minister is very vocal about his desire for his country to leave the EU. Such a move will have large implications for this organization which is co-headquartered and the company has been vocal about its preference for the two to remain EU members (The Guardian, 2014).

Economics

            Although the world recovered from the recent global recession, shoppers in Europe are still far from full recovery. Household consumption is still yet to reach pre-2008 levels. Also, wages have stagnated over recent years and unemployment rates are increasing at an alarming rate. Manufacturers such as Unilever have been affected by falling consumer demand due to low household consumption and falling wages (Gerstberger and Yaneva, 2013).
On the other hand, economies in areas such as china and Latin America are booming. This has provided the company with an opportunity for growth in these markets. Suffice it to say the company witnessed an 8.7% increase in sales from such emerging markets (The Guardian, 2014).

Social

            The life expectancy has increased dramatically in the developed nations. For example, the life expectancy in the UK from 1980 was 70.4 and 79.8 for men and women respectively. According to statistics from 2010, the current figures are 79.3 and 83.6 years. On the other hand, fertility rates are falling, resulting in accelerated population aging. In essence, the UK government has recent estimated statistics that show that the fraction of population that is aged below 30 years will fall, while those above 60 years will increase by a large margin (Office for National Statistics, 2009).
Such an aging population will present a challenge to businesses like Unilever because of the changing demand structures in the future. Older people tend to have different preferences, especially when it comes to the products sold by Unilever. In addition, there will be a shortage of labour in the future. Large corporations are constantly expanding and they might have to respond to this labour shortage by requesting their current work force to spend longer working hours (Maestas and Zissimopoulos, 2010).
In the past decade, people have taken up more healthy behaviours due to a number of public campaigns promoting the same. This has led to an increased interest in healthy food and a drive towards the avoidance of genetically modified foods. Unilever has already witnessed some effects from this trend. Two margarine brands including Flora are in a free-fall state with sales figures tumbling year-on-year (The Guardian, 2014).

Technological

Social media and mobile communication is taking centre stage especially among the younger generation. Sellers are taking advantage and utilizing mobile communication along with retailing websites to connect with the customers. This has prompted companies such as Unilever to harness the power mobile technology and to create newer advertising channels. It is currently a norm to find companies using social networking sites such as Twitter and Facebook as a major part of their promotional mix.
Further, such constant connectivity has introduced a newer more vigorous competitive edge that was not present earlier. Consumers now have close to perfect information of the market as well as constant exposure to product information and price. Firms now have carefully prepared their marketing strategy in this new digital age (Sashi, 2012).

Legal

Unilever is a multinational country that has a presence in more than 190 countries worldwide. The company’s level of multinational activity means that they have to conform to the laws of each country, and respond to any changes that might occur.
People management has been an area that has witnessed many changes in recent times, especially across Europe. Many countries in Europe have put in place laws that prevent the discrimination of employees based on gender, race, religion, and disability. Organizations, including Unilever, have had to make adjustments to their recruitment programs to ensure they conform to the new laws (Hyman, Klarsfeld, Ng, and Haq, 2012). The issue of the ageing population in Europe has also been addressed with new laws which have removed the mandatory age of retirement in the UK which used to stand at 65 years.

Environmental

The governments in many countries across the world are responding to calls environmentalist groups, and they are now calling for changes in industries to prevent further environmental degradation. The onus is on organizations that are engaged in large-scale production to ensure that they make use of fewer resources in production. The Kyoto protocol was a collaborative effort calling for the reduction of carbon emissions, and countries within the European Union are obliged to cap the emissions by their industries (Ellerman, Converey and Perthuis, 2010).

Internal Environment Audit

This audit will make an analysis of the internal environment affecting the Unilever Company.

SWOT Analysis

Strengths

Unilever’s main strength lies in its size and is the world’s oldest multinational company, being in operation since 1929. The company manufactures a total of more than 400 different consumer brands. Unilever products are sold across more than 190 countries. Furthermore, the company employs a massive workforce that is made up of some 160,000 employees. The company financial performance attests to their size as well as influence on the economy. In 2013, the year reported a profit of £4.4 billion which presented a 9% increase on the previous year’s earnings. Sales across emerging countries have also represented a large margin of the company’s growth, with the organization witnessing an 8.7% growth in sales to the region (Guardian, 2014).
Unilever has very strong brand awareness due to its size and longevity. Being the world’s oldest multinational company makes it very trustworthy among most of the client base that have been using the company’s products since childhood (Thain and Bradley, 2014).
Unilever has access to a large pool of human capital. Human capital can be defined as volume of knowledge, skills, competencies, and experience that individuals possess. This is a crucial for organizations because a high level of human capital is often linked to a high performance level. The company’s current CEO, Paul Polman, set out a cutting edge plan to boost the company’s sales and sustainability.

Weakness

The company has such a wide brand portfolio that analysts believe that this acts a weakness in most cases (Guardian, 2014). The company has more than 400 brands in four categories: food, cleaning, beverages, and personal care products. It ends up being difficult for the company to effectively market all of these brands. In such cases, only a few products will end up generating a large percentage of the firm’s profits (Putsis and Bayus, 2001). In the future the company might have to sell off some of its lesser brands. Suffice it; the company is already taking some steps towards this direction. The CEO has pointed the company’s aim to sell off some off some of their poorer performing brands. In fact, according to The Telegraph (2014) Unilever has already sold brands such as Slim–Fast and Peparami in 2014.  The company is also unable to tailor the products to the local needs of most countries.
Products sold by Unilever tend to be set at a price that is slightly higher than those of the competitors. This is a weakness in most market segments. Although the company reiterates that this is to represent the quality of their products, analysts argue that this is just to repay the vast amounts that the company spends on research and marketing each year (Thain and Bradley, 2014). As a case in point, in 2010 Unilever spent €6 billion on advertising alone. Currently, the company is still one of the largest spenders on advertising (Guardia, 2014).

Opportunities

            Social media is the new marketing front and it presents Unilever with a number of opportunities, considering that the company aims to lower their shockingly high advertisement expenses (Telegraph, 2014). Companies are now sing social media to keep consumers updated on their favourite products, offer discounts, and send invitations to special projects. This will enable the companies to develop a relationship with their customers who used to be almost impossible in the past (Sashi, 2012). Unilever has the chance to better develop their online brand presence through this inexpensive advertising method.
The vast research facilities that the company has in place can be used to explore new opportunities. The company has very many research facilities across the world, particularly in Shanghai, Bangalore, New Jersey, and England. The company can continuously use these facilities to come up with new and innovative product lines. Consumers are always excited to try out new products, as long as they are properly researched.

Threats

Unilever has a very similar business model to most their fierce competitors including Nestle and Procter and Gamble. Their product lines are also similar with the companies having very little or close to no differentiation. In fact, Unilever is outperformed by both companies in terms of sales (Thain and Bradley, 2014).
A large number of products sold by Unilever are premium and specifically targeted at consumers who are high-income earners. The current economic situation threatens to affect this market segment that is targeted by Unilever. Financial uncertainty might cause these households to move towards lower value items.
Food prices have been noticing an upward trend in recent years across the world (Headey and Fan, 2008). The company is obliged to pass the increased costs onto the consumers. This might be the cause of the recent change in direction by the CEO, who hopes to refocus the company on other product lines (Guardian, 2014).
There have been various sell-offs in some of the major sectors of Unilever in recent years. These can be treated as an opportunity in some cases e.g. the company was able to buy out TRESemmé hair brand. However, this can be a serious corporate threat of any of their major competitors manage to purchase any one of their brands. For example, Gillette’s purchase by P&G in 2008 and turning it into the largest company dealing in men’s personal care products (Guardian, 2014)
There is an increasing social ethic concern among the consumers in various countries. The company is being accused of pusing for western beauty standards in contries such as Japan, Bangladesh, and India. In this case, 80% of women in Bangladesh use Fair and Lovely a skin lightening product by the company. In Thailand the company had to withdraw an advertisement where they implicated that light skin directly correlates to intelligence. There was widespread disagreement with this sentiment by the locals arguing that the company was misrepresenting facts. These fair beauty products are a very major income source for the company, and they are under threat from their largest market (Guardian, 2014).

Unilever’s Competitive Edge Analysis

 

Financial Performance

The S&P 500 benchmark is considered as one of the best gauge for the companies that are trading in the US equities market. All the major Unilever competitors are trading in this market as well. Between 2008 and 2010, the S&P market witnessed a general increase while Unilever reported a 5% decrease in growth. These figures reveal that the company’s competitors are regaining the market share that was lost during the economic recession. The five year average, on the other hand, does reveal that the company is on a positive albeit it is significantly below the market average (Jones, 2002).
The net profit margin for Unilever has fallen around the industry average for the past five year. It is crucial to note that the net margin accounts for the profit calculated after the expenses have been subtracted. The 5-year average for Unilever for both gross and net and gross margins is favourable for the company. This is in comparison to the competitors, P&G and Nestle, and the gross margin is better than the S&P 500 average (See Appendix 1).
The Return on Capital Employed is marginally higher than the industry average, and close to the S&P 500 average. The ROCE analyses the percentage of profits against the total company assets (McLaney, 2006). The debt and equity ratios provide insight into the amount of funding provided by stakeholders and creditors. The higher any of these ratio is, the riskier the business. Unilever’s ratios fall around the industry average. In essence, their ratios are slightly higher than those of benchmark companies. Unilever can be able to finance their company through loans and still be able to furnish all the interest payments. Liquidity audit shows whether a company is able to meet their current liabilities obligation with the current assets they have (See Appendix 1).
Unilever also gains a competitive edge over their competitors by focusing on the demographics of their target market. Unilever offers a wide range of products targeted at the age groups. The company also focuses on the emerging markets that are often overlooked by large multinationals. Over the past decade the company has started to sell more of its products in India and other Asian markets. This has paid off and a significantly large percentage of the company revenue is from the developing Asian market. Unilever’s focus on innovation, low cost products, and wide customer base gives it a great competitive advantage over their competitors (Jones, 2002).

Recommendations for Persil Detergent

The clothes detergent market is the most fought over market segment in the UK. The leading brands are Persil and Ariel which take up a very large market segment. Although Persil is manufactured by Henkel, Unilever has been licensed to market, manufacture and distribute in the UK. It is the UK market that will be the focus of this marketing strategy. In order to ensure the success and improvement of the sales performance of Persil detergent, a marketing plan has to be put in place. The marketing plan will involve effective marketing strategies including targeting, segmentation, and elements of marketing mix (Solomon, 2003).

Segmentation

The company will have to adopt demographic segmentation in order to establish a new target market for their products. Through this method, Unilever will be able to understand the needs of specific and potential new customers. Generation X is a largely an unexplored market segment that can become a potential market for Persil detergents. The only drawback in this case is the method that should be used in the dissemination of information. They are not as accessible via the media as generation Y, and they tend to exercise brand loyalty (Jeannet, Hennessey and Jeannet, 2004).

Targeting

The baby boom will create a great opportunity to further market the detergent. The specific focus will be on new parents. Additionally, the product will target existing customers who use detergents but are concerned about the environment. The product will approach this strategy by making use of penetrative pricing at the initial stages. This will make it possible for the brand to capture consumers who are willing to change brands.

Marketing Mix

The 4 Ps of marketing will be used to attain the marketing objectives of the company.

Product

The Peril detergents should be rebranded to have a more environmental-friendly appeal. It should have some plant and mineral ingredients in addition to being biodegradable. This will make it to appeal to parents who are conscious about the products that they use to clean their children’s clothes as well as the environmentalist.
The company should pick up a biodegradable box packaging in place of their plastic bags. Cardboard boxes can be easily recycled as opposed to plastic. The labelling should remain the same to maintain the brand awareness. However, more tips on proper cleaning should be added to ensure the efficiency of their detergent. The packaging may also have information that may direct customers to the brand’s website on cleaner planet initiatives.

Price

A penetrating price strategy will be used after the product rebrand for a few weeks. The price should be in line with the other detergent products sold by the company. Eventually, the price will be increased to match those of similar products in the market, albeit with a slightly higher price to keep up with the ‘premium brand’ promise (Solomon, 2003). This price will not be static. It will be constantly reviewed in a bid to achieve the maximum potential of the detergent.

Promotion

The product has to be promoted through a number of marketing campaigns running concurrently. The marketing campaign will us radio, TV, and the internet to ensure maximum reach. There will be advertisements in the magazines as well as the newspapers. Also, promotional leaflets have to be used.
Unilever will partner with local authorities and hospitals to promote the use of the abandoned re-usable nappies, and their advantages. This will have to come bundled with the message that Peril is the most effective brand to be used when cleaning these nappies. Furthermore, there will be partnerships with companies that make the re-usable nappies to sell them along with coupons that can be redeemed for Peril detergent.

Place

The target market is made up of shoppers who don’t like to visit stores often. Therefore, the product has to be in the right place and at the convenience of the buyer. Distribution will be increased, especially to the retailers. The retailers tend to have an already established relationship with the consumers. On the other hand, the company has to approach and to become more vigorous in their efforts on e-commerce. This can be through the established e-tailers such as Amazon to reach a wider audience.

Conclusion

Unilever is a multinational company that sells personal beauty products, detergents, and food items. A SWOT analysis of the company reveals that the company is one of the largest corporations in the world and it has a capital in both UK and the Netherlands. The company is one of the main detergent sellers in the UK along with P&G. Unilever sells Persil detergent under license from Henkel. The company can increase sales and brand awareness of their detergent by practicing market segmentation and targeting the new parents in their new marketing plan. The new marketing plan should involve all the 4P’s of marketing. This will include rebranding the product, ensuring availability, using a penetrating price strategy, and a large marketing campaign.

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