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Market Overview
Market includes
Liquid & powder detergents Shampoos, body washes, personal care items Perfumes Cosmetics
Market Trends
During 1990s tight competition in established markets Economic slowdown in global market Strong competition to develop new products Need to control costs and price
Market Trends
Acquisitions or joint ventures to solidify global position Strong need to be able to satisfy changing consumer preferences Laundry detergents form the largest component 50%
Products
Unilever manages over 400 leading brands and just under 250 tail brands. These range from food to home and personal care.
Food Products
Ben & Jerrys Breyers Country Crock Hellmanns Ragu Slim Fast Lipton Others
Technological Scope
Global integration of SAP software Standardized corporate computer services includes intranet Standardized corporate e-mail Warehouse management systems using bar code technology
Corporate Centers
London Rotterdam
Trends in manufacturing
Fewer production centers More efficient production centers
Level of Differentiation
Recognition for key brands Dove, Snuggle Extremely effective in defending product patents
Response Time
In U.S. due to competition has had to improve flexibility Continuing to combine business functions
Human Assets
Promotes high level of training and empowerment Manufacturing becoming more non-union
Public Approval
Low recognition in U.S. Highly recognized oversees especially in third world countries
Mission Statement
At Unilever we are dedicated to meeting the everyday needs of people everywhere. We provide washing powder, shampoo and toothpaste, teas, ice cream, oils and spreads for consumers all over the world.
Corporate Philosophy
Unilever's Corporate Purpose states that "to succeed requires the highest standards of corporate behavior towards our employees, consumers and the societies and world in which we live. This is our road to sustainable, profitable growth for our business and long-term value creation for our shareholders and employees."
SWOT Analysis
Strengths
Finance 1) Strong Cash Reserves 2) Global Purchasing 3) International Exchange Rate
SWOT Analysis
Strengths
Marketing
1) Extensive product lines make Unilever a formidable competitor 2) Strong image for well-known brand products 3) Use of creative advertising and promotions on website and commercials
SWOT Analysis
Strengths
Operations
1) Two Major Divisions Foods and Home & Personal Care 2) #1 in many consumer product categories 3) Well developed supply chain
SWOT Analysis
Strengths
Human Resources
1) High level of training in place for employees 2) Employ approximately 265,000 people 3) Enterprise culture developing employee to be more customer friendly
SWOT Analysis
Strengths
Information Systems
1. Corporate intranet and e-mail 2. All laptops and desktop machines organized the same (Sunrise hardware program) 3. SAP software used globally 4. Total Business Productivity each category has website example Accounting
SWOT Analysis
Weaknesses
Finance
1. Since it is an overseas stock not included in US market analysis 2. Business acquisitions affect overall profit
Marketing
1. Lack of innovation in several categories has caused slippage in market share 2. Reduced marketing expenditures in television commercials
SWOT Analysis
Weaknesses
Operations
1. Innovation time cycles continues to need improvement 2. Consolidation of facilities is causing production turmoil
SWOT Analysis
Weaknesses
Human Resources
1. Expensive labor due to high benefit package 2. Union contracts limit flexibility
Information System
1. Global help desk India & Ireland 2. Deferred updating due to leased hardware 3. Insufficient software package training
SWOT Analysis
Opportunities
Demographics
1. Products appeal to wide range of population 2. Product loyalty through generations
Technology
1. Automated manufacturing facilities 2. Already using product innovation needed for front loading washing machines
SWOT Analysis
Opportunities
Economy
1. Goods are durable in any economic environment 2. Use of international exchange rate
Global
1. Largest consumer manufacturer 2. Integration of international employees bring broad cultural and business experience in all processes
SWOT Analysis
Opportunities
Environment
1. Maximize recycled packing materials 2. Processes environmentally friendly 3. Products are biodegradable
SWOT Analysis
Threats
Demographics
1. Low product differentiation tends to make consumers reluctant to change products 2. Consumer purchasing base on cost
Technology
1. Competitors manufacturing technology innovations 2. Reduction in innovations due to patent constraints
SWOT Analysis
Threats
Economic
1. Internal turmoil in third world countries 2. Ventures in developing countries are jointly owned
Global
1. Internal business in country may be given preference 2. Knockoffs
SWOT Analysis
Threats
Environment
1. Increased regulations 2. Pressure to reduce utility consumption
6% growth
6%
Assumptions
Prime Rate is 4% Available Market Growth is ongoing at 1 2% per year Assume our vendors will accept late payments Assume our customers will pay net 30 Existing computer hardware will be able to support new computer software Outsourcing of production has acceptable sources
Strategic Plan
Action Plan #1:
Reduce costs in production of laundry detergents by 3 5% over next 4 years
Action Plan #1
Information Systems:
Upgrade information systems to achieve improve forecast of sales
Improvement in forecasting should result in a change from 10 week product coverage to 9 week product coverage
Improve scheduling
Improvement in raw material inventory Reduces storage time 10 15%
These improvements would reduce storage time 10 15% Storage equates to $1 to $2/sq ft Results in a 10% savings
Action Plan #1
Finance
Change payment on Accounts Payable from normal 30 day cycle to 45 day cycle This allows capital to remain invested for a longer period Example - $1M invested at prime (4%) results in $1643 additional revenue in the extra 15 days
Action Plan #1
Marketing
Reduce marketing on cash cow brands such as Rinso, All, Final Touch and others These brands can effectively be marketed in Club Pack stores examples Cosco, Dollar General, Sams Allows for reallocation of cash cow brand marketing budget to key brands only should result in an additional $8 M available
Action Plan #1
Marketing Anticipated 2004 advertising cost increases
16% 14% 12% 10% P e rce n ta g e o f In cre a se 8% 6% 4% 2% 0% National TV rates Loc al TV rate Radio News papers
Ad ve rtisin g M e dia
Action Plan #1
Production
Initiate process changes to increase utilization of assets and reduces fixed costs Increase automation to reduce manual labor on production lines reduction in staffing from 5 per line to 3 per line
Average hourly pay $15/hr plus benefits Costs savings of $62,400/per worker
Action Plan #1
Production
Increase quality control to reduce over pack example
On a 50 oz package reduce your over pack from 2% to 1% Assuming cost of $5/lb Resulting savings of $3.4 Billion/year
Action Plan #1
Research & Development
Reduce cost by alternative formulation Reduce builder in powder detergents by 2%
Cost savings reduce raw material cost from 0.15/lb to 0.09/lb Total cost savings - $29 M/year
Human Resources
Provide additional staff and line worker training Training with help lines run more efficiently
Cost of Reversibility
Many of these changes would not have a cost of reversibility associated with them If the outsourcing of production needed to be reversed loss of workers and the need to divert capital back into production facilities would be costly
Summary
In order to meet the strategic goal both action plans must be implemented Personal care products have the higher profit margin Upcoming changes in laundry detergent market necessitate reduction in production costs to maintain current profit margin