Unilever: A Flashback, its Global Expansion and Marketing Strategies in Bangladesh.
Business & Marketing lives in a dynamic environment which is changing very fast. So to keep up with the pace of change and to update & upgrade of value in the marketing theory’s principles and practices must be a continuous basis. In brief marketing activities are perpetual activities. Unilever follows these principles and continuously involve in value innovation.
The purpose of making this report is to know all about unilever in particular and its marketing proses in Bangladesh i.e Business, Code of principles, Brand products, advartisement in general.
Global Marketing Concept:
A company guided by this orientation or philosophy is generally referred to as a global company, its marketing activity is global marketing, and its market coverage is the world. A company employing a global marketing strategy strives for efficiencies of scale by developing a standardized product, of dependable quality, to be sold at a reasonable price to global market, that is, the same country market set throughout the world, Important to the global marketing concept is the premise that world markets are being “Driven toward a converging commonalty” seeking in much the same ways to satisfy their needs and desires. Thus, they constitute significant market segments with similar demands for the same product the world over. With this orientation a company attempts to standardize as much of the company effort as is practical on a worldwide, while others require consideration of local influences. The world as a whole is viewed as the market and the firm develops a global marketing strategy.
The global marketing concept views and entire set of country markets (Whether the home market and only one other, or the home market and 100 other countries) as a unit, identifying groups of prospective buyers with similar needs as a global market segment as developing a marketing plan that strives for standardization wherever it is cost and culturally effective. This might means a company’s global marketing plan has standardized product but country specific advertising, or has standardized theme in all countries product but country specific advertising, or has a standardized them in all countries with country or cultural specific appeals to a unique market characteristic, a standardized bride or image but adapted products to meet specific country needs and so no. In other words, the marketing planning and marketing mix are approached from a global sought. Wherever cultural uniqueness dictated the need for adaptation of the product, its image, and so on, it is accommodated. The company standardizes its processes, logo, most of its advertising, store decor and layouts, and so forth when and wherever possible.
What does Globalization Mean?
Globalization means e deepening of worldwide interdependency. So that people who want to be in power and shape their futures in their local and nations will also have to act globally. Let us share the optimizing and the deep concern, the hopes and the fears. It is our conviction that the globalization can and should be shaped according to the needs of the world’s people. There are choice and alternative models for development. Which should be explored Ethics must not be left in a separate realm but should be planted in to the very core of international integration. International solidarity a global civic ethic inspiring common responsibility- must guide our societies. Globalization must be transformed into a process of inclusion, not guide our societies. Globalization must be transformed into a process of inclusion, not of exclusion. The global economy will not survive in a chaotic world of poverty, comfiest and exclusion, nor will humanism. The vital points should be kept in mind area.
ü That local civil society has a major role to play in shaping globalization.
ü That how comparative advantage is created should matter, but this principle should not be misused as a method to maintain or establish trade barriers.
ü That financial volatility should not be permitted to endanger the socio-economic stability or competitiveness of entire nations and regions.
ü Ways of financing global public goods need to be developed.
ü The crucial role of the private sector in the process of globalization and development shook is recognized.
This call for a deeper and more creative discussion of the different aspects of globalization and the need for action. Government, academics; the business community, trade unions, civic organizations and other parts of civil society need to interact to focus on long-term interests and decisions.
Get a Grip on Global Sales:
Here’s an easy, five-step approach on how to do it:
- Start selling in new countries or territories.
- Develop healthier relationship with your distributors and agents.
- Create a more innovative and effective international sales and marketing strategy in general. You want something that you can measure results.
- Request your staff take on more responsibilities.
- Sell more on open account with export credit insurance and work more closely with your credit manager.
Once you’ve built up your export base, start cutting expenses. Her are eight ways to start:
- Shift your production to a lower-labor-cost nation.
- Cut production costs. Eliminate unnecessary employees and hire temps or contract out when you need to fill in.
- Build your sales force according to your overseas customers.
- Use the best possible payment method. The one that works best is the one that gets the deal done.
- Engineer financing from a variety of sources.
- Work more closely with your freight forwarders (consider going direct).
- Use the Internet to increase efficiency.
If you put all of the above into play, you will be able to offer more favorable export pricing, maintain your profit margins, and increase your international sales.
After all, war or no war isn’t it about getting a grip on your global sales?
What is Marketing Strategy?
A strategy is a plan of action designed to achieve the long-run goals of the organization. Marketing strategies evolve from more general business objectives. Marketing strategies usually include the following dimensions:
1. The product or service market in which you expect to compete.
2. The level of investment needed to grow, maintain, or milk the business.
3. The product line, positioning, pricing, and distribution strategies needed to compete in the selected market.
4. The assets or skills to provide a sustainable competitive advantage (SCA).
Advantages of Strategic Marketing:
A strategic approach to marketing has a number of advantages. First, a strategic emphasis helps organizations orient themselves to key external factors such as consumers and competition. Instead of just projecting past trends, the goal is to build market-driven strategies that reflect customer concerns. Strategic plans also tend to anticipate changes in the environment rather than just react to competitive thrusts. Today firms with global marketing strategies are better able to meet customer needs and the growth of international competition.
The first step is to establish a comprehensive mission for the organization. Then a detailed assessrrient of each strategic business unit must be performed. This usually includes both– external and internal analyses of current strengths and weaknesses. Next, appropriate marketing strategies are identified for each business unit.
We strongly believe that you first decide what you want to do, your strategy; then you decide how to do it, your tactics. The elements of the marketing mix are highly interrelated, and the best mixes come about when you take a strategic approach. For example, a new product might be positioned as soap with lotion like properties or as a lotion with soap-like properties. The appropriate price and advertising appeal depend on this positioning. One price level might cause consumers to perceive the product as soap, while another price level might cause them to perceive it as a lotion. Of course, market strategy itself must be based on a sustainable advantage on one or more elements of the marketing mix.
Scope of Planning:
Planning may cover long or short periods. Strategic planning is usually long range covering 3,5,10 or (infrequently) 25 years. It requires the participation of top man agreement and often involves a planning staff.
Long-range planning deals with company-wide issues such as expanding or contracting production, markets, and product lines. For example, all firms in the U.S. auto industry must look ahead to the next century to identify key markets, plan new products, and update production technologies.
Short-range planning typically covers 1 year or less and is the responsibility of middle and lower-level managers. It focuses on such issues as determining which target markets will receive special attention and what will be the marketing mix. Looking again at the auto industry, Chrysler Corporation annually decides which target markets it will concentrate on and whether its marketing mixes for each of these markets need to be changed. Naturally, short-range plans must be compatible with the organization’s long-range plans.
Planning the marketing strategies in a firm should beconducted on three different levels:
Strategic company planning: At this level management defines an organization’s missions, sets long-range goals, and formulates broad strategies to achieve these goals. These company-wide goals and strategies then become the framework for planning in the firm’s different functional areas, such as production, finance, and human Sources, research and development, and marketing.
Strategic marketing planning: The top marketing executives set goals and strategies for an organization’s marketing effort. Strategic marketing planning obviously should be coordinated with company-wide planning.
Annual marketing planning: Short-term plans should be prepared for major functions. Covering a specific period, usually 1 year, the annual marls plan is based on the firm’s strategic marketing planning.
Strategic company planning:
Strategic company planning consists of four essential steps:
- Defining the organizational mission.
- Analyzing the situation.
- Setting organizational objectives.
- Selecting strategies to achieve these objectives.
The first step, defining the organizational mission, influences all subsequent nine. For some firms, this step requires only reviewing the existing mission slat and confirming that it is still suitable. Still, this straightforward step is too often
Conducting a situation analysis, the second step, is vital because strategic pal is influenced by many factors beyond and within an organization. By situation anal we simply mean gathering and studying information pertaining to one or more spec aspects of an organization. We’ll talk more about conducting a situation analysis in upcoming section.
The third step in strategic company planning requires management to decide set of objectives to guide the organization in fulfilling its mission. Objectives also standards for evaluating an organization’s performance.
By this point in its strategic planning, the organization has determined where it to go. The fourth step, selecting appropriate strategies, indicates how the firm is to get there. Organizational strategies represent broad plans of action by which an organization intends to achieve its goals and fulfill its mission. Strategies are selected either for the entire company if it is small and has only a single product or for each division if the company is large and has multiple products or units.
Do companies actually engage in this kind of planning and then prepare a written plan? According to a recent survey, almost 70 percent of firms have strategic plans in place; among them, nearly 90 percent believe their strategicplans have been effective interestingly, a larger proportion of younger firms (1 to 10 years old) than older firms have formal strategic plans.
Strategic Marketing Planning:
After completing the strategic planning for its organization as a whole, management needs to lay plans for each major functional area, such as marketing or production. Of course, planning for each function should be guided by the organization-wide mission and objectives.
Strategic marketing planning is a five-step process:
- Conduct a situation analysis.
- Develop marketing objectives.
- Determine positioning and differential advantage.
- Select target markets and measure market demand.
- Design a strategic marketing mix.
These five steps are shown in the middle of Figure 3-2, indicating how they relate to the steps of strategic company planning. Each step is discussed below.
The first step in strategic marketing planning, situation analysis, involves analyzing where the company’s marketing program has been, how it has been doing, and what it is likely to face in the tears ahead. Doing this enables management to determine if it’s necessary to revise the old plans or devise new ones to achieve the company’s objectives.
Situation analysis normally covers external environmental forces4 and internal no marketing resources (such as R&D capabilities, finances, and skills and experience levels of personnel) that surround the marketing program. A situation analysis also considers the groups of consumers served by the company, the strategies used to satisfy them, and key measures of marketing performance.
As the basis for planning decisions, situation analysis is critical. But it can be costly, time-consuming, and frustrating. For example, it’s usually difficult to extract timely, accurate information from the “mountains” of data compiled during a situation analysis. Moreover, some valuable information, such as sales or market-share figures for competitors, is often unavailable.
As part of a situation analysis, many organizations perform a SWOT assessment. In this activity, a firm identifies and evaluates its most significant strengths, weaknesses, opportunities, and threats. To fulfill its mission, an organization needs to capitalize on its key strengths, overcome or alleviate its major weaknesses, avoid significant threats, and take advantage of the most promising opportunities in order to fulfill its mission.
We’re referring to strengths and weaknesses in an organization’s own capabilities. For example, a Sears’ strength is its large size that gives it-among other things-clout in dealing with suppliers. However, a weakness is its comparatively high operating expenses.
Opportunities and threats often originate outside the organization. For example, an opportunity identified by Wal-Mart is the large number of metropolitan areas in which it has no stores. But a threat is the group of competitors (such as Kmart and Target await Vial-Mart in metropolitan locations
The next step in strategic marketing planning is to determine marketing objectives. 1l kiting goals should be dose- related to company-wide goals and strategies. In fact company strategy often translates into a marketing goal. For example, to reach an,, generational objective of a 20 percent return on investment next year, one organization strategy might be to reduce marketing costs by 15 percent This company strafe become a marketing goal. In turn, converting all sales people from salaried compensate, to a commission basis might be one of the marketing strategies adopted to achieve t marketing goal. We already know that strategic planning involves matching an organization’s sources with its market opportunities. With this in mind, each objective should assigned a priority based on its urgency and potential impact on the marketing and, in turn, the organization. Then resources should be allocated in line with the priorities.’ Hershey’s is trying to convey a “light” image for this chocolate product.
Positioning and Differential Advantage:
The third step in strategic marketing planning actually involves two complement decisions: how to position a product in the marketplace, and how to distinguish it f competitors. Positioning refers to a product’s image in relation to directly competition products as well as other products marketed by the same company.’ For example, gig, rising health consciousness among many consumers, manufacturers of mayonnaise, coal oil, and other food products recognized the need to introduce products that would he perceived as more wholesoure.’ CPC International is tuning to position its Hellmann’s Dijonnaise, which combines no-fat mustard with mayonnaise ingredients (but no egg yolks), as a healthful and tasty product.
After the product is positioned, a viable differential advantage has to be identified. Differential advantage refers to any feature 00, organization or brand perceived by customers to be desirable and different from those of the competition.’ At the same time, a company has to avoid a differential disadvantage for its product. Consider Apple computers.’ For many years, the Macintosh’s “user friendliness” represented a strong advantage for the product. As the 1990s began, however, the Macintosh’s relatively high prices created a disadvantage in relation to comparable IBM and Compaq computers.
Target Markets and Market Demand:
Selecting target markets is the fourth step in marketing planning. A market consists of people or organizations with needs to satisfy, money to spend, and the willingness to spend it. For example, many people need transportation and are willing to pay for it. However, this large group is made up of a number of segments (that is, parts of markets) with various transportation needs. One segment may want low-cost, efficient transportation, for instance, while another may prefer luxury and privacy. Ordinarily it is impractical for a firm to satisfy all segments with different needs. Instead, a company targets its efforts on one or more of these segments. Thus a target market refers to a group of people or organizations at which a firm directs a marketing program.
In a new company, management should analyze markets in detail to identify potential target markets. In an existing firm, management should routinely examine any changes in the characteristics of its agreement should decide to w and then pursue only those potential for successful marketing
A firm may select a sing highly specialized trade ma periodical. Business Week, at several market segments.
Target markets must b opportunities, a firm must results of demand forecast or whether alternatives i later in this chapter. Markets and alternative markets. At this point, at extent and in what manner to divide up total ma segments (that is, parts of markets) that show the cling.
Segment as its target, as was done by the publisher of amine, Progressive Grocer. In contrast, McGraw-Hill aims several market segments selected on the basis of opportunities. And to analyze forecast demand (that is, sales) in its target markets will indicate whether the firm’s targets are worth purl ed to be identified. We’ll take a look at demand forecast
\ext, management must design marketing mix-the combination of a product, it is distributed and promoted, and its price. These four elements together must the needs of the organization’s target market(s) and, at the same time, achieve its kiting objectives. Let’s consider the four elements and some of the concepts and egos you’ll learn about in later chapters:
· Product: Strategies are needed for managing existing products over time, anew ones, and dropping failed products. Strategic decisions must also be ma grading branding, packaging, and other product features such as warranties.
· Price: Necessary strategies pertain to the locations of customers, price flesh related items within a product line, and terms of sale. Also, pricing vstrateg1Ps entering a market, especially with a new product, must be designed.
· Distribution: Here, strategies involve the management of the channel(s) by ownership of products is transferred from producer to customer and, in many the system(s) by which goods are moved from where they are produced to when are purchased by the final customer. Strategies applicable to middlemen, wholesalers and retailers, must be designed.
· Promotion: Strategies are needed to combine individual methods such as using, personal selling, and sales promotion into a coordinated campaign- 10 lion, promotional strategies must be adjusted as a product moves from the stages to the later stages of its life. Strategic decisions must also be made regarding each individual method of promotion.
The four marketing-mix elements are interrelated; decisions in one area often affect actions in another. To illustrate, design of a marketing mix is certainly affected by whether a firm chooses to compete on the basis of price or on one or more other elements. When a firm relies on price as its primary competitive tool, the other elements must be designed to support aggressive pricing. For example, the promotional campaign likely will be built around a theme of “low, low prices.” In nonprime competition, however, product, distribution, and/or promotion strategies come to the forefront. For instance, the product must have features worthy of a higher price, and promotion must create a high-quality image for the product.
Each marketing-mix element contains countless variables. For instance, an organization may market one product or many, and they may be related or unrelated to each other. The product(s) may be distributed through wholesalers, to retailers without the benefit of wholesalers, or even directly to final customers. Ultimately, fro the multitude of variables, management must select a combination of elements t I satisfy target markets and achieve organizational and marketing goals.
Strategic Business Units:
Most large and medium-sized companies-and even some smaller firms-consist multiple units and produce numerous products. In such diversified firms, company-H planning cannot serve as an effective guide for executives who oversee the organization various divisions. The Philip Morris Company provides an example. The mission, ejectives, and strategies in its tobacco division are-and must be-quite different those in the Miller brewing or Kraft foods divisions.
Consequently, for more effective planning and operations, a multi business or multi product organization should be divided according to its major markets or product Each such entity is called a strategic business unit (SBU). Each SBU may be a ma division in an organization, a group of related products, or even a single major prod or brand.
To be identified as an SBU, an entity should:
Þ Be a separately identifiable business.
Þ Have a distinct mission.
Þ Have its own competitors.
Þ Have its own executive group with profit responsibility.
The trick in setting up SBUs in an organization is to arrive at the optimum num Too many can bog down top management in details associated with planning, operator and reporting. Too few SBUs can result in each one covering too broad an area t managerial planning. As the 1990s began, the number of SBUs comprising AT&T 19, ranging from long-distance service to computers. Of course, most companies ha fewer SBUs than AT&T.
Product Life Cycles :
The life cycle concept helps managers keep trek of their product portfolios. This promotion suggests that products are born, grow to maturity, and then decline, much like plant and animals. During the introductory period, sales grow rapidly but high expenses keep profits negative. Near the end of the growth stage, the rate of expansion of sales begins to slow down and profits reach a peak. During the maturity phase, sales reach their peak and profits are slowly eroded by increased competition. If something is not done to revive declining products, they eventually have to be dropped from the product line.
The life cycle concept helps managers think about their product line as a port folio of investments. Ideally, the firm wants to have some business units in each phase of the life cycle. If most of the items are in the mature and declining phases, the company will have trouble reaching its growth objectives. Similarly, if all the products are bunched in the introductory and declining phases, the firm is likely to experience serious cash flow problems. The best plan is to have enough business in the growth and maturity stages spinning off cash to finance the introduction of new products and the reformation of products in decline. The advantage of the product life-cycle analysis is that it makes executives realize that products do not last forever and must eventually be replaced. On the other hand, it is sometimes difficult to know when a product is leaving one stage and entering the next.
Product-Market Growth Matrix:
Most organizations’ statements of mission and objectives focus on growth-that is, a desire to increase revenues and profits. In seeking growth, a company has to consider both its markets and its products. Then it has to decide whether to continue doing what it is now doing-only do it better-or establish new ventures. The product-market growth matrix, first proposed by Igor an off, depicts these options.
· Market penetration: A company tries to sell more of its present products to its present markets. Supporting tactics might include greater spending on advertising or personal selling. For example, the Wrigley gum company relies on this strategy, most recently encouraging smokers to chew gum where smoking is prohibited.” Or a company tries to become a single source of supply by offering preferential treatment to customers who will concentrate all their purchases with it.
· Market development: A firm continues to sell its present products, but to a new market. For example, as the defense market softened, McDonnell Douglas devoted more resources to selling its helicopters in the commercial market.” Similarly, ski resort operators’ efforts to attract families and foreigners represent market development.
· Product development: This strategy calls for a company to develop new products to sell to its existing markets. One example is Sony’s introduction of the Watchman TV following its success with the Walkman personal stereo. To remain competitive, Kodak has to develop and introduce improved color film as often as every 2 years. Even more boldly, in the early 1990s, Kodak launched a major product-development effort in electronic imaging (also called film less cameras).
· Diversification: A company develops new products to sell to new markets. This strategy is risky because it doesn’t rely on either the company’s successful products or its position in established markets. Sometimes it works, but sometimes it doesn’t. As one example of diversification, Philip Morris acquired various companies (such as Kraft) during the 1980s. Promoting its disparate products, the company became the heaviest advertiser in the U.S.
As market conditions change over time, a company may shift product-market growth strategies. For example, when its present market is fully saturated, a company may have no choice other than to pursue new markets.
The Boston Consulting Group Matrix:
“Developed by a management consulting firm, the Boston Consulting Group (BC matrix dates back at least 25 years.” Using this model, an organization classifies e of its SBUs (and, sometimes, major products) according to two factors: its market shear relative to competitors. and the growth rate of the industry in which the SBU opera When the factors are divided simply into high and low categories, a 2 X 2 grid created, as displayed.
In turn, the four quadrants in the grid represent distinct categories of SBUs or ma products. The categories differ with respect not only to market share and industry growth rate but also to cash needs and appropriate strategies.
· Stars: High market shares and high industry growth rates typify SBUs in this category. However, an SBU that falls into this category poses a challenge for companies because it requires lots of cash to remain competitive in growing markets. Aggressive marketing strategies are imperative for stars to maintain or even build market share.
· Cash cows: These SBUs have high market shares and do business in mature industries (those with low growth rates). When an industry’s growth diminishes. Stars move into this category. Because most of their customers have been with them for some time and are still loyal, a cash cow’s marketing costs are not high. Consequently, it generates more cash than can be reinvested profitably in its own operations. As a result, cash cows can be “milked” to support the firm’s other SBUs that need more resources. Marketing strategies for cash cows seek to defend market share, largely by reinforcing customer loyalty.
· Question marks (sometimes called problem- children): SBUs characterized by low market shares but high industry growth rates fit in this category. A question mark has not achieved a strong foothold in an expanding, but highly competitive market. The question surrounding this type of SBU is whether it can gain adequate market share and be profitable. If management answers “no,” then the SBU should be divested or liquidated. If management instead answers “yes,” the firm must come up with the cash to build market share-more cash than the typical question mark generates from its own profits. Appropriate marketing strategies for question marks focus on creating an impact in the market by displaying a strong differential advantage and, thereby, building customer support.
· Dogs: These SBUs have low market shares and operate in industries with low growth rates. A company normally would be unwise to invest substantial funds in SBUs in this category. Marketing strategies for dogs are intended to maximize any potential profits by minimizing expenditures or to promote a differential advantage to build market share. The company can instead say “Enough’s enough!” and divest or liquidate an SBU that’s a dog.
Ordinarily, one firm cannot affect the growth rate for an entire industry. (An exception might be the dominant firm in a fairly new, rapidly growing industry. An example would be Rollerblade, Inc., in what’s called the in-line roller skating market.) If growth rate cannot be influenced, companies must turn their attention to the other factor in the BCG matrix, market share. Hence, marketing strategies based on the BCG matrix tend to concentrate on building or maintaining market share, depending on which of the four SBU categories is involved. Various strategies require differing amounts of cash, which means that management must continually allocate the firm’s limited resources (nota6i’ cash) to separate marketing endeavors.
In the financial investor needs a balanced portfolio with respect to rid and potential returns. Likewise, a company should seek a balanced portfolio of SBI Certainly. Cash cows are indispensable. Stars and question marks are integral to a 6a} arced portfolio, because products in growing markets determine a firm’s long-term performance. While dogs are undesirable, it is rare that a company doesn’t have at I one. Thus, the portfolios of most organizations with numerous SBUs or major prod include a mix of stars, cash cows, question marks, and dogs.
The General Electric Business Screen:
On the surface, the General Electric (GE) business screen appears to be very sine to the BCG matrix. This planning model, developed by GE with the assistance of consulting firm of McKinsey & Company, also involves two factors and results in a grand. But, as we shall see, the two models are different in significant respects.
Management can use the GE business screen to classify SBUs or major prod based on two factors, market attractiveness and business position. Each factor is ra according to criteria such as the following:
Þ Market attractiveness: Market growth rate (similar to the BCE matrix), m size, degree of difficulty in entering the market, number and types of competitor technological requirements, and profit margins, among others.
Þ Business position: Market share (as in the BCG matrix), SBU size, strength differential advantage, research and development capabilities, production capacity cost controls, and management expertise and dent agreement and oaten involves a planning staff.
The criteria used to rate market attractiveness and business position are assigned different weights because some criteria are more important than others. Then each ABC is rated with respect to all criteria. Finally, overall ratings (usually numerical scores) for both factors are calculated for each SBU. Based on these ratings each BBL’ is labeled as high, medium, or low with respect to (a) market attractiveness and then (b) business position. For example, a SBli may be judged as hag high market attractiveness but medium business position.
Following the ratings, an organization’s SBUs are plotted on a 3 X 3 grid, as illustrated in the figure The best location for an SBU is the upper left cell because it points to (a) the most attractive market opportunity and (b) the best business position to seize that opportunity. In contrast, the worst location is the lower right cell, for the opposite reasons. The nine cells have implications with respect to how resources are allocated and, in turn, what marketing strategies are suitable.
Even organization has to make decisions about how to use its limited resources most effectively. That’s where these planning models can help determining which SBUs should be stimulated for growth, which ones maintained in their present market position, and which ones eliminated. Ail SBL”s evaluation as indicated by its location on the GE business screen suggests how it should be treated:
- Invest strategy: SBUs in the three cells in the upper left of the grid should receive ample resource, P=. To strengthen and build these kinds of SBUs. Gold, well-financed marketing. -! = are net-led.
- Protect strategy: Should be allocated selectively to SBUsalong the diagonal running from the lower left to the upper right of the grid. This somewhat defensive approach helps an ‘S-BU maintain its present market position because it generates cash needed by other SBUs. For example. Kodak has; pent large sums on marketing to protect its position in the color film induct.
· Harvest strategy: Because they lack an attractive market and a strong business punition. `Bhs in the two cells just below the three-cell diagonal should not receive substantial new resources. Instead, expenditures should be curtailed to maximize any remaining profits. An alternative is to sell these SBUs.
· Divest strategy: SBUs in the lower right cell do not have much going for them. Hence. an ABC in this location should not receive any resources. The best approach probably is to eliminate it from the organization’s portfolio by selling it or. Failing that, shutting it down. In the early 1990s, Campbell Soup Co. followed this strategy by selling several small SBUs, including the Juice Works. 14
The criteria used to rate market attractiveness and business position are assigned different weights because some criteria are more important than others. Then each ABC is rated with respect to all criteria. Finally, overall ratings (usually numerical scores) for both factors are calculated for each SBU. Based on these ratings. each BBL’ is labeled as high, medium, or low with respect to (a) market attractiveness and then (b) business position. For example, a SBli may be judged as hag high market attractiveness-= but medium business position.
Following the ratings, an organization’s SBUs are plotted on a 3 X 3grid, as illustrated in the figure The best location for an SBU is the upper left cell because it points to (a) the most attractive market opportunity and (b) the best business position to seize that opportunity. In contrast, the worst location is the lower right cell, for the opposite reasons. The nine cells have implications with respect to how resources are allocated and, in turn, what marketing strategies are suitable.
Porter’s Generic-Strategies Model:
Michael Porter, a Harvard business professor, advises firms to assess two factors, scope: of target market and differential advantage, and then choose an appropriate Strategy is Porter’s generic-strategies model recommends three alternatives for consideration
· Overall cost leadership: A company or an SBU, typically large, seeks to satisfy & broad market by producing a standard product at a low cost and then under pricing competitors. The battle among Federal Express, United Parcel Service, and the U.S, Postal Service in overnight package delivery largely revolves around cost leadership at the present time.
· Differentiation: An organization creates a distinctive, perhaps even a unique, product through its unsurpassed quality, innovative design, or some other feature and, as a result, can charge a higher-than-average price. This strategy may be used to pursue either a broad or narrow target market.
· Focus: A firm or an SBU concentrates on part of a market and tries to satisfy it Hit6 either a very low-priced or highly distinctive product. The target market ordinary is set apart by some factor such as geography or specialized needs. For example. I small company in the auto-parts business might target owners of cars that are no longer produced (such as VW’ beetles and Avantis).
The strategies comprising Porter’s model are displayed in the figure Porter stresses that profitability depends on having a clear, distinctive strategy. Firms or SBUs that wind up “in the middle,” without cost leadership, focus, or differentiation, are unlikely to achieve satisfactory financial performance.
Unlike the BCG and GE models, Porter’s model indicates that financial success does not necessarily require high market share. Instead, using either a focus or a differed anon strategy, a firm can achieve success by doing a great job of satisfying part of a total market.
While its share of the total market is small. The company achieves a dominant position in part of the market.
SBUs can be evaluated by positioning them on a diagram that compares relative market shares with market growth rates shows a portfolio matrix developed by the Boston Consulting Group. Each circle represents a business unit in a firm’s product portfolio. The size of the circles shows the dollar sales being generated by each unit. The horizontal position of the circles shows their market share in relation to their competitors. A logarithmic scale is used for market share that goes from times the size of the next largest competitor. Thus, business units located to the right of the value are smaller than the competition and those to the left are larger.
Portfolio matrices are often divided into four separate quadrants for analysis purposes. The positions of the lines separating the sectors are arbitrary. High growth rates would include all businesses expanding faster than the overall economy. SBUs in each corner of the portfolio matrix have sharply different financial requirements and marketing needs.
Stars:Products that fall into the star category have strong market positions and high rates of market growth. The primary objective with stars is to maintain their market positions and to increase their sales volumes. Stars are the keys to the future because they provide growth, technological leadership, and enhanced respect in the business community. Although stars increase revenues to the firm, they tend to use more money than they generate from earnings and depreciation. To maintain their high rates of growth, stars require extra cash for expanded plant and equipment, inventories, accounts receivable, field salespeople, and advertising programs. Thus, stars are both a blessing and a curse because of the strain they put on the firm to constantly expand working capital.
Another problem with stars is that their high growth rates attract competition. The entry of other firms can help expand a market, but eventually the market will become saturated, and growth rates will decline. Apple was the creator and first star of the personal computer market. But IBM came along to grab the biggest share of an expanding market. Eventually the sales of the original Apple and IBM models slowed and they fell into the cash cow category. Apple and IBM were able to replace these stars with their own Macintosh and System models, but then Dell and Compaq gave these products a run for their money.
Cash Cows: Business units described as cash cows are low-growth, high-market share operations (Product C). These products are apt to be in the mature stage of their life cycles and do not require extensive funds for production facilities or inventory buildup. Cash cows also have established market positions and do not need large advertising expenditures to maintain their market shares. As a result, their high earnings and depreciation allowances generate cash surpluses that can be used to invest in other growing products, to support research and development, or to buy into new lines of trade. Cash cows thus provide the basic fuel on which portfolio management of business units depends.
For example, at PepsiCo the beverage business provided cash to expand into the related snack and restaurant businesses. Now the sales of its Frito-Lay, Taco Bell, Pizza Hut, and Kentucky Fried Chicken divisions exceed those of beverages and provide 65 percent of the company’s profits. Other examples of cash cows include Philip Morris and R.J. Reynolds, which used the profits of their cigarette divisions to finance expansion in beer, soft drinks, dog food, and fruit drinks.
Question Marks: Business products with low market shares in fast-growing markets are called question marks. These products have the potential to become stars of the future or to fade into oblivion. Question marks have such small market shares that they usually absorb more cash than they generate. Thus, in the short run, question marks just eat money, and when their market growth slows, they become dogs.
The preferred approach with question marks is to increase their market shares and move them into the star category (Product D). However, this often takes a pile of cash, sophisticated marketing plans, and a good measure of luck. If the prospects for improving the market position of a business are not attractive, the firm must consider phasing the business out. One popular approach is simply to sell the business to a competitor. Another technique is to withdraw all promotional support and tries to make a few dollars as the product withers away. Over the years, many firms have tried to challenge IBM and most of them have failed. Recently, several relatively smaller companies, including Sun, Compaq, Apple, and Dell, succeeded by emphasizing areas in which IBM was weak. This allowed new firms to slip into the star category by going after segments of the computer market initially ignored by the market leader, IBM. Dogs:Business products that fall into the low-growth, low-market-share quadrant are called dogs. These products are often in the decline phase of their life cycles and show little prospect for gaining market position or generating much cash flow. Even worse, dogs can become cash traps and absorb more money than they generate as firms try to revive a lost cause. A few years ago, Stroh Brewery tried to revive its dying Schlitz beer with a nostalgic ad campaign. However, sales continued to decline and the ad money was clearly wasted. The usual approach with dogs is to sell them when the opportunity occurs or to deemphasize marketing activities (Products E and F) Corning, for example, recently sold its house wares business to a joint venture with a Mexican glass maker. This 76-year-old business was once the pride of Corning and included such famous brands as Corning Ware, Pyrex, Corelle, and Revere Ware. However, their stodgy design allowed foreign competition to take over the market. As a result, Corning’s consumer products division lost market share and produced mediocre earnings. The money Corning received from the sale of the division will be invested in other, higher-growth businesses such as fiber optics, catalytic converters, and laboratory testing products. The most common criticism of the portfolio matrix approach is that it does not have enough dimensions to assess a product portfolio accurately. More important, the use of a matrix with its emphasis on market share may interfere with profit maximization.’ Indeed, while managers believe the matrix approach to be an effective technique, there is no empirical evidence that the BCG matrix is valuable as a decision aid. Despite these limitations, the terms along, star, and cash cow have become standard parts of the vocabulary of business planning.
7. Multifactor Methods:
(Other approaches to strategic planning include those by Arthur D. Little, Shell Chemical, PIMS (Profit Impact of Marketing Strategy), and future scenario profiles. Arthur D. Little has a 24-sector grid. It uses a four-stage product life-cycle concept and stresses that risks increase as products age and market positions weaken. Shell compares prospects for business sector profitability with company competitive capabilities. PIMS uses historical evidence collected across industries on factors contributing to performance. This information permits assessment of the current performance and future strategy options of a business unit. Future scenario profiles focus on projections of what the future may hold given different strategies that might be adopted by a business unit. In addition, some firms have developed their own in-house approaches.
General electric, for example, has developed a nine-cell matrix based on industry attractiveness and company strength in each business. Units with the best scores are candidates for further investment, and those with the lowest scores are harvested or sold off. Business units in the middle fall into a hold or cash cow category and are used to finance growth. Business units chosen for additional investments have included microwave ovens and industrial plastics. On the other hand, lamps and large appliances followed a hold strategy, and small appliances were sold off.
One survey of industrial firms found that heavy equipment manufacturers preferred the Arthur D. Little and PIMS approaches, light equipment manufacturers preferred the Boston Consulting Group and market attractiveness approaches, and component parts manufacturers preferred the Arthur D. Little approach. Arthur D. Little’s 24-sector grid has the most satisfied users. One firm where strategic planning has not worked well is Eastman Kodak. Marketing Strategies Box 2-2 describes the problems Kodak has encountered in trying to manage its portfolio of business units.
2.5. Creative Strategic Thinking:
Managers must be able to step back from the existing situation and view the products and the market from another angle. This is easier said than done. Some approaches that have been suggested to encourage strategic thinking include the following:
- Challenge the present strategy.
- Look for strategic windows.
- Play on the vulnerabilities of competitors.
- Change the rules of the game.
- Enhance customer value.
We elaborate on these approaches in later chapters, especially Chapter, which stresses looking for strategic windows and playing on competitors vulnerabilities throughout the book we emphasize enhancing customer value.
(Brief History of Unilever)
Flashback, its global expansion
Unilever’s corporate mission – to add vitality to life – shows how clearly the business understands 21st century-consumers and their lives. But the spirit of this mission forms a thread that runs throughout its history, leading right back to the late 19th century.
In the 1890s, William Hesketh Lever, founder of Lever Bros, wrote down his ideas for Sunlight Soap – his revolutionary new product that helped popularise cleanliness and hygiene in Victorian England. It was ‘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 Unilever’s products’. This was long before the phrase ‘Corporate Mission’ had been invented, but these ideas have stayed at the heart of Unilever’s business. Even if their language – and the notion of only women doing housework – has become outdated. In a history that now crosses three centuries, Unilever’s success has been influenced by the major events of the day – economic boom, depression, world wars, changing consumer lifestyles and advances in technology. And throughout Unilever has created products that help people get more out of life – cutting the time spent on household chores, improving nutrition, enabling people to enjoy food and take care of their homes, their clothes and themselves.
Balancing profit with responsible corporate behaviour:
In the late 19th century the businesses that would later become Unilever were among the most philanthropic of their time. They set up projects to improve the lot of their workers and created products with a positive social impact, making hygiene and personal care commonplace and improving nutrition through adding vitamins to foods that were already daily staples. Today, Unilever still believes that success means acting with ‘the highest standards of corporate behaviour towards its employees, consumers and the societies and world in which Unilever lives’. Over the years Unilever has launched or participated in an ever-growing range of initiatives to source sustainable supplies of raw materials, protect environments, support local communities and much more. Through this timeline you’ll see how Unilever’s brand portfolio has evolved. At the beginning of the 21st century, our Path to Growth strategy focused Unilever on global high-potential brands and their Vitality mission is taking them into a new phase of development. More than ever, Unilever’s brands are helping people ‘feel good, look good and get more out of life’ – a sentiment close to Lord Leverhulme’s heart over a hundred years ago.
Although Unilever wasn’t formed until 1930, the companies that joined forces to create the business we know today were already well established before the start of the 20th century.
Unilever’s founding companies produced products made of oils and fats, principally soap and margarine. At the beginning of the 20th century their expansion nearly outstrips the supply of raw materials.
Tough economic conditions and the First World War make trading difficult for everyone, so many businesses form trade associations to protect their shared interests.
With businesses expanding fast, companies set up negotiations intending to stop others producing the same types of products. But instead they agree to merge – and so Unilever is created.
Unilever’s first decade is no easy ride: it starts with the Great Depression and ends with the Second World War. But while the business rationalizes operations, it also continues to diversify.
Unilever’s operations around the world begin to fragment, but the business continues to expand further into the foods market and increase investment in research and development.
Business booms as new technology and the European Economic Community lead to rising standards of living in the West, while new markets open up in emerging economies around the globe.
As the world economy expands, so does Unilever and it sets about developing new products, entering new markets and running a highly ambitious acquisition programme.
Hard economic conditions and high inflation make the ’70s a tough time for everyone, but things are particularly difficult in the Fast Moving Consumer Goods (FMCG) sector as the big retailers start to flex their muscles.
Unilever is now one of the world’s biggest companies, but takes the decision to focus its portfolio, and rationalize its businesses to focus on core products and brands.
The business expands into Central and Eastern Europe and further sharpens its focus on fewer product categories, leading to the sale or withdrawal of two-thirds of its brands.
The 21st century
The decade starts with the launch of Path to Growth, a five-year strategic plan, and in 2004 further sharpens its focus on the needs of 21st century-consumers with its Vitality mission.
In the late 19th Century, at Oss in Brabant, the Netherlands, Jurgens and Van den Bergh – two family businesses of butter merchants – have thriving export trades to the UK.
In the early 1870s, they become interested in a new product made from beef fat and milk – margarine – which, they realise could be mass-produced as an affordable substitute for butter.
Later, over in the North of England in the mid-1880s, a successful wholesale family grocery business run by William Lever starts producing a new type of household soap. The product contains copra or pine kernel oil, which help it lather more easily than traditional soaps made of animal fats. Unusually for the time, Lever gives the soap a brand name – Sunlight – and sells it wrapped in distinctive packs.
The following Highlights reveals at glance how Unilever expedited its global expansion year wise.
|1872||In the Netherlands, Jurgens and Van den Bergh open their first factories to produce margarine.|
|1884||Lever & Co starts producing Sunlight soap.|
|1886||Knorr – which will become part of Unilever – launches soup tablets with meat extract to provide nutritious food for low-income consumers.|
|1887||By the end of this year Lever & Co is making 450 tons of Sunlight soap a week and William Lever buys the site on which he’ll build Port Sunlight – a large factory on the banks of the Mersey opposite Liverpool, with a purpose-built village for its workers providing a high standard of housing, amenities and leisure facilities.|
|1888||Jurgens and Van den Bergh both move into another prosperous market, Germany, and build factories there.|
|1890||Lever & Co become a limited company – Lever Brothers Ltd.|
|1891||Van den Bergh moves to new headquarters in Rotterdam.|
|1894||To support and promote the growing interest in personal hygiene, Lever & Co creates an affordable new product – Lifebuoy Soap.
Lever Brothers becomes a public company.
|Mid 1890s||In the UK Lever Brothers is selling nearly 40 000 tons of Sunlight soap a year and starts expanding into Europe, America and the British colonies with factories, export businesses and plantations.|
|1898||By this time Van den Bergh already has a 750 strong sales-force and launches a new branded margarine – Vitello.|
|1899||Lever Brothers introduces a new type of product, Sunlight Flakes – which makes housework easier than with the traditional hard soap bars. In 1900 Sunlight Flakes would become Lux Flakes.|
In the early part of the 20th Century, margarine and soap producing businesses start to move further into each other’s markets.
Competition and a sudden sharp rises in the cost of raw materials leads many to set up associations, promoting their interests and defending themselves against supplier monopolies.
With supplies of oils and fats struggling to meet the demand created by fast growing soap and margarine production, the companies that will one day become Unilever focus on securing stable sources of raw materials.
|1904||In the UK Lever Brothers launch another product to make housework easier – Vim, one of the first scouring powers.
The company is incorporated in South Africa.