Unilever Pakistan Limited

Prepared By: Nandlal Sukarani

Submitted To: Sir. Adnan Anwar Date: 10-Oct-13

Organization Introduction
Unilever Pakistan Limited is a multinational organization. Unilever PLC London is its parent company. Unilever is a European based company with headquarters in London, and their shares are quoted at the stock exchange of several European countries. They deal in all kinds of products from animal foodstuff to foods and detergents plus other personal and consumer products. Unilever has its subsidiaries in over 80 countries of the world, to which it spreads its vast knowledge and resources. William Lever (its originator) commences business in England as a grocer. He established Lever Brothers in 1827 in England Sunlight was the first product of Lever Brothers, which makes the beginning of the marketing of branded products at the same time Margarine Uni was established in Nether Land by Simon Van Berg and Anton Jurgens. These two companies in term of:

Buying raw material Selling finished goods

Consequently both the companies losing out money in term of profit. These problems led to think of the mergers in 1930. These two companies merged together and renamed the business as Unilever , the word UNI is taken from margarine Uni and Lever is taken from Lever Brothers. Unilever is a dual-listed company consisting of Unilever NV in Rotterdam and Unilever PLC in London. Unilever has 500 operating companies in 80 countries. It has 0.3 million employees and turnover of sales in 23000 million pounds. The global business proportion is 60% in Europe20% in North America and 20% in rest of the world. An identified board of directors control the activities of subsidiary companies throughout the world. Lever Brothers Pakistan Limited started its operations in 1948. A merger of Sadiq Vegetable Oils and Allied Industries existed in Rahim Yar Khan was taken place with Lever Brothers and HVM company based at Karachi. As a result of merger Lever Brothers Pakistan Limited was incorporated as an independent Unilever operating company in 1955. The company is quoted on the Karachi, Lahore and Islamabad Stock Exchanges. Lever Brothers Pakistan Limited played a dynamic role in boosting consumer products market. It stands at a unique position due to its honesty and integrity. In order to leverage the synergies of Unilevers international brand strength, market edge and corporate image, Lever Br others Pakistan Ltd. changed its name to Unilever Pakistan Ltd., in August 2002.

The company had a turnover of Rs. 23.3 bn (Euro 309 mn) in 2007, and 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 5 regional offices, 4 wholly owned and 6 third party manufacturing sites across Pakistan.
Accountable to our stakeholders:

Since the time Unilever Pakistan began its operations in 1948, the Company has been closely connected to the Pakistani people and its brands have been an integral feature in their daily lives. In fact, the nature of our business enables our brands to be the pulse and heartbeat of the 164 million people in Pakistan. This is a huge commitment, which makes us responsible and accountable to all our stakeholders and society as a whole and strengthens our resolve to: Make a positive difference to the lives of low income consumers Create new opportunities for growth Improve the overall quality of life in Pakistan, by promoting education, nutrition, health and hygiene.

BRANDS Food brands Walls Blue Band Brooke Bond A1 Brooke Bond Supreme Lipton Energile Knorr Pearl Dust Rafhan Personal care brands Clear (Shampoo) Dove Fair & Lovely LifeBoy Shampoo Life Boy Soap Fair & Lovely LUX Ponds Rexona Sunsilk Vaseline

Home care brands Comfort Rin Sunlight Surf Excel Vim

Macro Environment:
Organizations need to asses which environmental factors are affecting their business activities, which of the factors are important and how they are effecting. This analysis indicates political, economical, social and technological influences on organization.
Political & Legal Factors

As far as the Unilever Pakistan Limited concerns according to them that political instability have do affect but not particularly Unilever Pakistan Limited same as it affects any other organization around and specially they are in consumer products business which never make them out of business. In case of legal factors, any trade policy or import duties are not affecting particularly Unilever Pakistan Limited. In Pakistan right now following liberalization policy under SAP by IMF made which they have to waive off all restrictions and moreover due to huge investment by Unilever Pakistan Limited no government can afford to create hurdles in the way of an organization like Unilever Pakistan Limited.
Economical Factors

Economical factors affect Unilever Pakistan Limited in the same way as it affect any other organization like current economic situation in Pakistan and inflation has reduced consumers disposable income too, which in turn has reduced the purchasing power of consumer but affect is same for every organization and according to them Unilever Pakistan Limited have edge that they have targeted all possible segments through their vast product category i.e. the width and length too. So one way or other they find way to cover it up.
Capital Markets

In other economic factors like interest rates and inflation has affected the borrowing ability of organization but Unilever Pakistan Limited stayed unaffected as a company having business in billions and when in need of financing no single bank can fulfill the need, they have to make a consortium to finance Unilever Pakistan Limited and with very good credit standing and very low risk definitely they get the lowest or justified interest rate as well.
Socio-Cultural Factors

In socio-cultural factors, factors like lifestyle changes and level of education affects an organization. In case of change in lifestyle, the world has converted into global town now and

people have readily access to every sort of information and they are becoming more quality conscious. Now more concerned towards environmental issues now and demand more social responsibility on the part of organizations now. To cope up with all these factors Unilever Pakistan Limited maintained the quality standards and social factors like social responsibility and environmental concerns too.
Technological Factors

In technological factors comes R&D first and foremost that how much an organization spending in terms of product improvement or development of new products or improvement in production process or in the raw material etc. and what is the trend in the industry as Pakistan is not that big and not very much innovation seeking as the other developed countries. Yet they keep on finding new ways of doing things and new things as well they continuously launched variants in brands etc. and moreover in the market like Pakistan in product categories of consumer products rates of obsolescence is not very high rather very slow so no great pressure to launch new products,.
Trends, Issues & Opportunities:

FMCG products are those that get replaced within a year or less and the purchase cycle is relatively small as compared to other products and consumer durables. Examples of FMCG products include a wide range of frequently purchased products such as toiletries, soaps, cosmetics, tooth cleaning, shaving detergents as well as some non durables such as glass ware, bulbs, batteries, paper products and plastic goods. 1. In Pakistan the industry has evolved to a great extent even in the face of strict completion but the progress is slow as compared to regional markets such as India. There is a need to encourage demand drivers in Pakistan which include awareness young population, rapid urbanization and increased penetration of organized retail. 2. Away from the violence and the troubles of the big cities, the economy of rural Pakistan is booming. Flush with cash from bumper crops at record commodity prices, the farmers are spending on tractors, cars, motorcycles, mobile phones, personal grooming items, packaged foods and beverages and other consumer products like never before. 3. Pakistani people tend to leave their families and live separately and therefore there is sometimes no housewife at home to be responsible for the purchase of fresh items close to home. Supermarkets/hypermarkets became more popular over the review period, being gradually considered more convenient as this channel can offer a wide selection of products in one place and this changing trend is an opportunity for the growth of FMCG sector.

4. Pakistan continues to face major problems as it deals with the violent Taliban insurgency and multiple internal and external threats and crises of stagnant economy, scarcity of energy and the lack of sense of security. 5. Improving literacy rate and women inclination to work are further augmenting households to shop more and increasing middle class base. Hygiene awareness due to increasing literacy is bringing food sector turn over as people are shifting from unregulated unpacked food products. 6. Rapid increase in inflation rate is increasing the prices of products and hence can reduce demand. 7. Smuggled products are swallowing a big part of every year. Almost 40% tea and 29% shampoo used in Pakistan is Afghanistan and China. profits Unilever smuggled from

The Industry:
No business is an island. For success, the business will need to deal with customers, suppliers, employees, and others. In almost all cases there will also be other organizations offering similar products to similar customers. These other organizations are competitors. and their objective is the same: to grow, make money and succeed. Effectively, the businesses are at war, fighting to gain the same resource and territory i.e. the customer and like in war, it is necessary to understand the enemy. The major Competitors of Unilever are P&G, Nestle and Engro Foods in Ice Cream Sector. We will analyze the competitive forces of market for Unilever
1. Threat of new entrants 2. Threat of substitutes 3. Buyer power 4. Supplier power 5. Competitive rivalry.

Threat Of New Entrants

This potential threat always exists in every organization. But an organization like Unilever Pakistan Limited this threat is very minimum because you need a giant to compete with another giant like Unilever Pakistan Limited and in a relatively small market like Pakistan, they

are enjoying the highest market shares in most of their product categories like soaps, spread, fabric care, etc. so, they face no threat of any new entrant.
Threat Of Substitutes

Same as in the case of new entrant no as such threat they are facing.
Buyer Power

To determine buyer power one condition is always necessary i.e. the buyers are few so they exert power over an organization. But this condition is not present in case of Unilever Pakistan Limited, they have very diversified product categories and within each category they have brands targeted at almost each and every segment of the market so they dont face the buyers power as such but still customer is king and they do have to pay a lot of attention to buyers being a consumer product company.
Supplier Power

Suppliers dont exert any power over Unilever Pakistan Limited rather Unilever Pakistan Limited provides buyers power in this case, nobody would like to lose a buyer like Unilever Pakistan Limited so, they dont face any significant supplier power.
Competitive Rivalry

Competition is intense but not cut throat competition and all of them avoid frontal assault or direct attack. So, situation of healthy competition exist.
The Firm:

Unilever Pakistan Limited played a dynamic role in boosting consumer products market. It stand at a unique position due to its honesty and integrity. Lever Brothers Pakistan Limiteds main divisions of business are:
MERGER WITH BROOKE BOND

Brooke Bond Pakistan Limited was incorporated in 1948. Companys 40% shares are held by Unilever, 21% by financial institutions, 24% by individuals, and 10% by insurance companies. The company is quoted on Karachi and Lahore Stock Exchange market. The company is manually engaged in the blending, packaging and marketing of tea. It also has a small business in the sale of packing apices. The company employ around 850 persons. And has three manufacturing locations situated in Karachi and Khanewal. It also have three regional sales offices. The head office of the company is located in Karachi.

After the amalgamation of Unilever and Brooke Bond, Unilever will have a majority shareholding in the combined company and it will provide a comparable level of technical, management and financial resources. The proposed merger will benefit the consumer in term of price and quality. Acquisition Unilever Pakistan Limited acquire the shares of Pakistan Industrial Promoters Limited, Mehran International Limited and Ambrosia International Limited, which is known as Polka Group of Ice Cream Companies. Product Mix At present Unilever Pakistan Limited is engaged in marketing of diversified varieties and classes of products and playing a dynamic role in boosting consumer product market. It stand at a unique position due to its honesty and integrity. Unilever Pakistan Limited has both product length and depth i.e. it has by length a largest of product lines available and under each product line there are lots of variants like different weights, 100mg, 500mg, 1000mg, sache pack, family pack or in case of ice creams different brands have lots of flavor available which determines its product depth. So different no of product lines are called product length and no of products in each product line are called depth of product line. Unilever Pakistan Limiteds main product groups are listed below:

Objectives of Unilever Pakistan Limited

1.
Their main objective is to have a double-digit growth and resultant cash flows will be utilized in improving the product quality and contents to enhance the value to customer and final users. Unilever Pakistan Limited has an objective to have a responsive supply chain and technological based processes. They want to have consumer connectivity, i.e. they want to know what they eat, drink, how they spend their lives, what are their preferences. So in this way they want to be very close to customer, to know their real insight and desires so they can develop new strategy for product design and can implement their strategy in better manner i.e. avoidance of hit and trial approach and hitting the right target with right strategy at right time in right and accurate manner. They want to be cost efficient i.e. they want to reduce in their cost of production, cost of transportation, distribution and packaging cost and finally reducing all the human cost to offer a competitive price to customer maintain the high standards of quality.

2. 3.

4.

5. 6. 7. 8.

To have a partnership with their suppliers to enable them to provide high quality low cost material. Have entered and will be aggressively developing new markets. Be exciting to their customers with stream of innovative products. To be no in all their existing markets.

Strategies At Unilever Pakistan Limited

Now we will proceed with strategies being pursued by the Unilever Pakistan Limited at different organizational level. First we will discuss the corporate level strategy.

Corporate Level Strategy

At corporate Unilever Pakistan Limited is pursuing the strategy of vertical diversification i.e. driving away from the previously adopted strategy of vertical integration i.e. now they dont want to perform more than one step of the processes involved in converting raw materials into a product delivered and ready for consumption. Unilever Pakistan Limiteds operations are so complexed and involves 200 brands in Pakistan so now they wanted to reduce the operational complexity and going for strategic alliances with their suppliers, instead of producing themselves and going into complex operations now they want their suppliers to produce for them. The outsourcing the production so that they dont have to invest heavily in the production and to reduce the capacity problems, they now going for the third party contracting to produce themselves and now they want them to be restricted to marketing and distribution of products. Diversification strategy is being pursued by the Unilever Pakistan Limited but they mainly go for related diversification as against unrelated diversification for conglomerates, they are diversified into number of businesses as mentioned earlier but they are all related to consumer products. Through vertical diversification they will be able to eliminate the operational complexity and costs of buying and selling i.e. the transactional costs. Now they mainly wanted to step away from operations and want to focus more on customers. As means of diversification which are being utilized by the Unilever Pakistan Limited as all the time, been acquisition, neither joint ventures i.e. strategic alliances nor the internal development. Here we can take the example of the acquisition of Brooke Bond and Polka for example which have Brother acquired through a hostile takeover. And to step away from operational complexities now they go for subcontracting with the suppliers and want them to produce for Unilever Pakistan Limited as in case of oil and ghee and soap and with the passage of time will also be implemented in other categories as well.

Business Level Strategy

At business level Unilever Pakistan Limited is adopting a very unique and interesting set of strategies. First and foremost strategy they want to follow is the cost leadership. They wanted to control cost as much as possible and want to reduce cost by every mean. First cost efficiency is achieved through outsourcing operations and stop producing themselves and go for cost efficient subcontracting. Second they want to achieve cost efficiency through responsive and cost efficient supply chain, want to be in touch with suppliers all the time and for that they have connected themselves with the suppliers and to their suppliers as well to minimize cost related to forecasting now they want better forecasting through computer networks so to get the real time information about the inventory, stock, demand and supply. They are now reducing the inventory as well as average carrying the inventory of only 3 days and getting closer to the concept of just in time except for those products for which they have to brought in raw materials from far flung areas like tea and moreover routings of logistics as well like air routing or ship routing to curtail the costs other than cost efficiency, they have adopted the strategy of consumer connectivityi.e. want to stay closer to consumers rather to operations and want to focus all alternations to consumers through more research and customer profiles and demographics and wants to explore new customers and usage of products. To get customer connectivity they do the market research to check the trends of their customers. The do pre-launch, post-launch research, e.g. their did before and after lunching while antidandruff Sunsilk. The response was quite encouraging. Hence basically customer and market research and customer feedback, free samples distribution before and after launching new product / brand/ variant is aiming their basic strategy to implement and achieve the customer connectivity and to fulfill their customer demand. Here Unilever Pakistan Limited has used the strategy of product development i.e. by modifying and improving their Sunsilk it into Sunsilk antidandruff (white), they have increased their sales. They are applying Market and Development Strategy as well in which by introducing present product (Sunsilk) into a new demographic area i.e. dandruff conscious market segment with the launch of only new variant i.e. Sunsilk antidandruff white. They have added conditioner in it as initially the conditioner was missing in all shampoos of Sunsilk. While it is available in competing brands of P&G. Other than these two strategies another very important strategy is being followed by Unilever Pakistan Limited i.e. focusing on core brands or want to have a very focused on brand portfolio in which they wanted to get rid of the slow moving brands like in Surf you will get number of further variants like Surf Ultra, Surf Micro, Power Surf etc. and in Sunsilk number of

variants, Black, Green, Pink, etc. to name a few and how they have curtailed all these slow moving brands like focusing attention to Surf Excel only and in case of Sunsilk Black and White (antidandruff) and discarding slow moving items like Sunsilk Pink and Green etc. So, to avoid cannibalization effect now instead of number of brands to flood in the market only few better and improved brands, cash generating and more focused towards customers.
Operational Level Strategy

At operational level, Unilever Pakistan Limited has always adopted the strategy of TQM only never went for CPR i.e. they have not come up with a new brand in last few years. Only the improvements or new variants in existing brands or using the same old brand name to introduce a new product like Lifebuoy Shampoo or Fair & Lovely Soap. So it can easily be said that they believe more in adopting changes rather generative ones or go for single loop learning only because according to them its very expensive to introduce a
SWOT Analysis

The SWOT analysis of Unilever Pakistan Limited are as follows:

Strengths

1.

Unilever PLC England the parent company all over the world gives assistance to Unilever Pakistan Limited so Unilever Pakistan Limited enjoys a high level of support from Unilever. Another major source of strength for Unilever Pakistan Limited is its product targeting all income groups. Unilever Pakistan Limited is providing products total income groups i.e. providing quality with economy as well e.g. Sunlight washing powder, Lifeboy soap, Taza Chai, etc. Unilever Pakistan Limited is the oldest company operating in Pakistan which gives him a commanding position is Pakistan to certain extent. Unilever Pakistan Limited enjoys the services of highly professional management in the area of sales, marketing, technical and production. Unilever Pakistan Limited has such a strong goodwill in the market that some of its brand names has become the generic names for those products such as Surf for detergents. Unilever Pakistan Limited is the largest producer of consumer products inPakistan and has strong brands in every field such as Close Up, Surf, Lifebuoy, Lux, etc. Unilever Pakistan Limited having the biggest shares in tea market having the biggest brand Lipton and Brooke Bond.

2.

3. 4. 5. 6. 7.

8. 9. 10. 11. 12.

13.

They are market leader in ice cream business of Polka i.e. horizontal integration with hostile takeover they have captured their competitors thereby reducing competition. The company has the assets of more than 5 billion. So, it can invest further product innovation and development. It has the largest and efficient distribution network then any its competition. Unilever Pakistan Limited is the only company in Pakistan which has its own research department. The company is very strong financially. The company is working for almost 50 years in Pakistan. Thats why it has many advantages. Which other do not have. They have know how of the market. They understand the market very well. Similarly during this period they have developed a very organized distribution network all over the country. Another advantage is there wide range of products, which give them a position to monopolize the retailers shop. It is estimated that over more than 30% of a retailers shop items are by this single company.

Weaknesses

1. 2.
3.

Unilever Pakistan Limited unable to capture shampoo and toothpaste market i.e. low market share. New variants of the company were not able to sustain in the market such as harmony. Unilever Pakistan Limited is relatively week in their innovation department i.e. being first to introduce Surf but after that has no major innovation. Emphasizing only few products while ignoring others which could give them potential market shares e.g. beverages section. Unilever Pakistan Limited go for long term strategies for all their product categories which prove to be a weakness with change in the circumstances and taste, trends of people

4. 5.

Opportunities

1.

With the help of further advertising their non competing brands can increase their market share i.e. market penetration strategy. People will definitely go for these products as Unilever Pakistan Limited has a sound image in peoples mind. Whatever the brand is being sold is mostly on the basis of brand loyalty.

2.

They have capital to invest they can explore new product categories e.g. in food and beverages they can develop new products like Rafhan has launched custard, jelly, kheer mix, rasmalai mix, etc. through it again will broaden their product categories and will make their operations complex but this could be avoided with sub contracting i.e. strategic partnership with their suppliers. These products can prove a cash cows as

customer in Pakistan always welcome food items especially they will welcome due to brand image of Blue Band in food category and due to Lipton and Supreme in beverages category.

3.

Unilever Pakistan Limited relaunches most of its products with same name or little change in the name e.g. Surf Micro to Surf Extra, ,then to Surf Ultra and then to Surf Excel, with little change of name and little changes in its formula. If Unilever Pakistan Limited launch its products within prevailing product categories, with entirely new name and new formula then they can capture new market shares as it will gain capture the attention of its target market more as compared to existing one. Though apparently it will increase the advertising cost but it will be compensated with exciting sales as you have to advertise more even in case of relaunch of products with little change in names and formulas. So why not to go for new name and new formula as it will increase your brand portfolio, it can satisfy the needs of customers which were unsatisfied with the previous brands, its names, its formula, e.g. people used to say Surf fades the clothes, they changed formula and not name only gave it a suffix of Excel i.e. Surf Excel now the people who developed this perception that it fades the color, remain reluctant for long time even after its relaunch and heavy advertisement.

Threats

1. 2. 3. 5.

P&G is giving very serious threats to Pakistan Limited in the business of detergents and personal wash and shampoos. No of local companies producing detergents and market them at very low prices which is a threat to Surf. Treat is promoting Bodyguard very much and trying to produce a competition in the carbolic soap market. Increasing inflation in the country, persistently reducing the purchasing power of the people and dropping people from high price products to low price products e.g. the detergents and providing fuel to the expansion of unorganized sector. Increased import duties are also adding to the prices of the products and in Pakistan which is a very high price for all the firms not only Unilever Pakistan Limited who are using imported raw material. Threats of new entrants are also present. As ICI is a potential threat in detergents industry, because they are already involved in chemical business and providing raw material for detergent production to different manufacturing companies like Lever Brothers Pakistan Limited and Colgate Palmolive.

6.

7.

Problem Statement Our problem statement is regarding the shampoo segment of Unilever Pakistan Limited. They have managed such a deep and broad product category and manage to do so well that some of their brand name has become the generic names for that particular product but this is not the story with Sunsilk and recently launched Lifebuoy Shampoo. Our problem statement is that what are the causes, which kept Unilever Pakistan Limited away from market leader position in shampoo market.