Unilever - Porter's 5 Forces Analysis:

Porters 5 Forces Model:

Being a global company, Unilever has very strong competition not only from other strong
multinational companies like P&G, Kraft and Nestle but also from other regional retailers.
Porters ! forces model is one of the most recogni"ed frame#orks for the analysis of competitive
environment of an organisation. Porters five forces model #hich determine the competitive
intensity and therefore attractiveness of the market #here Unilever is operating. $his model
describes the attributes of an attractive industry and thus suggests #hen opportunities #ill be
greater, and threats less, in these of industries.
%ttractiveness in this conte&t refers to the overall industry profitability and also reflects upon the
profitability of Unilever. %n 'unattractive( industry is one #here the combination of forces acts
to drive do#n overall profitability. % very unattractive industry #ould be one approaching 'pure
competition(, from the perspective of pure industrial economics theory.
$his model is based on five important elements of an organisation and uses both internal as #ell
as e&ternal competences and threats faced by a business organisation. $hese five elements
including
Buyer Power:
Unilevers buyers are scattered all around the #orld and they are in billions. )n true sense they
are not so po#erful to pull prices do#n. But on the other hand it is easier for the customers to
s#itch to a competitor. *o Unilever has to be very precautious in deciding about prices and keep
the customers satisfied.
Competitive Rivalry:
)n consumer products business Unilever has a large number of competitors and these competitors
are in reality very strong. $hey range from small local corner shop retailer to big giants like
P&G, Kraft and Nestle. $hese competitors almost provide e+ually attractive products and
services and sometimes better. $hese competitors have the po#er to attract and influence the
customers by more attractive substitute, prices and marketing techni+ues.
!reat o" #u$stitution:
,ontinuous research and development in the consumer and household products has brought
about a revolution in the consumer market and today customers like to try something ne# and
better. $his trend has reduced the customer loyalty and product lifecycle. Unilever is under
continuous threat of substitute products and its competitors are already spending huge sums on
-&. and ne# product development. Unilever has to be very adoptive and closer to its customers
so as to get #hat e&actly its customers #ant.
!reat o" %ew &ntry:
%s Unilever operates in different geographical markets so threat of ne# entrants varies in
different markets. )n #ell developed countries #here big players like Unilever have a very strong
hold and brand image, it is very hard for a ne# entrant to enter the market because of higher cost
to set up a business. /n the other hand in less developed markets, it is easier to enter as legal
re+uirements and capital needed is not as much as in a developed market. Unilever has its
presence almost in every market either through its subsidiaries, branches or franchises. But its
brand image is a strong barrier in the #ay of ne# entrants
#uppliers Power:
Unilever has a policy of local buying and local manufacturing. 0hich provides itself an edge to
break po#er of its suppliers and make them #eaker to negotiate at its o#n terms1 2ost of time
Unilever has blanket agreements #ith its suppliers to provide for a certain period of time at a
certain rate. $his strategy help to prevent suppliers from s#itching to other competitors and
charge higher rates. %lso Unilever treat its suppliers fairly so as to create more loyalty among
them like customers
Conclusions and Recommendations:
Unilever is operating in a highly competitive and volatile environment and especially current
economic crisis have made it difficult for many businesses to operate profitability. 3egal
re+uirements, technical changes and change in the habits of the customers have created problems
for the businesses. Because of that companies like Unilever have to be updated and continues
-&. is solution to many of the problems. %n attractive business is one #ith higher margins and
lo# competitions. *o the environment #here Unilever operates is #ith higher level of
competition and lo# level of profit margins. )n this situation best strategy is to keep customers
satisfied and loyal, continues -&., cost control and be responsive to the competitors.