HRM11119 Leadership Strategy and Innovation

Introduction

Unilever is one of the popular multinational companies in the fast-moving consumer goods (FMCG) market. The company is headquartered in London, England while serving different categories of products under different brand names to the customers. The products of Unilever are available in around 190 countries across the world with over 400 brands operating under the main company (Murphy & Murphy, 2018). The company is recognized by providing products into the main divisions such as foods and refreshments, Homecare, beauty, and personal care products to the customers.

The porter generic forces framework has helped to identify the strategies that the company should be coming up with to tackle the complexities in the external environment (Sivakumar, 2021). The company follows a premium pricing strategy to attract the premium segment of the society which will help them in improving their personal care in their daily life. Thus, the porter generic forces framework will help us to understand the strategies that the company will take in getting a competitive advantage over their competitors in the market. There are several ways that Unilever can adopt to overcome these complexities such as product or cost differentiation which will help them to minimize the amount of variable cost and earn a desirable amount of revenue for their long-term survival in the industry (Lawrence, Rasche & Kenny, 2019).

Discussion

Analysis of Unilever’s business strategy using Porter’s Generic Competitive Strategies framework

Porter's generic forces are based on identifying the strategies that help an organization to get a competitive edge in the market. Unilever had been one of the renowned brands in the fast-moving consumer goods market. The intense competition has led to the generation of several complexities for Unilever to mark their leadership position in the modern days. Thus, the company has focused on a combination of cost leadership, differentiation, and the focus strategy to solve the external complexities. The increase in the base and the revenue generation has been the result of the combination of the three elements under the Porter generic forces which are as follows:

Cost leadership

The cost leadership strategy refers to gaining a competitive edge in the market by reducing their cost of production. This strategy is widely being used by Unilever in various consumer markets. Efficient value chain management had been the main target for the company in reducing their cost of production (Sanders, Maciejewski, & Basu, 2019). The strategy focuses on expanding the market share by targeting middle-class individuals in society. This is because the middle-class society covers the majority proportion in the consumer market mix in different countries. Middle-class people generally focus on the pricing of the goods and services which would be perfectly solved by the implementation of the cost leadership strategy (Firoz, Rashidirad & Suleman, 2019). For example, the detergents brands are normally used in 125 billion washes in a year. This implies around 14million washes per hour. The company does this laundry at a lower temperature which helps in the reduction in energy and water. The company focuses on the easy accessibility of the products and services across the globe which helps them in increasing brand awareness and more revenue generation in the coming days. This helps the company to achieve its sales target and handle the pressure from its immediate competitors in the market (Greckhamer & Gur, 2021).

Differentiation

Differentiation is the second element in the genetic strategy to have a competitive edge in the market. Unilever applies differentiation with the cost leadership strategy to achieve its targets. The implementation of the differentiation strategy helps Unilever to increase its customer base by providing unique products to them. The company uses this strategy to mark their innovation in the minds of the customer and address the customers about the growing health concerns related to it (Abdolshah, Moghimi & Khatibi, 2018). The customers are also made aware of this through huge investment in marketing, advertising and celebrity endorsements. Lastly, the brand logo has already a positive image in the minds of the customer. Thus, the logo has played an integral role to differentiate their products from that of the competitors in the market. The company also provides a wide variety of flavors to fulfill their taste and satisfaction (Vieira & Ferreira, 2020). For example, Unilever have several categories of products such as Dove bars which provides a solution for soaps that are not harsh or dry. Still the company are one of the leading market holders with the high pricing policies. This is because they focus more on cleaning rather than moisturizing. Thus, the new innovation has helped the company to attract more customers with their main mission to support sustainability and increase vitality in the customer’s lives.

Focus strategy

Focus is the third element under the generic competitive strategy that helps Unilever to target its loyal customer base. Through this, the company services to a particular segment of society and base their competitive advantage on niche marketing. The company focuses on providing customers with unique products at a cheaper rate (Ali & Anwar, 2021). The low-cost focus is maintained by the company to attract the niche segment of the society and fulfilling their demand at the best possible value. Thus, the company focuses on the taste, size, and design of the product which perfectly matches the requirements of the customer. With the upgrades in technology, Unilever also comes up with different innovative branding strategies to attract the majority of the customers in the market. The company comes up with repetitive changes in the product design and the packaging technique to keep the customers engaged with their products and services (Cavaleri & Shabana, 2018). Thus, Unilever has been successful in meeting the customer requirements by bringing modifications as per the demands and trends in the market. This is how the psychological aspects of the customer are fulfilled by providing them unique products by maximizing their value for money. 

Advantages of the framework

Porter's generic forces framework is used by different organizations to have a competitive edge in the market. Several companies come up with different strategies to overcome the problems and reduce the pressure from their competitors (Islami, Mustafa & Topuzovska, 2020). Porter's generic forces framework consists of both the advantages and disadvantages that have might have an effect on the daily operations of an organization. Some of the advantages of this model are as follows

• The model helps different organizations in minimizing their cost of production. The increase in the cost of production ultimately leads to an increase in the prices of the products and services in the market. This might have a negative impact on the minds of the customer which will insist them in switching to the alternatives that are available in the market at a cheaper rate. Companies should focus on minimizing their variable costs which will help them to provide the products at a cheaper rate in the market (Lee, Hoehn‐Weiss & Karim, 2021). Thus, through the model of cost reduction, companies will not only able to reduce their manufacturing costs but also help them to earn a desirable amount of revenue to mark their presence in the long run within the industry.
• The next important factor that the framework provides is product differentiation. Unique selling proposition has been one of the major factors that have helped most of the companies in having a competitive edge in the market. The model insists several companies focus on product differentiation and bring something innovative in the market (Irfan et al., 2019). This will help the companies in having a first-mover advantage in the fast-moving consumer goods market and attract the customers before the competitors.

 Limitations

Porter's generic forces framework also has some negative impacts on several companies implementing the framework. Some of the limitations of the model are as follows:

• The most important limitation of the model is the lack of flexibility and specificity. This results in restricting the companies in several aspects in the fast-moving dynamic environment. This is because the needs and wants of the external environment are changing continuously and the companies need to adapt themselves accordingly to meet the requirements of the customers (Anastasiu, GavriÅŸ & Maier, 2020). Thus, flexibility has been one of the major constraints in Porter's generic forces framework.
• The next limitation focuses on the originally introduced generic strategies which have been modified by adding three more dimensions to them. These new modifications include helping the companies for getting a better analysis as compared to the previous framework. The newly added elements include access-based, needs-based, and variety-based strategies (Alizadeh, Farid & Willems, 2021). But, Porter's generic forces does not provide any specific information regarding the newly added elements in the model which is more dynamic and profitable for the companies in the real-life scenario.
• Lastly, it has been observed that the model has got stuck in the middle of the hypothesis. This is because the model states that every organization should either focus on the cost leadership strategy or product differentiation strategy to have a competitive edge in the market. The companies will fail to have the same if they are not fulfilling these conditions (Alizadeh, Farid & Willems, 2021). Thus, it has been found that the model has been stuck in the middle of the hypothesis. For example, if a company is applying a cost leadership strategy, then it would be difficult for the company to have product differentiation as this requires new investment. So, the two elements of the model are contradictory to each other. Even after so much criticism, top companies like Unilever are applying these models to make some of their important strategic decisions in the modern days

Recommendations

The Porter generic forces have some limitations that need to be modified which will help the organizations in their planning and strategizing their goals and objectives. Some of the recommendations are as follows:

• The Porter generic forces framework covers only the issue that is related to the cost and the features of the product which the companies should improve in order to have a competitive edge. The framework should also take into account the competitor's actions that are being taken with the changing demands of the external environment. This will help the companies in availing information about the innovations that are brought in by the local brands in the market.
• The framework focuses on cost and product differentiation and both are contradictory to each other. If a company has to focus on reducing its cost it will automatically have a decreasing effect on the product differentiation strategy and vice-versa. Thus, the framework should consider the trends and demands in the market which will help the company to produce their goods and services according to the needs.
• Lastly, the framework should also be able to utilize the strengths and the weaknesses of the organisation so that they are able to tackle the external influence within the industry. This is how the company will be able to tackle the complexities in the external environment with its positive attributes.

Conclusion

Thus, it can be concluded from the above analysis that Unilever has almost successfully maintained the three categories in Porter's generic strategy framework. This has helped the company to come up with unique innovations in the fast mover consumer goods market and get the first-mover advantage in the industry. The unique combination of the strategy has helped Unilever to get a competitive edge over their competitors in the market. This is how the company has been known as one of the well-known brands in the industry with a positive brand image in the minds of the customer. Ultimately, Unilever has been successfully able to attract the majority of the customers in the fast-moving consumer goods market irrespective of the premium pricing policy that is being offered to the customers. Thus, as per the Porter generic forces, Unilever has to maintain a perfect balance in reducing their manufacturing cost and come up with product variation that will help them to attract the majority of the customers in the market.

References

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Ali, B. J., & Anwar, G. (2021). Porter’s Generic Competitive Strategies and its influence on the Competitive Advantage. Ali, BJ, & Anwar, G.(2021). Porter’s Generic Competitive Strategies and its influence on the Competitive Advantage. International Journal of Advanced Engineering, Management and Science, 7(6), 42-51. https://doi.org/10.22161/ijaems.76.5

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Anastasiu, L., GavriÅŸ, O., & Maier, D. (2020). Is human capital ready for change? A strategic approach adapting Porter’s five forces to human resources. Sustainability, 12(6), 2300. https://doi.org/10.3390/su12062300

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