Unilever Global in the Asean Region: Confronting the Tigers in Asia Essay

Custom Student Mr. Teacher ENG 1001-04 30 September 2016

Unilever Global in the Asean Region: Confronting the Tigers in Asia

I. Introduction

The era of consumer business operating on a global scale has become inevitable with the emergent technology impacting the areas of transport, information and knowledge, self-contained production and markets. In Asia alone, the continuing economic expansion in India, China and Indonesia are driving consumer firms like Unilever, Procter and Gamble, General Mills and other local diversified manufacturing firms into the fray. This scenario came as a result of the inherently cheap labor market in the Asean region which forced firms into intensive relocation and shifting of production plants in the area as quality and product pricing brought these firms further into the cutthroat thresholds.

‘Considering the Asean consumer market more seriously gave multinational firms significant advantages in terms an ideal self-contained market where production can equally be conducted without impacting the increasing distribution cost. The expansion of information technology further boosted growth in the region where managerial effectiveness has achieved a form of omnipresence transcending boundaries once considered formidable and time driven. Even the global phenomena of target costing management have become a surprising reality in the region. Here, the study of Unilever Global is presented as an entry assessment, a PESTLE analysis, and an evaluation of Unilever’s strategic competitive advantage (SCA) as a firm and as a global multinational enterprise (MNE). (Shenkar & Luo, 2008)

II. Unilever Global: An entry strategy more than a case of survival

Traditional markets led by the United States, Japan, Germany, Australia, France, Great Britain and the rest of the developed nations are finding themselves confronted with tightening competitive markets not only among themselves but with emerging markets in other continents. Business survival apparently is becoming a common business agenda with the market shaping and reshaping through the pervasive impact of information technology. Along the way, advanced and developed countries are discovering the growing significance of third world nations in the emerging reconfiguration of the global consumer market.

In terms of prospects and opportunities, Asia and Africa accounted for the most increase in consumer spending with the Asian region dominating the market with almost twice the growth rate in consumer spending from $9.2 trillion to $16.5 trillion during the 10-year period 2000 to the onset of 2010. With the market expanding by almost one billion customers annually, gross domestic product (GDP) in the developing and emerging (D&E) countries saw an average annual growth rate of 6.8 per cent compared with 2.5 per cent in the developed areas (World Bank/OEF, 2010).

Unilever Global, one of the major business organizations considered among the top players in the global consumer market finally entered the Southeast Asian area composed of Malaysia, the Philippines, Indonesia, Thailand, Vietnam, Cambodia and Laos, among its major constituents. With two of the most robust markets, China and India lying on the fringes of the Asean, is a done competitive advantage by an emerging economic bloc with a strong growth potential, both as a cost-efficient production area as well as a rich market for its own productive output.

It has become imperative for this study (1) to assess the progress made by Unilever Global in establishing itself in the Southeast Asian market from its original strategic entry to the present; (2) to analyze the environment of the emerging market with reference to the cultural, political and legal features that Unilever Global needed to take into special account; (3) to evaluate Unilever’s strategies: first for international entry, then for organizing and structuring its global operations, and finally for maintaining competitive advantage in the face of new challenges and changing conditions in the Southeast Asian market; (4) to come to reasoned and evidence-based conclusions about the level of success achieved by Unilever in seizing the opportunities and overcoming the problems present in the market for expanding its international business.

III. Research aims and objectives

The following aims and objectives are to be explained here: the attempt to bring attention and appreciation of the unique competitive strategies of Unilever based on its corporate intents; the innovations made through R & D, life-cycle product management, human resource development factors and organizational structures that characterized the corporate success history not only in the Asean market but similarly in the primary markets of its core operations.

IV. Unilever Global and the theories of growth, development and the trilogy of views (Institutional-Resource-Industry) of international business

An exploration of the theoretical relationship of Lewis’ Growth and Development theory (Ranis, 2004) is hereto applied to Unilever as it experiences both growth and development phenomena of its own in a new arena – the Asean market. The growth and development theory is likewise applied to the market area as it starts to build its own global distribution area.  (World Bank/OEF, 2010) Similarly, the principles of market, economic and strategic motives as motivations for entry into international trade as propounded by Shankar and Luo (2008) as well as phenomena of the interaction between globalization and localization not as a non-contrasting principle but more as a congruent, complementing business realities strongly support the theoretical background for this study.

Shenkar and Luo (p.123) further argues the differentiated roles are played by domestic multinational enterprises (DMNEs) competing with multinational enterprises insofar as their views on international business is concerned. Unilever, for one and among many MNEs operating in the Asean region, may have subsumed entirely the tripods of resource, institutional and industry based views of international business as propounded by Peng, Wang & Jiang, (2008) who discovered the trilogy of views on international business which identifies a new pod as the institutional view (aside from the resource and industry-based views of international business). Here, Unilever Global is a mute answer to its prevailing institutional sustainability as a driver of its strategy, operating as well as financial performance in the Asean region now registering a faster consumer spending rate of 16.5, the highest recorded among world regions. (World Bank/OEF, 2010)

Arguably, Unilever fairly succeeded in adapting to the socio-cultural and political realities of the region as well as in terms of growth and development phenomena through its firm focus on product life cycle, adaptation, advertising measures and utilization of local human resource for its Asean operations.

V. Methodology and Approach

A comparative analysis of the quantitative and qualitative research data approach and analysis is provided here, taking into account the documentary evidences and responses by key informants from the various Unilever stakeholders. The document analyses complemented the descriptive environment of Unilever’s progress from its beginnings to its current regional as well as global status as a consumer conglomerate. (Cooper & Schindler, 2008). Here annual reports, industry analysis reports and audit examinations data contributed immensely to the analytical depth provided.

Data gathering through the research approaches fairly succeeded in bringing objectivity and evidentiary support to the information taken as inferences in the section. The various other explanations expectedly brought the research writers into logical and relevant arguments for and against the methodology as well as with the various theories discussed earlier in the paper. similarly, data and information from the competition provided insights into the quantitative and qualitative information already available for Unilever. Insights and inferences brought rich information for the various perspectives where Unilever is better understood as a global provider of employment more than consumer values as predicted.

VI.   Findings, conclusions and recommendations

Expectedly, the findings explain the highlights of Unilever’s entry and sustainable competitive advantage as a multinational company operating in Asia. Documentary analysis added relevant discussions to the arguments. The inherent capabilities of MNEs vying for markets in the Asian and Asean regions equally proved useful in bringing inferences and analytical views to the consumer market led by Unilever. (Shenkar & Luo, 2008; p. 102)

Included further in this section is an analytical discussion on the theoretical dimensions along capital financing, management styles, stockholder expectations and corporate social responsibilities as premised. The technical standards imposed by host countries over certain critical corporate operations of firms operating within its boundaries (Shenkar & Luo, 2008; p. 54). These issues are deftly explained together with the assessment of Unilever’s program through the global requirements as a component of foreign direct investments sought by host nations — similarly with the constraints experienced by firms, including Unilever in its overseas operations. (Shenkar & Luo, 2008; p. 60).

VII. Unilever’s Path to Growth Strategy: A PESTLE Analysis

Among the world’s biggest consumer products company, Unilever is uniquely structured and designed as a highly responsive consumer company. Its twin-organization headed by two co-chairmen appears to be a strength as it addresses the firm’s needs to handle 160 million solutions to man’s personal care, home cleaning and food needs. It has become so heavily diversified that it wanted to reverse its diversification plan to a quarter of its prevailing size and volume to attain a higher margin and efficiency of its equity capital. With diversification bringing too many focuses, there came a need to establish core identity. By product area, Unilever has been strong in the personal care component ahead of its competitors driving the company’s growth to double digit figures since 2000 with reduced core brands. The research and development area promises to sustain such growth with adequate funds as it merely allots just about$1.1 billion R & D budget against $6 billion marketing cost.

Unilever is considered a giant in the consumer market because of sustained efforts in product conceptualization and marketing focusing more on the repackaging of the brand to Unilever’s specifications. Already, Unilever is manned by a local human resource component that is as dynamic as the organization itself. Although its human capital is considered a formidable strength, the productivity of its human resource remains wanting as it below par with the competition, lagging behind at a ratio of 180,000 per employee compared with General Mills with 605,000 revenue flag per capita. Competitors may look at Unilever’s ratio of revenues to employees as a productivity issue but Unilever remains a socially responsible company because it is concerned with employees’ financial welfare more than meeting the need to increase shareholder value. Thus, this ratio becomes more of strength than a weakness.

On one hand, Unilever’s environmental and animal issues for using animals as experimental medium is anchored on its avowed philosophy of protecting the environment as a “good corporate citizen.” In the area of organization and management, the uniqueness of the management style of Unilever with having two (2) chairmen of the Board becomes a strategic fit for Unilever considering its own uniqueness and the peculiarity of its industry. This is an arrangement that can run the risk of synchronizing depth in decision-making that are best handled by an ultimate single authority and accountability despite this becoming a  growing threat in terms of corporate bureaucracy.

Based on the latest figures, productivity went up to 188,000. The little improvement may have to enhance the Path to Growth strategy as a balanced learning organization. Unilever’s Path to Growth strategy projects investment to win, to compete and to grow through its portfolio of brands on a global scale. The strategy has resulted to cost-savings benefits despite divestments made although running short with projected 16 per cent operating margin. Notably, Unilever learned a lot from its unique activities more than from its efforts of managing and overseeing its normal operations, let alone its capital and equity transactions. Observers agree that executive time is spent more on streamlining operations than product research and development. While this measure is a component of the company’s reengineering options, hiring of new talented managers may have stalled somewhat the learning and growth balance of the company.  Academic theory dictates that the Balanced Scorecard principle may have been ignored that would have put Unilever in a stronger position to upstage the market in terms of profitability, customer satisfaction, quality business processes and learning and growth for its people.

Nonetheless, Unilever stands to dominate the market with a wide range of brands that would address the varying and changing palates of its market through acquisition and divestment cycle to gain turnaround fees. However, the firm may have to forego the call of the bottom lines to succeed within the framework of corporate social responsiveness, that is putting an equally compelling reason and rationale to every aspect of the Path to Growth strategy.

On one hand, the growing number of unique tastes and cultural diversities in the Asean region is getting aligned with the highly diversified nature of the company’s product lines; as well as the highly mobile consumer market that virtually locks patronage with brands and less with the firm-based view of the product.   On the other hand, the threats are projected along the environmental issues inherent in its products and processes. Thus, R & D budget and the CSR component may likely drain Unilever’s resources.

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