Unilever SWOT Analysis

A SWOT Analysis of Unilever

2015 and 2016 have been years of financial growth and increase in market share for Unilever.  With its large array of brands and products, Unilever is enjoying continuous growth and heavy profits. Apart from good financial performance, 60% of the brand’s business also gained market share.  The brand has also focused on innovation to respond to the fresh trends.  However, the FMCG landscape has grown highly competitive and operating profitably in this sector is highly challenging. Still, the Unilever brands are performing with full might where the strategic focus is consistent and competitive growth.

Unilever also owns 13 brands that have sales of €1 billion or more. The good news is that Unilever believes in accountability and social responsibility and is also focusing on making sustainable living common place. Globally, its brands are a household name and the large array of 400 brands does not just provide it global reach but also a scale that allows it to operate profitably with efficiency and operate at lower costs. Economy of scale apart from lowering costs enables it to combat several risks easily. While market volatility can create difficulties for FMCG brands, Unilever has consistently performed over the last eight years. Here is a SWOT analysis that highlights its key strengths, weaknesses, opportunities and threats of the brand.

Strengths:

• Large array of popular brands and products of which 13 have sales of €1 billion or more.
• Global presence – Sales in more than 190 countries.
• Strong financial performance – Consistently strong performance for the last eight years.
• Focus on innovation – Unilever invests in innovation to fuel fast growth. The brand uses consumer insight to uniform brand innovation. It spends €1 billion annually on R&D, employing approximately 6,000 experts for driving innovation, often in partnership with suppliers and academia.
• Economies of scale allowing the brand to perform with efficiency and lower operating costs
• Manufacturing and supply chain strengths: The company operates 306 factories in 69 countries. Its focus is on implementing world class manufacturing where it has already enrolled 119 factories and has identified 139.5 million Euros in savings. For its supply chain it operates a warehouse chain of 400 warehouses. These warehouses are coordinated by a central system of control towers which improves customer services and reduces costs.
• Innovative marketing practices: The company uses data to delve deeper and for more accurate segmentation of the consumers. It enables the brand to deliver more relevant and authentic as well as effective content.

Weaknesses:

• Lack of forward integration – A lack of forward integration leads to overdependence on the retailers.
• Availability of a high number of substitutes – The availability of substitutes and low switching costs are an important weakness.

Opportunities:

• Emerging Asian markets – The Asian markets are growing fast and taping into these markets can provide opportunities for faster growth and higher revenue.
• Millenial generation and their lifestyle needs – The millennial generation is an increasingly big part of the target market of the Unilever group and by focusing on their needs and catering to them, Unilever can find faster growth and higher profits.
• Sweeping health consciousness – Sweeping health consciousness too brings major opportunities for Unilever. Especially, the millennial generation is highly health conscious and making health friendly products can prove highly profitable for Unilever.

Threats:

• Currency fluctuations – Currency fluctuations globally affect the financial performance of Unilever.
• Intense competition: The level of competition in the FMCG industry is intense. Both Proctor & Gamble and Nestle pose competitive threats to the Unilever products and brands.
• Sluggish growth and economic crisis in key economies – Both India and Brazil are major markets for Unilever and demonetization in India and crisis in Brazil affected its profits. Sluggish growth or economic fluctuations in important economies can negatively impact its financial performance.

Conclusion and Recommendations:

To conclude the story, Unilever has a strong market presence and the brand has performed consistently over the last eight years. In the past two years, its financial performance has been great. The brand invests in innovation and uses consumer insights for best practices in marketing. However, the FMCG landscape has grown highly competitive and the number of substitutes for Unilever products is high. Apart from these currency fluctuations and sluggish economic growth in key markets are a major obstacle to its faster growth. Unilever can focus on the emerging Asian markets and take steps towards forward integration for quicker rise.  However Unilever is an accountable brand and invested in social and environmental responsibility.

Sources:

https://www.unilever.com/Images/unilever-annual-report-and-accounts-2016_tcm244-498744_en.pdf

https://www.unilever.com/investor-relations/annual-report-and-accounts/