Unilever's product differentiation and global strategy for competitive advantage

Innovative International Business Study

Global Fast Moving Consumer Goods (FMCG) atmosphere is fast modifying. Especially, the ever-improving reputation of line extensions appear to rely on benefits natural in brand leveraging. FMCG producers emphasize on R&D in order to produce items that best fulfills clients because clients have become more focused on linking themselves to a specific brand. They will also like to buy less expensive item due to current economic trend. Afuah (2009) argues that Unilever is one of the greatest FMCG companies on the globe. Unilever was established in 1930 by merging by the Lever Brother of Britain and Margarine Unie from Dutch. Today, Unilever PLC has two headquarters in London and Netherlands. Unilever's product portfolio contains some of the widely known and most preferred brands.

Figure 1: Sample items offered by Unilever

Corporate strategy

Unilever's corporate technique aims to produce high-quality products and achieve profitability and economic growth. The corporate technique can be recognized as a targeted or market niche technique based mainly on item differentiation and great quality production. Although targeted differentiation strategies target a narrower consumer section, this technique helps Unilever to gain a strong competitive advantage as it can offer customers something they understand is appealingly different from rivals. In addition to distinguishing its item from other competitors, Unilever's common technique brings together several other key elements. These are promoting an organizational reputation for social activism, creating brand loyalty and designing creative promotional campaigns (Doole & Lowe, 2008).

Product Differentiation

One approach to acquiring a competitive advantage is using differentiation to provide a better item that customers believe would be worth the premium cost. Since excellent high-quality products command more than the economy, Unilever has integrated item differentiation in its common business technique in order to control a high cost. The use of all natural, top quality components and the innovative items Unilever illustrates the strategic utility of product differentiation to acquire a competitive advantage in the market. Moreover, the emphasis on using recycled materials and unbleached paper in packaging products helps keep its costs low.

Strategic direction

In penetrating and competing in overseas marketplaces for its range of products, Unilever follows a global technique. Gelder (2005) has labeled this strategy "a think global and act global technique." The company uses the same aggressive technique in all national markets where it has existence, offers much the same products everywhere, aims to produce global brands, and organizes its activities globally (centralized).

A global technique used by the Unilever is much better than localized techniques because Unilever can quickly unite its functions and focus on developing a product picture and popularity that is consistent from nation to nation. It technique indicates to the Unilever success in building powerful personality brands such as Dove, Lux, and Rexona. Moreover, with a global technique Unilever must coordinate its operational, marketing and distribution globally.

Cooper and Edgett (2009) reveal that Unilever is increasing its initiatives to build on its long-established local footprints in developing nations. Through its well-established distribution network and an excellent ability to evolve successful international brand ideas to match local marketplaces, Unilever is in an excellent position to take advantage of the growth prediction in these areas.

To win consumer away from select opponents in national marketplaces, Unilever implements cross-market subsidization. Such an offensive technique is appropriate for Unilever, which contends in several national marketplaces with a wide range of brands. Lastly, in establishing roots in emerging country niches, Unilever uses low-cost strategies. Unilever follows this technique because customers in emerging marketplaces are often highly oriented on price. This could give low-cost local opponents the advantage unless a company can find ways to entice customers with bargain costs, as well as better items.

All techniques implemented by Unilever for competing in the global field are leading to an average 5% sales growth in 2012 -- just above industry standard. This ensures that Unilever keeps its position as third biggest player in consumer goods with a 7% share of the market (Jones, 2005). Second-positioned L'Oreal performed better, improving the gap between the two companies in partly courtesy of the Body Shop acquisition. Industry head Procter & Gamble stayed ahead of Unilever in terms of market share.

The launch process

Unilever is recording success in its new product launch model. Most notably, the idea generation and launching are marking significant success.

Idea generation -- Unilever is extremely leveraging its relationships with retailers for feedback from clients. Most clearly, it is engaging Wal-Mart as an associate in understanding clients. It discovered that clients had changed their behavior to shifting their detergents around or outside the house a lot more and were starting to become conscious of the adverse ecological results of product packaging. Just as important as getting the feedback for Unilever was the fact that Wal-Mart is becoming an involved associate in the new product procedure and that connection would be utilized later on in testing and releasing.

Testing and Release -- With the help of Wal-Mart, Unilever prevents mistakes through its test process that is crucial. In the 1990s many organizations produced eco-friendly products only to see that clients were not prepared to shop depending on ecological aspects (Jones, 2005). Unilever withheld releasing its item for years -- such timing was important. When it seemed like the chance was maturing, key managers at Wal-Mart approached Unilever, and release of the concentrated detergent item became a phenomenal achievement.

Ongoing business restructuring may pave the way for even more valuable product development. Many industry experts recommend that real inventions need small and nimble teams with independence from a large company. Unilever has tried to provide its item development teams with added independence, leading to multitude successes. However, Unilever must organizationally foster a less restricted culture and direct resources towards smaller, quick growing brands. This is more likely to produce success in creating new businesses.

Advantages of launching a range of new products

David Taylor has labeled this tactic of launching a range of products as brand extension.

This technique of item extension is well-known because it is less dangerous and less expensive as opposed to launching a single new item. Studies point the same cost-effective advantages by showing that the financial aspects of launching new brands are forcing organizations more towards launching a range of products into new marketplaces. Overwhelmed by the large R&D expenses, and more conscious of the statistics regarding failure rates for new brands, companies are progressively taking their recognized brands into new item fields. Other advantages linked with this technique instead of single item launches are as follows:

Consumer knowledge: the powerful brand employed to "promote a new product" makes it less crucial to make "awareness and imagery." The link with the main item is already done, and the main job is conveying the particular advantages of the new advancement. Customers are today attributing the quality associations they have of the original item to the new one. Release expenses may also be decreased by using item extension. Since the recognized item name is already well-known, the process of drawing awareness of the new item is not needed. Consequently, promotional, sales, and advertising expenses are decreased. Furthermore, there is the possibility that the company may be able to leverage on scale economies of advertising as ads for the original item and the extensions strengthen each other

Customer trust and loyalty: The current well-known-strong brands signify a guarantee -- of quality and useful features for consumers. Thus, the extensions will benefit from this good opinion and fame about the item to make a powerful value proposition in new marketplaces or segments (Jansson, 2007). Moreover, customers will be more likely to try a new item from a brand they realized, unlike for a new item. The client is anticipating transferring all information from the item to the extensions. If the common opinion regarding the brand is attractive, the behavior towards the extension should be favorable as well. An effective item extension can allow getting the client commitment. A pleased client by an extension will be more willing to repurchase the same item. For example in the sports arena, a client will more likely choose a brand providing a full accessories, outfit, equipment, and shoes.

Impact of the new product development process

The success of Unilever is connected to a successful product development processes. This uses their capability to recognize the needs of clients and to make items that fulfill these needs quickly. Therefore, product development process can be described as the heart of this company.

The innovativeness of a new item and Unilever's innovation capability is important for several reasons. Innovation processes present possibilities for the company concerning development and expansions into new areas as well as allows it to obtain a competitive advantage. The process of developing a new product is described as the creation, approval, and execution of new concepts, procedures, and items. The development process contains the acquisition, distribution and use of new knowledge and effective execution of creative suggestions within the organization (Jones, 2005).

New product development process provides Unilever an enabling climate to achieve an advanced level of efficiency and better customer values. Researchers have also determined that organizational learning is associated with growth of new knowledge, which in turn is crucial for company innovativeness and company efficiency. Important enhancements allow the company to establish a dominant competitive position. In addition, they afford newcomer companies an opportunity to gain an edge in the marketplace. Product development process includes different dimensions, item innovativeness from customers and companies perspective, advancement in item procedure, and human resources management methods. An item or a procedure alignment of company innovativeness will result in success if the company performs actions valued in the industry. According to Morschett, at al (2010), developing great items is not easy. Few companies emerge successfully posing a serious challenge for a product development team. Some factors making item development challenging are tradeoffs, features, details, time pressure, and creation. Others include meeting individual and societal needs, team spirit, and team diversity.

Trade-offs are about choosing between item requirements and the effect of cost around the option. The environment, competition, client preference, and technological innovation are all powerful factors. These cause serious barriers to new product development initiatives. Product development choices must be made quickly because products are intended to fulfill the needs of some kind. It is important to know that where product development is involved, all tools must be at hand and that the group works with one spirit

The impact of new products and inventions

Like the quest for great health, the quest for business growth is a long-term and regimented exercise. Just as fit individuals must enhance their bodies through lots of activities-cardiovascular, muscle, dietary, and others-corporations must engage in well-rounded growth tactics, from incremental developments to disruptive inventions that create new sectors and markets.

Disruptive inventions not only reduces profitable growth but also impacts industry positioning. For example, Unilever that have relatively differentiated items are forced to play a cost game and are vulnerable to lose market share to private brands, or even have to produce private-label editions of their items. This leads to further declines in R&D budgets and again less product difference (Ramesh, 2009).

In the same way, organizations find themselves in a poor position toward potential suppliers and partners. For example, some years back, when U.S. FMCG was in decrease, their capability to entice top-notch partners and suppliers was restricted. In comparison, Unilever was able to entice powerful partners, which performed a crucial part in assisting them develop their capabilities.

From a financial perspective, Unilever simply does not produce the growth premiums with disruptive inventions that they do with cutting-edge innovations. In many sectors, it is possible to recognize the value rates that innovative organizations generate in their stock values, comparative to organizations that are not innovative. The delta between these two could be the opportunity cost that the latter tend to pay.

Effective inventions can also promote upcoming value premiums. New products and inventions result in higher-than-market natural growth that is capital efficient and profitable. Investors have demonstrated their willingness to pay a premium for the share prices of Unilever because the company is continually accomplishing this kind of growth. They anticipate this organization to continue to outshine the industry later on.

Also associated with new products and inventions are some significant adverse effects on Unilever as a whole. These include a large recruiting cost: the less innovative a product is, the less eye-catching it is to first-rate workers and innovators (Meister, 2012). Therefore, the organization can no longer seek the services of or maintain the top-notch individuals who are thrilled by advancement and good at it. Moreover, the poor performance of the company's new items affects the company's compensation framework, increasing the challenge of attracting great talent and thus speeding up a downward trend.

Perhaps the most powerful effect of new products and inventions is the changes in the company's culture. Unilever has made incremental changes in its items for a period. Therefore, it will dilute its marketing spending, growth resources and other operational factors of the company so thoroughly. In effect, such an organization will have dropped into the invention death spiral. Such a dysfunctional terrible trend will affect all the company's functions: organizational, strategic, operation and financial.

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