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ABSTRACT
Porters five forces model is one of the most recognized frameworks in the analysis of
competitive environment of an organization. Porters five forces mode determines the
competitive intensity of an organization and also attractiveness of the market where in this case,
Unilever is the main focus. This model is based on five important elements of an organization
and uses both internal as well as external competences and threats faced by a business
organization.
INTRODUCTION
Fast Moving Consumer Goods (FMCG) industry also called the CPG (Consumer Packaged
Goods) industry primarily is concerned with the production, marketing and distribution of
consumer packaged goods. Examples are: Household Care, Personal Care, and Food &
Beverages. They are products which have a quick turnover and at relatively low cost. Some top
fast moving consumer goods companies are: Nestle, Procter & Gamble, Cadbury, Coca-Cola,
and PepsiCo among others.
Unilever being a global company is third-largest producer of consumer goods company
measured by 2011 revenues (after Procter & Gamble and Nestl) and it is the world's largest
maker of ice cream (CBS News, 2010). Unilever has very strong competition from other strong
multinational companies also from other regional retailers. Porters five forces model determines
the competitive intensity and attractiveness of the market where Unilever operates. The model
describes the attributes of an attractive industry and also suggests when there will be greater
opportunities and less threat in the industries. Attractiveness in this context is the overall industry
profitability and reflects on the profitability of Unilever. An unattractive industry refers to the
industry where the combination of forces acts to drive down the overall profitability.
A very unattractive industry will be one approaching pure competition from the perspective of
pure industrial theories of economics. The model is based on the five important elements of an
organization using both internal and external competences and threats faced by an organization.
These five elements includes: Substitute of new products, Competitive rivalry, Threats of new
entrants, Buyer bargaining power and the Supplier bargaining power.
COMPANY BACKGROUND
Unilever officially was formed in 1930, by merging of the Lever Brothers, a British soap
manufacturer and a Dutch margarine manufacturer (Jones, G., 2002) and has since been one of
the largest direct investors in the United States of America. Unilever is unique because it has
maintained a dual ownership structure since it started, controlled by an equalization agreement
(Van Der Oever, 2005). Although Unilever has two legal entities as its parents, the Dutch
(Unilever NV), and the British (Unilever plc), it has only one board of directors and reports one
set of financial statement (Yahoo, 2006).
Today Unilever is established in 150 countries, employs over 223,000 people, with numerous
well-known brands, 12 of which have worldwide sales each exceeding 1 billion(Unilever,
2005). The company has products for three markets, food, home and personal care, which fall
into 6 primary categories: home care (17%), spreads (12%), savory & dressings (21%),
beverages (8%), ice cream & frozen foods (16%), and personal care (26%). As at December
2011, Unilever has a market capitalization of 27.3 billion (London stock exchange, 2011).
VISION STATEMENT
Creating a better future every day in helping people feel and look good to get more out of life
with quality brands and services.
Inspiring people to take small actions always that can add up to a big difference for the world by
developing new ways of doing business while reducing environmental impact (Unilever, 2012).
MISSION STATEMENT
Adding vitality to Life to meet everyday needs for nutrition and personal care with brands that
help people feel and look good to get more out of life.
Committing totally to the exceptional standards of performance and productivity (Unilever,
2012).
Competitive Rivalry
Threat of New Entrant
Time and Cost of
Entry
Economies of Scale
Cost Advantage
Technology Protection
Barriers to Entry
Supplier
bargaining Power
Threat of New
Entrants
Competitive
Rivalry
Supplier Power
Number of Suppliers
Size of Suppliers
Ability to Change
Cost of Changing
Threat of Substitution
Number of
Competitors
Quality Differences
Switching Costs
Customer Loyalty
Buyer
bargaining
Power
Buyer Power
Threat of
Substitution
Number of Customers
Difference between
Competition
Price Sensitivity
Ability to Substitute
Cost of Changing
Current
Ratin
Future
Ratin
Key Rationale
Key Rationale
Y-4
Y-9
Y-8
Y-2
Y-2
Competitive Rivalry
Factor
Characterizatio
Future
n
(current)
Trend
Y-H
Excess Capacity
Competitive Rivalry
Significant Economies of Scale
Entrants Access to Raw Materials
Y-M
N
YL
YL
Y-H
Y-L
H
YL
Y-L
N
YM
YL
YM
business
YM
Y-M
REFERENCES
1. CBS News (2010). An Ice Cream Machine That Measures Smiles. CBS News. 25 June
2010. Retrieved 7 January 2012.
2. Harvard Business Review (2008)
3. Jones, G., Lina G. (2001); Foreign Multinationals in the United States(London, 2001).
4. London Stock Exchange (2011). FTSE All-Share Index Ranking"stockchallenge.co.uk.
Retrieved 26 December 2011.
5. Porter, M.E. (2008) The Five Competitive Forces That Shape Strategy, Harvard business
Review, January 2008.
6. The Wall Street Journal (2006) (Eastern ed.). P. B8. Retrieved February 5, 2006, from
Business Source Premier Electronic Database.
7. USA Today (2012) Unilever buys some Sara Lee businesses for almost $2B". USA
Today. 25 September 2009. Retrieved 7 January 2012.
8. Van den Oever, R. (2005, December 20). Unilever simplifies ownership regime, keeps
two parents.
9. Yahoo (2006). Yahoo finance webpage. Retrieved February 5, 2006, from
http://finance.yahoo.com.