Research paper a comparison the business strategy of unilever and procter and gamble in asian market

THE UNIVERSITY OF DANANG UNIVERSITY OF ECONOMICS - - RESEARCH PAPER A COMPARISON THE BUSINESS STRATEGY OF UNILEVER AND PROCTER&GAMBLE IN ASIAN MARKET Academic advisors: Trịnh Thúy Hường Class: 42K01.5 Student’s name: Phan Công Anh Hồ Thị Vui Huỳnh Ngọc Toàn FONGSAVANH VILAYPHONE Danang, June,2020 LIST OF PICTURE INTRODUCTION Rationale Nowadays, as globalization is becoming popular and necessary for every country in the world, multinational companies are also formed quickly with the desire to reach out to the international market, creating an increase growth in size and sales Growth is indispensable to maintain for each company, so choosing the strategy to reach out to the international market plays an extremely important role for each company The right strategy not only helps the company gain profits in the short term but also paves the way for long-term development Markets around the world are different in culture, economy, income level, demographics, etc Understanding different strategies of different companies has become an indispensable experience for each company In the world, two famous corporations in the field of consumer goods, Unilever and P&G, are typical for approaching the market with different strategies that bring different advantages, especially in Asian markets Objects and scope of research The scope of the study is the operation of Unilever and P&G in typical countries in Asia such as Japan, Vietnam, Singapore, The research period is conducted from the time when companies penetrate the market and the main ones The book has changed to adapt to that market Methodology The paper is studied by methods of data collection and data analysis Layout of the thesis The paper consists of chapters: Chapter 1: Theoritical basic Chapter 2: UNILEVER'S ASIAN MARKET STRATEGY Chapter 3: P&G'S BUSINESS STRATEGY IN ASIAN MARKETS Chapter 4: COMPARE STRATEGY OF P&G AND UNILEVER Chapter THEORETICAL BASIS 1.1 Multinational company Multinational companies are often referred to as MNC (multinational corporation) or MNE (multinational enterprise), which refers to companies producing or providing services in two countries, which can greatly influence relationships international relations when they have a major economic impact on some areas with abundant financial resources, serving public relations and political corridors Multinational companies operate and are based in many different countries Multinational companies play an important role in the process of globalization, a new form of MNE is formed corresponding to the process of globalization - it is a global consortium enterprise 1.2 Characteristics of multinational companies Centralized ownership: affiliates, subsidiaries, and agents around the world are owned by the parent company, even though they have specific daily activities that are not exactly the same 1.3 The purpose of development of multinational companies First, there is the need to internationalize manufacturing and markets to avoid trade restrictions, quotas, import duties in countries of purchase, use of raw materials, cheap labor, and exploitation of local potential Second, it is the need to use the competitiveness and comparative advantages of the host country, making the transfer of high-tech industries Third, seek higher profits and risk dispersion As well as avoiding the instability caused by the business cycle when manufacturing in a single country In addition, protecting the monopoly of technology or production know-how in an industry that does not want to be transferred is also a reason to expand the locality for production Besides, cost optimization and market expansion are also the goals of MNC The operation of MNCs, because it is carried out in an international environment, issues such as input markets, output markets, transportation and distribution, capital mobilization, payment have certain risks The common risks of MNCs fall into the following two groups: - Risks in buying and selling goods such as: tariffs, transportation, insurance, supply-demand cycles, other macro policies - Risks in transition finance such as risks when local government policies change, risks of exchange rates, inflation, foreign exchange management policies, taxes, debt crisis 1.4 International business strategies of multinational companies 1.4.1 The International Strategy The product is manufactured in the domestic market and sold to other countries with minimum adjustments according to local requirements Each Strategic Business Unit has the right to actively apply this strategy This strategy is less under pressure to reduce costs and the pressure of local requirements (because production is primarily localized) But it is highly sensitive to exchange rate and political risks Features of the international strategy: • Exploiting comparative advantage, domestic position to turn into a competitive advantage • Entering into skills-deficient markets of MNC Value is created by moving the core of competition from the country to abroad, where competitors are not able to develop, respond, and maintain in a similar fashion when expanding markets foreign school • Centralizing product development functions such as R&D in the country, producing products according to domestic market demand standards • Establish production and marketing divisions in key regions and countries where they international business • Headquarters headquarters strictly control marketing strategies and products, local adaptation is limited • International activities ranked second after the market in the country Limitations: • May miss opportunities in local market • Not specifically grasping the needs of other localities • Not a long-term strategy 1.4.2 The Transnational Strategy The strategy that MNC seeks to achieve global efficiency and respond locally, sharing the common mission of MNC but taking action that varies according to local requirements (standardizing where possible, adapting where required) Selecting an optimal location cannot guarantee that the quality and cost of the inputs there will also be optimal Transfer of experience can be a core resource of competitive advantage, but experience cannot be transferred automatically Features of the Transnational strategy: • Competitive advantage can be developed in any of MNC's operating units • Try to achieve low cost based on regional economy, economies of scale, effective learning as well as production differentiated products for customers in different areas, encourage opening up in places where developing operational skills in global operations • The product and skills line can be transferred between units in MNC, collective promote the development of skills in global learning institutions • The value created by innovation reinforces and exchanges ideas, products and processes Limitation: Implementing this strategy has many difficulties because local response increases cos Two trends need to be avoided: focus the company's operations too large on a central location, or because it wants to increase the level of local adaptability that distributes the company's operations across too many different locations 1.4.3 The Global Strategy MNC expands overseas markets based on standardization and competitive costs; Value is created based on product design for the global market and the most effective production and marketing The scale of production and distribution of products has been improved, facilitating development investment and reducing costs very positively; but difficult to meet local needs Features: • Link SBU in many countries to share cheap resources, emphasizing the issue of ensuring the size of economic benefits • Standardize global products to maximize profits by exploiting scale, regional economic learning (strategic location) • Not trying to meet local - Suitable for industrial products • Strategic objectives The strategy is to pursue a global low-cost strategy to support the "aggressive pricing" in the world some of the most favorable positions on the global scale (outsource) • Decentralized decision at headquarters Limited: inappropriate in markets that need high adaptation 1.4.4 The multi-domestic Strategy Strategic decisions and activities disaggregated by business unit of each country This strategy has a high customer base but limits the exploitation of economic scale, learning and coordinating information Features of the Mutil-domestic Strategy: • Focusing on competition in each market • Make a profit by offering customers a product that meets the tastes of different national markets, resulting in increased product value in the local national market and pushing up product prices • High local decentralization (proximity to location and culture) • Value created by empowering local administrators to adapt to local economic and legal economic environment • Suitable when available many branches in countries and the pressure to reduce costs is not large - Suitable for consumer products Limitations: high costs Chapter UNILEVER'S ASIAN MARKET STRATEGY 2.1 General introduction about Unilever 2.1.1 General infomation Unilever is a global corporation founded in the 1930s of England and the Netherlands that is world-renowned in the field of manufacturing and fast-moving consumer products including home and personal hygiene products, eat, tea and tea drinks Typical Unilever brands are widely consumed and accepted globally such as Lipton, Knorr, Cornetto, Omo, Lux, Vim, Lifebouy, Dove, Close-Up, Sunsilk, Clear, Pond's, Hazeline, Vaseline, with sales of over millions of dollars for each brand has proved Unilever is one of the most successful companies in the world in the field of consumer healthcare business (Personel Care) Along with Proctol & Gambel (P&G), Unilever currently dominate the world on these products Some basic information of Unilever Founded: Merged Lever Brothers and Margarine Unie in 1930 Headquarters: London and Rotterdam Industry: Manufacturing (Household Appliance, Food, Personal Care) Type: Mass Key employees: Paul Polman (CEO), Marijn Dekkers (chairman) Website: www.unilever.com 2.1.2 History of formation Unilever was founded with the original name of Lever Brothers, starting its soap business The initiator of the initial business idea was Wiliam Hesketh Lever In 1884, he bought himself a small soap factory He then focused on marketing his products, thereby increasing production by 20 to 450 tons per week At that time, his workshop had two strategic products: Lever’s pure Honey and Sunlight By March 1888, he decided to expand the factory to an area of over 23 hectares In 1890, Lever decided to expand the market beyond Britain's borders with the first overseas markets being Australia, Canada, Germany, and Switzerland In 1906, the company acquired Vinolia, a soap-making company In 1910, the Company acquired Hudson’s - a major detergent manufacturer in the UK From 1910-1915, Lever bought three more British soap-making companies, one of which was Pears, one of Unilever's rivals By 1911, the Lever brothers had a huge market share, and one out of every three soap bars was Lever After World War I, the company continued to expand into Africa Until January 1930, a merger of Margarine onion (Netherlands) and Lever Brothers (England) created an Anglo-Dutch alliance with the new name Unilever To avoid double taxation of the two countries, the company has split into Unilever PCl based in the UK and Unilever NV based in the Netherlands 2.1.3 Mission, vision, business goals 2.1.3.1 Mission Activity to create a fresher future every day Unilever's mission is to make everyone feel comfortable, improve their beauty and get rid of life's worries with products that are good for them and those around them And they achieve this by creating and producing products that are affordable, suitable for all walks of life and society around the world Inspire people through daily actions through our products to make a big difference to the world Grow your company with a great caliber but still care about the surrounding environment 2.1.3.2 Vision With the mission set out above, Unilever believes its products can improve the quality of human life Therefore, for the sustainable development of the company, Unilever focuses on the issues of society and the environment, considers business activities and promotions that bring value to the company and the whole society 2.1.3.3 Business goals • Long-term goals: Meeting the daily needs of consumers around the world, recognizing the wishes and desires of customers in the future Respond creatively and compete fairly with other brands to improve the quality of life Especially the goal of sustainable development, developing the company separate from the bad influence on the natural environment • Short-term goals: For each period, the company will have its own short-term goals depending on business strategies, market activities and the influence of the global economy 2.1.4 The organizational structure of Unilever Unilever's structure is a combination of senior leaders including executives, nonexecutive directors, company executives, departments and employees The departments will undertake their own functions, operating independently However, there is still a connection between departments to create flexibility in business activities Functional departments: • Materials supply department: finding and supplying raw materials to serve the increasingly complete production activities • Accounting Department: is responsible for managing the entire capital and assets of the company, organizing the inspection and implementation of economic and financial policies, timely statistics, and the exact situation of assets and capital sources to help The director regularly checks the company's business operations • Planning Department: making plans for the company to help the implementation process be more convenient, avoiding mistakes in the implementation process 10 and sales force to specific markets to best serve customers and increase sales efforts to increase sales of large customers.P&G often used its strong brand name to launch coming out with new products For example, the Ivory brand specializing in soap has expanded into baths, dishwashing liquid and shampoo The launch of a new product with a strong brand name has made it more accepted and trusted faster, while saving a lot of costs P&G distributes products globally but makes adjustments to be more local P&G TVCs have also been changed, not only have to use one TVC to advertise a product around the globe, in which country to advertise, use the language of that country P&G advertisements are tailored to specific countries, using popular local stars to promote their products For example, Head & Shoulders shampoos in Vietnam, invited actor Minh Hang as an advertising representative 30 Chapter COMPARE STRATEGY OF P&G AND UNILEVER 4.1 Business situation of Unilever and P&G in recent years 4.1.1 Unilever Unilever CEO Paul Polman stated in 2014 that the company is targeting beauty care brands and is likely to buy these brands, especially those from high-end products Earlier, Unilever's business report also showed that the company is using the financial revenue from the food business to fund the expansion of the beauty care product sector In the final report of 2014, merging and acquiring the beauty care business was one of Unilever's top priorities in 2015 In 2014, Unilever had no major mergers Its personal healthcare and hair and skin care products market share has declined However, in early 2015, the group made mergers and acquisitions (M&A) and many experts predict Unilever will continue M&A deals in 2015 However, Unilever's move to expand its personal care business was accompanied by its decision to reduce its operations from food and beverage In 2014, Unilever sold seven brands of low-growth products and said the company's non-core brands would be separated into a separate business Polman CEO also stated that the group will focus on core business activities, while restructuring its portfolio of brands The above statements show that expanding the business structure is an important goal of Unilever but restructuring and focusing on core business with higher priority The food business segment has provided a good profit before tax for Unilever, but the company's revenue growth has slowed down in recent years Many experts believe that 31 the food business segment is shifting away from Unilever's core business and the group is shifting its focus to high-end cosmetics and beauty products 4.1.2 P&G For many years, revenue and profit of P&G continuously decreased In particular, 2015 was a difficult year for P&G with revenue and profit down by 8.2% and 38.6%, respectively Picture P&G Facing this situation, P&G decided to narrow its business scale and focus on core products In keeping with the trend, for many years, P&G successfully expanded its business by acquiring a number of famous brands such as Gillette, Wella Professional, Iams and Ambi Pur However, revenue and profit of P&G have decreased significantly in recent years due to too many brands, even the "dead" brands At the end of the 2015 fiscal year, only 21 P&G 32 brands reported annual sales of over $ billion P&G's revenue and profit both dropped sharply, by 8.2% and 38.6%, respectively As a result, P&G announced a recall of 100 less effective brands and focused only on 70 brands in 10 business areas These leading brands account for over 90% of revenue and 95% of P&G's net profit While many other multinational corporations are actively promoting business expansion and acquiring many valuable brands, P&G has chosen to narrow, focusing on developing core products P&G has announced the resale of Duracell to Berkshire Hathaway It also left a joint venture with a Chinese battery company Then, P&G announced the resale of Camay and Zest soap brands to Unilever in July 2015, along with 43 beauty brands (including cosmetics such as Hugo Boss perfume, fashion like Gucci and Dolce & Gabbana, and a number of another hair styling brand) for cosmetics company Coty Inc in a deal worth $ 12.5 billion 4.2 General comments In terms of global strategy, P&G is still superior to U with a more advanced position and occupying a unique position in many important industries and markets By acquiring Gillete and focusing on its strategic commodities, P&G will continue to expand P&G has a very modern and effective management model, always one of the pioneers of management model innovation in the world From a revenue perspective, P&G is still much better, and if you look at the position of the strategic product, P&G is clearer In the Asian market, the strategies of the two sides are also different, difficult to comment fairly P&G targets a group of customers with a high average income, choosing the most profitable segment (more premium & urban than U), 33 In terms of marketing effectiveness, P&G is better because the segment they choose is easier to make money Perhaps because the Unilever culture is very Political and Positive, this is the situation P&G seems more intellectual, more peaceful P&G and Unilever in Asia of course Unilever will prevail This is because P&G initially misjudged the Asian market, for example in Vietnam, as evidenced by the fact that Vietnamese people had heard about Omo before hearing about Tide and listening to Comfort before knowing about the existence of Downy in other markets, since then, P&G has won completely, especially in the US P&G is "inviolable" P&G products seem to be too small and overshadowed by Unilever products Therefore, if P&G keeps this situation, sooner or later, it will lose market share for Unilever's customers Loyal to P&G also feel bored when walking to find and find goods of Unilever Unilvever seems to be more powerful when marketing and advertising techniques seem to "suppress" P&G competitors, so to speak, because Unilever seems to be quite imposing on European style and Asia lifestyle up its products Besides, Unilever is more multidisciplinary: consumer goods, food, while Unilever chose a strategy of uniform spread, expansion and emphasis on it The Unilever leader has applied better pioneering rules in Asia than P&G Unilever's product identification system is still better than P&G Unilever has spent a lot of time on product marketing campaigns, product recommendations, gifts and promotions For example, during the golden age of the Sunsilk dynasty, U's budget for Mark & Sale for Sunsilk was equal to the total budget of Pepsi Vietnam for all products You should pay attention to the budget of Sunsikl = Pepsi Coola + 7up + Mirinda + Aquafina + Twister 34 Unilever spends on PR and creates better products for P&G through the events: Cloth couple's wedding - OMO Festival, Unilever has spent too much net profit may not be as big as P&G But it is popular and reach many customer segments 4.3 Compare strategies A business strategy must have elements: strategic objectives, strategic scope, core competencies, competitive advantages and operational strategies So, how are the elements in two multinational companies producing consumer goods like U and P&G? Let's take a look at the comparison table below: STRATEGIC OBJECTIVES STRATEGIC SCOPE UNILEVER - The annual growth rate for these products annually reaches about 20-25% - Helping over billion people to improve their health and happiness index - Reduce by half the impact on the environment - Use 100% sustainable materials - Make consumers feel and appreciate U's products compared to other company's products on the market - Serving the target group of retailers, supermarket systems or distributors - Unilever provides products to consumers who are middleincome consumers, targeting developing countries - One of the multinational corporations supplying consumer goods with 400 food and hygiene 35 P&G - P&G aims to provide products of superior quality and value to improve the lives of consumers around the world in the present time and tomorrow Since then P&G is known as a leading brand in terms of revenue and value creation; This contributes to the prosperity of the employees, shareholders of the Group and the whole community where P&G operates - Product design pleases consumers but still maximizes resource protection - Minimize waste in the production process and promote recycling - P&G customers include large traders with groceries, stores with member clubs, drugstores, focusing on developed countries - A global cosmetics group with 80 brands in product segments: + Beauty, Hair and Personal Care + Grooming + heal Care ADVANTAG E Competition products for families and individuals with main product groups + Food and drink + Home Care + Personal Care + Water Purifier - Is a large corporation in the world providing consumer goods with 400 brands worldwide - Product innovation creates great competitive power for Unilever - In addition to the array of Cosmetics, U also provides additional array of food - Linking the top global organizations: Oxfam Oxford Committee for Famine, International Population Service (PSI), Child Protection, UNICEF United Nations Children's Fund, World Food Program to open Giving recommendations to consumers for personal hygiene and helping to improve the lives of those in need Since then, the product quality as well as the company's reputation are further confirmed in the eyes of consumers - Wide distribution network, especially in developing markets, accounting for 53% market share of developing countries - Being a leading company in promoting products, especially on television - As a holder of source technology around the world on the production of these products - Always work with integrity + The central responsibility is integrity, respect for people, 36 + Fabric and Home Care + Baby, Feminine and Family Care - Consumers belong to the middle class belong to urban areas, so the quantity with the ability to collect is very high - As one of the world's leading consumer goods companies - High market access, loved by many retailers - Choose the stars in the Showbiz world, sports and information transmission that have a great influence on consumers For example, in Vietnam, singer Minh Hang (Head and Shoulder shampoo), singer My Linh (Ariel washing powder), Messi is the global ambassador for Head and Shoulder for man shampoo brand - The ability to understand customers through strong investment in market research - P&G is considered a leader in investing in industry research Integrity + Always try to the right things organization and operating environment - Positive impact + Social commitment to brand activities and commercial relationships, voluntary contributions - Continuous commitment + Commitment to how to influence the environment + Activities towards sustainable development goals - Set aspirations in the field of operation + Aspirations are based on business principles, providing an approach to management and corporate responsibility - Provide consumers with high quality products at reasonable prices wherever they need to be + Honest and straightforward + Operating under the law Leadership + High responsibility + Clear vision + Focusing resources to achieve goals Ownership + Accept personal explanations to meet business needs, improve the system and help others improve efficiency + See corporate assets as their assets to achieve long-term success - Passionate victory + Determined to best what is most relevant + Not satisfied with the status quo + Desire to improve and win the market Credibility + Respect and trust colleagues Conclusion International business strategy greatly affects the brand and the long-term development of a multinational company Companies can choose different types of strategies to grow their companies or they can choose the same strategy with different practices Two large corporations, Unilever and P&G, have been rivals for decades and have achieved much success in their development The right international business strategy gives them many benefits and experiences for the future Although in Asian markets, Unilever often dominates in terms of product quantity and market size However, each company has its own identity, increasing the difference with competitors is also a strategy for the company to exist In the future, when the world market is constantly changing and 37 markets become saturated, corporations need to have new business strategies to adapt to market conditions and to survive and develop REFERENCE Nguyễn Tuyết Anh, Khái niệm loại hình chiến lược kinh doanh quốc tế gì, Luan van 1080, https://luanvan1080.com/cac-chien-luoc-kinh-doanh-quoc-te.html, April,3, 2019 Quach Thi Buu Chau (2010), Researching business strategies International group of Procter & Gamble, Ho Chi Minh City University of Economics https://www.unilever.com https://vn.pg.com/ 38 ... to expand the market beyond Britain''s borders with the first overseas markets being Australia, Canada, Germany, and Switzerland In 1906, the company acquired Vinolia, a soap-making company In 1910,... companies penetrate the market and the main ones The book has changed to adapt to that market Methodology The paper is studied by methods of data collection and data analysis Layout of the thesis... thesis The paper consists of chapters: Chapter 1: Theoritical basic Chapter 2: UNILEVER'' S ASIAN MARKET STRATEGY Chapter 3: P&G''S BUSINESS STRATEGY IN ASIAN MARKETS Chapter 4: COMPARE STRATEGY OF