Unilever Value Chain Analysis

Introduction

Value chain analysis seeks to distinguish the activities undertaken by a firm into a sequence, whereupon value addition is done at every stage of the sequence to enhance competitive advantage. A number of broadly defined activities are identified by Michael Porter which can be disaggregated in order to offer more detailed recognition of the actual activities of the firm. This paper seeks to analyze the main activities undertaken by Unilever Company to enhance on its products’ competitive advantage against other rival players in the industry. In particular, the company focuses on research and development initiatives, high diversification, and e-business strategy.

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Value Chain Definition

Unilever has initiated specific strategies aimed at ensuring that its products compete effectively with those of its main rival in the market, Procter and Gamble. Unilever spends considerable amounts of its resources in executing and sustaining research and development activities for purposes of manufacturing high quality products, high diversification, and ebusiness strategy as it seeks to emphasize on market leadership for its numerous brands.

1. Research and Development initiative

The Unilever undertakes increased research and development activities every year in order to support innovation in as far as the company’s products are concerned. The company has established very large centralized facilities mainly for research activities in three countries, mainly the United Kingdom, Netherlands, as well as the United States of America. Additionally, other smaller development laboratories have been established in more than 40 countries worldwide where Unilever operations take place. Huge financial resources are budgeted for these research activities in order to sustain them. For instance, in 1993, £518 million were spent in R&D, which represented close to 2 per cent of the company’s total turnover (Cole 158).

Through the increased activities in R&D, consumers of Unilever products are assured of quality products with very high innovation. The integration of technology as a result of R&D also ensures that the company cuts down on its total spending on production. This effectively implies that consumers of the company’s products are able to purchase them at very affordable products. In comparison Procter & Gamble, Unilever’s main competitor, also focuses on R&D as one of its main areas of building competitive advantage. P&G, however, spends more in R&D at the tune of $2 billion annually with a very comprehensive research network (Lamb, Hair and Mcaniel 77). This implies that P&G’s level of product innovation is quite higher as compared to that of Unilever.

2. High Diversification

Unilever adopts a diversification strategy in order to enhance its market competitive position as it targets entry into new markets. Its highly decentralized structure emphasizes a multi-local orientation pursued by the company. Through this strategy, Unilever establishes local companies whose operations are substantially independent from the headquarters, adjusts international brands to fit into local markets, as well as maintains and develops local brands that truly reflect specific needs of the local consumers. Overly, the multi-local organization targets flexibility in as far as being sensitive to consumer tastes and needs is concerned (Djarova 211).

The high diversification strategy has added value to consumers of the Unilever products in the sense that they have access to products whose origin may not necessarily be their country.

To further optimize on the value addition, Unilever does not force foreign tastes into particular national markets but rather blends the local tastes with the global product. The resultant high brand recognition by the global market provides Unilever a competitive advantage over its other rivals in the industry. On its part, P&G mainly expands into new global markets by pursuing acquisition and strategic partnering strategies. This provides the company with the advantage of establishing itself into such new markets without necessarily introducing new products. Thus, the company does not spend much of its resources attempting to stabilize a new product into the market because the products were already existing in the market in the first place (Sinha & Sinha 3).