EIC Analysis of Hindustan Unilever limited

Hindustan Unilever Limited (HUL) is India’s largest fast moving consumer goods company,
touching the lives of two out of three Indians with over 20 distinct categories in home &
personal care products and food & beverages. They endow the company with a scale of
combined volumes of about 4 million tonnes and sales of over Rs. 13,000 crores.

It is currently headquartered in Mumbai, India and its 41,000 employees are headed by
Harish Manwani, the non-executive chairman of the board.

HUL is also one of the country’s largest exporters; it has been recognised as a Golden Super
Star Trading House by the Government of India. The Anglo-Dutch company Uni lever owns
a majority stake (52%) in Hindustan Unilever Limited.

Hindustan Unilever’s distribution covers over 1 million retails outlets across India directly
and its products are available in over 6.3 million outlets in India, i.e., nearly 80% of the retail
outlets in India. It has 39 factories in the country. Two out of three Indians use the company
products and HUL products have the largest consumer reach being available in over 80 per
cent of consumer homes across India.

HUL was one of the eight Indian companies to be featured on the Forbes list of Worlds Most
Reputed companies in 2007.

EVALUATING THE ENVIRONMENT

EXTERNAL ENVIRONMENT – PESTLE ANALYSIS

The PESTEL analysis of Hindustan Unilever limited is as follows:

(P)olitical

While discussing PESTEL analysis of Hindustan Unilever Ltd. firstly I discuss political
aspect of PESTEL analysis of Hindustan Unilever Ltd. India’s deregulatory environment has
helped MNCs in India to expand into various products and services, after 1991 HUL also
took advantage of this situation and merged with Tata Oil Mills Company and Lakme Limited
enabling HUL to enter new markets of cosmetics and food oil of which it was not part before
and wanted to enter.

Later on in 1994 it took over Kimberly Clark Corporation in order to take over marketing of
Huggies diapers and Kotex sanitary pads. HUL does not support any political party or
government by funding its operations since it is a business entity and wants to restrict its
operations to that field only, also it knows how sensitive people of India are in terms of
political alliances.

However, such MNCs, due to large funds reserved for helping the government in improving
the livelihood of people they sometimes tend to exert pressure on government to pass out a
certain law that’s favouring them.

(E)conomic

While discussing PESTEL analysis of Hindustan Unilever Ltd. Secondly I discuss economic
aspect of PESTEL analysis of Hindustan Unilever Ltd. When the whole world faced a major
economic crisis, Asian countries were least hit due to their not-so-strong reliance on interest
based investments. When unilever was making in most of the countries abroad it remained
profitable in India although profit declined.

Raw material sourcing is first step of supply chain and fluctuation in them could disturb the
pricing of the products. The brands that unilever sells are everyday product so people are
sensitive to their pricing and constant price change can put them off. Chemicals and palm oil
are major raw material used and inflation keep eating the bottom line for soaps and detergents
which are formed from these raw materials.

India stand on lowest level when it comes to per capita consumption on personal care
products; HUL has been trying to change that perception for years. In India HUL faces direct
competition not only by MNCs but also local producers who are successful to extent that it is
impossible to break their market share and loyalty

(S)ocial

While discussing PESTEL analysis of Hindustan Unilever Ltd. Thirdly I discuss social aspect
of PESTEL analysis of Hindustan Unilever Ltd.HUL launched program “Shakti” for women
in rural areas to empower them andmake them independent, earning their own livelihood and
spending that incomeon improving lifestyle of whole family.

The project started off with one womanbeing selected from each village as “Shakti woman”
who would buy Unileverproducts from company representatives at a discount and sell these
products fora profit at her own village.
Another initiative by HUL includes increasingawareness among villagers about the
importance of cleanliness throughLifebuoy Hand washing Programme since 2010. Through
Pure it is providingclean drinking water to millions of people. It has also controlled
environmentalpollution by curtailing CO2 emissions, reducing waste products and usage
ofwater.
HUL also promotes Equal Employment Opportunity to all and encouragewomen to be a
part workforce even after marriage and children and make iteasy for them to maintain a
balance in their worklife and household responsibilities, by opening daycares at offices,
providing flexible timings and workhome facility.

(T)echnological

While discussing PESTEL analysis of Hindustan Unilever Ltd. Fourthly I discuss

technological aspect of PESTEL analysis of Hindustan Unilever Ltd. For HUL technological
development in India means more connectivity to people. Now there are apps available which
would inform the consumers when theirfavourite brands are being restocked at their nearest
supermarkets.

For HUL ithas become easier to manage its large supply network and monitor the
inventory situation. Factories have been installed with automated operationswhich have
eliminated the errors that manual work could produce and alsoincreased the productivity
and efficiency.

(E)nvironmental

While discussing PESTEL analysis of Hindustan Unilever Ltd. Fifthly I discuss

environmental aspect of PESTEL analysis of Hindustan Unilever Ltd. HUL has been in
highlight for breaching environmental laws of dumpinghazardous chemical on a nearby land
endangering lives of citizens andemployees.

This incident happened at Kodaikanal factory where Unilever wasaccused of dumping and
selling scrap of glass material containing Mercury, whenthis was brought under light, HUL
not only closed down the factory but alsolaunched investigation and tried to trace all the
material that has been sold tothe dealer. The results of investigation showed that illegal
selling of scrap mercury did take place which is the breach in code of conduct however the
manufacturing process itself was safe as was duly audited by both company and relevant
authority.

The company had to clean all the scrap waste from the soil and offered to stop the
contaminated water from down the valley through placement of silt traps. They took
permission from both Indian and U.S. government to transport back waste material to U.S.
for further processing.

(L)egal

While discussing PESTEL analysis of Hindustan Unilever Ltd. Lastly I discuss legal aspect
of PESTEL analysis of Hindustan Unilever Ltd. HUL makes sure it adhere to all local laws of
the state in which it is operating. For example in Gujarat due to floods and drought the
government put restrictions on prices of all good and services available in order to provide
some relief to people, HUL could not increase price of its brand despite of high cost of
production.
Basic laws are more or less the same with slight variations and unilever has to make sure it
does not violate any laws due to negligence , thinking that same laws will be applied
everywhere.

PORTER’S FIVE FORCES MODEL

Threat of Substitutes products (Low):

The presence of substitute product can definitely lessen the revenue of HUL. The threat of
substitute product for HUL is high but it is low. The first and foremost thing to consider is
this regard is the switching cost for the customer and definitely it is low as mentioned above.
But as matter of fact, the less availability for the substitute makes the position of HUL strong.
HUL being reliable and well reputed company has the loyal customers. The reason is that
HUL has won the trust of its customers by proffering the high-quality products at fair prices.
All these things combine to make HUL the best choice for all the customers.

Threat of new Entrants (Low):

The threat of new entrant for HUL is low. The first and foremost thing to consider in this
regard is the high cost of brand development and second thing is high economies of scale. As
matter of fact, it is not difficult for the customers to switch to new entrant if they proffer them
the high-quality products at low prices as compared to HUL.
HUL enjoy a good repute and customers rely on it. All these things make it difficult for new
entrants to enter into his market and win customer trust. Consequently, the HUL remains in
really strong position and threat of new entrant is really low.

Bargaining power of Suppliers (Moderate):

As a matter of fact, the HUL has wide array of options: when we talk about suppliers so the
size of average suppliers remains moderate in size. The external factors are moderate overall
supply, the moderate population of suppliers as well as moderate size of individual suppliers.
HUL has very good relationship with its suppliers, same as it has with the customers. So, the
suppliers don’t switch or high their cost merely for sake of good relation with the company.
So, the bargaining power of suppliers is significant consideration but at same time, it’s
moderate for HUL.

Bargaining power of Buyers (High):

The business of HUL entirely depend on the customer response to the products. So, in this
scenario the customers as well their response, is really very important for the company.
The reason for bargaining power of buyers is high due to that the cost of switching cost for
the customers is really low so they can easily transfer or switch from HUL products to other
companies. Also, the customer has all information regarding product quality as well its prices.
So, this also make it really very easy for the customers to judge well and switch to the option
which is beneficial for them. For instance, the customer can compare the quality of products
as well as their prices and decide on the better option for them from all available options. So,
keeping all these in mind, we get to know that bargaining power of customer for HUL is
really strong and HUL needs to satisfy them in accordance with quality and prices.

Competitive rivalry (High):

No matter what the industry is, the competition has been the major thing to consider. When
we talk about HUL, competition becomes one of the most important external factors to
consider. The HUL face a strong level of competition from competitors in the industry.
HUL isn’t the only firm but there are number of firms available that are operating in this
industry of customer goods. There are many which are giving tough competition to HUL as
switching cost for customer is really low, for instance, the customer is always provided the
several options to buy the good from, in this high level of competition in this industry.

SWOT ANALYSIS OF HINDUSTAN UNILEVER LIMITED

(S)TRENGTHS

 HUL is a part of the Unilever group, hence strong brand equity

 It has over 18000 employees
 Hindustan Unilever has a reach of 6.4 million retail outlets which includes direct
reach to over 1.5 million retail outlets
 Two R&D centres in India in Mumbai and Bangalore
 Products with presence in over 20 consumer categories with over 700 million Indian
consumers using its products
 As a part of CSR, HUL has initiatives like project Shakti, plastic recycling, women
empowerment etc
 Strong legacy of the HUL brand since its inception in 1934
 Book value per share improving for last 2 years.
 Rising net cash flow and cash from operating activity.
 Through high infiltration in the market, HUL had figured out how to hold their high
piece of the overall industry in various item classifications.
 By marking mainstream VIPs for the commercials of their items HUL has made
positive verbal exchange over the ages which helped them in social acknowledgment
of their items brilliantly focused on and implied for various salary gatherings.

(W)EAKNESS
  Negative breakdown first support (LTP<S1)
 Promoter holding decreased by more than -2% QoQ
 Promoter decreasing their shareholding.
 Hindustan Unilever faced controversies like skin lightening creams, pollution etc
 Sometimes having an expansive brand portfolio can prompt confounded situating.
Value situating in certain classifications takes into account low-value rivalry like
AMUL caught Quality’s piece of the overall industry.

(O)PPORTUNITIES

 Brokers upgraded recommendation or target price in past three months.

 HUL can tap rural markets and increase penetration in urban areas
 Mergers and acquisitions to strengthen the brand
 Increasing purchasing power of people thereby increasing demand

(T)HREATS

 Intense and increasing competition amongst other FMCG companies can affect
business of HUL.
 FDI in retail thereby allowing international brands.
 Competition from unbranded and local products can hurt Hindustan Unilever’s
market.
 Stocks with high PE (PE>40)
 With exceptionally enhanced shopper merchandise advertise where there are loads of
brands guaranteeing various sorts of advantages, it’s very hard for buyers to adhere to
a specific brand and consequently results into brand exchanging where purchaser got
capacity to choose a brand dependent on a few factors like accessibility, reference
bunch suggestion, inclination, and cost.

BCG MATRIX OF HINDUSTAN UNILEVER LIMITED

The BCG matrix is a chart developed by Bruce Henderson for Boston Consultancy Group in
1968. The matrix uses market growth rate and market share as the parameters for analyzing
the portfolio of any organization.

DOGS:
A business unit that has a small market share in a mature industry. A dog may not require
substantial cash because dogs have low market share and a low growth rate. If we apply this
on Hindustan Unilever Limited Taaza, Bru and Brooke Bond Sehatmand are the dogs.

CASH COWS:

While discussing BCG Matrix for Hindustan Unilever Limited secondly cash cows are
discussed. When market share is high and market growth is low then the situation is known
as cash cows. Here, Hindustan Unilever Limited in this situation is applied on Clinic Plus,
Sunsilk, Vaseline and Red label.

STARS:

While discussing BCG Matrix for Hindustan Unilever Limited thirdly Stars s are discussed.
When market split and market enlargement both are high then the situation is known as stars.
Here Hindustan Unilever Limited Axe deodorant, Lakme, Vim, Wheel, Surf excel, Lifebuoy,
Lux, Kwality Walls, Kissan jam and Knor Soup come under stars.

QUESTION MARK:

While discussing BCG Matrix for Hindustan Unilever Limited fourthly and finally question
marks are discussed. When market share is low and market growth is high then the situation
is called question marks. Question marks are also known as problem child. Close-up,
Annapurna, Fair & Lovely, Domex, Breeze and Knor meal Maker are considered as question
marks here.

McKINSEY’S 7 S MODEL
The McKinsey 7S Model is a framework for organizational effectiveness that postulates that
there are seven internal factors of an organization that need to be aligned and reinforced in
order for it to be successful.

7s Models are-

 Strategy
 Systems
 Structure
 Skills
 Staff
 Style
 Shared Values

STRATEGY:

The Strategy of HUL has been to introduce new and innovative products at competitive price
in the market which gives value for money. This is the prime reason that the company
emphasizes a lot on research and development. This is why it has termed as the most reputed
FMCG brand in the country.

STRUCTURE:

The basic organisation of the company, its departments, reporting lines, areas of expertise and
responsibility (and how they inter- relate).

Hindustan Unilever Limited is India’s largest fast-moving consumer goods (FMCG)

Company. It is present in home and personal care and food and beverages categories’ and
Group Companies have about 15,000 employees, including 1200 managers.

The fundamental principle determining the organisation structure is to infuse speed and
flexibility in decision making and implementation with empowered managers across the
company’s nationwide operations.
SYSTEMS:

Formal and informal procedures that govern everyday activity, covering everything from
management information systems, through to the systems at the point of contact with the
customer (retail systems, call centre systems, online systems, etc.)

HUL has one of the best MIS systems in the country to coordinate day to day activities with
its huge distribution network including depots, wholesalers and retailers as well. The
company has come up with the new retailing structure of city stores, family and bazaar store
that are supported by the Adonis Software System.

SKILLS:

The capabilities and competencies that exist within the company. What it does best.

HIUL excels in the following-

 The company has maintained an extensive network of distributors that enables it to

reach millions of customers. No other manufacturer in the country has such extensive
distribution channel.
 HUL’s factories ensures uninterrupted supply of FMCG for captive consumption.
 HUL is distinguished by its global presence and its access to other global brands.

SHARED VALUES:

The values and beliefs of the company

HUL believes in the following values-

 Equality of opportunity
 Conducting operations ethically
 Long term Partnership with suppliers/ business associates
 Training for new skills development
 Promotion on merit
 HUL believes in being good corporate citizens.

STYLE:

The leadership approach of top management and the company’s overall operating approach.

Career development program in HUL takes in to consideration the following activities-

 Provides training to the employees and recognized its front-end sales force.
 It has undertaken intensive training program for its employees and managers to ensure
excellence in customer service. It has empowered its workforce by promoting the best
performers and bringing in new managers with fresh ideas.

STAFF:
The company’s people resource and how they are developed, trained and motivated. Unilever
is committed to diversity in a working environment where there is mutual trust and respect
and where everyone feels responsible for the performance and reputation of our company.

It will recruit, employ and promote employees on the sole basis of qualifications and abilities
needed for the work to be performed

They are committed to safe and healthy working conditions for all employees. They will not
use any form of forced, compulsory or child labour.

They are committed to working with employees to develop and enhance each individuals’
skills and capabilities.

They respect the dignity of the individual and the right of employees to freedom of
association.

They will maintain good communications with employees through company-based

information and consultation procedures.

ANSOFF’S GROWTH STRATEGY

MARKET PENETRATION:

Market – India
Product – Lifebuoy
 Re-launch as sales plummeted in 2001 by 15%
 Swasthya Chetna Campaign and a new shape of the soap
 In 2009, introduced the Lifebuoy way to reach rural markets

PRODUCT DEVELOPMENT:

New Product: Various new products of dove

 Shift from soap brand to a beauty brand
 The advertisements made used real women as opposed to models
 High priced and good quality
 Needed to be differentiated to remain competitive
 Brand extension – Deodorant, Face wash, Lotions etc.

MARKET DEVELOPMENT:

Market: India
 Exiting product – Citra, skin brand which is available in Middle east and South easy
Asia
 Competition to Patanjali, Dabur and Himalaya
 Targets women between the age 15-35 years
 Why- further strengthen HUL’s dominance in skin care
DIVERSIFICATION:

New Product: Ayurvedic products under brand Ayush

Market: India
 Why- Behemoth and Baba
 Launch 20 products of toothpaste, skin creams and other beauty products with mass
market positioning
 Price range between 30-130