STRATEGIC MANAGEMENT

Semester Three

ESTHER PANNALALL
BBA C3
31st July 2023
Comprehension
In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspati Manufacturing Company,
followed by Lever Brothers India Limited (1933) and United Traders Limited (1935). These three
companies merged to form Hindustan Unilever Limited (HUL) in November 1956. HUL is the largest
consumer goods company in India, established in 1933 and based out of Mumbai. The company is
known for its presence across almost all categories of consumer products and has a variety of products
in each of the categories targeted at almost all the customer segments. It has products in over 20
consumer categories, including Food & Drink, Personal care, Homecare and Water Purifier, serving
over 700 million customers across the country. It is undoubtedly the market leader in the FMCG
sector. Some of the famous brands of HUL are Dove, Lux, Lifebuoy, Pears, Hamam, Lyril, Rexona, Surf
Excel, Wheel, Comfort, Clinic Plus, Sunsilk, Fair & Lovely, Pond’s, Lakmè, Vaseline, Bru, Taj Mahal,
Lipton, Brooke Bond, Cornetto, Kisan, Annapurna, Magnum, Close up, Pepsodent and many more. On
1 April 2020, HUL also acquired some leading brands like Horlicks and Boost. The company has
21,000 employees, along with 31 factories, more than 1150 suppliers and products available at more
than 8 million outlets in India
Problem Statement
PART 1
1. Assess the external environment of HUL through:
a) An analysis of the macro-environment factors using the PESTEL framework.
b) An analysis of the industry environment using Porter’s Five Forces Model.

PART 2
2. Assess the internal environment of HUL through:
a) An analysis of the firm’s business through the SWOT framework.
b) An analysis of the firm’s resources (any one) through the VRIO framework.
 PART 1
1. Assess the external environment of HUL
1.a. An analysis of the macro-environment factors using the PESTEL
framework.
PESTEL framework helps firms to systematically evaluate the external surroundings and analyse
all the factors that may affect the organisation.

Here is the PESTEL analysis for HUL:

Political - HUL is a global FMCG that has products in over 20 consumer categories worldwide.
This denotes that HUL is is extensively importing and exporting, whether it be raw materials or
finished products. This requires HUL to have healthy relations with all countries involved by abiding
to the policies for each country. Countries also have different tax and trading policies which requires
being met for a smooth functioning institution. Along with all these policies the currency value for
each country is different. In order to procure the best quality materials for the lowest cost, HUL is
obliged to maintain healthy relations globally.
 Economic - There are many factors that play a role when it comes to economic factors.
HUL being the an FMCG giant is also responsible for about 21,000 employees. For a
successful business, HUL must efficiently ensure that each employee is paid on time and
according to the salary promised. Furthermore, their success also relies on how well the stock
market is doing, both national and international. The stock market is significantly responsible
for how profitable the company is. This also includes the impact of recessions and inflations.
Socio-cultural - “By 2022, we had achieved a gender balance of 46% at managerial
levels” states the HUL website. HUL also actively recruits members of LGBTQI+
communities, persons with disabilities and minority groups. HUL is an exclusive company
that hires based on capability. HUL’s Corporate Social Responsibility (CSR) Policy aims to
positively impact by promoting hygiene and nutrition, and also focussing on developing rural
areas and encouraging education for these areas. HUL’s Project Shakti initiative positively
impacted over 1,90,000 women in rural areas of India to become independent. Project Prabhat
was developed to create sustainable community according to the UN Sustainable
Development Goals (SDGs) in order to empower communities with health and nutrition,
economic and environmental sustainability.
 Technological - According to a headline in the Economic Times, “HUL is on an
aggressive digital transformation”. In the current world of technological advancement,
HUL is updating its factories to be more efficient. They are also aiming to improve
their social media presence. In a 2019 new article, HUL was conducting over 80
experiments to accelerate the company’s digital transformation including augment
human cognition to be a “future-fit” company.

Environmental - HUL is ambitiously committed to protect nature. The

organisation’s main goal is to create a waste free world, to protect and regenerate
nature and to rely more on renewable energy. HUL believes that “nature is our biggest
ally”. They are reformulating product that are more plant based and use fossil fuel
alternatives. The aim is to achieve net-zero emissions by 2039. They are also working
on reducing their waste footprint and to reduce plastic, food and factory wastage.
 Legal - HUL is liable for all local and regional laws for each country. For example,
in the United States, products such as cosmetics and food items need to be approved
by the FDA, whereas, in India this approval needs to be granted by the FSSAI. Along
with this, the employment laws for each country is different and essential to abide by.
Countries also have consumer protection laws, such as the Consumer Protection Act
1986 which enables easy and fast compensation to consumer grievances and preserves
consumer rights. Legal also includes any leasing agreements for both lands and
equipments and any other leased item. Furthermore, Non-Disclosure Agreements are
vital for any enterprise to abide by.
A PESTEL analysis gives important insight into a company’s external
environment. We have now seen how the political, economic, socio-cultural,
technological, environmental and legal factors are affecting HUL.
1.b. An analysis of the industry environment using Porter’s Five
Forces Model.
Porter’s Five Forces Model was created to gain a better understanding of the
market system:

Here are the Five Forces:

- Competition from rival sellers

- Competition from potential new entrants
- Competition from producers of substitute products
- Supplier bargaining power
- Customer bargaining power
Competition from rival sellers.

Some rivals of HUL are ITC, Godrej Consumer Products Ltd., Marico Ltd., Procter
& Gamble Hygiene & Healthcare Ltd. The rivalry that HUL has is a consolidated
landscape where HUL is one few leaders on the industry that have an impact on the
market price along with the companies mentioned above.

Competition from potential new entrants to the industry.

FMCG barriers for entrants are generally very high however, companies such as
Patanjali and Mama Earth have been able to infiltrate the market with their own line of
products similar to the products HUL produces, such as shampoos and detergents.
Even though these companies have come through the barrier still remains very high, it
is not easy for a new company to take a leading stand among HUL products.
Competition from producer of substitute products
In the realm of instant noodles and pastas, HUL has a line of Knorr Instant pastas
and soups, ITC has Sunfeast instant pasta and Yippee noodles and Nestle owns the
infamous Maggi. Items such as these are a subject of competition among companies.
Some items sold by HUL such as cosmetics also has a wide range of substitutes and
therefore placing the threat on a moderate level. For some products, local grocery and
kirana stores also pose a threat.
Supplier bargaining power
HUL has a supplier power of 54,000 suppliers. This means that HUL relies on
54,000 suppliers for constant flow of materials for the 400 brands that it runs. This
may make the supplier bargaining power high since HUL is heavily reliant on them
but also since there are so many that reduces the threat as a replacement may be found
among the many suppliers.
Customer bargaining power

A company that has successfully excelled since the 1930s, has gained a good
amount of customer’s trust. Since, HUL is also the market leader that heavily impact
the market prices, the customer has no room for bargain. The price come printed on
the products and therefore there is nothing to bargain. However, HUL is obligated to
set prices at a decent and affordable in order to still have competitive advantage.
 PART 2
2. Assess the internal environment of HUL
2.a. An analysis of the firm’s business through the SWOT
framework
SWOT analysis is a method of internal evaluation that helps a firm where they
stand and how they can be better.

SWOT stands for:

- Strengths
- Weaknesses
- Opportunities
- Threats
Strengths:

HUL has plenty of strengths such as a wide variety of product line, they sell from cosmetics to cleaning
products to food items. They also have a global reach that allows them a massive market for distribution. Their
brands are a renowned household name, for example, Dove, Vaseline, and Lifebuoy. Along with this HUL is also
a market leader. They have also made individual sized products keeping in mind such as a single cup quantity
knorr soup and shampoo and condition single use sachets. This shows that they believe in catering to
individuals.

Weaknesses

HUL’s Net Profit has seen some decline in the last three quarters. In the December 2022 quarter the net
profit was 12% with a growth of 16%, whereas in the June 2023 quarter the net profit is 8% with a growth of only
7%. Furthermore HUL faced a terrible backlash after the Red Label ad which gave them a negatively trending
#boycotthindustanunilever. This hurt their image. Moreover, in 2016 HUL was accused of exploiting the
environment causing riots against them. Even though HUL took responsibility for their actions and progressed
to fix them, it left a stain on their reputation. Recently in 2022, HUL’s existing distributors were faced with the
fear of losing half their investments because HUL was looking to hire more distributors. This pertains to the lack
of communication between HUL and its distributors.
Opportunities
HUL like any other company has the opportunity to increase their revenue. By creating
newer products and a wider product line such as frozen foods (excluding ice creams) and
ready to eat meals. Following the recent unrest with distributors, HUL can do better to build
better relations with those that work with and for HUL. HUL does have a opportunity in the
medical field. With the recent launch of the Shikhar app that has made it easier for
distributors to get bulk orders, pharmacies can benefit from this app too.
Threats
HUL’s most damaging threat came with the #boycotthindustanunilever.
Misunderstanding cultural and social sensitivities can cause a far bigger damage than failed
products. This type of activity holds the power to turn away loyal customers too. In addition,
a bad media image never does any firm any good. Furthermore, the cost of raw materials is on
the rise and the availability is receding. As a big FMCG this is a big threat for the future
wellbeing of the company.
2.b. An analysis of the firm’s resources (any one) through the VRIO
framework.
- Resource analysed for this VRIO framework - Distribution Network
The distribution network is definitely a valuable resource that stretches all the way
from local kiranas to big grocery stores to online platforms. It is very difficult to exploit
or disrupt this resource. This distribution is somewhat rare because not all company
can organise themselves to be able to do it, however, all FMCGs have a wide range of
distributors. This therefore does make it difficult to imitate a distribution like HUL’s.
To coordinate the production of items so that it meets all distributors needs is a task
only few enterprises can conduct. It is not easy to organise such a harmonious flow of
products through distributors. It takes coordinated minds to create a network of
smooth distributions throughout the globe that consist of timely imports and exports.
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