Unilever

YiChi Lin 03/02/2011 Unilever in India Case Analysis * Problem What methods should Unilever use to train their rural sales promoters (RSP), to achieve Shakti project goal – reach 100 million consumers by 2006. * Situation Analysis A SWOT analysis (See Appendix A) resulted in the following conclusions. * Internal * Strengths Being a subsidiary company of Unilever, HLL has well-established brand image which makes it competitive in fast-moving consumer goods market. Moreover, HLL’s early entering to Indian market, local manufacturing capacity and complete supply chain strengthened HLL’s competitive advantages. * Weaknesses Political developments deregulated Indian economy policies, which made HLL faced competition in almost every category, from international as well as local rivals. In price war between HLL and P&G, HLL’s margins were affected by price drops and made it difficult from make profit. * External * Opportunities Through implementing iShakti in rural India, the rural community was benefit from accessing to information. Dialogue-interactive software developed by the Unilever research team can help residents of the village to access information such as education, career opportunities, and health. By providing this service – iShakti – to rural community, HLL can promote corporate social responsibility as well as improve brand image. * Threats However, varying degrees of support from different state government was a big threat for HLL, because governments played essential roles to determine a project successful or not in their areas. * Alternative of courses of action 1. Recruit local residents as RSPs to train Shakti entrepreneurs to help HLL achieve 100 million consumers. * Pros * Increase local employment rate and this action would acquire support from state government on Shakti project. * Because each state local resident know their own dialects, this can reduce challenge of communication while training. * The cost of recruiting local people as RSPs will be much lower than people from other countries. * Less culture barriers * Cons * Low literacy rates makes HLL difficult to find qualified workers. * Different cultures in HLL company might cause communication problem and affects successfulness of Shakti project. 2. Train current 500 RSPs to learning different dialects * Pros * HLL can save money from recruit another 500 RSPs. * There already is a group of qualified RSPs who can be trained in language skills. * Cons * Workload for current RSPs would be heavier that might cause work efficiency decrease or higher turnover. * It takes time to learning language, therefore, the goal of Shakti project might not achieve by 2006. 3. Create an interactive communication entrepreneur social network through iShakti, which would give information and feedback to the Shakti entrepreneurs. * Pros * Sharing experiences through iShakti, Shakti entrepreneurs learn how to increase their numbers of consumers. * Cons * It will increase cost of Shakti project, because HLL needs to improve telecommunication to build iShakti network. * Recommendation From the above alternatives, Option 1 provides the greatest opportunity for HLL for the following reasons: First, Shakti project operated in 12 states, however, only 5 state governments cooperated with HLL closely. Acquiring support from local government while implementing a project will definitely increase the possibility of successfulness. There are societal advantages to hiring locally such as a reduction in the unemployment rate, which will lead to a reduction in crime and will pay dividends for HLL far into the future. Due to this reason, each local government would happy to support HLL to implement Shakti project in their states. Moreover, one challenge in developing this plan is the language barrier that exists hinders communication from region to region. That is, low education levels might affect successfulness of Shakti project, but HLL can recruit people from urban areas who have higher level of education as new RSPs to solve this problem. Finally, due to increasing cost of Shakti project, HLL should not recruit more RSPs from other countries because it would increase overhead cost for HLL and people from other countries might need to be trained in language skills. Besides, another advantage of recruiting local workers is that they know the cultures and the correct mannerisms which help HLL connect to region closely. Furthermore, HLL is a multinational company; therefore, it is not a new experience for employees in HLL working in the multinational environment. * Conclusion In the early 1990s, the deregulation of India’s economy brought new local and national competitors to HLL’s markets. Although HLL had some advantages and potential opportunities to success in Shakti project, keep increasing cost expenditures would have serious consequences for Shakti project’s success. Therefore, recruiting local people as RSPs would be the best solution for HLL because it would not only reduce overhead cost for HLL but also reduce culture barriers in rural markets. Appendix A Exhibit 1 SWOT Analysis * Strengths * HLL was India’s largest fast-moving consumer goods (FMCG) company and a subsidiary of global consumer goods giant Unilever. Their products account for 40% to 45% market share in every category. * HLL has strong, well-established brands. * HLL has integral local manufacturing and supply chain system. | * Weaknesses * Large number of small brands makes HLL difficult to effectively market any dominant brand. * Previous cost-cutting measures have made HLL more difficult to be profitable with established brands, Star products are moving to Cash Cow' * Operating in each different province requires different governmental regulations and interests which create red tape. | * Opportunities * HLL was the only FMCG company accessing accessible villages close to urban (indirect coverage) markets directly. * HLL partnered with recipients of micro-credit to develop its brands trough local influencers in rural markets. * There is a demand for low-unit-price packs among lower-income groups * HLL was the first and only company developed information technology to rural India, which could help it to build brand image. | * Threats * HLL faced to two broad forms of competitions, unorganized local players and organized national brands. * HLL’s rivals had begun to emulate a number of its rural distribution initiatives * Because of poor reach of electronic media and lower literacy levels in rural markets, HLL’s brand consciousness was low. * Increasing costs from Shakti project affected revenues of Shakti project. * Different state governments held different degrees of support on Shakti project. |