Business strategy assignment determining business strategy of Unilever using Porter’s Generic Competitive Strategies framework

Question

Task: Analyse Unilever's business strategy using Porter’s Generic Competitive Strategies framework. Critically evaluate Porter’s Generic Competitive Strategies framework by identifying its advantages and limitations, and then develop three recommendations on how its limitations might be overcome. Use academic sources to support your argumentsmentioned in the business strategy assignment.

Answer

Introduction
The business strategies need to be planned by organisations keeping several factors in mind. The organisations must analyse their internal and external environment as well as investigate the factors which lead to competitive advantage. In this business strategy assignment, Michael Porter’s generic strategy theory will be referred to for understanding the business strategy of Unilever. This framework of Porter facilitates the organisations to remain competitive in the market and thrive in the given market environment (Islami, Mustafa &TopuzovskaLatkovikj, 2020). For successful business planning, strategies are crucial. The organisation, Unilever can identify its industry niche and learn more about its target customers. The company can employ strategies which are effective and competitive. According to Liu (2022), Porter looks at strategy as the organisational ability to gain competitive advantage through three different strategies. These three strategies include differentiation, cost leadership and focus. This is a generic approach suggested by Porter and is applicable to organisations in general irrespective of the industry or sector. In the first part of this business strategy assignment, the Porter’s Generic Competitive Strategies framework will be applied for determining the business strategy of Unilever. In the second part of the business strategy assignment, an analysis of the framework will be made along with a reflection on the framework. The benefits and limitations of the framework will be identified in this section. This is a more generic segment and does not apply to the organisation specifically.

Analysis of business strategy of Unilever using Porter’s Generic Competitive Strategies framework in the business strategy assignment
The strategy of Unilever is to make sustainable living a commonplace for the global customers. This strategy and purpose drives the business of at Unilever and motivates its employees to work towards such goal realisation and to deliver exceptional performance. As per the Porter’s Generic Competitive Strategies framework discussed in the business strategy assignment, there are three main strategies. These three crucial strategies mark the success of an organisation (Lauer, 2019). The first strategy is that of cost leadership. The aim of the company is to ensure that they can stand out in the industry as a low cost supplier. In this case, Unilever should strategically plan their operations so that they can reduce their cost of production which would be then reflected in the prices. The sources of cost advantage could be diverse. For Unilever, the cost leadership depends on factors like proprietary technology, economies of scale and preferential access to raw materials. The company addressed in the business strategy assignmentneeds to identify and exploit these sources of cost advantage. When Unilever is able to achieve cost advantage and sustain, they can emerge as a cost leader in the industry. Unilever is trying to emerge as cost leaders in India, U.S, China and other emerging markets (Unilever, 2022a). The low cost of production in developing nations would give a cost advantage to Unilever. They are further aiming at exploiting the e-commerce market which could curtain costs and increase reach.

The next strategy mentioned in the business strategy assignmentis that of differentiation. This implies that Unilever has to aim at emerging as a unique company in the industry. This is possible when the company seeks to emerge unique along certain dimensions which are valued widely by the buyers (Unilever, 2022a). The company can select one or more attributes which the consumers in the industry consider as important and might give a unique position to the company. Unilever needs to find its point of differentiation to have a better position in the industry. Unilever will be rewarded with a premium price for its uniqueness. Unilever is trying to create their differentiation by accelerating their portfolio development into the high growth spaces like skincare, hygiene, prestige beauty, plant-based foods and functional nutrition.
The third strategy mentioned in the business strategy assignmentis that of focus. This is a generic strategy which depends on the choice of streamlined competitive scope within the industry. The company, Unilever,as a focuser should select a group or segment of the industry so that it can tailor its strategy to serve that section, excluding others. Unilever can explore the two variants of the focus strategy. When Unilever is ‘cost focus’, the company seeks to identify the cost advantage in the market’s target segment. As stated by Odwaro, Abongo& Mise(2022), in the ‘differentiation focus’ Unilever aims at differentiating in the target segment. It is found in this business strategy assignment that the foundation of the focus strategy and its two variants lie in the difference between the target segment of the focuser and the other segments in the industry. The target segment of Unilever should either have consumers with unusual needs or delivery system and production which best serves the target segment and should differ from the other segments of the industry. Cost focus exploits the cost behavioural differences across segments while differentiation focus exploits the specific needs of the consumers of the segment (Memon et al, 2021). For differentiation focus, Unilever considered in the business strategy assignment is trying to win with their brands which are a force for good as they cater to social and environmental issues. Sustainability today is a special need of consumers.

According to Johnson et al (2020), the product strategy of Unilever is to focus on the acquiring the leading position in the industry and exploring high growth markets. It is found in the business strategy assignment that in the year 2014, Unilever had divided their product portfolio into four main segments. These include home care, personal care, refreshments (ice cream and tea) and foods. There are various popular brands under the brand name of Unilever. These include Blue Band, Knorr, etc. in foods segment. Dove, Axe, etc. under personal care category. Cif and Omo in home care segment and Lipton, Magnum, etc. are popular products under refreshments category (Unilever, 2022a). Unilever aims at gaining competitive advantage by making their products available to the customers in developed nations in the supermarkets as well as customers in developing nations through small retail stores. According to Unilever (2022b), the annual reports of Unilever highlight the strategies Unilever uses to deliver value and compete in the market. It is found in the business strategy assignment that the company has consistently focused on continual development, introducing improved products across their four segments so that they can cater to the customer needs. Unilever over the years, have been innovating in their business and adding a new meaning to their brand concept in international markets. The company has tried to lower their cost of sourcing, distribution and manufacturing. However, the company has never tried to emerge as a cost leader by compromising on their quality. Thus, Unilever’s strategies are aligned to Porter’s generic competitive strategies framework.

Analysing the advantages and limitations of thePorter’s Generic Competitive Strategies framework
Benefits addressed in the business strategy assignment
There are several benefits of thePorter’s Generic Competitive Strategies framework mentioned in the business strategy assignment. As discussed above, there are three main generic strategies in the generic strategy theory of Porter. These are differentiation, cost leadership and focus. As per Manyeki, Ongeti&Odiyo(2018), out of these three strategies, an organisation can choose a strategy for gaining competitive advantage. The benefit of the cost leadership generic strategy mentioned in the business strategy assignmentis that an organisation can lower the costs while retaining the prices on its popular, high demand products. Through differentiation strategy, an organisation can reap the benefit of offering the products which attract a selected target segment in the market or they might choose to offer products across segments, industry-wise. The organisations can benefit from each strategy use as the outcome of each would be different. There could be companies in the same industry selecting different strategies depending on the situation and their needs. The organisations using the Porter’s generic strategy framework can run a competitive analysis within their specific industry. The companies must know before planning their strategies who are its competitors and what their moves are so that it does not become difficult in driving the marketing efforts towards a desired outcome or getting optimum returns on the investment (Bhattacharyya &Thakre, 2021). It is found in this business strategy assignment that the benefit of the Porter’s framework is varied across companies. The relative position of a company within the industry decides profitability of the company. The companies can emerge above their industry average if they make a right analysis of their competitors. The basis of the above industry average profitability over the long term period is sustainable competitive advantage. As opined by Lorenzo, Rubio &Garcés(2018), the organisations can use the framework for gaining cost leadership. They are benefitted because they can gain a larger market share by lowering their prices. This cost leadership is maintained while retaining the profitability. The companies can further utilise the Porter’s generic competitive strategy framework for maintaining the average prices and further increasing their profits. The companies can make the most out of the Porter’s generic competitive strategiesif they select the strategy which suits their business, its strengths and weaknesses, and not just having potential of adding revenue. The companies use this framework for making a priority list and assessing their strategies. It is found in this business strategy assignment that the dealing of the business should be considered while prioritising the strategy. The companies can strategically plan their move by analysing the five industry forces of entry barrier, supplier power, buyer power, threat of substitutes and rivalry (Sun & Lee, 2019). It can be said that the Porter’s generic competitive strategies are used far and wide across organisations and sectors because the move, actions and strategies can be planned and guided by the framework, keeping profitability and competitiveness in mind.

Limitations addressed in the business strategy assignment
The Porter’s generic strategy framework has certain limitations. These limitations are from the managerial relevance and research methodology perspectives. As per Okatahi et al (2021), the theory or framework is not appropriate for empirical description of diversified company strategies or strategies of multinational companies because the generic approach is not applicable. It is analysed in this business strategy assignment that there are companies which fail to implement one of the generic strategies effectively. As per this framework, a company is stuck midway if it is unable to offer features or products which are unique for convincing the customers for buying them. The company will also not be able to attain success if their prices are very high for competing in the market. However, this may not be the case for every organisation. The same issues and strategies are not applicable to every situation.

Recommendations
According to Greckhamer& Gur(2021), effective pricing is needed for having a competitive edge but examining the organisational strategy at business level through generic lens has limitations. As per the business strategy assignment findings, the companies which follow a specific generic strategy tend to share specific characteristics. This can be well explained with the help of an example. A company might try to emerge as a cost leader by keeping its costs low. This they might attain by not making huge expenditures on advertising. However, every organisation will not follow this path to gain cost advantage. Walmart and Waffle House both have adopted cost leadership strategy. However, the former spends sufficiently on television and print advertisement while the latter hardly invests in advertising. As stated by Abdolshah, Moghimi&Khatibi(2018), the companies might not be able to match every feature or attribute which the generic strategy suggests or entails. Therefore it is found in this business strategy assignment, the generic application of strategy limits its implementation. The organisations need to plan and implement a strategy which considers the nature of the business in the specific industry. The idea of the generic strategy is important, however, its situation specific implementation is essential for attaining success in business.

Conclusion
It can be concluded from the business strategy assignmentthat Unilever or any other organisation to attain success in their business should resort to Porter’s generic competitive strategies framework. This framework is useful because it helps the organisations to gain competitive advantage. This implies that through the implementation of the three strategies, cost leadership, differentiation and focus, aligned with the Porter’s generic strategies framework, an organisation can find the path for sustainable growth. Unilever has planned its business strategies keeping the three generic strategies in mind, which is reflected in their purpose and goals as well as annual reports. Unilever has gained an edge above its rivals in the market by planning their strategies as per the requirements and aspirations of the customers. Their sales and cost structure gives them a competitive edge, taking them beyond and above their competitors in the market. Through the analysis of the advantages and limitations of using Porter’s generic strategies, it can be said that the strategies may not always be applicable to every situation and every organisation. However, these generic strategies provide effective assistance in management, profitability and growth. As per the findings of the business strategy assignment the competitive advantage created by organisations can be sustained if they make contextual or situation application of the three strategies of Porter.

References
Abdolshah, M., Moghimi, M., &Khatibi, S. A. (2018). Investigating competitive advantage in banking industry based on Porter's Generic strategies: IRANs newly-established private banks.
International Journal of Applied Management Sciences and Engineering (IJAMSE), 5(1), 52-62.
Bhattacharyya, S. S., &Thakre, S. (2021). Coronavirus pandemic and economic lockdown; study of strategic initiatives and tactical responses of firms. International Journal of Organizational Analysis.
Greckhamer, T., & Gur, F. A. (2021). Disentangling combinations and contingencies of generic strategies: A set-theoretic configurational approach. Long Range Planning, 54(2), 101951.
Islami, X., Mustafa, N., &TopuzovskaLatkovikj, M. (2020). Linking Porter’s generic strategies to firm performance. Future Business Journal, 6(1), 1-15.
Johnson, G., Whittington, R., Regnér, P., Angwin, D., & Scholes, K. (2020). Exploring strategy. Pearson UK.
Lauer, T. (2019). Generic Strategies, Outpacing and Blue Ocean–Discussing the Validity of Three Strategic Management Theories Using Case Studies from Airlines and Grocery Retail. Theory, Methodology, Practice, 15(01), 57-66.
Liu, Y. (2022). A Review of the Basic Theory of the Great Michael Porter’s Positioning School. In Proceedings of the 5th International Conference on Economic Management and Green Development (pp. 265-271). Springer, Singapore.
Lorenzo, J. R. F., Rubio, M. T. M., &Garcés, S. A. (2018). The competitive advantage in business, capabilities and strategy. What general performance factors are found in the Spanish wine industry. Wine Economics and Policy, 7(2), 94-108.
Manyeki, K., Ongeti, W., &Odiyo, W. (2018). Influence of Porters Generic Strategies on Performance of Private Chartered Universities in Kenya: A Case of Nairobi County. Journal of Strategic Management, 2(5).
Memon, A. A., Afshan, G., Memon, A. A., Rajput, O., & Kumar, K. (2021). War for Competitive Advantage–‘Porter’s Generic Strategies Past–Present–Future’–A Review. Available at SSRN 3846056. Odwaro, N. C., Abongo, B., & Mise, J. K. (2022). Moderating Effect of Dynamic Capabilities on the Relationship Between Porter’s Generic Strategies and Performance of Commercial Banks. European Journal of Business and Management Research, 7(4), 217-224.
Okatahi, O., Nwachukwu, C., Minh, V. H., &Odiakosa, I. (2021). Porter’s generic strategies for competitive advantage: how they work in selected asian economies. LaplageemRevista, 7(3D), 282-289.
Sun, K. A., & Lee, S. (2019). Competitive advantages of franchising firms and the moderating role of organizational characteristics: Evidence from the restaurant industry. International Journal of Hospitality Management, 77, 281-289.
Unilever. (2022a). Our Company. Available at About - Purpose - Our Company | Unilever. [Accessed on 13 September 2022]
Unilever. (2022b). Archive of Unilever Annual Report and Accounts | Unilever. Available at Archive of Unilever Annual Report and Accounts | Unilever. [Accessed on 13 September 2022]