Firm Background and Industry: Provide an overview of the chosen firm, including its history,
industry, products/services, and geographical scope of international operations
With a legacy that spans over a century, Unilever, a lasting giant started over a century ago, emerges
as a mighty entity in the domain of consumer goods. Ever since its establishment in 1930 as a result
of a successful Dutch-British merger, this multinational corporation has managed an extensive
distribution network, supplying detergent, processed foods, and various consumer goods in
numerous countries. Within the complex fabric of Unilever's historical narrative, significant events
emerge like celestial entities: from the foregoing exploration of mass markets in the burgeoning
regions of Africa and Asia to the monumental endeavour of extending its sphere of influence into the
continental fabric of Europe and distant territories. A multitude of corporate evolutions have been
woven into a complex narrative through the acquisition of numerous entities.
The extravagant assortment of Unilever, which includes but is not limited to food, beverages,
cleaning elixirs, and personal care products. This celestial marketplace is embellished with renowned
brands including Dove, Liquid I.V., Sunsilk, and Vaseline. Unilever, a multinational corporation with a
dominating influence in the chilly domain of ice cream, exerts control over sectors including beauty
and wellness, personal care, home care, and nutrition. Its omnipresent presence reverberates
through the sonic waves of international trade.
International operations flourish as the cartographic tendrils of Unilever extend across the vast
extent of space, shaping consumer goods enterprises in the fertile regions of Africa, the mysterious
terrains of Asia, and the rhythmic pulses of Latin America. A testament to Unilever's economic
ascent, the 1970s witnessed the emergence of a European court of grandeur, wherein approximately
177,000 disciples laboured throughout the European Economic Community and invested ardently in
fixed assets. As strategic acquisitions, comparable to celestial alignments, strengthen Unilever's
presence in North America, the narrative progresses westward, encompassing entities such as
National Starch in the laborious landscapes of the United States and Frigo ice cream in the warm
Iberian regions.
Unilever's transformation, a cosmic ballet of commerce characterised by an alchemical evolution into
a transnational entity choreographed by the pragmatic harmonies resonating in the marketplace.
However, within this symphony of stars, Unilever's guiding principle becomes apparent: an allegiance
to Positive Beauty and Healthy Way of Life, which surpasses mere financial gains. Unilever,
symbolising regeneration, equity, and inclusivity, persists in crafting its mysterious history, which is an
intrinsic part of its very being.
Institutional Distance Analysis: Define and explain the concept of institutional distance. Analyze
the institutional differences (cultural, regulatory, political, etc.) between the home and host
countries of the firm's international operations.
Institutional Distance Analysis
Concept of Institutional Distance:
Institutional distance is all about spotting the dissimilarities in the formal and informal setups, like
cultural, regulatory, and political factors, between different countries. These disparities become a big
deal for multinational companies when they're spreading their wings into foreign markets. It's crucial
for them to get a handle on these differences to make their international business endeavors
successful.
Institutional Differences Between the UK and India for Unilever
Unilever, this giant global company, does its thing in both the United Kingdom (UK) and India. But, it
bumps into quite a few differences in how things work in these two places.
Cultural Differences: According to Hofstede's cultural model, India has this thing called a low power
distance culture, which basically means a more equal structure in how organizations are set up.
That's not quite the norm in the UK, and this difference might shake up how people manage stuff
and make decisions at Hindustan Unilever Limited (HUL).
Political: Now, India's rules and politics are on a whole other level compared to the UK. Taxation,
labor laws, government policies – they're not the same. Unilever has to be like a chameleon,
changing its strategies to fit into India's scene.
Market Dynamics: India's market is like a wild ride with twists and turns – consumer habits,
economic conditions, and rural demands create unique challenges and opportunities for Unilever.
Like, there's even a recent report talking about how wonky monsoon rains affected farming income
and what people are buying, messing with how much Hindustan Unilever sells.
Business Strategy and Innovation: Unilever's game plan in India, like their "Winning in Many Indias"
approach, shows they get that India is a diverse market. So, they're customizing their products, ads,
and how they get stuff from point A to point B.
Unilever has its work cut out, dealing with these big differences between how things roll in the UK
and India. We're talking about culture, rules, politics, and how people shop. Figuring out how to
handle these gaps is like the secret sauce for Unilever's success in different corners of the globe.
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International Strategy: Discuss how the identified institutional distance has influenced the firm's
international strategy. Analyse the firm's approach to entry modes, market selection, adaptation,
etc., to local institutional environments.
The company’s international marketing strategy has been an interesting blend of both globalisation
and localisation. This is in recognition of the varied natures of the Indian market as well as
specialised products, messages, marketing communication and transport solutions. Saffron, the
company’s “Winning in many Indias” growth strategy is another example of the strategy. Similarly
with its international strategy where it has put emphasis on successful Brand Strategy, Creativity
Brands Strategy and focus in emerging markets (United States Securities 4-10, qtd. in United States
Department of Education).
Unilever institution distance has impacted the company’s ownership pattern, entering mode and
area selection in India. Political risks and other problems like the recent Indian economic crisis and a
little bit of inflation have really hit this company’s performance. The country of India’s politics and
tradition have influenced the way that Unilever conducts its business.
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The institutional distance in Unilever has influenced how it has approached its entry modes, market
selection, as well as adaptation in their local institutional environments. The following analysis
highlights these aspects:
Entry Modes:
- At different times, Unilever has relied on different entry modes that include joint venture,
acquisition, investment, and franchising into local markets.
- For most of its existence, Coca-Cola has had an aggressive globalization policy. It buys up local firms
in any country into which it expands and then raises the production standards while promoting each
product’s brand name inside that same marketplace.
Market Selection:
- Emerging markets in countries like India are important for Unilever because they acknowledge the
potential in the lower income level market.
- This is clearly evident in its “Winning in many Indias” approach which necessitated customizing
products, advertisements, and distribution strategies to cater for India’s pluralistic makeup.
Adaptation to Local Institutional Environments:
- Localization was instrumental in Unilever’s policies and actions particularly after the war.
- This company’s organizational setup provides for decentralized operations and localization as well
as encouragement of unileverization of product groups which give them more control and freedom
to initiate actions.
- Research and innovation have combined both global and unique approaches to develop local skills
and allow cross-posted managers from all over the world to gain different knowledge.
Briefly, Unilever’s institutional distance is the basis of how the company will select its entry modes,
markets, and adapt to local institutional environments. In order to address challenges and
opportunities that are unique to every emerging market, the company employs a mix of globalization
and localized approach.
Entry mode, market selection and current performance of HUL
Financial Performance in the United Kingdom:
Unilever's 2022 Annual Report highlights strong financial performance, with a 9.0% increase in
underlying sales, demonstrating broad-based growth across its five business groups
The report emphasizes the company's resilience in a challenging macroeconomic environment, with
strong top-line growth and underlying operating profit
Unilever's investment choices and portfolio management have contributed to its financial success,
with a focus on sustainable business performance and growth
Financial Performance in India:
Hindustan Unilever (HUL) in India has demonstrated strong financial performance, with a turnover
growth of 11% and underlying volume growth at 3%, significantly ahead of the market, and the
highest year-on-year market share gain in a decade
Despite market pressures such as droughts and depreciating demand from rural consumers, HUL has
demonstrated resilience, with segments like Dove hair care and Pond’s skin lightening creams
performing well
United Kingdom market share:
Unilever's market capitalization in the UK is $113 billion
The company's 2022 Annual Report highlights strong financial performance, with a 9.0% increase in
underlying sales, demonstrating broad-based growth across its five business groups
Unilever's investment in brand and marketing has increased, reflecting the company's commitment
to driving growth and competitiveness
India market share:
Hindustan Unilever's market capitalization is $78 billion, equal to 69% of the market value of its
parent Unilever
HUL's turnover growth of 11% and underlying volume growth at 3% were significantly ahead of the
market, and its year-on-year market share gain was the highest in a decade
Despite market pressures such as droughts and depreciating demand from rural consumers, HUL has
demonstrated resilience, with segments like Dove hair care and Pond’s skin lightening creams
performing well
Brand Recognition:
Unilever's brand value worldwide has been consistently strong, reflecting the company's global
recognition and brand strength
The company's strategic focus on core brands, priority markets, and key channels has significantly
contributed to its brand recognition and performance
Unilever's investment in brand and marketing has increased, reflecting the company's commitment
to driving growth and competitiveness
Unilever performance in terms of any other relevant performance metrics in United Kingdom and
India
United Kingdom:
Unilever's 2022 Annual Report highlights strong financial performance, with a 9.0% increase in
underlying sales, demonstrating broad-based growth across its five business groups
The company's strategic focus on core brands, priority markets, and key channels has significantly
contributed to its performance
Unilever's investment in brand and marketing has increased, reflecting the company's commitment
to driving growth and competitiveness
India:
Hindustan Unilever's financial performance in India has demonstrated resilience, with a turnover
growth of 11% and underlying volume growth at 3%, significantly ahead of the market, and the
highest year-on-year market share gain in a decade
Despite market pressures such as droughts and depreciating demand from rural consumers, HUL has
demonstrated resilience, with segments like Dove hair care and Pond’s skin lightening creams
performing well
Impact of Institutional Distance on Firm Performance: Critically assess how the identified
institutional distance has had an impact on the chosen firm's performance. Analyze how the firm's
international strategy has either leveraged or mitigated the effects of institutional differences.
Financial Performance:
- Unilever's 2022 full-year results demonstrate strong topline growth, with underlying sales growth of
9.0% in challenging macroeconomic conditions.
- The company's investment in brand and marketing increased, reflecting a commitment to driving
growth and competitiveness, with underlying sales growth of 10.9% from billion+ Euro brands.
- Despite significant input cost inflation, Unilever prioritized stepping up brand and marketing
investment, leading to broad-based growth across its five business groups.
Organizational Structure and Evolution:
- Unilever's historical evolution has been characterized by a Darwinian system of retaining what was
useful and rejecting what no longer worked, responding to the marketplace.
- The company's "ization" policy and the increasing number of local competitors have influenced its
organizational structure and management dynamics, emphasizing the need for localized,
decentralized management and a common mission across subsidiaries.
Operational Model and Decision-making:
- Unilever's more category-focused operating model, organized around five business groups and a
technology-driven backbone, Unilever Business Operations, has driven greater operational focus and
faster decisions.
- The company's simpler, more category-focused operating model has been in place since July 2022,
aiming to generate around €600 million of cost savings over the first two years, with the majority in
2023.
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The global business approach of Unilever has been used to leverage and counter the implications of
institutional variations through its mode of market entries, politics and regulations and performance
in the UK and India countries respectively.
Leveraging Institutional Differences:
- In fact, this has enabled Unilever to effectively target different customer segments and customize its
advertisements accordingly.
- For the company to have succeeded, it had to learn how to survive in different institutional
environments and overcome the difficulties in these markets, therefore exploiting the available
opportunities and promoting the competitive advantage and increment of their sales level.
Mitigating Institutional Differences:
- Unilever has attempted to diminish the impact of institutional differences through emphasizing
brand funding and operational effectiveness, making it possible for the firm to withstand political and
administrative obstacles together with flexible market environments and preferences of consumers.
- This is why the company’s emphasis on core brands, priority markets, and most important channels
have significantly shaped the company’s success. The organization could easily identify the particular
categories of consumers by adopting these strategies.
The conclusion is that Unilever’s international strategy on one hand capitalises on the differences
due to institutions, and on the other hand attempts at diminishing them so as to enable the company
to more specifically address certain customer groups, fine tune the marketing efforts to fit into
individual customers’ preferences, This has enabled the company to fit into various institutional
environments as well as confront the challenges in these markets.
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Adaptations and Recommendations: Based on your analysis, suggest strategies that the firm could
consider to better navigate the challenges posed by institutional distance and further enhance its
firm performance
Based on the analysis of Unilever's international strategy and the challenges posed by institutional
distance, the following strategies could be considered to better navigate these challenges and further
enhance the firm's performance:
1. Focus on a combination of globalization and localization: Despite this, Unilever should persistently
develop new product strategies to meet varying consumer needs across various markets but still
under their one world brand strategy.
2. Prioritize brand investment and operational efficiency: Unilever should also maintain investments
in its brand and marketing as a strategy to spur growth, boost competitiveness and manage issues of
politics and regulation as well as changing demands by customers with varied market conditions.
3. Embrace research and innovation: Unilever should maintain its tradition of embracing research
and innovations to discover ways that will meet the specific needs of various markets and
consumers.
4. Foster local talent and initiative: Unilever therefore, ought to maintain supporting local talent and
initiatives in coming up with effective strategies that take into account the diverse markets’ and
consumers’ interests.
5. Simplify organizational structure: Simplifying organisational structure of unilever will enhance
operational effectiveness through more focused organisation and fast decision-making process which
in turn can allow it to adjust itself to different market conditions and customer requirements.
In conclusion, we recommend that Unilever can use various options to deal with idiosyncrasy and
improve their overall performance such as globalization and localisation, brand promotion and
operational improvement, research and innovation, talent development, and organisation
simplification. Such strategies would assist Unilever manage varying institutional settings, politico-
regulatory problems and seize the chances presented by the market.
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References:
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Brand Recognition:
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