International Marketing Essay

1. Introduction 1. History Lever Brothers was founded in 1885 by William Hesketh Lever. The company initially started its operations by manufacturing soap. In 1917, the company began to diversify into foods, acquiring fish, ice cream and canned foods businesses in order to apply synergies caused by commonalities in the raw materials required to produce and distribute these products. In 1930, the Dutch company Margarine Unie merged with a British company, Lever Brothers, to form the multinational Unilever. Unilever has two parent companies: Both companies have the same directors and effectively operate as a single business. 2. Marketing Management Philosophy Marketing management process undertakes the stages of strategy formulation, implementation and control. Therefore, it is imperative to first identify the adopted marketing management philosophy by the organization. Organisational purpose of Unilever clearly states that organisation’s focal attention is centered towards anticipation and satisfaction of customer needs and wants. Kotler (2000) mentions that marketing concept holds that the key to achieving its organizational goals consists of the company being more effective than competitors in creating, delivering and communicating customer value to its chosen target markets. Deep insight into organizational purpose reveals that goals and objectives of Unilever depend on determining the needs and wants of target markets and to satisfy the customers efficiently than competitors. The company also considers its role as socially responsible entity by ethical business practices and ongoing welfare projects in many of the South Asian markets. Such adopted marketing management philosophy as a central element of corporate purpose will definitely influence the international/Global strategy of Unilever. Hence, it can be concluded that whole of the business philosophy of Unilever is embedded into marketing oriented organization with the purpose to keep in consideration the expectations of all stake holder groups. 2. Organisational structure of Unilever Organisational structure of Unilever follows a de-centralized setup, where corporate level strategies are formed by board members and executive committee. Unilever operates in two separate global divisions for food and home & personal care business. Table 1: Regional groups Source: http://www.uniliver.com The directors of these global divisions are company’s executive committee. Business level strategies and formulated by Presidents of each of the separate regional groups made for food and health & personal care business. These business presidents are responsible for delivering business results in their respective regions and reports to Directors of Food and Home & Personal care division. At functional level, host country managers are responsible to implement strategies and to make functional level strategies in accordance with the changes in sub-localities. The core building block in Unilever is the local operating company. These companies are organized into eleven regional groups. At regional levels, Unilever has deployed host country managers. 3. Global or international strategy of Unilever At present, it is difficult to suggest any of the orientation stage for Unilever. When it comes to global marketing, market segmentation decisions are no longer focused on national borders. Cateora and Graham (2000) explain that at global marketing stage, companies treat the world including their home market, as one market. Market segmentation decisions are no longer focused on national borders. However, critical review of Unilever’s operations state that the marketing strategies of the company are both internationally and globally oriented. While, developing market segments, Unilever takes into accounts the incomes levels, usage patterns and other factors that span countries and regions. The global brands of Unilever in Food and Personal care business are examples of it. However, the company also laid a minute focus on various regional markets by developing distinct regional market segments in light of the tastes, preferences, income and other factors of these markets. The broad category of local brands is an example of it. Therefore, in order to determine elements of Global/International marketing strategy of Unilever, it is imperative to analyze the stages of international marketing involvement and strategic orientation of the company. The deep insight into these dimensions reveals the stature of organization as international or global company. 1. Stages of marketing involvement Initially, the focus of the company was limited to few product categories, targeted segments and market. However, with the passage of time, the company was gone through the transition process from one stage to another. The learning curve and experience of Unilever along with analysis of market potential and company capabilities enable the organization to extend its product portfolio and to step into different markets. By keeping in view the involvement factors of company towards strategic marketing orientation, it is difficult to suggest any one stage of orientation. Unilever is truly international in a sense that it sells diversified range of products around world which comes up from planned production. However, the concept of global marketing states that market segmentation decisions are no longer focused on national borders. In practice, critical review of Unilever’s operations reveal that the marketing strategies of company are both internationally and globally oriented. Development of market segments at Unilever takes into account the taste and consumption preferences and other segment variables that span countries and regions. The global brands of Unilever in food and personal care business highlight this approach. At the same time, Unilever focuses on regional and country markets by developing distinct regional market segments by considering tastes, preferences, income and other natures of these regional markets. The broad category of local brands made to tailor the regional market needs exhibit this approach. Hence, it can be concluded that Unilever is catering to the needs and wants of mass market segments around the world by making a blend of international and global orientation. 2. Strategic orientation 1. Strategic Brand Management International strategy of Unilever is focused to build its business by creating, developing and delivering value brands. Unilever has a diversified product category and each product line has much depth and width in it. Evaluation of Unilever’s marketing strategies reveals that the organization is more centered towards buildings and positioning brands, Branding is known to be the spinal cord function at Unilever which basically stick together all functions of marketing like marketing research, product development, pricing, advertising etc. Thus, Marketing functions and activities at Unilever are combined together to focus the process of branding. As first step, marketing research function facilitates the brand managers and business level managers with the comprehensive profiles of various regional markets around the world. Then, strong brands are developed as a solution to customer needs. Unilever has core focus towards effective brand management in order to develop both global and local brands. As a part of future growth strategy of company, Unilever implied law of contraction to refine and retune its diversified brand categories by focusing only on potential brands. Consequently, organization resources will be allocated on the brands, which have growth potential and growth levels and will be pursued to enhance profitability. Jean and Kapferer (2000) states that the brand is a focal point for all the positive and negative impressions created by the buyer over time as they comes into contact with brand’s product, distribution channel, personnel and communication. Accordingly, brand managers and research experts at Unilever classify the customer groups in term of their demographic, geographic, economic and personal profiles. Along with, they identify the changing consumer preferences in terms of their needs, wants, satisfaction, tastes and expectations. All these considerations are then tailored to manipulate the marketing mix elements to develop a successful and value delivering brand. One of the prominent examples of Unilever brands which shows the company’s insight into consumer health requirements is Annapurna Salt. Continuous marketing research function and collaboration with health organisations let Unilever to identify that majority of people living in Africa and south Asian region inherently have deficiency of iodine component in their bodies. As a result, Unilever introduced iodised salt for the consumer segments in this market with the brand name, Annapurna. The particular example shows that understanding of consumer needs enables Unilever to build in health benefit into their product. 2. Social Responsibility This dimension of international marketing strategy clearly defines the characteristics of organizational cultural paradigm and purpose of the company to position itself in minds of customers. Kotler (2000) defines that societal marketing concept holds tha the organisation’s task in to determine the needs, wants and interests of target marketes and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhance the conusmer’s and the society’s well-being. In realistic and factual terms, in today’s business environment, social responsibility is a good marketing strategy to effectively position the corporate and brand names in targeted markets. Companies have international and global orientation operates in variety of international regional markets. Although, the principle of marketing always remain the same regardless of the market environments, however, at the corporate level, the strategists also take into consideration the role and overall contribution of company with in each market and region. Contemporary marketing philosophies do consider the role of an organization as socially responsible entity by ethical business practices. The degree to which an organization will be socially responsible to its macro market environments is determined at the stage of formulation of corporate level strategy. Incase, of a multinational company like Unilever, international marketing strategies take into account the role of company in various environments. Organization does incur some costs to emerge as socially responsible organization and do seek some benefits out of it in form of consumer’s affiliation and overall perception of organization in their minds. Unilever claims: As a multi-local multinational we aim to play our part in addressing global environmental and social concerns through local actions and in partnership with local governments and organisations. Now it is quite obvious that at broader scale the international marketing philosophy of Unilever is to stand as socially responsible organization. However, the action-oriented approach towards implication of social responsibilities entirely depends upon individual nature of market and environmental conditions. As a decentralized approach of strategy, the corporate level management at local operating companies defines the paradigm of social responsibility in regional and country markets and business level managers pursue the objectives by developing and implementing action-oriented strategies. Unilever Pakistan is the largest consumer goods company in Pakistan. In Pakistan, it is registered as a separate local operating company. In order to pursue international marketing strategy contents in relevance to social responsibility, Unilever Pakistan, in context to the local market environment analyzed and assessed nature of market environmental. The through analyses of environmental and natural resources reveal that the country faces shortage of water resources which are crucial to be used as household, agricultural and industrial requirements. In result, Business level managers worked out to enhance the performance and efficiency of its production and manufacturing processes by cutting shirt the overall requirement of water resources to be used in processes. With in five year time, Unilever reduced its total water consumption by 40% and proved its role as a socially responsible organization in the sector. 3. Identification of Major Competitor: Jobber (2004) defines that the most important part of conducting competitor’s analysis is identification of competitors, following product form, product substitution, generic strategies and competition arena. In FMCG sectors, there are some names which have made significant progress in the industry. Namely, few of them are Nestle, Proctor & Gamble, Johnson & Johnson, Kimberly-Clark and Unilever. The examination of Unilever’s business segments and product categories reveal that Nestle and Proctor & Gamble are chief competitors of Unilever in international market. Precisely, Nestle is the chief competitor to Unilever due to parallel level of competition among these two companies in respect to homogeneity among their international marketing strategy. The emphasis of both of the companies towards building global and local brands simultaneously, shows that the adopted business slogan is â€Å"Think Global-Act local†. As a result Nestle and Unilever stand shoulder to shoulder in many of the regional markets with diversified line of their local product brands. Annual turnover of Unilever for the year 2003 shows that its Food division contributed 57% share to total sales turnover and 43% share is contributed by Home & Personal Care division. The percentages clearly exhibit that Unilever has comparative strength in its food division over home & personal care division. In light of the analysis, it can be concluded that Nestle is the chief competitor of Unilever in the business segments of Food as Nestle is recognized as world largest manufacture of food related items. On the other hand, Proctor & Gamble is Unilever’s leading competitors in business segments of Home & Personal care as P&G has relative strength in this sector. In food sector, Nestle is far ahead then Unilever due to width and depth of its product lines. In comparison to Unilever, The product categories of Nestle includes; Baby food, dairy products, Break fast cereals, Ice cream, Chocolate & confectionary, prepared food, Beverages, Bottled water and Pet care nutrition. In Home and Personal care, P&G enjoys leadership position in Beauty and Fabric care as the company attains strong global brands in these categories like Ariel and Pantene. 2. Percentage Contribution of geographical markets to total organizational Turnover Annual Sales figures of Nestle, for the year 2003 shows that European and American markets are its major business markets, as both of the markets contributes 32% and 31% respectively to total organizational turnover. Similarly, in case of P&G, North American and Western Europe are the chief markets with 50% and 24% share to turnover respectively. For Unilever, major business markets are Europe and North America which percentage share of 43% and 23% respectively to total sales turnover. The figures clearly state that all of the organizations have a cut-throat competition in North American and European markets and each of the organization has relative strengths in these markets. However, the Asian Pacific markets which have a huge business potential due to huge house hold size and populated economies, there still exists significant margin of improvement. For P&G, Northeast Asian market contributes 21% share to total turnover for year 2004. For Nestle, Asian and African markets contribute to 16% of annual turnover. And in case of Unilever, Asia and Pacific contributes 17% to total organizational turnover. 4. Nature of markets and methods of entry 1. Nature of Markets The business operations of Unilever are expanded over almost 110 countries world wide. Each of the regional and country market has different nature in terms of economies of scale, market segmentation, level of competition, political and social factors. In order to have a deep in-sight to explore and identify the marketing strategies of Unilever in relation to market nature, we will give you a highlight of company’s operations in Asian region with particular emphasis on Pakistani and Chinese market. 1. Nature of market in Pakistani 1. Economic & Demographic Profiles Pakistani market constitutes total population of almost 150 million people. In Pakistan, the affluent and rich class is no more than 6% of the total population. Almost 32% of population is living a life under poverty line. The major segment of the society belongs to middle class consumers which are actually target market for FMCG Company like Unilever. The product portfolio of Unilever constitutes almost 135 brands for Pakistani market. Majority of these brands are part of consumer basket index in South Asian society. Prominent examples are the items like cooking oil, laundry detergent and tea, as these product categories are used with in every Asian household. 2. Level of Competition FMCG companies like Unilever owns a diversified range of products which are different in their nature and most of the product categories are not even interrelated such as laundry detergent and tea. These differential products in a way are recognizable as different strategic business units. Unilever markets almost 135 brands in Pakistan and have not to confront too many players in FMCG industry. The structure of industry in Pakistani market has been shaped in form of Oligopoly, as there are only few leading players as Nestle and Proctor and Gamble. However, each product category defines different level of competition when it comes to analyze the potential of different competing brands both in global and local context. For example, while comparing to huge industry giant like Uniliver, P&G offers limited range of product categories in Pakistani market. On the other sinde, leading detergent brand, Ariel, owned by P&G gives tough time to brands which are included in Unilever’s product category of laundry detergents. Similarly, there are some local companies who manufacture and market a single brand. Tapal is one of the leading tea brands in Pakistani market which stand in cut throat competition against Unilever’s global brands, Lipton and Supreme. The third important factor which determins level of competition for Unilever in Pakistani is the huge market of unbranded products. The unbranded products are low priced and inferior in quality and they are marketed in within regional boundaries. In order to combat these unbranded products, Unilever extended its distribution network to remote areas to capture market share. 3. Blend of Local & Global Brands Unilever clearly understand the cultural and social differences in Pakistani society which have a significant impact over people’s preferences, tastes and life style. By following the nature of market with heavy regional segregation, Unilever decided to offer both Global brands and developing local brands in the market. Lipton is the leading brand of Unilever in the product category of tea. It is marketed in over 100 countries and it shows the global presence of the brand. However, Unilever Pakistan owns several regional brands in product category of tea which are low priced. These tea brands like; Tazza, A1 and Top star are distributed and circulated in regional markets. Similarly, the advertising and media focuses regional languages to promote these brands. 2. Nature of target market in China China cosmetic market has been expanding rapidly over the past 20 years. In 1982, the total sale was only about RMB200 million. By 2001, this figure went up to about RMB40 billion, a growth of 200 times from 1982. China’s annual sale of cosmetics are forecasted to reach RMB60 billion by 2006 and RMB80 billion by 2010. Despite significant growth over the last two decades, there are still have a number of opportunities in Chinese cosmetic market and the country is expected to remain a dynamic market. This is based on some factors: firstly, with a population of billion and 480 million urban residents, China has the largest number of potential cosmetic customers in the world. Secondly, as a result of China’s 7-8% high rate of economic growth, living conditions will continue to improve, which enable an increasing number of people to join the cosmetic consumption force. Finally, China has opened its market according to WTO rules will further stimulate its cosmetic market with more international and domestic players. 2. Method of Market Entry 1. Market Entry Methods in Pakistani Environment As far as market entry mechanism is concerned, Unilever follows two approaches. First, Unilever sets up a local operating company in a country of choice by following the business regulations & company act status in host country. The second approach of market entry followed by Unilever is acquisition. In some of the market settings, Unilever prefers to acquire a prominent brand in spite of establishing totally new setup of production and distribution. Such approach of diversification and market entry strengthen its grip in local markets around the world. By having an investment to acquire a local brand will enable the company to use the pre-running production facilities and marketing networks & distribution channel. This mode of entrance into a market doesn’t swallow precious time resources to build brand awareness. 1. FDI FMCG sector primarily requires a blend of capital intensive and labour intensive resources. Therefore, it was a best option for Unilever to establish its manufacturing and production facilities in local area to reach economies of scale by using cheap skilled and un-skilled labour. For example, in Pakistan, Unilever is operating as locally registered company and it fulfills all the legal requirements of Company Act 1981 and regulations of security and exchange commission. Moreover, Unilever is a public listed company and follows the legal requirements of Securities and Exchange Commission of Pakistan. The Chief Executive of Unilever Pakistan Ltd. reports to Unilever’s top management, based in team leader country of the regional group. Under such form of market entry, Unilever has to made foreign direct investment in selected country markets. By foreign direct investment, Unilever establishes manufacturing & production facilities along with development of integrated marketing and distribution channels. Unilever established a local operating company in Pakistan with the name, Unilever Pakistan Private Limited. 2. Acquisition The strategy of Unilever in regional country markets like Pakistan is to dominate the market by acquiring the leading local brands offered by other manufacturers. Hence, the benefits result into diversification and enhanced market share. The leading example in this regard is of Polka, which was leading ice cream brand in Pakistan. Unilever launched it global ice cream brand Walls in Pakistan in year 1998-99. Initially, Walls faced severe competition from Polka, as the national brand attained a strong image and equity in the market. As a result, Unilever Pakistan, decided to extend the brand lines by acquiring Polka. The acquisition of Polka enables Unilever to use production and distribution facilities to promote Walls. The targeted markets of Unilever are divided into Regional & sub-regional markets. In each of the country, there exists a local operating company. All these local operating companies are organized into eleven regional groups. 2. Methods of Market Entry in China When the Unilever firstly entered the Chinese market, they usually chosen a Chinese company to cooperate or conduct joint venture, because they were not familiar with Chinese market and did not has distribution and sale channel. However, when they had developed their sale force and built sale channel, Unilever has bought the share from the Chinese company and built new plants in other cities, which is direct investment. 5. Extent of standardization or adaptation of marketing strategy Unilever claims to be the one of the biggest consumer goods manufacturing company in the world. It claims that everyday, almost 150 million people in over 150 countries choose our products. So for a multi national company of that stature, an emerging question for marketing directors will definitely be to examine standardization or adaptation approach in order to develop international/global marketing strategies. An expert’s opinion in this regard is that, â€Å"Forward looking, proactive firms have the ability and willingness to accomplish tasks, standardization and localization. Global markets continue to homogenize and diversify simultaneously. The in-depth study of the product categories and length, depth, and width of product lines reveals that the management of Unilever has a dual focus on homogeneity of needs of consumer around world and towards global customization. In addition, some of the marketing analysts state that a successful company should focus on both of the aspects such as standardization and adaptation at the time of deciding target market segments, the measures of determining these segments and targeting strategy. Unilever states: â€Å"Our deep roots in local cultures and markets around the world are our unparalleled inheritance and the foundation for our future growth. We will bring our wealth of knowledge and international expertise to the service of local consumers- a truly multi local multinational† The argument can be justified by Unilever’s motto: â€Å"A Multi-local Multinational†. In-light of the above created discussion, we conclude that Unilever is conscious of the features of global and international markets. For instance, the product category of Unilever constitutes the global as well as local brands, which implies that Unilever manipulates the marketing mix elements by having a favourable blend of both standardization and adaptation. 1. Product When the Unilever wanted to enter the Chinese market, they use product adaptation strategy, which means, â€Å"adapting a product to meet local conditions or wants in foreign markets (Kotler, Armstrong, Saunders, Wong 2001, p.175)†. They did not just bring the products sold in UK to launch in Chinese market, but has done a number of researches about Chinese women’ skin and found that Chinese people’ skin is quite different from European’s. Therefore, they have changed the formula of the pond’s products, which can be perfectly suitable for Chinese women. As can be seen, Unilever has adopted adaptation strategy, which is highly cost, but has increased the market share. 2. Branding and promotion Unilever has implemented plans to make greater use of its corporate brand in support of its companies and products around the world. By 2005 subsidiary companies will adopt the name. Also, over the coming years the Unilever name will appear on all product packaging. Consumers and stakeholders will find it easier to see who Unilever is and what it does. Its goal is to strengthen Unilever’s business and reputation, so that both Unilever and its brands are better understood and trusted throughout the world. The trend shows the enhanced recognition of branding as supreme function of marketing. Al Ries and Laura Ries (1998) explain that marketing is building a brand in the mind of the prospect. If you can build a powerful brand, you will have a powerful marketing program. Although, Unilever announced corporate brand, they still use the adaptation strategy in some of the products. For example, the Unilever has changed their brand name from English form into Chinese manner, which is easier for Chinese young women to identify and remember. In addition, food division of Unilever claims Knorr as one of its supreme global brand with almost 2.3 billion euro annual sales in over 100 countries. The product range of knorr includes soups, sauces, noodles and complete meals. Similarly, in personal care market, Unilever owns prominent brands as Axe, Dove, Lux, Ponds, Rexona and Sunsilk. However, in frozen food category, Unilever has supreme local brands. i.e. Findus (for Italian market), Bird’s eye for UK and Iglo for other European countries. Moreover, in category of margarine & spreads, Becel is a prominent brand for Dutch market. Flora is the brand in UK and Take control is in American market. In olive oil category, the most important brand, Bertolli is appealing to consumer taste for Mediterranean food. Unilever clearly at the same time recognizes the homogeneity of consumers by developing global brands and also make itself adaptive to the cultural, political and social environment of different regional markets by developing local brands and keeping in view the distinct needs of the consumers. Unilever normally design different advertisement for different countries. For example, when Unilever shoot an advertising film in Asian marketing, it is keen to adopt Asian actresses. 3. Pricing Terpstra and Sarathy (2000) state that incomes, culture, and consumers’ preferences differ from country to country, thus, for the same price in different countries, the demand will be different. Therefore, Unilever has institute dissimilar prices according to the nature of markets in different countries. For example, the level of income in china is relatively low. Therefore, the price of pond’s products in china is lower than Europe. Another reason for low price strategy is that Unilever produce Pond’s in china. The cost is low. However, if Unilever just export its products from one country to another country, the cost will be high considering the tariff, insurance and transport fees need to be added into the cost. Therefore, Unilever would adopt the standardization within the operation to balance the difference. 4. Distribution It is not easy to build distribution channels in foreign countries. When Unilever enters in a new marketplace, it is more likely to find some partners. For example, Unilever has cooperated with several big Chinese companies. Therefore, it can use the existing sales distribution network. However, Unilever not just satisfy to employ this network. It has work with big supermarket in china, which can deliver and sell mass products in china, to build their own distribution channels. However, Unilever do not use joint venture in Holland. They directly work with whole sellers, department stores, and supermarkets to distribute their products. As can be seen, Unilever use different distribution strategy in different countries. In this way, Unilever use the adaptation marketing strategy. In Pakistan, Unilever established its unique distribution system by setting up business partnership with various distributors and traders. Various geographical areas have been distributed into business regions. With in each business region, Unilever selects trading companies by assessing their financial worth and experience. These distributors act on behalf of Unilever as they are responsible to Unilever items directly to the chain of retailers. 6. Conclusion Reference – Kotler P., Armstrong G., Saunders J., Wong V., 2001, Principles of Marketing. London: Pearson Education. – Terpstra V., Sarathy R., 2000, International marketing. London: The Dryden Press – Kotler. P (2000) Marketing Management, The millennium Edition, U.S.A. Prentice Hall Inc – Jobber. D (2004) Principles & Practices of Marketing, 4th Edition, U.K. McGraw-Hill – Ries. A, Ries .L (1998) The 22 immutable laws of branding, Great Britain, Harper Collins Business. – Cateora P.R, Graham J.L (2000) International Marketing, 11th Edition, McGraw-Hill/Irwin – Jean, Kapferer N (1992) Strategic Brand Management. Creating and sustaining Brand Equity Long Term, 2nd Edition, U.K, Kogan Page Limited. – www.nestle.com – Annual Report of Nestle: 2003, http://www.ir.nestle.com/ – www.unilever.com – Annual Report of Unilever: 2003, http://www.unilever.com/investorcentre/ – www.pg.com – Annual Report of Proctor & Gamble, http://www.pg.com/investors/sectionmain.jhtml