The Internal Environment

SWOT analysis
The second element of a strategic audit is an analysis of the internal mechanisms of the
business. This part of the paper uses a SWOT analysis to identify and critically examine the
strengths, weaknesses, opportunities and threats facing Unilever
Strengths
 The size of the company is its major strength. Unilever manufactures more than 400
brands which it sells to some 190 countries . In addition, it employs over 167,000
people and expends 928 million euros on research and development annually. In
terms of performance, the company has bucked recent economic trends.
 As well as its sheer size, a major source of strength for Unilever is its longevity and
brand recognition. The company has been in existence since 1929 and is the world’s
oldest multinational enterprise
 Another strength of the company is its geographical spread. Unlike some consumable
manufacturers, which are headquartered in just one country and found on just one
public index, Unilever has headquarters in two countries, is floated on two indexes
and is secondarily floated on the New York Stock Exchange.
 Another of the company’s strength is its human capital. Human capital is the volume
of skills, knowledge, experience and competencies embodied in individuals that staff
and run the business. This is important for there is a good deal of empirical research
that links high levels of human capital with firm performance (Huselid, Jackson and
Schuler, 1997). The company’s chief executive officer, Paul Polman, who held senior
positions at both of the company's major competitors, Nestle and Procter and Gamble,
has been termed a ‘rainmaker’ that has taken the company from strength to strength
(The Telegraph, 2014). On taking the reins in 2009, Polman set out a plan to double
the size of the business, to double sales to £80 billion and to boost efforts at
environmentalism and sustainability.
Weaknesses
 Some analysts have argued that the company's broad product portfolio is a source of
weakness (the Guardian, 2014). The firm produces goods in four broad product
categories – cleaning agents, food, personal care products and beverages. It is argued
that such a broad portfolio can prevent the business from focusing its marketing
efforts appropriately (Putsis and Bayus, 2001). Thus, in order to consolidate its
activities, the company may need to divest some brands or product ranges in the
future. Indeed, the company already seems to be taking steps in this regard, selling
popular brands Peparami, Slim-Fast, Ragu and Bertolli in 2014 (The Telegraph,
2014). In addition, most of brands produced by the company are multinational brands
which may prevent them from being tailored to the needs of local markets.
 A further weakness of the product line concerns the prices offered to consumers. The
prices of Unilever brands are generally higher than those of its competitors (Thain and
Bradley, 2014). The company has explained that prices are high to represent the
quality of the goods, while analysts have attributed the high prices to the enormous
amount the company spends on research and development and its massive marketing
budget (Thain and Bradley, 2014). In 2010 alone, Unilever spent 6 billion euros on
advertising, and today, the company is one of the world’s largest purchasers of
advertising media (The Telegraph, 2011).
Opportunities
  Social media offers considerable opportunities to Unilever, particularly given its aim
to reduce its advertising expenditure (The Telegraph, 2014). Social media sites are
increasingly used by companies to update consumers on new products, to offer
discounts and special promotions, and to invite consumers to special events that are
either held online or physically (Sashi, 2012). Unilever may be able to capitalise on
this trend either through corporate accounts or through brand accounts.
 There are considerable opportunities to the company through its extensive research
and development efforts. Unilever has research facilities in England, Shanghai,
Bangalore, New Jersey and Connecticut, which are working continually to develop
new product lines and refine existing ones. Through this investment the company is
able to regularly introducing new brands or reintroduce redesigned brands to the
market.

Threats
 The company is facing a number of threats, particularly from competitors, the market
and consumers.
 Firstly, while Unilever’s broad product portfolio might be conceived as unusual, it is
not unique in this respect. Procter and Gamble and Nestle have very similar business
models and product lines (Thain and Bradley, 2014). Indeed, in terms of sales,
Unilever is outperformed by both of these competitors.
 A large proportion of Unilever’s products are premium brands aimed at consumers
with relatively high levels of disposable income. This might be considered a threat in
the context of the current economic downturn. Increased financial uncertainty might
lead households to move away from these brands to own-brand and lower value
products, negatively affecting both net sales and sales margins.
 Food prices have risen substantially worldwide (Headey and Fan, 2008). This
represents a significant threat to the company because it must pass the cost of food
inflation to customers in order to maintain current profit margins. This might explain
why the firm’s CEO is starting to consider refocusing the company strategy on
alternative product lines, such as sundries or hard lines (The Guardian, 2014)
 Although the company has a stated aim to double its sales levels, analysts have noted
that the company is still far short of accomplishing that aim. As the Telegraph (2014,
online) notes, “the acquisitions of TRESemmé shampoo maker Alberto Culver and
Radox bath foam have added almost €3bn in turnover…However, these deals have
hardly moved the needle and Unilever is still sitting on a big pile of cash. With
growth slowing in emerging markets where 60pc of the group’s sales are generated,
investors may start pushing for Unilever’s leader to be a bit bolder if he is to reach his
ambitious €80bn sales goal”.
 In the context of the recent economic downturn, there have been some demergers and
sell-offs in some of the sectors in which Unilever operates. While in some cases this
has proven to be an opportunity for the company (for instance, the firm has recently
been able to purchase top hair care brand TRESemmé), it also poses a threat should
any of these product lines fall into the hands of its competitors. For instance, the 2008
purchase of shaving brand Gillette by Procter and Gamble immediately made it the
biggest company in men’s personal care (The Telegraph, 2014)
 An increased social ethic and concern for the environment among consumers should
also be considered a threat to the company. In Japan, Thailand and particularly in
India, Unilever has attracted heavy criticism for the manufacture of so-called
‘fairness’ products. These are products that are typically aimed at women and used for
lightening the skin. While such brands are a major source of income for the company
- allegedly, one skin lightening agent produced by the company, Fair and Lovely, is
used by 80 per cent of the population of Bangladesh (Unilever Bangladesh, 2014) –
the company has also come under fire for promoting Westernised standards of beauty.
In Thailand, an advert for one of the company’s fairness creams was withdrawn from
media outlets after widespread censure because it correlated white skin and high
levels of intelligence (The Guardian, 2014).