1. Strategic Overview of the Company, Identification of the Key Strategic Decisions since the Start of its Internationalization Process
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Overview of the company
Unilever Plc is a consumer goods manufacturer and retailer. It is organized into three sections: “Beauty and Care Products, Food and Nourishment, and Home Care”. The Beauty and Personal Care category includes sections for “skin cleaning, hair care, skin care products, and deodorants”. Foods and Refreshment sell “ice cream, savoury products, salad dressings, and tea”. The Home Care section encompasses the fabric group as well as a diverse array of cleaning items. Antonius Johannes Jurgens, William Hulme Lever, and Samuel van den Bergh formed the company on January 1, 1930, and it is headquartered in London, United Kingdom (Murphy and Murphy, 2018). Unilever is the world’s biggest soap manufacturer. Unilever’s goods are sold in approximately 190 countries.
About the strategy
The key strategic decision that Unilever uses as its internationalization process for entering the market of Nepal is the Foreign Direct Investment strategy.FDI—defined as investment in the manufacturing and the service facilities in a foreign process to actively manage them—is another aspect of national economies’ increasing integration (Otto, 2020). The largest investment in international markets is a direct investment since the company invests in new manufacturing in the foreign country to expand their local product and it is relatively easy to regulate the price of raw materials.
2. Critical Analysis of the Internationalization Strategy, Identification the Model/S used During the Expansion Strategy and the Key Capabilities Used to Support it
Internationalization is a tactic that a company employs when it wishes to extend its market. The need for Internationalization emerges when a company has exhausted all domestic expansion opportunities and is looking for expansion opportunities beyond national borders.
Internationalization can be referred to as a process by which a company seeks to extend beyond its domestic domain and penetrate a foreign market. Unilever uses the Foreign Direct Investment strategy to expand its business in Nepal.
Discussion about the identified model
FDIs occur when a party invests in a corporation or organisation in a country to establish a long-term relationship, in which the company invests in another country (Bruno, Campos, and Estrin, 2017). Long-term interest differentiates FDI from international investment portfolios, where investors passively retain foreign securities. A long-term interest or expansion of its activities into another country may be carried out through foreign direct investment (Otto, 2020). When a foreign investment produces a long-term benefit, it is called the FDI. A permanent interest is created if an investor acquires at least 10% of a business’s voting rights.
In foreign direct investment, control is a key factor. The word control refers to the purpose of effectively regulating and influencing the operations of a foreign company (Opoku and Boachie, 2020). This distinguishes direct from indirect investment in international portfolios. In order to qualify as an FDI, 10% of the shareholding in the foreign voting business is therefore required. However, this requirement is not always applied. It is worthwhile thinking that it has leverage over larger publicly traded companies, for example, since it is probably a smaller part of the voting stock.
As mentioned above, an investor can invest directly abroad to expand his company in another country. This is shown by the relocation of Amazon’s headquarters in Vancouver, Canada. Profits from overseas activities are also called foreign direct investments, as are based on inter loans to overseas subsidiaries.
Both the investor as well as the international host country profit from foreign direct investment. These benefits motivate all parties to pursue and permit FDI (Otto, 2020).
The following are some of the advantages for businesses:
Diversification of the market
FiscalIncentives (Bruno, Campos and Estrin, 2017).
Reduced labor costs
Tariff preferences
Subventions
The advantages to the host nation are the following:
Stimulate the economy (Napiórkowski, 2017)
Human capital development
Jobs growth
Availability of management experience, capabilities, and technology
For companies, the majority of these advantages are focused on cost savings and risk mitigation. The benefits to host countries are primarily economic.
FDI is classified into two broad categories: vertical and horizontal FDI.
Horizontal expansion occurs when a company extends its domestic activities into another region. In this situation, the company continues to operate in the same location but in a different country (Opokuand Boachie, 2020).
Vertical expansion occurs when a company enters a foreign country while moving up the supply chain. In the other words, a company can engage in a variety of activities outside of its home country, as long as those activities are related to the primary business.
A free and open economy is key to direct foreign investment (FDI) (Napiórkowski, 2017). An important impetus for development and an international economic system. However, the advantages of FDI are not equally distributed among countries, industries and local communities. The attraction of FDI to a broader spectrum of developed nations and the maximisation of the growth value of FDI is crucial to national policies and foreign investment architecture. The main challenges are the host countries, which must establish transparent, inclusive and successful policy conditions and the institutional and human resources required to enforce them.
Unilever may benefit from foreign direct investment in various distinct ways. This includes the following:
Acquiring new markets
The most logical way for a company to benefit from FDI is to expand into new markets (Bruno, Campos and Estrin, 2017). The profit is self-evident – by investing in the sector or establishing a new project inside a foreign country, the company joins and extends its market scope. Expanding market access can assist a company is growing and diversifying its revenue streams. Gains can manifest themselves not only through an increase in market share within a particular industry, and also through access to discrete target consumer groups.
Obtaining services
Additionally, a business can benefit and increase its profits by expanding its access to resources. Through participating in a foreign business, a business gains access to emerging technology, expertise, management capabilities, and opportunities for collaboration. Both of these factors will help the company save money or increase profits. While the availability of resources, including such managerial skills, can be an indirect way to improve earnings, other resources, such as raw resources for the products, would provide a more specific boost.
Reduced manufacturing costs
Profitability increases as a result of cost savings in output are related to the preceding stage. If the business obtains raw materials, it will naturally produce the goods at a lower cost than if it had to purchase them first. Additionally, vertical FDI encompasses activities such as acquiring a manufacturing facility, which will increase profit by lowering manufacturing costs – if one can manufacture the goods in-house, it would not need to spend more money on purchasing the final product from such a third-party supplier. Making FDI in nations with lower labour costs is a typical example of the opportunity to bring down the expenses. Countries with lower labour costs will entice businesses to relocate their operations – a controversial issue in the developed world.
Simplifying the tax code and accumulating tax advantages
Companies may also profit through FDI in terms of taxes and the treatment of their earnings both domestically and internationally. FDI increase benefit through taxation by various means. There are many possible outcomes. The business could:
Benefit from the profits in the new country more because the foreign country has a more advantageous tax system – either there are fewer taxes overall or the levels are lower/more favourable.
Profits earned in even a foreign country are tax-deductible in the home country.
Countries would provide businesses with tax advantages if they invest in a foreign country or if their home countries allow for tax deductions on FDI (Opokuand Boachie, 2020). Tax incentives could be related directly to wages and earnings, or they can be indirectly related to these market factors. For instance, R&D in the new nation may be taxed differently, and the benefit of developing new technology may result in increased income both internationally and even in the parent company’s home country. The preceding are the four primary ways in which a business may profit from foreign direct investment. Naturally, obtaining these advantages is not as easy as it sounds. Just as starting a company from scratch is difficult anywhere else in the world, replicating success in another country or gaining a competitive market share in a nation with proven competence in the industry can be challenging.
If a company wants to expand through FDI, it must have the potential to fulfil some factors. Firstly, it must have the power to tackle all the political issues to go beyond its national barriers and expand its business to another nation. The company must have heavy fiscal power to conduct its operation in another country also it has to acquire the social settings of the country it has chosen for expanding its business. Technology is now a day is of utmost significance, thus a company must have the potentiality to seize a good technological aspect that can help the business to skyrocket its progress. Finally, a piece of firm knowledge about the environmental and legal setting of the country where the company wants to expand its business is of utmost importance. These dimensions provide the company to have a piece of overall knowledge and a set of valuable information about the chosen country and thus aid in advancing the progress of the business of the company in the chosen setting.
As Unilever acquires all of the above-mentioned factors, it thus could expand its business to Nepal without any hassle.
3. Analysisof the Value that Unilever has added in the Nepalese Market and its Competitive Positioning
Unilever is Nepal’s largest “fast-moving consumer goods (FMCG)” business, with a history dating all the way back to the 1950s. Incorporated in 1992 with the establishment of a manufacturing plant in Makawanpur, the company manufactures some of the world’s most recognisable companies in an ultra-modern manufacturing facility (Tamang, 2019). Near about 90% of Nepali families use its goods on a daily basis to feel better, look better, and get more out of life, providing the company with a unique opportunity to help Nepal develop a brighter future. Every one of the company’s divisions, “Beauty and Personal Care”, “Foods and Refreshment”, and “Home Care”, includes a portfolio of international brands focused on delivering steady, successful, and socially conscious growth (Mandal, 2019).
The endeavour of UNL is supported by steady expenditure in innovative products and marketing initiatives. With more than 28 brands spanning diverse categories such as skin care soaps, shampoos, deodorants, kinds of toothpaste, packaged foods, tea, detergents and cosmetics, UNL is ingrained in the daily lives of millions of people in Nepal (Basnet and Shrestha, N.D.). “Wheel”, “Pepsodent”, “Clinic Plus”, “Pond’s”, “Sunsilk”, “Vaseline”, “Glow & Lovely”, “Lifebuoy”, “Brooke Bond Red Label”, “Rin”,”Lux”,”Lakmé”, “Dove”and “Closeup”, are among UNL’s leading household brands.
Business Facts and Figures
The following facts and statistics apply to UNL:
It directly employs 242 people and indirectly employs over 20,000 people in the supply chain.
“Unilever Nepal” is the stock with the highest dividend yield on the “NEPSE” (The Nepal Stock Exchange Limited)
It commands a commanding market share in all operating segments in Nepal (Baumann et al., 2020).
UNL announced the following in its annual report for the fiscal year 2019-20:
UNL has a market capitalization of 23000 million NPR (approx.)
Its NPR 358 million net profit
A 3.6 per cent increase in the company’s revenue
NPR 5540 million in net sales (Chapagainet al., 2019).
The inception of the Brand
A Nepali Anglo-Dutch Indian company that began as “Nepal Lever Limited”, UNL is investing Rs 70.37 million to establish a factory in Makwanpur district. The plant started production of “detergents”, “powders”, “toothpaste” and “toilet soap”. In February 1994, UNL started producing Wheel Wash Powder in a large size in 1 kg packaging (Tamang, 2019). In the third year of activity after 1995, businesses began to export their products and began to make money.
However, exports began to decline rapidly in the early 2000s and ceased entirely in 2004. It occurred as a result of India’s elimination of the quota-free export scheme for Nepalese companies. The company encountered several difficulties following the cessation of export opportunities. It then considered expanding its market in Nepal, at which point the company changed its name to “Unilever Nepal Limited” (Rajani and Reddy, 2017). After years of commitment to growth in Nepal, it now appears as if the export slowdown was a blessing in disguise. This shifted UNL’s attention to the Nepali market. UNL has seen and benefited from the country’s highs and lows throughout its 25-year history, emerging as a major player in the manufacturing sector.
Effective Expansion in the International Market
UNL maintains an extensive product range of products from toothpaste to dishwashing soaps for personal care and home care. Globally well-known brands from this business have also become family names in Nepal as mentioned in the previous section. The fact that the products of the group are located around the country shows UNL’s market penetration (Chaudhary, 2018). UNL items are widely accessible across the country from large supermarkets and grocery stores in large towns to small shops in rural areas. The enterprise has also gone into the high hills of the districts of “Jajarkot,” Kalikot” and “Humla.” Unilever has meanwhile packaged and marketed goods to make them affordable for customers in all income classes (Khadka, 2019). For example, everyday goods such as detergent powder, shampoos, toothpaste and other items have been produced in small packaging to allow customers from low-income groups to purchase the products.
Effective Distribution System
Since 1956 UNL’s parent company Hindustan Unilever Limited has operated in India, and since then brands have been accessed via import to Nepal. But the company started to build an effective distribution network to supply goods in the home market with the beginning of UNL operations (Chapagain et al., 2019).
Initially, due to its weak road infrastructure and connectivity, domestic delivery was both expensive and difficult. The organisation has worked in close cooperation with its dealers, distributors and suppliers to provide customers with better services. During 1999-2000, the Organization began new rural development programmes through its trading partners, including manufacturers, dealers, producers, transport and forwarders, transporters, rural distributors, wholesalers and redistribution suppliers. As with Chauhan, UNL represents its distributors and sub stock companies directly in all but two regions. In all, UNL ensures the customer can find the goods he wants in the nearest grocer’s store anywhere and provides 25,000 direct and indirect jobs between the group, retailers, subscribers, HamriDidis and Logistics Partnern (Tien, 2019). With this dedication to better services for customers, the business has easily and economically affordable produced and distributed world-class goods to Nepalese consumers.
Consumer and Distributor Centric Programmes
UNL engages in the organisation of a variety of retailers-focused programmes, distributors andcustomer. It has implemented many such programmes, which no other manufacturing plant in Nepal has done. The major market-centric programmes of FMCG are aimed at increasing consumer consciousness in Nepal about product quality and proper use. UNL’s goods are all about instilling healthy behaviours in customers(Heikkilä, Bouwman and Heikkilä, 2018). Market awareness of personal hygiene and providing them with the appropriate value through our continued specialisation in all areas of personal grooming is a pillar of our development.
Additionally, it organises trade loyalty programmes and educational sessions for retailers and distribution networks. For instance, the “Perfect Store” programme, which has been in place for many years, seeks to improve implementation at the time of purchase. Another campaign, “Shopper Delight”, has been running for three years(Chaudhary, 2018). The programme is part of UNL’s “Joint Business Planning” effort to strengthen the distributor sales team’s success culture. The company’s goal is to increase the breadth of distributors’ business coverage by educating them and their sales force to penetrate all forms of market categories.
Since the 1880s, Unilever has been in operation. Its singular history has shaped the way the organisation does business today. In the 1890s, William Hesketh Lever, founder of “Lever Bros”, penned his ideas for “Sunlight Soap”, an innovative new product that aided in the popularisation of cleanliness and hygiene in “Victorian” England.
It was “to make cleanliness ubiquitous; to reduce women’s work; to promote wellbeing and lead to personal attractiveness, in order to make life more pleasant and satisfying for those who use our goods.” This was years before the term ‘corporate project’ was coined, but these concepts have remained central to the company’s operations. Unilever’s mission is straightforward: to render” sustainable living” more available (Tamang, 2019). The company’s leaders agree that this is perhaps the most effective long-term strategy for the company’s development. Their distinct mission and organisational experience through its business model will allow them to realise their vision of driving business growth while reducing the company’s ecological footprint and enhancing its impact on society in a positive direction.
4. Future Recommendations to Enhance the Company’s Performance in the International Market
Although Unilever has achieved a significant amount of socio-economic success and prosperity in Nepal, it is a fact that there is no limit to what it can achieve in the future. therefore, it would be very wise on the part of the company, to make certain effective steps in order to make sure that its success does not stagnant at some point, and also that it keeps on enhancing its potential in the Nepalese market. The following steps are most likely to help the company in achieving further financial success:
Deepening the extent of market penetration in the host country
Numerous factors contribute to businesses remaining confined to their existing market. All enterprise systems are in place, staff are informed and aware of expectations, organizations realize who their consumers are, and they may even have a specific market share (Toteva, 2021). Given Unilever’s business enjoys a favourable image in the market, it needs to bolster this image further. It should look for further opportunities to enhance its existing market penetration and create a solid basis for future growth. By analysing existing consumers’ data, a business may make the greatest possible decisions, increasing efficiency and bolstering corporate performance and connections.
Setting up new distribution channels
Product distribution may be a challenge for multinational corporations. Businesses can easily stagnate, even if they have established distribution channels if revenues decline dramatically. If Unilever wants to develop its company and raise sales, it needs to explore new distribution methods aggressively. Unilever can smooth out irregular purchases from its existing client base and improve revenue by developing a new delivery route (Sadullayevich and Akhmadbek Feruz-o’g’li, 2021). Adding additional distribution channels enhances the brand worldwide while also confining it to the vicissitudes of its current distribution channels. Businesses must ensure a high standard of distribution to keep customers.
Offering the existing customers with extended benefits
In addition to current items, providing exceptional services may help a firm strengthen its customer relationship. Unilever should develop a new service line designed both to solve customer concerns and to improve earnings where there are possibilities. Unilever may generate income and create relationships with consumers through the provision of services that satisfy existing or future customers’ requirements. The firm should invest time identifying which fresh and distinctive services it can give in order to earn more money and leads.
Broadening the line of the offered products
Existing and prospering on the global market, particularly for consumer-facing businesses, is difficult. Unilever’s present product offering may not be adequate to sustain long-term growth. To develop more successful methods for satisfying their consumers, clever businesses evaluate their product lines and do extensive research on their customers’ wants and expectations. Adding new product lines, such as promotional gifts, to complement existing ones is a prudent method for increasing client loyalty. Unilever may choose to change product names in current markets, as well as its official logo, branding, and packaging, in order to ensure that the company’s fundamental business message is expressed consistently across its product portfolio description (Pasaribu, 2018). Additionally, expanding the product line would create new sales opportunities inside the firm’s current market.
Detecting newer customer segments
To maintain rapid growth, it may be important to concentrate on a new client and market segments. The organisation has to be more conscious of industry trends and differences in the way consumers and other firms, particularly competitors, operate. The company must discover what additional items or services its present customers receive from alternative sources (van Tulder and van Zanten, 2018). Unilever may increase its customer base by increasing the number of existing customers.
The important thing to remember is that any company, especially a multinational corporation like Unilever, should never stop seeking new possibilities. The focus on sales alone will not lead to effective corporate growth. Companies that want to be competitive in international markets must always seek best practices to elevate the efficacy of their goods and services, strengthen their supply and distribution networks, and maximize productivity, inventiveness, and profitability.
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