Business and Environment - Unilever and Reckitt Benckiser - Case Study Example

Environment and Business Task Business Environment) Unilever and Reckitt Benckiser Introduction of the Two Companies: Unilever is a FMCGcompany headquartered in London, England. The company offers a wide range of products which includes food items, beverages, cleaning agents, and personal care products. It is world’s third largest company as per the revenues. Unilever has served a huge portion of the market covering many countries thus becoming a famous FMCG provider organization. The products of Unilever are available in more than 190 countries. The famous brands of Unilever are Lipton (famous tea), Lux and Rexona (soap), Sunsilk (shampoo), Surf (washing powder) and Magnum (ice cream). Reckitt Benckiser is another world famous FMCG headquartered in Berkshire. The major product lines are home products, hygiene and health concerning products. The company operates in more than60 countries and served almost 200 countries with a wide range of network. The famous brands of Reckitt Benckiser are Dettol (famous antiseptic), Strepsils (famous medicines of throat infections), Veet (famous depilatory), and Air Wick (famous air freshener). Legal Structure of Companies: There can be different forms of companies e.g. sole proprietorship, partnership, limited partnership, corporation and many others. The legal structure and other rules and regulations are totally dependent on the specific form of the company. Unilever is a public limited company and dual listed in two different stock exchanges with different names as Unilever N.V and Unilever PLC but still they work as a single entity. Reckitt Benckiser is also a public limited company listed in London Stock Exchange. These public limited companies usually float their shares in the trading market and thus raise the capital to be employed in the business. These shares are offered to the general public, anyone can purchase them. Every shareholder gets the ratio of profit according to his shares in the business and no other liability is owed to him. Financial Information of Companies: Though Reckitt Benckiser is operating at relatively small scale than Unilever but still both of them can be considered as competitors to each other because their origin are same, their serving market is same. Both of them are offering products which are commonly used in house hold matters in a routine life. Therefore they are competing firms with respect to many aspects. There can be many indicators which are usually used to highlight the firm who beats other market players. One of these indicators is the financial information of any firm. The research studies show the financial information of Unilever and Reckitt Benckiser which is given below (Oscroft 2013; Chester 2012); Comparison of Unilever and Reckitt Benckiser (figures as per year 2012-13) Unilever Reckitt Benckiser Market Capitalization £34.3bn £32.6bn Share Price £22.73/share £36.15/share Net Gearing 72% 33% Forecasted Operating Margin 13% 25% These figures show a mutual trend competing trend among both companies. This means that Unilever and Reckitt Benckiser are facing a healthy but tough competition in the market because both of them are nearly close to each other in the financial facts. Their competition is also shown through their advertising strategies. Vision Statement of Companies: Every firm needs a vision statement on which it can run its business activities. This vision statement actually depicts the purpose of existence of any firm. A clear and vivid vision helps to devise values for the company and these values are actually the terms and conditions to work with that specific company. These vision and values ultimate motivate employees to work harder and achieve success. Unilever team says that there vision is to provide people the households through which they can feel good, look good and get more out of life. They want their customers to take huge advantage of little things which are used in daily routine life. This shows that the Unilever team wants to get inside into people’s daily life with the help of their household product items. Contrary to Unilever Company, team at Reckitt Benckiser is aimed to give a healthy yet innovative life with the help of their house hold products. They want to differentiate themselves in the market among competitors on the basis of their innovative but useful products. They want to give a world where health and fitness are preferred by the people. Corporate Responsibility: Corporate responsibility can be defined as the ethical and moral duty of any entity or we can say organization to devise such operational strategies which are beneficial for the people and the whole society as well. Now the people are very much aware about these delicate issues. They noticed such kind of activities if any firm is fulfilling its corporate social responsibility. United Nations says that CSR means that companies are integrating their operational activities with the social concerns (What is CSR 2013). Like many other multinational firms Unilever is trying its best to fulfill the corporate social responsibility and thus achieve a good image in the minds of the customer. The Unilever team always prefers to provide a healthy and hygienic environment with the help of their different household products. By adopting better techniques of waste management they have tried their best to save the environmental pollution. An efficient use of natural resources like minerals, water and certain gases is also a part of social responsibility and the Unilever team is very much concerned about it. Another aspect of execution of corporate social responsibility is green marketing and the team at Reckitt Benckiser is aimed at it. They have planted almost 5 million trees and thus proved themselves to be nature friendly organization which operates to lessen the effects of environmental pollution. They claimed that all of their products are eco-friendly which means that its use will not harm the surrounding environment of a house. Effect of Stakeholders: In general terms the stakeholder can be defined as any single person who may get affected because of any change in the policies of the organization. Even the end-users are also considered as the stakeholders for an organization in some cases. The organization has to consider all of its stakeholders before taking any decision because it may affect them directly. These stakeholders are very important consideration for any organization because they affect the policy making process and the decision making process of the top management. Some authors give so much importance to these stakeholders that they say a firm cannot survive without the support of these stakeholders. Unilever says that we are fully committed with our stakeholders because they are the reason of our success. Government is the biggest stakeholder because they have to give us an environment in which we can operate well. Government policies are very important because the team at Unilever make their policies on the basis of them. Managing relationships with customers, suppliers, investors and the most important employees is a critical issue. Unilever always to engage all of its stakeholders with them so that they fell involved in all decision making. The team at Unilever believes that sustainability in the operations is only possible when all the stakeholders play their positive role. The team at Reckitt and Benckiser always strive to maintain sustainability in their operations (Vorhies 2013). And this sustainability is only possible if the stakeholders are with them. Once RB faced some agitation for them customer regarding product quality but then the Reckitt Benckiser team changed it as per the customer demand. According to RB management stakeholders are those who even can alter the policies of the organizations with their immense power. Therefore it is necessary for them to take care of those stakeholders either case they are i.e. Government, investors, customers, employees and the suppliers. Organizational Strategies: To operate in the market, an organization must need certain organization strategies. These strategies are actually the ways or the plan of actions which help the management to behave in a certain situation. These strategies are very much helpful for the firm so they must be designed with great care keeping all the possible contingencies in mind. If there is contingency management in any organization then it shows the strength of its flexibility towards uncertain situations. These strategies must be aligned with the objectives of the firm. The team at Unilever named their organizational strategy as the compass path because it provides them a direction to move on for further development. The business strategy is designed towards a sustainable growth. This strategy is also aimed to involve all the possible stakeholders so that they can feel their involvement in it. The basic aims of the operational or we can say business strategy is to save the environment, double the size of the product lines and the most important is the positive social impact. The team at Reckitt and Benckiser is also very much suspicious to design such an organizational policy which could match with their vision of innovativeness. They aimed at finding the unique solutions for the customers. It is also tried that these strategies should meet the mutual interest of the shareholders and the stakeholders. Employing right people on right places is also a part of strategy so that they work well and also with their interest. Task 2 (Business Environment) Impact of Different Economic Systems: An economic system may refer towards the production and then distribution of goods and also the resource allocation as per their availability. The economic system is composed of many small level entities like institutions, agencies and the most important consumers. The study of economic system actually focuses on the linking of all the above mentioned entities, information flow between them and finally on their mutual social relationships. All of these issues come under the roof of an economic system. There can be four possible types of the economic system. These four types basically evolved with a passage of time. Different economies put focus on different issues thus forming a new type. The first one is the traditional economic system. In this type the local customs, traditions and beliefs shape the economy. This shows that usually the resource allocation under this economic system is done as per the traditional practices of the market. The second form is the market economy which is totally based on consumers’ choices. The meaning shows that resource allocation is done as per the demand management schedule. This demand management is done on the basis of results of market analysis. The third one is the command economy which actually shows the centrally controlled system. It means that Government takes all the working decisions about the efficient use of scarce resources and every market player has to follow them. The last one is mixed economy which shows that there is an involvement of both customers and also the Governments in policy designing and in the decision making. Or in other words we can also say that firms make their own policy by consideration both stakeholders. Both our selected organizations Unilever and Reckitt Benckiser are using such strategies in their policy making that are according to the economic system. Their organizational policies and strategies are always flexible. Impact of Fiscal and Monetary Policies: Fiscal and monetary policies are the whole and sole responsibility of the current Government. Though any organization does not involve in these policies but still they are the top most affecters of these policies. Fiscal policy is related to the spending and the revenues of the Government and the monetary policy can be defined as the supply of money which can be further controlled by certain other factors. The research studies showed that the sales and growth at Reckitt Benckiser is directly affected due to these policies (Wilson & Daneshkhu 2013). This effect can be at its adverse level if the firm was not flexible to handle the crisis situation within no time. Impact of Competition: Competition can be referring to the rivalry of firms which are operating in the same market, serving the same customer base and also with a same product line. This may create a healthy and strong sense of competition among the firms. In order to better compete with other market players an organization must need to devise a policy for the competition. This competition policy helps companies to enhance their unique features which would add points to its value in the customer’s minds. The competition policy basically aims to apply certain general rules for the whole market. The managerial team at Unilever claimed that it focuses global competition. Today there are no as such boundaries for the companies between different countries. They can freely move to one country from other one. The possible solution of this problem is to devise a competition plan which can be acted upon globally. This global competition strategy can help the team members to face any kind of challenge coming on the way. This ‘global competition’ is a good approach used by the companies. Under this global approach they focus on the innovativeness of the products, because innovativeness is the biggest tool to deal with the global competition. Pricing Strategies: In order to better position the product a marketer needs to promote it so that the customers may know the advantages of it. Similarly if the company needs to get the benefit of the innovative product which they have made then they should price it correctly which is also covering its costs. The best fit pricing is always beneficial for the company. There can be different pricing strategies as per the market in which the firm is operating. These strategies are premium pricing, penetration, discounts etc. premium pricing is applicable only when the firm charges more than the original cost only because of any special feature associated with that product. Discount pricing is exactly opposite to the premium pricing. In this pricing strategy the firm offers discounts and rebates in order to sale the product. This can be used to increase the overall sales of the organization. The third pricing strategy is the penetration strategy which is very much common among companies. Usually companies sets the average price prevailing in the market in order to get penetrated into the market. The low price would be beneficial in this case only. Usually new entrant firms adopt this king of penetration strategy so that they may enter the market at least. Another not so famous pricing strategy is skimming strategy. According to this price strategy the organization usually sets high prices for the products at first time so that they may grab the market because it is a common conception that a high price means a high quality. All of these pricing strategies are advantageous but in different situations. We cannot say that any specific strategy is good while the other one is not that much good. When we talk about the pricing strategy at Unilever then the research studies show that Unilever managerial team prefers a discount pricing strategy to be used for the products. In this way the company at first offers a discount price on the products and then tries to cover the cost by cutting down other marketing expenses. The main advantage of this type of pricing is that it attracts customers at once due to the discount offered. Actually this discount pricing strategy also helps the company to manage their expenses. Impact of Market Forces: When the firm operates in any specific firm then for sure it has to face certain market forces which can adversely affect the operational activities of the firm. These market forces may include the demand and supply pressure. The interaction of these two forces actually shapes the economic market. Unilever is also one of those companies which can be affected by these market forces. Due to the availability of a wide range of substitutes available in the market Unilever always face the demand supply pressure. For a market player these two market forces are a normal issue not a giant. Like many other firms Unilever has also witnessed many ups and downs in the economic life cycle and this fluctuation is only because of demand and supply fluctuation. Another major reason of these ups and downs can be the local operators of the market. They are also considered as the competitors. Impact of Cultural Issues: Culture is also an important issue to be focused. The reason behind this is may be the involvement of international players at local market level. The firm may go global and have experience of different cultures which can be a problem for adjustment. Cultural issues are considered as the ethical or social issues therefore must be solved earlier. When the firm expand its scope of operations then definitely it may add up another culture to it potential customer base. Now it is the whole responsibility of the company to mange with these cultural issues. The market customers may be different from each other and these cultural and social issues can be lifestyle, age, religion and educational background. Being one of the worlds famous FMCG’s providing company the team at Unilever take care of these issues and always try to manage the cultural diversity in the customers but even in the employees also. Every market segment has its own group of thoughts and now the firm has to be specific regarding the selection of marketing strategies and the marketing tools. It is the responsibility of the marketer to fully utilize available resources and thus create good image in the customer’s minds. This report is all about the environmental analysis of the firm. There may include micro and macro factors which adversely affect the operational activities of the firm. Reference List: ‘What is CSR?’ 2013, United Nations Industrial Development Organization, viewed 23rd Feb, 2014 http://www.unido.org/en/what-we-do/trade/csr/what-is-csr.html Chester, G, A 2012, ‘Head to Head: Unilever vs. Reckitt Benckiser’ viewed 22nd Feb, 2014 http://www.fool.com/investing/international/2012/08/28/head-to-head-unilever-vs-reckitt-benckiser.aspx Oscroft, A 2013, ‘Why Reckitt Benckiser Group Plc beats Unilever Plc and Associated Foods British Plc’ viewed 22nd Feb, 2014 http://www.fool.co.uk/investing/2013/08/14/why-reckitt-benckiser-group-plc-beats-unilever-plc-and-associated-british-foods-plc/ Vorhies, F 2013, ‘Reckitt Benckiser’s sustainability Reporting: walking the talk and talking the walk’, viewed 23rd Feb, 2014 http://www.forbes.com/sites/francisvorhies/2013/08/13/reckitt-benckisers-sustainability-reporting-walking-the-talk-talking-the-walk/ Wilson, J & Daneshkhu, S 2013, ‘Reckitt Benckiser forecasts growth at the upper end of Targets’, viewed 23rd Feb, 2014 http://www.ft.com/cms/s/0/267e7fdc-f822-11e2-92f0-00144feabdc0.html Read More