Various levels Strategy of HUL ,Value-chain Analysis of Nestle

1. CCA of Strategy Management
Submitted by
Name : Ravi Ranjan
MBA-Finance (60)
Subject: Strategy Management
CCA:
1.Various levels Strategy of HUL
2. Value-chain Analysis of Nestle
Submitted to:
Dr.Sanjay Bhale Sir

2. Definition of Strategy
 Strategy can also be defined as knowledge of the goals, the uncertainty of
events and the need to take into consideration the likely or actual behavior of
others. Strategy is the blueprint of decisions in an organization that shows its
objectives and goals, reduces the key policies, and plans for achieving these
goals, and defines the business the company is to carry on, the type of
economic and human organization it wants to be, and the contribution it plans
to make to its shareholders, customers and society at large.
Features of Strategy
 Strategy is Significant because it is not possible to foresee the future. Without a
perfect foresight, the firms must be ready to deal with the uncertain events
which constitute the business environment.
 Strategy deals with long term developments rather than routine operations, i.e. it
deals with probability of innovations or new products, new methods of
productions, or new markets to be developed in future.
 Strategy is created to take into account the probable behavior of customers and
competitors. Strategies dealing with employees will predict the employee
behavior.
Levels of Strategy

3. Analysing various levels Strategy of HUL
Company overview:
Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer
Goods company with a heritage of over 80 years in India. On any given day,
nine out of ten Indian households use HUL products. With over 35 brands
spanning 20 distinct categories such as soaps, detergents, shampoos, skin care,
toothpastes, deodorants, cosmetics, tea, coffee, packaged foods, ice cream, and
water purifiers, the Company is a part of the everyday life of millions of
consumers across India. Its portfolio includes leading household brands such as
Lux, Lifebuoy, Surf Excel, Rin, Wheel, Fair & Lovely, Pond’s, Vaseline,
Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Brooke Bond,
Bru, Knorr, Kissan, Kwality Wall’s and Pureit.
The Company has about 18,000 employees and has sales of INR 37660 crores
(financial year 2018-19). HUL is a subsidiary of Unilever, one of the world’s
leading suppliers of Food, Home Care, Personal Care and Refreshment products
with sales in over 190 countries and an annual sales turnover of €51 billion in
2018. Unilever has over 67% shareholding in HUL.

4. 1.Corporate level strategy:
Strategy for expansion of business
Takeovers:
 Unilever considered takeovers as a prefeered moe inits strategy of rapid expansion in
all its major businesses. For e.g. in soaps and detergents industry it took Tomco for
consideration of 21 crores. The prices and benefits of Tomco constantly enhanced
HUL s position in market share.
 In food and beverages section the takeover of UB group’s Kissan Products and
Dipy’s.brook bond was spearheading the acquisition which absorbed Kissan. It was
followed by Kothari general foods (KGF) instant coffee and Pepsi’s tomato paste
plant.
 In Cosmetics and personal care HUL acquired Lakme sin care through joint venture
50:50 first in 1995 and formed a marketing company as LakmeLever Company. It
used all its ready made dedicated nationwide distribution chain of lakme to market all
its products.the dedicated shelf spaces and salons in network greatly enhanced HUL
‘s launchof top line products like Elizabth Arden, Rimmele and Calvin
Klein.susequently HUL took over lakme in 1998 trademarks/brands and
manufacturing leaving lakme just a shell company.
Joint ventures:
HUL derived the expansion route throught joint ventures also first being LAKME. in
Cosmetics and personal care .a joint venture 50:50 in year 1995 enabled HUL to have ready
made dedicated nationwide distribution chain of lakme to market all its products.the lakme
lever company successful thus launched products like Elizabth Arden, Rimmele and Calvin
Klein throght the dedicated shelf spaces and salons in lakme network later in 1998.
ORGANIC GROWTH ROUTE
Start up route: backward integration strategy
HUL invested some 40 crores in skin care factory at silvasa in dadra and nagar haveli. This
unit became one of the largets manufacturing facilities ofr skin care products with capacity to
manufacture entire line and range of skin care compounds and Ingriediets.this facilities
enabled HUL to produce Fair &Lovely cream and lotion, shampoo bases and lotion bases for
the brand Pond’s and lakme.
Integration strategy
HUL like the parent company UNILEVER carried out regrouping and integration of existing
businesses and company in the country into a single mega firm.It took two companies at a
time – two companies which enjoyed the closest synergy were merged into a single entity,
and subsequently merged into another company to form a larger group. This continued till a
stage where there remained one and sole single company in India - HUL
 Brookbond merger- two of the e exixting HUL’s company Doom Dooma India and
tea estates India and two taken over companies Kissan General Foods and Brook

5. Bond were merged into one company. Lipton was also subsequently merged into one
with now BBLIL- brooke bond lipton india ltd.
 Quest international Indian ltd was merged with pond’s brand . QIL was engaged in
perfumery and flavours which enabled pond’s expertise in launching many unique
perfumes and fine fragrances.
2. Business level strategy:
Focus on product innovation/ relaunches/ development of new markets
HUL has undertaken hands on focus on developing new markets and products brands.
 The successful re launch of Lux helped volume growth in the soaps segment and
market share seems to be stabilizing now.
 Fair & Lovely winter fairness cream was re launched and the company is seeing good
growth.
 In the hair & oil category, Dove and Clinic Plus grew strongly and the former is now
the No. 1 brand in modern retail.
 Sunsilk was re launched in November 2009 and growth momentum continues in this
category as well.
Aggressive price cuts:
HUL’s second level of aggression was to cut prices sharply in the soaps and detergents
category.
 In this high inflationary environment, regional players will be under cost pressure as
they do not have HUL’s international sourcing acumen and scale. The company
insisted that “competitive growth is the No. 1 priority” and thus the company’s price
cut in Rin (~2% of sales) and other segments will help it record higher volume
growth.
 HUL’s global management has emphasized the importance of a “strong foothold in its
own backyard” and the recent price cuts indicate the company’s strong commitment
to continue as market leader in the soaps and detergents segment, while maintaining
profitability. As a reminder, the company still holds 45% market share in toilet soaps
and 37% in washing powder as per industry data.
High investment in Advertising and Sales Promotions
HUL is the biggest FMCG player and has the scale to absorb increased ASP costs. Therefore
increasing brand awareness for new and existing products improves brand equity in the
longer run and HUL believe this is the right strategy at this point of time. This should also
enable the company to focus on other high margin business such as personal products.
Premiumization of customers
HUL is focused on market development as well as upgrading consumers in certain categories.
 New product launches (in ice cream and foods) as well as the recent price cut in Rin
are possible opportunities to upgrade customers to mid segment from lower price
points.

6.  Dove grew rapidly across shampoo and conditioners, becoming the No.1 hair care
brand in modern trade while Dove sachet has captured ~5% of the market.
 In skin care, Pond’s White Beauty and Fair & Lovely’s ‘winter fairness' cream has
received good response from the market.
3. Operational level strategies
Capability Building
HUL has institutionalized the process of attracting, developing and retaining top talent. Some
steps in this process are:
 Get them early
 Train them well
 Build careers
 Encourage diversity
 Reward top performance
 Instil values
HUL does capability building across functions and at every level of the organisation. For
example, HUL has ‘skills-maps’ against which the workforce in its manufacturing units and
its sales force are benchmarked.
Besides on the job training, they undergo up to eight man-days of training every year. On a
conservative basis, this implies a staggering one lakh man-days of training across the
organisation every year.The same emphasis on skills training is extended sales and
distribution network to have invest another one lakh man-days of training every year.
Supply chain management
HUL prioritise speed and flexibility in its supply chain to deliver growth. HUL are doing this
through simple ideas.
 For example, in some of its detergent factories HUL are running 'twin track' on single
production lines.This has helped us to nearly double its production thus enabling
better customer service while improving operating efficiencies.
 Apart from this, today most of its production lines have developed the capability of
quick changeovers to meet the market demand.
 Supply Chain service levels as measured by CCFOT (Customer Case Fill On Time)
HULre the highest achieved in the recent past. IT solutions based on SAP application
systems led to significant improvements in planning and logistics efficiencies.

7. Value-chain Analysis of Nestle
Definition of value chain analysis
Value chain analysis (VCA) is a process where a firm identifies its primary and support
activities that add value to its final product and then analyze these activities to reduce costs or
increase differentiation.
Value chain represents the internal activities a firm engages in when transforming inputs into
outputs.
Primary Activities:
Primary activities relate directly to the physical creation, sale, maintenance and support of a
product or service. They consist of the following:
 Inbound logistics
These are all the processes related to receiving, storing, and distributing inputs
internally. Your supplier relationships are a key factor in creating value here.
Nestle receives some of the stocks which is not available for production in Malaysia
at its respective factories for storage and later distribution. The company has presence
across India with 8 manufacturing facilities and four branch offices spread across the
region. The company's head office is located in Gurgaon, Haryana.
 Operations
These are the transformation activities that change inputs into outputs that are sold to
customers. Here, your operational systems create value.

8. Transforming inputs into products or services. Nestle have a lot of types of food
which includes junior foods, milk, breakfast cereals, hot cereals, creamer, beverages,
coffee, culinary products, chilled dairy, ice cream, confectionery & chocolate and
many more. For each product that they have, it will have its own ingredients and raw
materials that they need. For instance, manufacturing of chocolate. The input are the
raw materials needed such as cocoa, milk and many more. The process which will be
done by the machine such as whipping of the ingredients then froze the ready made
chocolate in chiller. Finally, the output are the chocolates that have been packaged in
their own brand which is Nestle.
 Outbound logistics
These activities deliver your product or service toy our customer. These are things
like collection, storage, and distribution systems, and they may be internal or external
to your organization.
Distributing products and services to customers. Nestle prefers distributing their
products by servicing in land transportation rather than rail train or short sea shipping
because the possibilities of their product to deliver in good shape is higher. Use big
lorries that can load more products to avoid empty runs. Send the stock to each Nestle
branch around India. Distribution are made with many kind of grocery shops.
 Marketing and sales
These are the processes you use to persuade clients to purchase from you instead of
your competitors. The benefits you offer, and how well you communicate them, are
sources of value here.
Helping customers to buy the products or services of the firm. All ingredients that
contained in the product is all labelled accurately on the container of the food.
Running a food based business is not an easy task as many advertising need to be
done. However, Nestle is brilliant in attracting their potential customers and also
existing customers. Many types of advertisement that is made by Nestle such as
through television commercials and flyers that is passed around at the shopping mall
and many more.
 Service
These are the activities related to maintaining the value ofyour product or service to
your customers, once it's been purchased.
Nestle provides its official website for the consumers to review its products. It is very
helpful as all functions and purposes of product is stated clearly and is a satisfactory.
The website has a very welcoming vision.Make people that consume the product feels

9. healthy, happier and prevent from getting diseases because if the good nutrition in
their food and beverages products.
Support Activities
These activities support the primary functions above. In the diagram, the dotted lines show
that each support, or secondary, activity can play a role in each primary activity. For
example, procurement supports operations with certain activities, but it also supports
marketing and sales with other activities.
 Procurement (purchasing)
This is what the organization does to get there sources it needs to operate. This
includes finding vendors and negotiating best prices.
Buying the resources needed to carry out the entity is the primary activities. Finding
potential supplier, although Nestle have a lot of supplier around the world to keep
them always available with raw materials needed to manufacture products.
 Human resource management
This is how well a company recruits, hires, trains, motivates, rewards, and retains its
workers. People are a significant source of value, so businesses can create a clear
advantage with good HR practices.
Nestle is not only good in producing nutritional products, they are good in attracting
people to join their company. Nestle have given many job opportunities to the public
with many different positions. Advertising of job in website and newspaper. Nestle
have also given useful information in the website for the one who is interested to
work with them. Nestle is also known as one of the companies that took care of their
employees' rights and duties.
 Technological development
These activities relate to managing and processing information, as well as protecting a
company's knowledge base. Minimizing information technology costs, staying current
with technological advances, and maintaining technical excellence are sources of
value creation.
Nestle have a department of 'Research and Development' to make sure that they are
always up to requirements of the public. It is a costly thing to do for company but it
pays back the cost with double profit. Having the department of 'Research and
Development' helps Nestle a lot in healthy competition aspect. Nestle also use solar
panels in warehouse as energy consumption. Nestle is a very economically friendly
company.

10.  Infrastructure
These are a company's support systems, and the functions that allow it to maintain
daily operations. Accounting, legal, administrative, and general management are
examples of necessary infrastructure that businesses can use to their advantage.
Nestle has a very stable infrastructure. It is all planned properly by expertise and high
education people who have a lot of experience in the nutrition field. It have its own
accountant, lawyers, administrative and other officers to do their significant job that
has been assigned. Below are the members in the board of director and is assigned to
its own job.