HUL and ITC ltd. Competitor Analysis
DATE: 10 OCTOBER, 2013
TO: MR. NITIN PARANJPE,
MD AND CEO HINDUSTAN UNILEVER
FROM: RATUL KAPOOR
RE: STRATEGIC ANALYSIS
________________________________________________________
In response to our conversation on October 1, I have prepared a strategic analysis to assess the current competitive position of Hindustan Unilever Limited in the Fast Moving
Consumer Goods (FMCG) industry. Considering the environmental factors slower gross domestic product growth and high levels of consumer inflation are eating into consumer budgets, affecting demand for products of daily consumption as well as discretionary ones.
The home currency “INR” has declined approximately 13% with respect to Dollar since May,
2013 which increases the cost of imported raw materials hence increasing the final price of the products. But factors like rising urbanization, growth of retail etc. (refer to exhibit 1) serve as assets for the industry. With the revised FDI caps of 51% in multi band retail and
100% in single brand retail, Wal Mart has considered in investing in India. This move will be very beneficial for FMCG industries in India as it will increase the retail market.
The industry is moderately attractive with low barriers to imitation. But the incumbent firms are having a competitive advantage with high learning curves and brand value. Intensity of rivalry is very high with firms spending huge amounts in advertisements. With the presence of substitute goods in the market the consumer has no hesitation to switch among variety of products which gives them high bargaining power. Bargaining power of suppliers is low with a less threat of forward integration and also high level of competition among the supplier itself. (Refer to 5 forces analysis, exhibit 3)
With expected rise in urbanization from a 30% in 2007 to 35% in 2015 (in the graph below) still there remains a 65% rural market in the country.
100
80
70
60
40
30
65
35
URBAN
RURAL
20
TO: MR. NITIN PARANJPE,
MD AND CEO HINDUSTAN UNILEVER
FROM: RATUL KAPOOR
RE: STRATEGIC ANALYSIS
________________________________________________________
In response to our conversation on October 1, I have prepared a strategic analysis to assess the current competitive position of Hindustan Unilever Limited in the Fast Moving
Consumer Goods (FMCG) industry. Considering the environmental factors slower gross domestic product growth and high levels of consumer inflation are eating into consumer budgets, affecting demand for products of daily consumption as well as discretionary ones.
The home currency “INR” has declined approximately 13% with respect to Dollar since May,
2013 which increases the cost of imported raw materials hence increasing the final price of the products. But factors like rising urbanization, growth of retail etc. (refer to exhibit 1) serve as assets for the industry. With the revised FDI caps of 51% in multi band retail and
100% in single brand retail, Wal Mart has considered in investing in India. This move will be very beneficial for FMCG industries in India as it will increase the retail market.
The industry is moderately attractive with low barriers to imitation. But the incumbent firms are having a competitive advantage with high learning curves and brand value. Intensity of rivalry is very high with firms spending huge amounts in advertisements. With the presence of substitute goods in the market the consumer has no hesitation to switch among variety of products which gives them high bargaining power. Bargaining power of suppliers is low with a less threat of forward integration and also high level of competition among the supplier itself. (Refer to 5 forces analysis, exhibit 3)
With expected rise in urbanization from a 30% in 2007 to 35% in 2015 (in the graph below) still there remains a 65% rural market in the country.
100
80
70
60
40
30
65
35
URBAN
RURAL
20