Unilever is a British-Dutch multinational company

Unilever is a British-Dutch multinational company

As discussed above, Unilever is a British-Dutch multinational company. Its product includes food and beverages, cleaning agents, beauty products, and personal care products. Diversification is an act of an existing entity branching out into a new business opportunity or just expanding its current operations. This corporate strategy enables the company to enter into a new market segment that does not already operate in. They may be related businesses or that support one another in what is known as a horizontal diversification strategy. Also, they may be unrelated, making their parent company a conglomerate (Ansoff 1957). Diversification always requires a company to acquire new skills and knowledge in product development as well as new insights into the new market behavior. It also requires the company to acquire new resources, including new technology and new facilities that expose the company to higher levels of risk. Product diversification involves the addition of new products to existing products, either being manufactured or being marketed.

Companies diversify because of some reasons like, for growth business operations, ensuring maximum utilization of the existing resources and capabilities, and to escape from unattractive industry environments. Unilever is a company that has diversified its products, which has worked exemplary very well for it. Unilever is currently a multinational company that deals with food and personal care products as its core business. In 2009, Unilever was able to rank top with their hair products, which earned them $250million. Thus, they were able to manufacture more products and distribute them in the market. They have acquired a significant market share (Bush, 2010). Since 2015, the company bought 29 companies and, most recently, in April announced the plans to acquire vitamin brand Olly. Last year, Unilever reported spending $1.45 billion on the acquisition. In 2017, it spent $ 5.5 billion.

Unilever can diversify either horizontally, vertically, or conglomoratelly acquisition of companies for its growth. In a horizontal acquisition, for Unilever plc to grow in the market, according to me, it will have to continually strive to try to maximize its share in the market. To cover the market, the company will have to offer better quality products or try to eliminate the competition. Thus, for better elimination of competition, the company will have to acquire the competitor. For Unilever to grow and diversify, it will have to obtain other companies that compete within the market. I recommend the company to acquire a company like Colgate-Palmolive. Colgate-Palmolive Company is an American consumer products company focused on the production of household, health care, and personal care products. The company is a major competitor of Unilever in the market. By acquiring this company, Unilever will have increased its market, thus achieve growth.

On vertical acquisition of companies, Unilever can achieve this acquisition by either backward integration or forward integration. Backward integration is a situation where the wholesaler, who is having a monopoly in the trading, acquires a manufacturing unit in producing the same commodity. Forward integration is where the wholesaler acquires retail stores. This gives a direct customer-facing which helps in earning the retail level profit. Unilever plc has both backward and forward integration. But for the entire achievement of vertical acquisition for close customer relations, the company can acquire an online delivering and selling company that is multinational like e-bay. E-Bay is an American digital company based in San Jose, California. It focusses on online. By acquiring this multinational company, Unilever will have a close relationship with its customers and thus maximizing its profit. This is because customers will be buying directly from the company worldwide.

On conglomerate acquisition, Unilever can venture into the acquisition of a company like CHECKOUT. CHECKOUT is a payment processor that is a combination of a merchant account and payment gateway that does not require a pay pal or a merchant account. This is a company that they are very different in the production line, diverse geography, and varied customer base. They have nothing in common, but they plan to undertake such acquisition to diversify the risk and try to cover the new market. This acquisition will help Unilever to provide its products to the customers through online delivery and payment of the product.

In conclusion, the acquisition of firms that are related to the activities of Unilever will lead to its growth. As noted above, Unilever needs to acquire firms of a related kind to enhance its growth and development.

A COMPANY THAT UNILEVER SHOULD ACQUIRE

It is evident in my discussion that for Unilever to continue growing in the market, it must acquire more companies. This will help not only to reach out to new markets but also to reduce market competition, which is the crucial factor in its growth. The acquisition also helps in entering a foreign market, growth of a company, reduce excess capacity, and gain new technology. As discussed above, acquisition is when one company purchases most or all of another company’s shares to gain control of that company. Purchasing 50% of the target firm’s stock and other assets allows the acquirer to make decisions about the newly acquired assets without the approval of the company’s shareholders ( Maljers, F.A.1992). Unilever plc has shown significant acquisition in the market. For example, it recently acquired betty ice in 2018, Horlicks India in 2018, Ren skincare in 2015, and Tatcha in June 2019, among other acquisitions. These acquisitions have resulted in its growth in the market by reducing competition of the products it produces in the market.

In my view, the company needs to acquire more companies, especially those that deal with the same products in the market. I highly recommend that Unilever t acquire to Colgate-Palmolive company. Colgate-Palmolive Company is an American multinational consumer products company that just as Unilever, is focused on the production, distribution, and provision of household, health care, and personal care products. It was founded by William Colgate in 1806, 213 years ago. Its headquarters are in 300 park avenue, New York, united states. Its products include cleaning agents, personal care products, and pet food. The primary product of Colgate- Palmolive Company is Colgate mouth wash. Just as Unilever produces pepsodent mouth wash, the company is experiencing huge market competition from it. This makes me see the need for the acquisition of this company. My selection of this company is because of the following reasons.

On looking at the financial statements, Colgate- Palmolive company is not doing as well as Unilever; thus, it can be acquired. Even if not wholly, the company can purchase its shares, thus control its market. In these considerations, I will compare the 2018 fiscal year annual report of the two companies. On looking at the balance sheet as one of the financial statements, the following can is observed. On current assets, the Colgate-Palmolive company had existing assets amounting to $3,793 billion in the 2018 fiscal year. Also, it had non-current assets amounting to $8368 million. In that fiscal year, total assets were $12,161 billion. The assets seemed to decrease from the previous fiscal year. The total assets of 2017 were $12,676 billion. This indicates that the company had not done quite well in that year, in comparison to Unilever company that had total assets of $17,149 billion. This suggests that Unilever can acquire the company.

On comparing the income statement, another financial report, the Colgate-Palmolive company, had a gross profit of $9,231 million. It also had an operating profit of $ 3,694 million. The net income that was attributed to Colgate-Palmolive was $ 2,400 million. This is very low as compared with Unilever, which had a net profit of $35,787 million. And a net profit of $ 5,237 million in the 2018 fiscal year.

Lastly, when looking at the cash flow of the two companies in that 2018 annual financial statement, Colgate-Palmolive company had the following statistics. It had $3,056 million net cash provided by operations, $1,170 million net cash used in investing activities, and $2,679 million net cash used in financing activities. When compared to Unilever’s cash inflow, Unilever had $5,916 million net operating activities, $1,264 million net investing activities, and $4,651 million cash flow from financing activities. This also is an indicator that Unilever can acquire the company as Unilever is achieving more as compared to it.

At looking at the current capital structure, Colgate-Palmolive has a total asset of about $ 12.676 billion in 2017. Also, the company had 34,500 employees in 2018. When compared with Unilever, which had 15,000 employees and total assets of 59.456 billion euros in 2018, it is crystal clear that Unilever can easily acquire Colgate-Palmolive company to reduce market competition and maximize profit.