distinctive competencies of hul
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Business Model of Hul revolves around the production of fast-moving consumer goods.
Established in the year 1933 by the Lever Brothers of United Kingdom, HUL or Hindustan Unilever Limited is an Indian subsidiary of Unilever, a British-Dutch multinational company headquartered in Mumbai, India.
It governs a massive range of products, including foods, cleaning agents, beverages, personal care products, fast-moving consumer goods, and water purifiers.
In 2018, HUL acquired GlaxoSmithfline’s India business from $3.8 billion in a 1:4:39 ratio all-equity merger deal. HUL leads the Indian market with its consumer products that suit the needs of the Indians. There are over 20 consumer categories of HUL like tea, detergent, soap, shampoo, and other products which have over 700 million Indian consumers.
This post will take you deep into the business model of Hul and help you understand how it channelizes its business and makes profits. So, let us get started right away-
Principles followed by the Business Model of HUL
Hindustan Unilever Limited identified its purpose as making sustainable living a commonplace. It, though, was further accentuated by their 2009 tag- ‘Our strategy for sustainable growth.’ They believed profoundly in sustainable living. The principles are however as follows-
- A better future for children
- A more confident future
- A healthier future
- A better future for the planet
- A better future for the farming and farmers of India
History of HUL Business Model
Around the 19th century, a renowned social reformer called William Hesketh Lever was the main propagator of measures for employee welfare like health benefits, savings plans, etc. imbibed Unilver with a strong sense of corporate responsibility and leadership. It became the most inbuilt culture of Unilever, passing on to Hindustan Unilever Limited inevitably.
Unilever first came in a country like India, which had a nascent market too large with an immense number of possibilities and opportunities. They established three companies between the years 1931 to 1935- the Hindustan Vanaspati Manufacturing Company, which created edible oil, Lever Brother India Limited that created soap, and United Traders who specialized in personal products.
These three companies were then put under a single unit in 1956 to form the Hindustan Lever Limited. In the coming four decades, Hindustan Lever Limited represented the entire business of Unilever in India.
Hindustan Lever Limited gained a reputation for being an Indian company and not a multinational company. Thus, HUL went on to contribute to the rural segment of India with projects to improve their quality of living, and sustainable development became the primary motive.
By 2010, HUL became India’s one of the largest exporters and the biggest FMCG company that leads the market with its personal and home products with its reach over 600000 villages and counting.
Key partners of HUL
The key partners of Hindustan Unilever Limited are as follows-
- Investors
- Acquisitions
- Retailers and distribution network
- Providers along with the supply chain
- Farmers
- Regulators
- Advertising Agencies and Media
1. Reverse innovation
This technique, implemented by Hindustan Unilever Limited, has been an excellent example for other big brands. The famous HUL product ‘Knorr Stock Pot’ was a creation leading to the renowned approach of reverse innovation.
They took inspiration from other big brands that created products being purchased at a high rate. The first nation to launch in 2007 was China’s ‘Dense Soup treasure,’ where soup consumption is at its peak. Chinese people loved the way the convenient process of cooking soup enabled them to save time and consume something delicious at the same time.
2. Target the poor
Hindustan Unilever Limited has made products preferably to suit the needs of the majority of Indian consumers. In the 1990s, Hindustan Unilever came up with a laundry detergent called Wheel, which was developed from the Indian market.
The detergent had lower oil-to-water ratio, making it suitable to wash textiles in rivers solely with hands as the majority of Indians use this method in India. The product has been distributed in a manner that it was available in several local corner shops as well as sold from door-to-door by sales representatives.
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3. Giving importance to other areas of the Triple Bottom Line
Hindustan Unilever Limited has a new take on the triple bottom line that truly defines the actions of a business that cares to not only gain profit but to also care for its people and the planet.
The new movement by the rebranding of the product ‘Fair and Lovely’ to ‘Glow and Lovely’ was more of a cultural issue that they rectified in the wake of the All Black Lives Matter movement. This way, Hindustan Unilever Limited portrays itself as a multinational company that cares for its consumers’ opinions.
4. Massive Distribution Strategy-
They focus on hypermarkets, wholesalers, and cash and carry, small convenience stores, other fast-growing channels like e-commerce, and out-of-home and direct-to-consumer to distribute their products to. Consumer insights are given high importance.
5. Project Shakti Amma
This project has enabled several rural women in villages across India to become entrepreneurs and get nurtured through their financial independence. The women entrepreneurs are called Shakti Ammas, who are trained in basic principles of distribution and management familiarization with the products of Hindustan Unilever Limited.
The Rural Sales promoters coach these Shakti ammas by familiarizing them with the products of HUL to manage their businesses better. Rural India got more exposure to HUL products as well as enabled them to be successful and independent entrepreneurs.
Core competence and competitive advantage
Core competency: Organizations with core competencies enjoy global leadership. It represents the organization’s will to harmonize their multiple resources and skills. It distinguishes the firm in a market place because of its products and service’s uniqueness and because they become difficult to imitate by others. In such an organization, all business strategies revolve around the core competency. Core competencies give a company one or more competitive advantages, in creating and delivering value to its customers in its chosen field. Organizations which believe in spending generously on research and development can and the ones which experiment and investigate the processes can develop core competency.
Core competencies lead to the development of core products. Core products are not directly sold to end users; rather, they are used to build a larger number of end-user products. For example, let’s take the example of Honda’a expertise in engines. Honda was able to exploit its core competency to develop a variety of quality products from lawn mowers and snow blowers to trucks and automobiles. Honda can boast of its sharp and competitive engineer’s team who can be credited for its core competency. In another example, Microsoft has expertise in many IT based innovations where, for a variety of reasons, it is difficult for competitors to replicate or compete with Microsoft’s core competences in building software.
