Emba: Mkt 561 Team Case Analysis “Unilever in Brazil” Case Study Solution
Being a strong market leader in the Brazilian detergent powder market with approximately 81% of market share; Laercio Cardoso is considering whether the firm should expand towards the lower-income market segment of Brazil that has a comparatively lower market share. Along with it, Cardoso is also considering that whether the firm should introduce a new brand or should it extend its current brand portfolio through the repositioning of its current brand if the firm decides to move towards the low-income segment in Brazil. Moreover, what could be the optimal marketing mix in terms of the product description, pricing strategy, promotional technique and the distribution channel, to turn the expansion into a great success, and to grab a higher market share in the low-income segment, avoiding the cannibalization effect on its premium brands?(Pedro Pacheco Guimaraes, 2007)
Q1. Should Unilever target the low-income segment of consumers in the Northeast? Why/Why not? Provide your analysis.
Indeed, Unilever should target the low-income market segment of consumers in the northeast area of Brazil. As the firm already exists in different countries, such as: China, India and other Asian countries, with a huge number of low-income consumers and a large market share. This implies that there is lower uncertainty of being unsuccessful in the low-income markets segment in Brazil. Moreover, Brazil is a country with a high population and low income, as almost 55 million Brazilian were facing poverty in the year 2017. Similarly, an increase of around two million population was reported in 2016,which had increased by4% within one year, according to the data of 5th December 2018.
Around 30% (51.06 million) of Brazil’s population earns less than 125 dollars a month. More specifically, around 25.4 million in NE and 25.62 million in the SE.NE consumers are very price sensitive. Moreover, Brazil’s detergent industry is also favorable for Unilever, with a leading market position that could be viewed by the following Porter’s five forces model.
Porter’s Five Forces
Buyer’s Power (LOW):
Unilever produces detergent products in large volumes ata global level. Despite of variation in the product line category; consumers do not have an ability to influence the Unilever’s product pricing. Due to this reason, a number of issues have been faced by Unilever, but it can still support its financial state by the revenue generation of other relevant products.
Competitive Rivalry (HIGH):
Unilever faces an intense competition. Unilever’s biggest rival P&G continuously works on strategies to beat Unilever, as it has been successful in India with Nimra (detergent powder). Unilever has a list of strong competitors, ranging from small corner shops across the street to big giants like P&G.
Threats from Substitutes (HIGH):
Growth in the sector of consumer and household products has evolved the consumer market, and the consumers demand something better at a cheaper cost for which they are willing to try a new product. This culture has reduced the element of customer loyalty. The companies have increased the flow of their investments into R&D department for new products’ development. Unilever is under constant threat by its competitors and its increased focus on developing new products.
Threat of New Entrants (LOW):
The barriers to enter in this market are high, because the manufacturing process is capital intensive. This industry has a higher level of competition amongst each player, and if the new entrants consider entering the industry, then they would have to create strategies tograsp a chunk of the market from not just these market giants but also from the local manufacturers.
Few companies are willing to take risk while entering in a market-facing such an intense competition with a capital intensive nature, as the possibility of catering to the needs of the consumers at a competitive price is close to impossible for them, which also tends to reduce the chances of new entrants in the industry to almost zero…………………………
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