Unilever 2010 Annual Report Download - page 37

34 Unilever Annual Report and Accounts 2010
Report of the Directors About Unilever
Outlook and risks continued
Description of risk What we are doing to manage the risk
Markets
• Managing the business across globally competitive markets
• Volatility of emerging markets
• Building strategic alliances and partnerships
Unilever operates globally in competitive markets where the activities
of other multinational companies, local and regional companies and
customers which have a significant private label business may
adversely affect our market shares, cash flow, turnover, profits
and/or profit margins.
In 2010, more than half of Unilever’s turnover came from developing
and emerging markets including Brazil, India, Indonesia, Turkey,
South Africa, China, Mexico and Russia. These markets are typically
more volatile than developed markets, so we are continually exposed
to changing economic, political and social developments outside our
control, any of which could adversely affect our business. Failure to
understand and respond effectively to local market developments
could put at risk our cash flow, turnover, profit and/or profit margins.
Our strategy focuses on investing in markets and segments which
weidentify as attractive, i.e. where we have or can build competitive
advantage and where we can consistently grow sales and margins.
Many years of exposure to D&E markets has given us the ability to be
able to operate and develop our business successfully during periods
of economic, political or social change.
We seek in-fill acquisitions to support our category and geographic
ambitions and our New Business Board actively monitors
opportunities to invest in potential future businesses, new
technologies and different business models.
We identify strategic partnerships with specialists that enable us to
leverage external expertise to more efficiently and cost-effectively
develop and manage our business.
Brands and Innovation
• Design, development and roll-out of consumer/customer
relevant products and services
Unilever’s Mission is to help people feel good, look good and get
more out of life with brands and services that are good for them
andgood for others. This is achieved by designing and delivering
superior branded products/services at relevant price points to
consumers across the globe. Failure to provide sufficient funding
todevelop new products, lack of technical capability in the research
and development function, lack of prioritisation of projects and/or
failure by operating management to successfully and quickly roll out
the products may adversely impact our cash flow, turnover, profit
and/or profit margins and may impact our reputation.
We have processes to monitor external market trends and collate
consumer, customer and shopper insight in order to develop
long-term category and brand strategies. Our established innovation
management process uses comprehensive marketing tools and
techniques to convert category strategies into a series of projects,
building on internally developed know-how and expertise. It further
identifies, prioritises and allocates resources and develops relevant
brand communications. We have well-established procedures to
planand execute roll-out of products to our customers.
Customer
• Building long-term, mutually beneficial relationships
with customers
• Customer consolidation and growth of discount sector
Maintaining successful relationships with our customers is key to
ensuring our brands are successfully presented to our consumers
andare available for purchase at all times. Any breakdown in the
relationships with customers could reduce the availability to our
consumers of existing products and new product launches and
therefore impact our cash flow, turnover, profits and/or profit
margins.
The retail industry continues to consolidate in many of our markets.
Further consolidation and the continuing growth of discounters
could increase the competitive retail environment by increasing
customers’ purchasing power, increasing the demand for competitive
promotions and price discounts, increase cross-border sourcing to
take advantage of pricing arbitrage and thus adversely impact our
cash flow, turnover, profits and/or profit margins. Increased
competition between retailers could place pressure on retailer
margins and increase the counterparty risk to Unilever.
We build and maintain trading relationships across a broad
spectrumof channels ranging from centrally managed, multinational
customers, to ‘discount’ chains and to the ‘traditional’ trade via
distributors in many developing countries. We develop joint business
plans with all our key customers, including detailed investment plans
and customer service objectives, and regularly monitor progress.