EXHIBIT 5.4 Value-Chain Activities: Examples of Differentiation

the total profits in an industry at all points along the industry’s value chain.

We see growing consumer need for: a healthy lifestyle more variety, quality, taste and enjoyment time, as an increasingly precious commodity Helping people to feel good, look good and get more out of life will enable us to meet these needs and expand our business. Unilever is in a unique position to understand the interrelationships between nutrition, hygiene and personal care. We can do this thanks to our strong science capability and our locally rooted consumer insight. It is by bringing all this together that we can strive to contribute to quality of life and wellbeing – adding vitality to life. The long-term success of our business is intimately interconnected with the vitality of the environment and the communities in which we operate. The environment provides us with our raw materials and the ingredients we need to make our products. Healthy, prosperous communities provide us with a healthy, growing consumer base. VISION

Let’s look at examples of two firms that have successfully implemented focus strategies. LinkedIn has staked out a position as the business social media site of choice. Rather than compete with Facebook head on, LinkedIn created a strategy that focuses on individuals who wish to share their business experience and make connections with individuals with whom they share or could potentially share business ties. In doing so, they have created an extremely strong business model. LinkedIn monetizes their user information in three ways: subscription fees from some users, advertising fees, and recruiter fees. The first two are fairly standard for social media sites, but the advertising fees are higher for LinkedIn since the ads can be more effectively targeted as a result of LinkedIn’s focus. The third income source is fairly unique for LinkedIn. Headhunters and human resource departments pay significant user fees, up to $8,200 a year, to have access to LinkedIn’s recruiting search engine that can sift through LinkedIn profiles to identify individuals with desired skills and experiences. The power of this business model can be seen in the difference in user value for LinkedIn when compared to Facebook. For every hour that a user spends on the site, LinkedIn generates $1.30 in income. For Facebook, it is a paltry 6.2 cents.44

Functional Level Strategies:
Unilever Bangladesh Ltd follows different functional level strategies to gain competitive advantages and sustain it in the long run in the matured industries. They increase their efficiency through exploiting economies of scale and learning effects. For example, 808,720 bars of soaps, 1,023,810 packets of detergent powders,154, 430 toothpaste tubes and sachets,329, 530 bottles and sachets of shampoo, 156,910 tubes, jars, bottles and sachets of creams and lotions, and 35, 000 packets of tea are produced in one day in Bangladesh by Unilever. They adopt flexible manufacturing technologies, upgrade the skills of employees through training and perform research and development function to design products that are easy to manufacture. They have higher customer responsiveness rate. They carry out extensive research to innovate new products and modify the existing products to better satisfy the consumers. They continuously innovate products, promotional activities, packaging and distribution. This way they can respond quickly to customer demands. Business-Level Strategies:

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The Internet and digital technologies create new opportunities for firms to achieve low-cost advantages by enabling them to manage costs and achieve greater efficiencies. Managing costs, and even changing the cost structures of certain industries, is a key feature of the digital economy. Most analysts agree that the Internet’s ability to lower transaction costs has transformed business. Broadly speaking, transaction costs refer to all the various expenses associated with conducting business. It applies not just to buy/sell transactions but to the costs of interacting with every part of a firm’s value chain, within and outside the firm. Think about it. Hiring new employees, meeting with customers, ordering supplies, addressing government regulations—all of these exchanges have some costs associated with them. Because business can be conducted differently on the Internet, new ways of saving money are changing the competitive landscape.

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Potential Internet-Related Pitfalls for Differentiators Traditional differentiation strategies such as building strong brand identity and prestige pricing have been undermined by Internet-enabled capabilities such as the ability to compare product features side-by-side or bid online for competing services. The sustainability of Internet-based gains from differentiation will deteriorate if companies offer differentiating features that customers don’t want or create a sense of uniqueness that customers don’t value. The result can be a failed value proposition—the value companies thought they were offering, does not translate into sales.

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Too much focus on one or a few value-chain activities. Would you consider a person to be astute if he cancelled his newspaper subscription and quit eating out to save money, but then “maxed out” several credit cards, requiring him to pay hundreds of dollars a month in interest charges? Of course not. Similarly, firms need to pay attention to all activities in the value chain.18 Too often managers make big cuts in operating expenses, but don’t question year-to-year spending on capital projects. Or managers may decide to cut selling and marketing expenses but ignore manufacturing expenses. Managers should explore all value-chain activities, including relationships among them, as candidates for cost reductions.
Increase in the cost of the inputs on which the advantage is based. Firms can be vulnerable to price increases in the factors of production. For example, consider manufacturing firms based in China which rely on low labor costs. Due to demographic factors, the supply of workers 16 to 24 years old has peaked and will drop by a third in the next 12 years, thanks to stringent family-planning policies that have sharply reduced China’s population growth.19 This is leading to upward pressure on labor costs in Chinese factories, undercutting the cost advantage of firms producing there.
The strategy is imitated too easily. One of the common pitfalls of a cost-leadership strategy is that a firm’s strategy may consist of value-creating activities that are easy to imitate.20 Such has been the case with online brokers in recent years.21 As
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This places Bangladesh ahead of other countries in the region such as India (88th) and China (128th). In 2005 total FDI inflow into Bangladesh increased by 84% amounting to US$845 million. This growth is the second highest in the entire South Asia region. According to the World Investment Report 2006, Bangladesh is now ahead of India in terms of the FDI Performance Index being ranked 116 among 200 economies (BOI Handbook, 2007). Unilever is an Anglo-Dutch company, with a history of grand operation, on which it has gradually built its capital. Today it owns most of the world’s consumer product brands in food, beverages, cleaning agents and personal care products. Unilever Bangladesh Ltd is one of the world’s most successful fast moving consumer goods manufacturing companies with local manufacturing facilities, reporting to regional business groups for innovation and business results. Unilever brands are trusted everywhere and, by listening to the people who buy them, they’ve grown into one of the world’s most successful consumer goods companies. In fact, 150 million times a day, someone somewhere chooses a Unilever product. Unilever Bangladesh Limited has five departments to carry out all the organizational functions. Multinational corporations are large companies which operate in more than one country.

“Discuss the weaknesses that may exist in an organisation’s value chain and relate these to Unilever, ..

Yugo was offering a lousy value proposition. The cars literally fell apart before your eyes. And the lesson was simple. Price is just one component of value. No matter how good the price, the most cost-sensitive consumer won’t buy a bad product.

Topic: Discuss the weaknesses that may exist in an organisation’s value chain and relate these to Unilever, which is in the fast-moving consumer goods industry.

Prestige or brand image (Adam’s Mark hotels, BMW automobiles).25
Technology (Martin guitars, Marantz stereo components, North Face camping equipment).
Innovation (Medtronic medical equipment, Apple’s iPhones and iPads).
Features (Cannondale mountain bikes, Honda Goldwing motorcycles).
Customer service (Nordstrom department stores, Sears lawn equipment retailing).
Dealer network (Lexus automobiles, Caterpillar earthmoving equipment).
Exhibit 5.4 draws on the concept of the value chain as an example of how firms may differentiate themselves in primary and support activities.