Strategic Management
The report topic is on India tea Industry
First i will need a Industry Environmental Analysis “porter’s five forces” based on India tea industry.
Note# the porter’s five forces need to be connected to India tea industry with details and if possible with
data or news to prove it. #News and data has to be recent#
Second i need based on Hindustan Unilever limited one of the main player in India tea industry.
The Hindustan Unilever’s Resources and Capabilities in term of Tangible Resources, Intangible Resources
and Human resources.
Third i also need a VIRO Framework for Hindustan Unilever.
And last i need Hindustan Unilever core Competencies
At the end of the paper please attached all the linked that is used in the report as i will need it for future
explanation to my lecture. Thank you.
STRATEGIC MANAGEMENT 2
Strategic Management
Porter’s Five Forces Model
The framework is used for the analysis of the industry and business strategy
development. It describes five forces that determine the competitive intensity and attractiveness
of the market 1 . These factors are referred to as the micro-environment and have direct impacts
on a firm’s ability to make profits and serve its customers. Any changes in these factors require
that the company reassesses its marketplace.
Bargaining power of customers
The bargaining power of the customers in India’s tea industry can be rated as high.
Although the number of buyers currently willing and taking part in the buying of the tea is huge,
the buyers have many alternatives in terms of the sellers of the product 2 . When the buyers have
many option in terms of the sellers they can buy the product from, and then their purchasing
power becomes high. Consequently, product differentiation in terms of quality, price, and taste is
lacking which is another key factor in contributing to the high bargaining power of the buyers. In
1 Barua, Nissar A., and Mukta Mazumder. “Indian Tea in Global Market.” Review Of
Management 3, no. 1/2 (June 2013): 11-20.
2 Raman, K. Ravi. 2014. “Business, Ethnicity, Politics, and Imperial Interests: The United
Planters’ Association of Southern India, 1893-1950.” Business History Review 88, no. 1: 73-95.
STRATEGIC MANAGEMENT 3
addition, the switching costs for the buyers from one seller or mode of purchase is substantially
low making it easy for them to switch from one seller to another.
Threats of new entrants
Threat presented by entrants of new players into the market within the tea Industry in
India can be rated as moderate. This is attributed to the presence of supportive government laws
and policies such as the Food and Beverage Act as well as a large untapped market for branded
tea in the rural area within India and potential global markets for Indian tea. India is one of the
big consumers of tea in the world with the local consumption currently standing at 900 million
kg (MKg) while India’s share of the global market is also low 3 . The domestic consumption is
projected to have an annual growth of 3.5 percent that indicates a continued growth of the local
market 4 . Again, the existence of few differentiation efforts in the market is also likely to attract
new entrants hoping to capture the market by taking advantage of this aspect of the market.
However, the high cost of doing business associated with the long time it takes to grow and get
ready for sale and the high cost of labour have proven to deter much of the new entrants. Labour
cost for tea production, for instance, takes up over 60 percent the total cost of production 5 . The
high cost of production has been linked with the nature of tea production in India where the tea
plantations are not just economic production units but social institutions responsible for
3 Barua, Nissar A., and Mukta Mazumder. “Indian Tea in Global Market
4 Raman, K. Ravi. 2014. “Business, Ethnicity, Politics, and Imperial Interests
5 2013. “Hot Drinks Industry Profile: India.” Hot Drinks Industry Profile: India 1-36.
“The ultimate tea guide for rall your needs.” Retail Snapshot (March 30, 2014): 9-10.
STRATEGIC MANAGEMENT 4
providing apart from employment, house, welfare, and water to the workers. The nature of the
tea industry in India, which is generally unorganized, may also present a barrier for new entrants.
The presence of the foreign direct investment (FDI) in the Indian tea industry may also
significantly attract new entrants 6 .
Threats of substitute goods
The threat presented by substitute products can be described as moderate. Substitute
goods in this case are products such as coffee, juice, and other soft and cold drinks 7 . The main
challenge here is that the price of the substitute products may be lower. With many substitutes
whose prices may be lower and whose quality may be better, the price competition is likely to
emerge. Recent coffee consumption trends in India indicate that tea consumption in the country
is on the rise. Consequently, coffee shops and cafes have been spreading rapidly across India.
However, the total consumption of coffee is still low as compared with that of tea in the country 8
. Cafes are perceived as the major driving force towards changing the trends of coffee
consumption across India.
Bargaining power of suppliers
The bargaining power of suppliers is generally low. The suppliers in this case are the
producers of the tea in the country. The number of the tea producers in India is also very high.
The large number of suppliers in turn reduces their bargaining power due to competition amongst
6 2013. “Indian Tea: Fluctuating Fortunes; Over the years, even as India has lost its dominant
place in tea export, the domestic tea industry has remained buoyant because of surging local
demand.” Facts For You, 2013. Business Insights: Essentials.
7 2013. “Hot Drinks Industry Profile: India
8 2013. “Indian Tea: Fluctuating Fortunes
STRATEGIC MANAGEMENT 5
themselves. In addition, the high level of production creates low switching costs among the
companies and in turn contributes to the low bargaining power of the suppliers in the India’s tea
industry. India is projected as a top tea producer in the world accounting for an approximate 23
percent of the global tea supply and employing over a million workers 9 .
Competitive rivalry within the industry
The competitive rivalry across the different companies involved in tea production is high
in India. With over 600 factories involved in the production of tea, the competition is intense and
stiff 10 . The many companies seeking each to claim a section in the market generates a lot
competition among themselves at the benefit of the consumers. The tea industry is dominated by
a large proportion of players who are unorganized and who lack collective bargaining power.
The top competing sellers of tea in the Indian market are the Hindustan Unilever Limited and the
Tata Tea Limited, Limtex, Godrej Tea, Duncans Industries, Girnar Food & Beverages, Golden
Tips Tea Company, and Madhu jayanti International Limited. The growth for the tea industry has
been quite slow postulated at 2 percent 11 .
Hindustan Unilever Limited
Hindustan Unilever Limited (HUL), owns two of the most popular brand lines Brooke
Bond and Lipton. One of the strengths of the HUL Company is their brand name, which is
9 Leading the way for India’s tea market: Wagh Bakri: tea is to India like wine is to Italy. A way
of life, a part of culture and a symbol that has become synonymous with the country. Wagh
Bakri, India’s largest privately held packaged tea group, has been constantly growing and
evolving since their start in 1892.” Tea & Coffee Trade Journal, 2012., 42.
10 2013. “Hot Drinks Industry Profile: India
11 2013. “Indian Tea: Fluctuating Fortunes
STRATEGIC MANAGEMENT 6
widely recognized. The company in 1967 established at the Hindustan Unilever Research Centre
in Mumbai and in Bangalore in 1997 12 . The facilities have enabled the staff of the company to
develop many innovations in manufacturing processes and products. The company prides in
excellent technology and has contributed immensely in terms of production and sales. For
instance, the company’s salespersons have a handheld device called iQ which offers customized
recommendations on the products to sell, in what quantity, and when to sell them for each store.
The device works through the use of the market information to monitor the market at the
distributor terminus. Consequently, the company owns numerous stores across the country and a
direct selling division. It has a robust distribution network with over 3500 distributors and over
16 million outlets 13 . Another major strength for the company is their well distributed network.
The HUL distribution network covers over a million direct retail outlets across the Indian market
while its products are available in over 6 million retail outlets in India. In addition, HUL has 39
factories across the country with surveys indicating that two out of every three Indians use their
products 14 .
HUL is recognized as the owners of the largest number of brands in the list of the most
trusted brands. HUL is a very trusted brand name within the Indian market. This presents as a
key strength for the company. Their products enjoy a wide coverage with about 80 percent of
consumer homes across India that can easily access their products 15 . In addition, the HUL
12 2013. “Hindustan Unilever Limited SWOT Analysis.” Hindustan Lever Limited SWOT
Analysis 1-9.
13 Unilever NV, Unilever PLC and Hindustan Unilever Limited File Indian Patent Application
for Prebiotic Use of Water Soluble Soybean Polysaccharide.” Global IP News: Biotechnology
Patent News, 2014., Business Insights: Essentials.
14 2013. “Hindustan Unilever Limited SWOT Analysis
STRATEGIC MANAGEMENT 7
company strategy extends to include their unique sizes such as stir ready and tea bags as well as
product range in terms of a wider range characterized by technological superiority. The
company’s alliance with Pepsi has opened new channels to access a massive distribution
network. Such an alliance with a big well-known partner further enhances the strong distribution
capability of the company as well as promoting demands for their products further 16 .
HUL believes that the human resource is their most important asset. This is also reflected
by a survey by Nielsen Campus Track B-School of 2013, which rated the company as the
employer number one in India. HUL employs over 16,000 workers with an annual turnover of
27408 crores as per the 2013/2014 financial year. The company has an effective HRM strategy
for recruiting, retaining, and developing their employees. HUL has also created a performance
culture that furthers diversity within the organization. In addition, the company has developed a
superior brand name that is synonymous with its products. This has been effective in developing
a competitive advantage for the company and winning loyalty among the domestic customers 17 .
VIRO Framework for Hindustan Unilever
Value
The value of HUL is in their company’s ability to offer diverse products, as well as
catering for the different segments in the industry. The company prides in international wealth of
15 Unilever NV, Unilever PLC and Hindustan Unilever Limited File Indian Patent Application
for Prebiotic Use of Water Soluble Soybean Polysaccharide
16 “Hindustan Unilever Limited.” (n.d.): Hoover’s Company Profiles.
17 Unilever NV, Unilever PLC and Hindustan Unilever Limited File Indian Patent Application
for Prebiotic Use of Water Soluble Soybean Polysaccharide
STRATEGIC MANAGEMENT 8
knowledge and expertise that is specialized for the different segments in the market and in
satisfying the needs and desires of their customers. In addition, the company has also
demonstrated a high-level standard of corporate behaviour in regard to its stakeholders:
customers, employees, and other business partners. Their commitment to the welfare and better
working conditions are indications of the company’s realization of the value of the employees as
the most valuable asset of the organization. HUL encourages open communication with
customers that involve feedback a useful tool in improving their products 18 .
Rarity
Moreover, HUL prides in the competitive advantages it earns from its robust distribution
network and supply chain. The wide coverage reached by this system enables the company to
reach out to more of its customers as compared with its competitors 19 .
Imitability
18 Hindustan Unilever Limited.” (n.d.): Hoover’s Company Profiles.
19 Ebenezer, I. Alfred, S. R. Devadasan, C. G. Sreenivasa, and R. Murugesh. 2011. “Total failure
mode and effects analysis in tea industry: A theoretical treatise.” Total Quality Management &
Business Excellence 22, no. 12: 1353-1369.
STRATEGIC MANAGEMENT 9
Through the numerous valuable and rare resources that the company owns as opposed to
their rivals, the company has made it hard for rivals to imitate. It is difficult for companies to
imitate and effectively manage social relationships that are entailed in resources and organization
culture 20 .
Organization
HUL has a system of leadership and management that is unmatched in the market
comprising of empowered managers in their companies nationwide that makes the decision
making process a speedy and flexible operation. The effective management is capable of
leveraging its resources for efficient operations. The company’s commitment to their employees
is also a contributing factor to the effective organization of the organization 21 .
Hindustan Unilever Limited Competencies
HUL has a robust distribution network and supply chain that covers about 16 million
outlets and over 35000 distributors. The company’s sales organization structure integrates foods,
personal care, and household distribution networks together. This way HUL is able to align
organization towards its common goal. Again, by introducing a wide array of their products in
different segments and at different prices, they are able to strategically position themselves
within the markets. The company is committed to market analysis and subsequent alignment of
their business strategy to improve their foothold in the unoccupied market segments 22 .
20 Hindustan Unilever Limited.” (n.d.): Hoover’s Company Profiles
21 Ebenezer, I. Alfred, S. R. Devadasan, C. G. Sreenivasa, and R. Murugesh. 2011. “Total failure
mode and effects analysis in tea industry
22 Hindustan Unilever Limited.” (n.d.): Hoover’s Company Profiles
STRATEGIC MANAGEMENT 10
Bibliography
“Hindustan Unilever Limited.” (n.d.): Hoover’s Company Profiles.
“The ultimate tea guide for rall your needs.” Retail Snapshot (March 30, 2014): 9-10.
- “Hindustan Unilever Limited SWOT Analysis.” Hindustan Lever Limited SWOT
Analysis 1-9. - “Hot Drinks Industry Profile: India.” Hot Drinks Industry Profile: India 1-36.
STRATEGIC MANAGEMENT 11
- “Indian Tea: Fluctuating Fortunes; Over the years, even as India has lost its dominant
place in tea export, the domestic tea industry has remained buoyant because of surging
local demand.” Facts For You, 2013. Business Insights: Essentials,
Barua, Nissar A., and Mukta Mazumder. “Indian Tea in Global Market.” Review Of
Management 3, no. 1/2 (June 2013): 11-20.
Ebenezer, I. Alfred, S. R. Devadasan, C. G. Sreenivasa, and R. Murugesh. 2011. “Total failure
mode and effects analysis in tea industry: A theoretical treatise.” Total Quality
Management & Business Excellence 22, no. 12: 1353-1369.
Leading the way for India’s tea market: Wagh Bakri: tea is to India like wine is to Italy. A way of
life, a part of culture and a symbol that has become synonymous with the country. Wagh
Bakri, India’s largest privately held packaged tea group, has been constantly growing and
evolving since their start in 1892.” Tea & Coffee Trade Journal, 2012., 42.
Raman, K. Ravi. 2014. “Business, Ethnicity, Politics, and Imperial Interests: The United Planters’
Association of Southern India, 1893-1950.” Business History Review 88, no. 1: 73-95.
Unilever NV, Unilever PLC and Hindustan Unilever Limited File Indian Patent Application for
Prebiotic Use of Water Soluble Soybean Polysaccharide.” Global IP News:
Biotechnology Patent News, 2014., Business Insights: Essentials.
