Unicharm SWOT and PESTLE Analysis

Strength

1. Global presence in 80+ countries with leading share in Asian markets: Unicharm is a success story of more than 50 years of sustained growth. Since its inception, the company today is a billion dollar company with 6.5 billion USD as its closing revenue for the financial year 2016. It has the leading share in the fast-growing Asian market in baby care, feminine care and health care segments. It has earned the number 2 position in global health care and number 3 position in both baby and feminine care products globally. The brand enjoys a special place in the people's heart, not only in its domestic market but over 80 markets. In emerging markets, there is a rising demand for baby and feminine products while in advanced markets, a growing demand for pet and adult care products is there due to the ageing population. Thus the unique role played by their high-quality products makes them indispensable in making everyday life cleaner and hygienic.

2. Broad portfolio of value added products: Unicharm began its operation with the baby and feminine care products. The compant has positioned 3 step value addition for women and children is self independence, economic development and social advancement and eliminates poverty. With Unicharm products, women feel more self-independent during their periods and with baby pant style diapers, it helps them during child rearing. In emerging economies, due to cultural constraints where women are held back, Unicharm products give them the opportunity and confidence to move ahead, study and work to alleviate property. Further Unicharm provides products for the cohesive society which includes people across the age groups. Their products are a source of support and encouragement for the elderly. It induces social participation, extends life expectancy, more active lifestyles and better sleep at night. The company’s feminine care product segment is hugely popular in the Chinese market with its attractive designs and high quality, helping Unicharm flourish in this segment. Moreover, Unicharm has tapped into this huge popularity by introducing high value-added products like the shorts-type sanitary napkins. Since pets are a part of thes cohesive society, the need is addressed by the Unicharm 's portfolio of pet care products.

3. Corporate culture of NOLA and DOLA : NOLA stands for Necessity of life with activities and DOLA stands for Dreams of life with activities. Unicharm has effectively worked on both DOLA and NOLA and developed it into its major strength. Nola and Dola are the corporate themes of Unicharm which mean it's not only essential to reduce discomfort but as a business, to remain sustainable, it has to provide comfort and satisfaction to its customers. As a result of which , before, the Unicharm corporate focus was to eliminate discomfort (NOLA). However it soon realized, NOLA is just one side of the coin. One has to achieve DOLA (Changing from no discomfort to feeling good) to be a leader both in market sales and in people's heart. So it has become dual focused- Transformative change from negative to Zero (NOLA) and Transformative change from Zero to plus alpha (DOLA). Since 1961, Unicharm not only strives to eliminate typical issues faced by people like discomfort, inconvenience and unsanitary conditions but their products give customers a greater sense of enjoyment and pleasure. With this corporate slogan at its focus of the operation the company has strengthened its positin as one of the most trusted brand in the sector.

4. Resonant Management structure implementing the SAPS model: As a pendulum moves in a to and fro and maintains a balance of movement, Unicharm feels the company is like the links of a chain. Every link matters in the successful operation of the organization. So the management gains primary information and intuition from front line employees which they keep in mind while formulating strategies. This helps the front-line employees to gain insight into the management's point of view and act accordingly. This working together towards the shared goals is the major factor behind their growth and success. But the above process is time-consuming and to assist the managers to manage the process efficiently SAPS model is introduced. SAPS stands for S- Schedule( Formulate plans), A- Action(Implement plans), P- Performance(Assess impact, identify points to reflect on/improve, S- Schedule(Formulate next plan based on outcomes of a previous plan). Under this model, each division, group and individual channels efforts into resolving high priority, high value-added issues. This makes the organization agile, dynamic and in the right trajectory in a short space of time.

5. Distinctive Differentiation Business Structure: With increasing demand for Unicharm products also the operating environment of Unicharm is changing – driven by Millennials. So Unicharm has to come with a strategy targeting them. So a roadmap has been created and the 10th Medium-term Management Plan as its inception step. Under the plan, the aim is the innovation which can be achieved by focusing on three key areas – value chain, technology and customer experience value which will make Unicharm as one of the most trusted and popular brands in the competitive market arena.

Weakness

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Opportunity

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Threat

1. Maturing domestic market: Unicharm has captured a high share of the market in Japan by leveraging its unique value proposition and addressing the needs of the ageing population. As the domestic diaper market has matured, the company focuses on delivering innovative value proposals. Furthermore, awareness is created about hygiene and comfort issues in both domestic and emerging markets. As a result, it translates into sales growth ahead of the market average and significantly boosts profitability. By being dynamic and understanding the need for nuclear families which aims at fewer babies, Unicharm is changing its strategy. People put more emphasis on quality than quantity as quantity is reduced. And, depending on the market focus of different countries, Unicharm is changing its approach. It has come up with high-quality products that aid in childbirth and raising children comfortably.

2. Foreign currency fluctuations: In fiscal 2016, ended December 31, 2016, Unicharm reported net sales of ¥710.9 billion, decreased by ¥27.7 billion years on a year, and operating income of ¥78.2 billion decreased by ¥1.6 billion. The results were affected by the strong yen and fluctuations in emerging market currencies. The company faced certain non-recurring costs like those of business restructuring costs due to keeping in tune with the distribution channels of major emerging economies like China. As Unicharm operated in 80+ countries globally, it has to make investments to develop itself in the new markets. In fiscal 2016, ended December 31, 2016, sales in Asia declined 10.6% year on year to ¥305.0 billion and operating income fell roughly 30.8% to ¥22.3 billion, reflecting the impact of fluctuations in emerging market currencies and heavy spending on marketing.

3. Risk of information security and intellectual property: Unicharm follows utmost care in securing its information from being misutilised. It protects the sensitive personal information of its customers and prevents data leaks. Security principles and procedures, such as the Information Security Policy and the Information Management Security Rules are in place for the above reason. Information Management Security Committee helps to educate the employees using e-security courses and performs ongoing monitoring. To further strengthen the initiatives, information management day is observed on one day of a month to educate the employees regarding one of the security topics and remind them of consequences attached to information leaks. With 80% patent application rate and 92% patent registration rate, Unicharm aims to build a portfolio of intellectual property such as patents, utility models, designs and trademarks. By cooperation with overseas subsidiaries and local governments, it aims to counterfeit and eliminate unauthorized product usage. Proper on-the-job training, off-the-job training and e-learning training is imparted to the employees to make them aware of the compliance issues.

4. Increasing competition from Kao: Unicharm made an entry to the Chinese market with its disposable diaper products Mamypoko and Moony. It even started to produce it locally and sell the products. While the business model was profitable till 2016 until its Japanese peer Kao entered the Chinese market. It exported its products from Japan to China which turned out to be a huge success. Such behaviour of the Chinese market to Japanese product which is manufactured locally is due to the fact that Chinese parents have apprehensions regarding the safety of products produced locally and look up to high-quality products exported from Japanese Market. Secondly, Unicharm placed the affordable Mamypoko as its main brand instead of high-end Moony. This plan worked till Chinese parents sought to online for higher-quality products. Thus Unicharm now plans to export diapers to China rather than manufacturing them locally to mitigate the threat.

5. Competition in adult incontinence segment: Adult incontinence is a fast growing segment with an increase in ageing population and affordability and the market size is expected to cross $14 billion by 2021. However, the segment has also seen major increase in competition over the past few years with many competitors such as Daio paper, P&G, Covidien, Kao., Kimberly Clark, Hengan, Medline, Ontex, DSG and Nippon Paper that sell adult incontinence products. Thus, Unicharm faces huge competition in the adult incontinence segment.

Political

1. Increase in geo-political tensions: The last few years have seen an increase in geo-political tensions especially in the South China Sea and Middle east and North Africa (MENA) region. Both these regions are important markets for Unicharm, especially China which is one of the largest and profitable market for Unicharm. Escalating Japnese-Chinese tensions may result in political and trade conflicts and may even lead to Chinese consumers boycotting Japanese products. Further deteriorating political situation in MENA markets such as Egypt and Saudi Arabia may impact Unicharm’s prospects in the region.

Economical

1. Strong Yen and currency fluctuations: Amidst debt crisis of Europe and doubts over US economic growth, Yen is growing stronger and stronger. The government has tried many interventions to tamper the rising yen, but the net effect is negligible. A strong currency is a good news. But still, the news is like a double-edged sword for the Japanese economy. It though gives a leverage to domestic markets to expand overseas through merger and acquisition but also heavily dampens the export market of the already sluggish economy of Japan. On one hand, Japanese companies have already spent $ 26.6 billion on M&A in overseas in the three months, the highest quarterly volume in three years. But on the other hand, the Japan export sensitive market is down by 3.3%. Though Japan is debt-ridden most of Japan's debt is held domestically and non-existent inflation is all conducive factors for the strengthening of Yen. Government officials are buying dollars in exchange for yen, increasing the liquidity in Japanese financial system etc in order to weaken the yen. But it is predicted that strong Yen is here to stay. Japan should, therefore, focus to develop an economy that favours a strong Yen. Therefore, Japan needs to foster new industries, like care for its elderly, and seek opportunities overseas. So this provides an opportunity for Unicharm to growth on a global scale. As it is predicted, every time the global economy weakens, the Yen will strengthen.

Social

1. The ageing population with declining birth rate: The issue is skewed birth and death rates all over the world. Japanese population has a high death rate compared to the birth rate. The declining birth rate leads to the ageing population and due to the combination of increasing longevity and the low fertility rate, the total population will decrease by 2050. However, on a positive note, this natural curb is essential for the human beings survival within the already limited scarce resources. But population ageing has devastating consequences on social and economic growth. The future is bleak. The major reason can also be attributed to rising living costs and the longer business working hours. Even the social pressure and the difficult choice placed before a working woman to choose between a career and children, has discouraged many to stay unmarried and childless. Unless the society and the government make the conditions conducive to childbirth and their breeding, the situation will persist. For an ageing population country, the retirement age has increased and people work even after their official retirement age. This has lead to reduced efficiency, huge labour shortage and increased medical costs. Maternal and child care, women health and change of workforce working structure are some of the measures to enhance the birth rate. For Unicahrm, this condition can pose a huge threat to its high grossing baby care diaper products and some strategy like adult diaper pants must be adapted to function sustainably.

2. Rising income in emerging markets: By the end of 2016, there 3.2 billion people coming from middle-class income groups. Within 2 to 3 years, this population will grow up to 2/3 rd of the total world population. Out of this, the majority (around 88%) will live in Asia. This population will constitute the major portion of the emerging economies. The middle-class spending accounts for 1/3rd of the total global economy. In 2015, the total spending of middle-class income groups was $35 trillion. There are two types of global middle-class- one being developed economy middle class which experience slow growth and the other being fast-growing emerging economy middle-class. By geography two major populous countries of the world, India and China account for a major percentage share of emerging economies and the purchasing power of the people have increased significantly. Another reason for the growth is rising educational standards and more participation of talented youth in the global workforce. Thus we can safely say that the gap between the developed markets and emerging markets is closing. As a result, the unique value proposition offered by different companies like Unicharm are recognized and converted into sales.

Technological

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Legal

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Environmental

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