1 - Unilever Review the article titled, \"Unilever's Big Strategic Bet on the Dollar Shave Club\" do additional research and answer these questions. You should prepare your report according to this format: Introduction/Context (write about one page summarizing the case; include the context, that is why is this case written and what are the learning points) Q1 (list the question) A1 (your answer) Etc. Conclusion (write no more than one page of your conclusions and observations) Work cited Use list (bullets), graphs, charts, tables, etc. to make your report more effective (a sample is on Blackboard). Be sure to use data available in the Case supplemented with additional research. Your report must be between 4 and 5 pages, 1.5 space with font TNR11 ********************************************************* QUESTIONS: 1. Visit Unilever website and review their 2006-2015 financial data (under Investors Relations) and make relevant comments concerning its strategy and performance. 2. Do a web research (you can also use UML library) and discuss Shaving Industry size, trends, major players & their market shares and industry drivers. Be sure to support your responses with hard data. 3. Using Porter's Five Force Model, assess the profitability potentials of the Shaving Industry. Treat Dollar Shave Club as a new entrant in discussing your response. Use Table 1 (below) to analyze Competitive Force Model 4. Why has Dollar Shave Club been successful? Why did Unilever buy the Dollar Shave Club? Table 1 - Shaving Industry Competitive Force Model Force Threat of New Entrant Threat of substitute Rivalry among current players Bargaining Power of buyers (identify buyers) Bargaining power of suppliers (identify key suppliers) Overall conclusions Discussion of the intensity Intensity (High, Moderate, Low) BUSINESS MODELS Unilever's Big Strategic Bet on the Dollar Shave Club by Bhaskar Chakravorti JULY 28, 2016 Buttoned-down Unilever just paid $1 billion dollars for the Dollar Shave Club. The scrappy startup, launched in 2012, oered a blades-by-subscription service for as little as $3 a month and quickly grew to a team of 45 engineers and 3.2 million subscribers. It's the fourth-most valuable M&A deal of a venture backed e-commerce company. And it's a telling tale about whether the consumer products industry can get a digital business model right. The deal is full of intriguing details. Unilever paid ve times what Dollar Shave Club was expecting for revenues this year. Analysts had valued it for far less: in its most recent funding round a $90.7 million Series D in November 2015 Dollar Shave Club had been valued at $630 million, according to Pitchbook. While Dollar Shave Club represents a growing share of the razorblades market, it is still tiny, it operates with low margins, is made up of an irreverent albeit engineering-savvy team - and is, as yet, unprotable. So why did a traditional consumer products company do a deal that feels more like it belongs in the tech sector than the consumer product industry? Unilever's Big Strategic Bet on the Dollar Shave Club There are three possible rationalizations. Filling out its brand portfolio. The most natural explanation is one that would t Unilever's recent pattern of re-shuing its categories and brands. It has clearly been making a more general strategic move to grow in the personal care category and pare back in low margin categories such as food. In 2015, the company's shifting portfolio was even reected in its re-classication on the S&P and MSCI indexes from \"packaged food\" to \"personal products.\" More specically, male grooming is Unilever's largest growth driver, according to Chet Henderson, Unilever's VP of Insight, Personal Care. This includes several powerful brands, including the bestselling line Dove Men + Care as well as other brands like Axe and Clear. And according to a market study by Technavio, the global wet shave market is expected to reach $31.41 billion in 2020. But there were other, bigger candidates in the marketplace. The more obvious candidate would have been the No. 2 player in the razor category: Edgewell, a company that has been widely rumored to be available since its split from Energizer Holdings. Edgewell makes 60% of its revenue from razors (its Schick brand) and shaving cream. Its stock price had fallen in recent months, making it a more attractive buy and it is underexposed in emerging markets, representing a large growth opportunity, particularly for a company such as Unilever that does the majority of its business in emerging markets. Edgewell was even named as an ideal takeover candidate for Unilever, according to an earlier analysis by Barron's. Absorbing a disruptor. Dollar Shave Club is an interesting illustration of the theory of a disruptor breaking into a highly protable and over-served industry from the low-end; it's not unusual for incumbents to seek to absorb these rivals when they're still relatively small. Thanks to the momentum Dollar Shave Club created, the online market for razorblades has grown from essentially zero to $263 million, according to estimates from Slice Intelligence, a market research rm. While disruption has become an over-hyped and misunderstood idea, particularly in the tech industry, it is still relatively novel in consumer goods whose products may be \"fast moving,\" but with Big far Strategic more slowly Unilever's Bet onevolving the Dollarbusiness Shave Clubmodels. Despite all this, it is hard to rationalize paying such a high premium for a small player, no matter how disruptive, with a low margin business model, focused on a zero-sum game of taking business away from an incumbent. This would be particularly at odds in a time when Unilever's corporate strategy is focused on re-balancing in favor of higher margin categories and brands, with growth potential. At the very minimum, the company would be sending a confusing signal to its shareholders. A fundamental shift in the industry. A third rationale that builds on the rst two, to my mind, is the most compelling one. As I mentioned earlier, a deal such as this - involving an acquisition of a disruptive rival for a ve-times revenue multiple would feel at home in Silicon Valley. The best explanation for it is that it is, indeed, a \"Silicon Valley\" play. Unilever's move is a signal of more fundamental changes in the consumer products industry. Dollar Shave Club has shown that the shaving market can still be transformed - thanks to an online subscription model, a memorable brand, and a strong consumer experience. For more evidence of this, consider that Gillette, still the No. 1 razor brand, saw its market share fall from 71% in 2010 to 59% in 2015. (And for the record, P&G-owned Gillette sued Dollar Shave Club late last year for patent infringement. Dollar Shave Club led a countersuit in February.) One of the ways in which P&G managed to slow Dollar Shave Club's encroachment was by responding with its own subscription entry, the Gillette Shave Club. In fact, P&G has extended the idea into new categories, the Tide Wash Club, oering pod rells for a subscription fee. Other competitors, such as Harry's, have also jumped on the bandwagon with its own \"shave plans\". In the meantime, the biggest player on the online retail block, Amazon, is growing as a serious competitor to consumer products companies, with its push into private-label goods - diapers, detergents and grocery items combined with its \"subscribe and save\" option for these sorts of staples that require regular replenishment. The accumulation of these transitions suggests that the classic consumer-products business model is about to be busted across the board, with both retailers and their suppliers gearing up to encroach on each others' traditional positions along the value chain using a digital connection with the consumer. For Unilever, however, the move ought to be considered to be more than just a defensive move. Companies like Unilever need to gure out their digital relationship with their customers. Email and social media connections, usage data, and user engagement create a trail that can be analyzed and applied to tailor advertisements, promotions, and loyalty plans to precise demographic segments. Soon, the products themselves could also be tailored to what the data reveals. Plus, there are two additional directions of growth beyond the U.S. domestic market. One is geographic; emerging markets have huge growth potential for the consumer industry. Consider China, one the biggest opportunities for Unilever. The economic slowdown in China has slowed brick and mortar retail in the country. But online sales are estimated to have expanded by over 40% year on year in every quarter since last year. According to The Wall Street Journal, Unilever's online sales in China have reached more than $161 million. Buying Dollar Shave Club gives Unilever more digital distribution power to capitalize on those kinds of opportunities. As mentioned above, the company is also be looking to expand into higher-margin products; Unilever CEO Paul Polman has mentioned his interest in extending the model for its \"prestige\" category. With predictive analytics helping identify customer preferences, the opportunities for tailoring products and commanding premium prices can quickly expand. In conclusion, for a relatively low risk the investment represents less than 2% of its assets Unilever has bought into a startup with a ready-made organization, technical expertise, and business model that allows it to go digital in a whole new way. Making the most of its daring digital deal, however, will require the ultimate walk along a razor's edge: how to grow the digital business - a club that oers more than a clean shave without undermining a legacy business model founded in the 1880s that now involves 400 brands used by two billion people. Bhaskar Chakravorti is the Senior Associate Dean of International Business & Finance at The Fletcher School at Tufts University and founding Executive Director of Fletcher's Institute for Business in the Global Context. He is the author of The Slow Pace of Fast Change. This article is about BUSINESS MODELS FOLLOW THIS TOPIC Related Topics: MERGERS & ACQUISITIONS | RETAIL & CONSUMER GOODS Comments Leave a Comment POST 1 COMMENTS Darryl Franklin 2 days ago You fail to mention what I suspect is the main driver and why buying something like Schick would not be interesting. What this represents as a direct selling engine you can bolt on to all their other brands....brands such as Axe (youth market/millennial targeted) . You an then expand into all kinds of personal care subscription models. The supermarket/pharmacy shelf space battle is like WW1 trench warfare. New real estate and sales is very expensive for not much result. This is a whole new avenue through which they can engage the consumer of the future across all their brands. They have bought the team that knows how to do this. 10 REPLY JOIN THE CONVERSATION POSTING GUIDELINES We hope the conversations that take place on HBR.org will be energetic, constructive, and thought-provoking. To comment, readers must sign in or register. And to ensure the quality of the discussion, our moderating team will review all comments and may edit them for clarity, length, and relevance. Comments that are overly promotional, mean-spirited, or off-topic may be deleted per the moderators' judgment. All postings become the property of Harvard Business Publishing. Unilever's Big Strategic Bet on the Dollar Shave Club 2 Unilever's Big Strategic Bet on the Dollar Shave Club Introduction In the current generation technology has greatly advanced and also it has spread greatly in all corners of the world. Most people are now using technology to make deals and other things easily as the world has grown digital. Businesses have also not been left behind in this as they are trying to match their services with technology to avoid being out-competed (Campino,2015). In the context of the recent move by Unilever, a consumer products industry buying Dollar Shave Club a personal products business in the shaving industry is a tactical strategy by Unilever. Companies are ready and willing even to expand in other industries the industry in which they operate with the idea of getting the large market share and reducing competition. Although Dollar Share Club is a young startup with small profit margin, Unilever bought it at $ 1 billion dollars which were five times of the revenue that Dollar Shave Club anticipated as revenue that year. The deal did not seem right to many people to a big company like Unilever to buy such a young company with small profit margin compared to the high-profit margin operation of Unilever instead. The option of the people is that Unilever would have gone for a big company like Edgewell which was number two in razor group. Dollar Shave Club started in 2012 was able to beat the legend; Gillette company in the shaving industry in the online market sales. In 2015 Dollar Shaves Club had 60% online market while Gilette had 28%. Unilever was driven by the increasing men grooming and the increasing online market for Dollar Shave Club(Dhebar,2016). This case is written to show how competition is changing to the new level each and every day. Such is an eye opener to those in business that they should not be comfortable at their operation level as completion may come from any direction. The lesson from this context is that businesses should try to offer their services online as there is a large potential market online. Businesses should also try to expand their line of operation so as to diversify their products with the view of reducing the magnitude of competition. Question 1. Comments concerning Unilever Strategy and Performance Context? Learn digital business model application to consumer products, traditionally extended value chain industry Unilever trying to learn? Enter into another brand through acquisition? Horizontal growth? Industry attractiveness? Competitive force model? Risks in entering a highly concentrated industry? Absorbing a disruptor? Turn to \"silicon val;ley\" for future growth/opportunities? Unilever's Big Strategic Bet on the Dollar Shave Club 3 what is the strategy? by markets? by lines of business The strategy of Unilever is idea because according to its financial data, the company is performing super well. The strategy to change its portfolio to include products in others lines of operation and industries puts it at a better competitive edge compared with to its competitors. financial data analysis? trends? Question 2. Shaving Industry The shaving industry is a duopoly and has for a long period remained stable without major changes until of late. These changes have been triggered by increasing concern of men grooming and online services in this industry. US? worldwide? The market for shaving industry is $ 4.98 billion and is expected to rise to $ 8.5 billion in 2030 (Katagiri,2016). Major players in this industry includes: copied? marketshare? Wilkinson Gmbh Eisfeld The shaving industry is facing the following trends in the market: explain/discuss copied? The drivers in the shaving industry determine the success of the companies' operation here. The key drivers are: copied? increase sales Unilever's Big Strategic Bet on the Dollar Shave Club 4 Rising income Question 3. Profitability Potential in Shaving Table 1: Shaving Industry Competitive Force Model Force Discussion of the intensity Threat Intensity(High, Moderate, low) New No barriers to joining this industry and of news firms can join at any time. Entrant Threat of Substitute Moderate; may be due to the investment needed. pl do see ch 3 and week 3 notes need substantive discussion of "barriers"? what are they? high? low etc. There are substitutes for razors which High as consumers' need and includes lotions and other products. awareness changes often. electric razor Rivalry among There is rivalry among the existing firms current players trying to out compete others and even court suites. High as firms use different strategies to remain in the market and market share. Bargaining power of There are more buyers than the companies Moderate as buyers can shift buyers(identify therefore buyers have medium power. depending on prices offered. buyer) Men are the major buyers. Bargaining power of The products are differentiated thus Moderate because of the supplier(identify key companies have bargaining power but the differentiation features. suppliers) suppliers are few including Gilette and Edgewell. rivals? plastic? steel? Overall Conclusions The market is growing and consumers, The industry has tastes changes often as new entrants and competition and technology changes with time thus posing profitability as competition. moderate moderate firms are increasing. seems to be high based on above analysis? Question 4. The reason for the success of Dollar Shave Club and why Unilever bought it. The reason as to why Dollar Shave Club was able to succeed being a startup was because it came up with the new idea of the online market which had not been explored by the existing companies. It operated on small profit margins tie in to trends and discuss Unilever's Big Strategic Bet on the Dollar Shave Club 5 aren't they already? Unilever bought Dollar Shave Club as a strategy to enter the personal product industry and also the rising concern on men groom whose online market was increasing rapidly. discuss using data from article and research as well as from above analysis Conclusion The of observation of this context is that every industry is facing competition as firms are striving to remain in the market. There is also rising concern and consumer awareness of the products. Firms are trying to diversify their operation in other lines to reduce competition. The conclusion is that firms need to keep informed of the current trends, key drivers and changes in the market to compete effectively. Diversification of products assist the firms to deal with competition, and it also increases sales, reduces expenses and increases the market share of firms. Competition is real and firms cannot avoid it completely. The way to handle competition is minimizing its negative effects on the firms or even changing it for the benefit of the firms. Unilever's Big Strategic Bet on the Dollar Shave Club 6 References List Campino, A. L. (2015). Dollarshaveclub. com-a case study on how can the brand tone of voice enable a startup to become a viral sensation. Dhebar, A. (2016). Razor-and-Blades pricing revisited. Business Horizons, 59(3), 303-310. Katagiri, Y. (2016). Firms' Decisions to Enter a Market of Highly Differentiated Products: Apparel Industry and New York Fashion Week. Porter, M. E. (2015). March 1979 How Competitive Forces Shape Strategy. Harvard Business Review https://hbr. org/1979/03/how-competitive-forcesshape-strategy accessed February, 16. Unilever's Big Strategic Bet on the Dollar Shave Club 2 Unilever's Big Strategic Bet on the Dollar Shave Club Introduction In the current generation technology has greatly advanced and also it has spread greatly in all corners of the world. Most people are now using technology to make deals and other things easily as the world has grown digital. Businesses have also not been left behind in this as they are trying to match their services with technology to avoid being out-competed (Campino,2015). In the context of the recent move by Unilever, a consumer products industry buying Dollar Shave Club a personal products business in the shaving industry is a tactical strategy by Unilever. Companies are ready and willing even to expand in other industries the industry in which they operate with the idea of getting the large market share and reducing competition. Although Dollar Share Club is a young startup with small profit margin, Unilever bought it at $ 1 billion dollars which were five times of the revenue that Dollar Shave Club anticipated as revenue that year. The deal did not seem right to many people to a big company like Unilever to buy such a young company with small profit margin compared to the high-profit margin operation of Unilever instead. The option of the people is that Unilever would have gone for a big company like Edgewell which was number two in razor group. Dollar Shave Club started in 2012 was able to beat the legend; Gillette company in the shaving industry in the online market sales. In 2015 Dollar Shaves Club had 60% online market while Gilette had 28%. Unilever was driven by the increasing men grooming and the increasing online market for Dollar Shave Club(Dhebar,2016). This case is written to show how competition is changing to the new level each and every day. Such is an eye opener to those in business that they should not be comfortable at their operation level as completion may come from any direction. The lesson from this context is that businesses should try to offer their services online as there is a large potential market online. Businesses should also try to expand their line of operation so as to diversify their products with the view of reducing the magnitude of competition. Question 1. Comments concerning Unilever Strategy and Performance Context? Learn digital business model application to consumer products, traditionally extended value chain industry Unilever trying to learn? Enter into another brand through acquisition? Horizontal growth? Industry attractiveness? Competitive force model? Risks in entering a highly concentrated industry? Absorbing a disruptor? Turn to \"silicon val;ley\" for future growth/opportunities? Unilever's Big Strategic Bet on the Dollar Shave Club 3 what is the strategy? by markets? by lines of business The strategy of Unilever is idea because according to its financial data, the company is performing super well. The strategy to change its portfolio to include products in others lines of operation and industries puts it at a better competitive edge compared with to its competitors. financial data analysis? trends? Question 2. Shaving Industry The shaving industry is a duopoly and has for a long period remained stable without major changes until of late. These changes have been triggered by increasing concern of men grooming and online services in this industry. US? worldwide? The market for shaving industry is $ 4.98 billion and is expected to rise to $ 8.5 billion in 2030 (Katagiri,2016). Major players in this industry includes: copied? marketshare? Wilkinson Gmbh Eisfeld The shaving industry is facing the following trends in the market: explain/discuss copied? The drivers in the shaving industry determine the success of the companies' operation here. The key drivers are: copied? increase sales Unilever's Big Strategic Bet on the Dollar Shave Club 4 Rising income Question 3. Profitability Potential in Shaving Table 1: Shaving Industry Competitive Force Model Force Discussion of the intensity Threat Intensity(High, Moderate, low) New No barriers to joining this industry and of news firms can join at any time. Entrant Threat of Substitute Moderate; may be due to the investment needed. pl do see ch 3 and week 3 notes need substantive discussion of "barriers"? what are they? high? low etc. There are substitutes for razors which High as consumers' need and includes lotions and other products. awareness changes often. electric razor Rivalry among There is rivalry among the existing firms current players trying to out compete others and even court suites. High as firms use different strategies to remain in the market and market share. Bargaining power of There are more buyers than the companies Moderate as buyers can shift buyers(identify therefore buyers have medium power. depending on prices offered. buyer) Men are the major buyers. Bargaining power of The products are differentiated thus Moderate because of the supplier(identify key companies have bargaining power but the differentiation features. suppliers) suppliers are few including Gilette and Edgewell. rivals? plastic? steel? Overall Conclusions The market is growing and consumers, The industry has tastes changes often as new entrants and competition and technology changes with time thus posing profitability as competition. moderate moderate firms are increasing. seems to be high based on above analysis? Question 4. The reason for the success of Dollar Shave Club and why Unilever bought it. The reason as to why Dollar Shave Club was able to succeed being a startup was because it came up with the new idea of the online market which had not been explored by the existing companies. It operated on small profit margins tie in to trends and discuss Unilever's Big Strategic Bet on the Dollar Shave Club 5 aren't they already? Unilever bought Dollar Shave Club as a strategy to enter the personal product industry and also the rising concern on men groom whose online market was increasing rapidly. discuss using data from article and research as well as from above analysis Conclusion The of observation of this context is that every industry is facing competition as firms are striving to remain in the market. There is also rising concern and consumer awareness of the products. Firms are trying to diversify their operation in other lines to reduce competition. The conclusion is that firms need to keep informed of the current trends, key drivers and changes in the market to compete effectively. Diversification of products assist the firms to deal with competition, and it also increases sales, reduces expenses and increases the market share of firms. Competition is real and firms cannot avoid it completely. The way to handle competition is minimizing its negative effects on the firms or even changing it for the benefit of the firms. Unilever's Big Strategic Bet on the Dollar Shave Club 6 References List Campino, A. L. (2015). Dollarshaveclub. com-a case study on how can the brand tone of voice enable a startup to become a viral sensation. Dhebar, A. (2016). Razor-and-Blades pricing revisited. Business Horizons, 59(3), 303-310. Katagiri, Y. (2016). Firms' Decisions to Enter a Market of Highly Differentiated Products: Apparel Industry and New York Fashion Week. Porter, M. E. (2015). March 1979 How Competitive Forces Shape Strategy. Harvard Business Review https://hbr. org/1979/03/how-competitive-forcesshape-strategy accessed February, 16