G202 Unilever Case + Market Power and Pricing

Topic 5 G202

Unilever Slogan

Do Well by Doing Good

USLP

Unilever sustainable living plan

Stakeholder Heirarchy

Consumers, Society, Employees, Shareholders

Consumers

Growing trend to health and environment

Employees

Increased motivation & empowerment = more innovation

Govt regulation & NGO activists

mitigating global social threats

Socially Responsible Investors (SRIs)

trust and transparency

more elastic consumer

decreased price

more inelastic consumer

increased proce

USLP initial result

increased profit

Customer Loyalty after USLP

higher prices, more sales. market share outpaced market growth (operating amrgins 13.6%→14.5%)

Employee loyalty after USLP

improved retention and recruiting, increased productivity. (employee satisfaction 635→ 75%)

investor loyalty after USLP

more R&D and expansion, listed as sustainability leaders (18% increase in valus)

Profit maximization reached

MR=MC

Social efficiency

D=MC

USLP Results

mixed social impact

Sustainable targets

2013→ 50 tgts, 5 off plan

2014→67 tgts, 7 off plan

internal resources (can control)

GHG down 40%

water impact down 31%

external resources (cant control)

GHG increased 5%

water impact increased 15%

case choice

doubled down on USLP with partnerships

case result

Unilever’s USLP advanced sustainability and equality by cutting waste and emissions, improving nutrition, reaching 1.3 billion people, and empowering over 2 million women.

market power

when firms restrict competition to sustain price>MC

market strategies for market power

guard trade secrets, control essential resource, exclusive contracts/customer lock in, collusion

non market strategies for market power

government licensing, patent/copyright, trade regulations, govt/ngo certifications

a firm with market power

produces too few units, prices set higher than efficient

customizing prices

matching price to consumer elasticity

imperfect price discrimination

groups charged diff prices based on elasticity (increased Pro Surplus)

perfect price discrimination

each consumer charged diff price based on elasticity (max Pro surplus)