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Assess the extent to which Unilever may benefit from its takeover of Dermalogica - Edexcel - A-Level Business - Question 1 - 2022 - Paper 2
Question 1
Assess the extent to which Unilever may benefit from its takeover of Dermalogica. A takeover occurs when one business acquires a majority shareholding of another bu... show full transcript
Worked Solution & Example Answer:Assess the extent to which Unilever may benefit from its takeover of Dermalogica - Edexcel - A-Level Business - Question 1 - 2022 - Paper 2
Step 1
Benefits for Unilever:
Answer
One of the significant benefits for Unilever from the takeover of Dermalogica is the established brand reputation that Dermalogica holds. With a strong recognition in the skincare market, this can enhance Unilever's visibility and credibility in health and beauty products.
Moreover, being a part of Dermalogica’s global distribution network enables Unilever to tap into new markets, thereby potentially increasing its market share in this segment.
Unilever may also benefit from economies of scale due to this acquisition. They can streamline operations and reduce unit costs by leveraging Dermalogica’s purchasing, including gaining knowledge about sustainable sourcing and ingredient preferences from consumers.
Step 2
Possible Counterbalance:
Answer
Despite these benefits, there are challenges that Unilever might face post-acquisition. The high initial cost of £500 million could pose a risk, particularly if it leads to a reduction in short-term profits. Additionally, Dermalogica's employees, products, and operational practices might experience disruptions as a result of the takeover, which could hamper productivity and service quality.
Furthermore, while integrating Dermalogica, Unilever must consider the nuances in brand management in order to avoid alienating Dermalogica’s existing customer base.
Step 3
Potential Judgment:
Answer
Ultimately, the success of this takeover will hinge on Unilever's ability to maintain and strengthen Dermalogica’s brand integrity. If Unilever effectively preserves the strengths of Dermalogica’s business model, it may achieve its goal of increasing the share of personal care goods to 66% of total worldwide sales. Retaining the loyalty of Dermalogica's core customers while expanding its reach will be crucial for the projected success of this merger.