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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
Dermalogica, as an established brand with a strong reputation, can enhance Unilever's presence in the health and beauty market.
With well-developed global distribution links, this acquisition may allow Unilever to increase its market share significantly.
The merger could lead to economies of scale for Unilever, especially in purchasing ingredients that are essential for skincare products. Additionally, the expertise of Dermalogica's management in the skincare market can help refine Unilever’s product offerings and may reduce its overall unit costs.
Step 2
Possible Counterbalance:
Answer
However, there are potential drawbacks. The initial cost of £500 million to acquire Dermalogica could result in a reduction of short-term profits for Unilever.
Moreover, there may be issues following the takeover, such as employee adjustments. These could disrupt productivity if Dermalogica’s existing staff are not integrated smoothly into Unilever's operational structure.
Step 3
Potential Judgement:
Answer
This takeover may allow Unilever to achieve its objective of increasing the sales of personal care goods to 66% of total worldwide sales, as Dermalogica currently operates in over 80 countries.
Ultimately, Unilever stands to benefit significantly from this acquisition, provided it maintains the strengths of Dermalogica’s business model and retains its current distribution networks without damaging the brand image amongst skincare professionals.