Post on 22-Oct-2014
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A7Bhushan Patil Sandesh
Wadekar Rajesh Mudaliyar
Organization Change at Unilever
The Case discusses a long organization restructuring exercise undertaken by Unilever, a Old multinational global fast moving consumer goods (FMCG) company. It examines in details the important elements of the restructuring programme
The Case focuses on the changes made with respect to the organizational structure, various Unilever businesses, branding strategies and supply chain management practices. It discusses the results of the restructuring exercise and examine the company’s future prospects in the light of its falling Market share and the faster growth of many of P&G brands (detergents)
In 1872, two Dutchmen, Jurgens and Van Der Bergh had ventured into the margarine business
In 1927, they decided to merge to form two companies, Margarine Unie NV, based in the Netherlands and Margarine Union Ltd, based in the UK
Unie
Strategy: GrowthTool: Merger
Lever
William Hesketh Lever founded “Lever Brothers in 1885By 1887, introduced “SUNLIGHT, thee worlds 1st packaged
Laundry soapLever & CO. was making 450 tons of Sunlight soap a weekHe expanded his business from UK to Australia, North
America and other parts of EuropeIn 1890, Lever & CO became a limited company – LEVER
BROTHERS LTD, by 1894, they went PUBLICDiversified into other businesses, acquired pears soap and
wall’sLaunched its innovative product, VIM Strategy:
GrowthTool: Acquisition
A New Beginning
Unilever was formed in 1930 from two companies It was a full business merger, operating as a single
business entity Two separate legal parent companies were maintained:
Unilever NV(Netherlands) & Unilever PLC (UK)
This works through an equalization agreement and other contracts between the two companies
About UnileverAround 173000 Employee at the end of 2012On a given day, 2 billion consumer worldwide use Unilever
productProduct Offerings: Personal Care, Detergent, food etcAnnual revenue: in excess of $ 51 billionSells more than 400 products in virtually 190 countryDetergents accounts for 25% of the revenueOmo is one such detergent which is sold in over 50 countriesPersonal Care products account for 15% salesIt includes Cosmetics, Oral care & skin care lotionFood products account for 60% salesIt includes tea, ice cream, frozen foods & bakery productsIn this Unilever market share in most of the countries exceeds
70%
HUL IN INDIAIn 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspati Manufacturing Company, followed by Lever Brothers India Limited (1933) and United Traders Limited (1935). These 3 companies merged to form HUL in November 1956
HUL’s Brands like Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond’s, Sunsilk, Clinic, Pepsodent, Close-up, Lakme, Brooke Bond, Kissan, Kwality Wall’s – are household names across the country. They are manufactured over 40 factories across India
The operation involve over 2,000 suppliers and associates. HUL’s distribution network, comprising about 4,000 redistribution stockiest, covering 6.3 million retail outlets reaching the entire urban population, and about 250 million rural consumers
Decentralized Structure of Unilever before 1990’s
Unilever was organized on a decentralized basis In Europe the company had 17 subsidiaries in the early 1990s, each
focused on a different national market Subsidiary companies in each major national market were
responsible for the production, marketing, sales and distribution of products in that market
Each was a profit center and each was held accountable for its own performance
The structure allowed local managers to match product offerings Marketing strategy to local tastes and preferences To alter sales and distribution strategies to fit the prevailing retail
systems To drive to localization, Unilever recruited local managers to run
local organization To build a common organizational culture among its managers
Reason for, the need or frequent restructuring at Unilever???
Strategy Period Features Advantages Disadvantages
Independent units at various location 1930 - 1979 Matrix Organizational
Structure LocalizationHigh Cost structure,
duplication of manufacturing facilities at
various locations
Focused Growth 1980 - 1995
Concentration on 4 industries, 100 acquisition, 38
companies acquired in 1995
concentration on both developed & Emerging
markets
Too many acquisitions, accountability &
responsibility, complexity, difficulty in decision making
Breakthrough Sustainability Strategy 1996 - 1999
Variable Pay, 3 member committee
was dissolved, 7 member committee was appointed, 1st Non Dutch & British Chairman appointed
Focus on core competencies,
Operations were grouped by product
combination of "Global Push & Local Pull"
No fit between structure & strategies, Dip in market share prices, too many brands resulted in "Last
Focus". Big dip in market share
Path to Grow Strategy 1999 - 2004
Brand portfolio of 1600 became 400 for
better focus. 150 units closed down
for cost control, 55000 employees
laying off
Focus on core competencies. 400 brands contributed 93% Sales increased
by 30%, focus on brands & decision
making. Profit increased by 4-5%
Sales dropped by 15%, Profits fell by
13%, Top Line Growth reduced to
3%, Share price felled down by 7%, EPS effected, High cost & advertising
budget for maintaining non performing 1200
brands
Growth to vitality Strategy 2005 - 2010
High concentration on Emerging
markets. Company simplified its management
structure, 20000 job cuts in Europe. Target: 3 - 5 %
Organic growth
41% revenues were generated in developing
countries. Focus on advertising and
promotion
Why there was a need for New Organizational Structure???
Early 1990s the competitive environment was changing
Creation of a single market in 1992 in European Union
This made it possible to manufacture certain items such as detergents and margarine at favorable central Unilever introduced a new organizational architecture
based on regional business groups, each of which contained product division
Unfortunately for Unilever, some of its global competitors moved more rapidly to exploit this changes in the
competitive environment To reestablish a fit between competitive environment, Unilever had to embrace the difficult process of strategic &
Organizational Change
Centralized Unilever
• Facilitate Coordination
• Decision Making
• Authority & Power
• Avoid Duplication of Subunits
• Cut from 10 to 2
• Manufacturing at Only One Site
• Pan-European Advertising
By taking these Steps, Unilever estimated it may save as much as $400 million a year in its European Operations
Problems at UnileverUnilever’s Market Capitalization of about £ 82 Billion
in June 1999 Shrank to £ 20 billion by January 2000 (Stock Prices Plunged)
Company’s existing brand structure had lost its focus
Unilever was criticized for spending large amounts of funds due to frequent restructuring over the year
Unilever market share was taking a big time hit
There was no fit between the company’s organizational structure and its strategies
Current Structure
The Day to day operation are supervised by the National Management comprising the Vice Chairman, Managing Director (HPC), Managing Director (Foods) and the Finance Director
Each division is self-sufficient with dedicated resources and assets in sales, marketing, commercial, and manufacturing
In Marketing each category has a Marketing Manager who heads a team of Brand Managers dedicated to each or a group of brands
Unilever grouped its worldwide operations into 2 global division. Foods and Home and Personal Care. It uses the worldwide geographic area structure
ASIA
Latin America
UnitedStates
Australia
Europe
AfricaMultinational
Head Quarters
In 2012, we continued to make good progress in the transformation of Unilever to a sustainable growth company. We exceeded €50 billion turnover,
with all regions and categories contributing to growth.Key Financial Indicators
Underlying SALES Growth
6.9%2011: 6.5%
Underlying Volume Growth
3.4%
Core Operating
Margin
13.8%
Free Cash Flow
€ 4.3billion
2011: 1.6%2011: 13.5%
2011: €3.1%
Turnover by Geographical Area
Asia/AMET/RUBThe AmericasEurope
40%33%27%
Operating Profit Geograph-ical Area
Asia/AMET/RUBThe AmericasEurope
38%
35%
27%
Challenges of Unilever & Our Learning
Challenges in 21st Century
Our Key Learning's
• Divestment/Reduce Number of Target
• Cost Cutting & improving margins
• Streamline the management & Leadership to fight risk & competition
• Concentration of 400 Brands • Acquisitions• Concentration on Asian
Giants
• Importance of Organization structure in Global competitive market
• Importance on “Acquisition” as an Strategy
• Adaptability of Unilever in Global Market
• Dynamics of changing international market
• Importance of Employee Training
Unilever Initiatives Save the Children
What was the need for unilever to have separate legal identity but operate as a single entity ?? Can
unilever plc and unilever nv fuse, in future ???
What was the reason for, the need of frequent restructuring at unilever ??
Pan European Advertising Worked????
Had unilever grown more than its cradle ??
Should unilever opt for umbrella branding ever in future ? If yes, why?? If no, why???