unilever organisational change & acquisition policy

8/4/2019 UNILEVER ORGANISATIONAL CHANGE & ACQUISITION POLICY

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GROUP 8 : UNILEVER


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Unilever is a British-Dutch multinational corporationFounded on 1 January 1930 by Antonius Johannes Jurgens, Samuel van den Bergh andWilliam Hulme Lever, 2nd Viscount LeverhulmeProduct Offerings: Personal Care, detergent, food etc

Annual Revenue: In excess of $ 50 billion

Sells more than 1000 products in virtually every country

Detergents account for 25% of the revenue

Omo is one such detergent which is sold in over 50 countries

Personal Care Products account for 15% sales

It includes Calvin Klein Cosmetics, Pepsodent Toothpastes, Vaseline skin care lotion

Food products account for 60% sales

It includes tea, ice cream, frozen foods & bakery products.

In this Unilevers market share in most of the countries exceeds 70%

WHAT IS GIVEN IN THE CASE STUDY

Organization structure mid 80s

Its features, advantages & disadvantages

Transformation in mid 90s

Its features, advantages & disadvantages

ABOUT UNILEVER


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What was the old decentralized structure of Unilever before1990s

To build a common organizational culture among its managers.

To drive the localization, Unilever recruited local managers to run local

organizations

to alter sales and distribution strategies to fit the prevailing retail systems.

marketing strategy to local tastes and preferences

The structure allowed local managers to match product offerings

Each was a profit center and each was held accountable for its ownperformance.

Subsidiary companies in each major national market were responsible for theproduction, marketing, sales, and distribution of products in that market.

In Europe the company had 17 subsidiaries in the early 1990s,each focusedon a different national market.

Unilever was organized on a decentralized basis.


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WHY THERE WAS A NEED FOR A NEWORGANIZATIONAL STRUCTURE ?

Early 1990s the competitive environment was changing

Trade barriers between countries were falling

Creation of a single market in 1992 in European Union

This made it possible to manufacture certain items such as detergents and margarine atfavorable central

Locations in order to realize the benefits associated with location and experience curveeconomies

Unilever introduced a new organizational architecture based on regional business

groups, each of which contained product divisions

Also, new products in areas such as frozen foods and margarine were gaining regional oreven global acceptance

Unfortunately for Unilever, some of its global competitors moved more rapidly to exploitthis change in the competitive environment

To reestablish a fit between strategy, architecture, and environment, Unilever had toembrace the difficult process of strategic and organizational change


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What are the features & advantages of Centralization

First, centralization can facilitate coordination

Second centralization can help ensure that decisions are consistent withorganizational objectives

Third, Concentration of power and authority bring major organizationalchanges

Fourth, centralization can avoid the duplication of activities by varioussubunits

The number of European plants manufacturing soap has been cut from 10to 2

Some new products will be manufactured at only one site

Product sizing and packaging are being harmonized to cut purchasing costsand to pave the way for unified pan-European"advertising.

By taking these steps, Unilever estimated it may save as much as $400million a year in its European operations


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What was the reason for, the need of frequent restructuring atunilever ??

STRATEGY PERIOD FEATURES ADVANTAGES DISADVANTAGES

Strategically

independent units at

various locations

1930 to 1979 Matrix

Organizational

structure

Localization High cost structure,

duplication of

manufacturing

facilities at various

locations

Focused Growth 1980 to 1995 Concentration on 4industries, 100

acquisitions, 38

companies acquired

in 1995

Concentration onboth Developed &

Emerging markets

Too manyacquisitions,

Accountability &

Responsibility,

Difficulty in decision

making, Complexity

Breakthrough

Restructuring

strategy

1996 to 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 Lost

Focus , Big dip inmarket share,


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STRATEGY PERIOD FEATURES ADVANTAGES DISADVANTAGES

Path to Grow

Strategy

Consolidation

1999 to 2004 Brand portfolio of

1600 became 400

for better focus.

150 units closeddown for cost

control, 55000

employees laying

off

Focus on core

competencies. 400

brands contributed

93%. Salesincreased by 30%,,

Focus on brands &

decision making,

Profit increased by

4-5%

LOSSSales

dropped by 15%,

Profits fell by 13%,

Top Line Growthreduced to 3%,

Share prices fell by

7%, Earnings per

share affected, Due

to loss liquidity

affected, High cost

& advertising

budget formaintaining non

performing 1200

brands.

Growth to vitality

strategy

2005 to 2010 High concentration

on Emerging

markets. Company

simplified itsmanagement

structure, 20000

job cuts in Europe.

Target 3to 5%

organic growth

41% revenues were

generated in

developing

countries. Focus onadvertising and

promotion


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HOW CONSTANT ACQUISITIONS MERGERS HELPED

UNILEVER ? OR TOO MANY ACQUISITIONS ???

Filling theproduct gap in

business

Increased distributionnetwork

Brand Extension & diverseproduct range

Brings increase in sales & profits

No interdependence on any product or entity

BIG ACQUISITIONS OF UNILEVER: Best foods, Chesebrough-Pond's (Vaseline), Naarden International, Brooke Bond, Calvin

Klein, Empire of Carolina Inc., Chicago-based Helene Curtis

Industries,


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WHAT IS HUL Current Structure ?

The day to day operations are supervised by the NationalManagement comprising the Vice Chairman, Managing Director(HPC), Managing Director (Foods) and the Finance Director.

Each division is self-sufficient with dedicated resources andassets in sales, marketing, commercial, and manufacturing.

For managing sales operations, HUL has divided the country intofour regions, Delhi, Kolkata, Chennai and Mumbai. Headed by aRegional Manager.

In Marketing, each category has a Marketing Manager who

heads a team of Brand Managers dedicated to each or a group ofbrands.

Each Division has a nationwide manufacturing base, with eachfactory peopled by teams of Production, Engineering, QualityAssurance, Commercial and Personnel Managers.

HUL's Central Functions are Finance, Human Resources,Technology and Research

Unilever grouped its worldwide operations into 2 global divisions-Foods and Home and Personal Care. It uses the worldwidegeographic area structure.

For the foods division regional presidents are responsible foroperations in the region i.e. Asia, Europe, Turkey, North America,Africa , Middle east and Latin America.

Unilever strengths lies in Best foods because of which they areable to tailor the products according to different markets as wellas to anticipate consumer demands and trends.

LATIN

AMERICA

UNITED

STATES

MULTINATIONAL

HEADQUARTERS

AUSTRAL

IA

AFRICA

EUROPE


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HOW HUL OPERATES IN INDIA?

In 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

three 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, Knorr-

Annapurna, Kwality Wall's are household

names across the country .They are

manufactured over 40 factories across

India.

The operations involve over 2,000

suppliers and associates. HUL's

distribution network, comprising about

4,000 redistribution stockists, covering 6.3

million retail outlets reaching the entire

urban population, and about 250 millionrural consumers


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Shakti Programme.

In 2001, the company embarked

on an ambitious programme,

Shakti. Through Shakti, HUL is

creating micro-enterprise

opportunities for rural women.

Improving their livelihood and

the standard of living in ruralcommunities.

Shakti also includes health and

hygiene education through the

Shakti Vani Programme

Shakti has 100,000 Shakti

entrepreneurs covering 500,000

villages, touching the lives of

over 600 million people.


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CHALLENGES OF UNILEVER & OUR LEARNING

CHALLENGES IN 21 CENTURY DIVESTMENT/REDUCE NUMBER OF

TARGETS

COST CUTTING & IMPROVINGMARGINS

STREAMLINE THE MANAGEMENT &LEADERSHIP TO FIGHT RISK &COMPETITION

CONCENTRATION OF 400 BRANDS

ACQUISITIONS

CONCENTRATION ON ASIAN GIANTS

OUR KEY LEARNINGS IMPORTANCE OF ORGANISATION

STRUCTURE IN GLOBAL COMPETITIVEMARKET

IMPORTANCE ON ACQUISITION ASSTRATEGY

ADAPTABILITY OF UNILEVER INGLOBAL MARKET

DYNAMICS OF CHANGINGINTERNATIONAL MARKET

IMPORTANCE OF EMPLOYEETRAINING

unilever organisational change & acquisition policy

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