unilever organizational change


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unilever organizational change

  1. 1. Organization Change at Unilever Bhushan Patil Sandesh Wadekar Rajesh Mudaliyar A7
  2. 2. 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)
  3. 3. Unie  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 Strategy: Growth Tool: Merger
  4. 4. Lever William Hesketh Lever founded “Lever Brothers in 1885 By 1887, introduced “SUNLIGHT, thee worlds 1st packaged Laundry soap Lever & CO. was making 450 tons of Sunlight soap a week He expanded his business from UK to Australia, North America and other parts of Europe In 1890, Lever & CO became a limited company – LEVER BROTHERS LTD, by 1894, they went PUBLIC Diversified into other businesses, acquired pears soap and wall’s Launched its innovative product, VIM Strategy: Tool: Growth
  5. 5. 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
  6. 6. About Unilever Around 173000 Employee at the end of 2012 On a given day, 2 billion consumer worldwide use Unilever product Product Offerings: Personal Care, Detergent, food etc Annual revenue: in excess of $ 51 billion Sells more than 400 products in virtually 190 country Detergents accounts 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 Cosmetics, Oral care & skin care lotion Food products account for 60% sales It includes tea, ice cream, frozen foods & bakery products In this Unilever market share in most of the countries exceeds 70%
  7. 7. HUL 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 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
  8. 8. 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
  9. 9. Reason for, the need or frequent restructuring at Unilever??? Strategy Period Features Independent units at Matrix Organizational 1930 - 1979 various location Structure Advantages Disadvantages Localization High Cost structure, duplication of manufacturing facilities at various locations Concentration on 4 Too many acquisitions, industries, 100 concentration on both accountability & Focused Growth 1980 - 1995 acquisition, 38 developed & Emerging responsibility, complexity, companies acquired in markets difficulty in decision making 1995 Variable Pay, 3 Focus on core No fit between structure & member committee competencies, strategies, Dip in market was dissolved, 7 Breakthrough Operations were share prices, too many 1996 - 1999 member committee Sustainability Strategy grouped by product brands resulted in "Last was appointed, 1st combination of "Global Focus". Big dip in market Non Dutch & British Push & Local Pull" share Chairman appointed
  10. 10. Path to Grow Strategy 1999 - 2004 Growth to vitality Strategy 2005 - 2010 Sales dropped by 15%, Profits fell by Focus on core 13%, Top Line Brand portfolio of competencies. 400 Growth reduced to 1600 became 400 for brands contributed 3%, Share price better focus. 150 93% Sales increased felled down by 7%, units closed down by 30%, focus on EPS effected, High for cost control, brands & decision cost & advertising 55000 employees making. Profit budget for laying off increased by 4-5% maintaining non performing 1200 brands High concentration on Emerging 41% revenues were markets. Company generated in simplified its developing management countries. Focus on structure, 20000 job advertising and cuts in Europe. promotion Target: 3 - 5 % Organic growth
  11. 11. 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
  12. 12. 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
  13. 13. Problems at Unilever Unilever’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
  14. 14. 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
  15. 15. ASIA Australia United States Africa Latin America Multinational Head Quarters Europe
  16. 16. 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 Underlying Volume Growth Core Operating Margin 6.9% 3.4% 13.8% 2011: 6.5% 2011: 1.6% 2011: 13.5% Turnover by Geographical Area 40% 33% 27% Asia/AMET/RUB The Americas Europe 38% 35% 27% Free Cash Flow € 4.3billion 2011: €3.1% Operating Profit Geographical Area Asia/AMET/RUB The Americas Europe
  17. 17. Challenges of Unilever & Our Learning Challenges in 21st Century • 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 Our Key Learning's • 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
  18. 18. 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???