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Osd section b group 7
- 1. P&G and Unilever OrganizationalStructure Lessons to Learn Presented by GROUP 7 SECTION-B Himanshu Dhamija UM15081 Saif Hasan Rizvi UM15105 Rahul Kumar Jena UM15101 Sibasis Mohapatra UM15111 Varanasi Arjun UM15121 Yasasvi Santosh UM15123
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- 3. Introduction – Proctor& Gamble 1837 $83.06bn 180 300 RevenueEstd. No. of countries - Global Presence No. of Brands Organizational Structure over the years Then Now Proposed by Jager, then CEO of P&G Followed a Geographic Divisional Structure To increase production , innovation & technology support To decentralize power referring decision making to lower level managers To encourage learning and sharing from each other yielding innovation, brainstorming & empowerment GBU’s grouped into 4 Industry Based Sectors – Industry-wise and geographic focus Streamlining the resources by concentrating on few brands Focus on common consumer benefits, share common technologies, and face common competitors P&G’s initial thought of Transactional Change cascading to more Holistic Transformational Change. Results Forced Adaption Decline in Profit Results Wide Focus Increased revenue
- 4. STRENGTHS WEAKNESSES OPPORTUNITIES THREATS • Robust innovationcapabilities • Global outreach to 180 countries • Brand value worth 24 bn $ • Organizational structure promoted Speed , flexibility & agility • Very strong marketing channel • Invests close to 500 mn$ for Understanding consumer behavior • Declining expenditure in Innovation • Big product breakthrough fell by 6% • 14% decline in operating Income Between 2011-2013 • 3 major organizational restructuring in 8 years • Low degree of Employee empowerment • Net earning from core products fell by 6% • CAGR of 23% in 4 years from emerging markets • Profensive strategic approach • Use of own website to sell products • Ensure more employee empowerment • Greater rural penetration in emerging • markets • Products to cater to regional tastes • Lack of product line in the economy end as compared to competitors like HUL weakens its positioning in emerging markets • Falling market share form 11.75 to 11.25 % in three years • Presence of cheap substitutes • Lack of cross functional linkages between GBUs & shared services leading to lesser innovation
- 5. Major Strategic Initiatives •P&G launches direct sell website •P&G cuts down digital roster •Improving productivity •P&G invests 2 bn $ in R&D in 2015 •Includes sustainability into its areas of core strength •Restructures Marketing Organisation as “Brand Management” •3 major organisational restructuring •P&G to sell of 43 brands worth 12.5bn$ •P&G cuts down the number of agencies it works for by 40% •Focus on billion dollar brands To cut costs 79/80 brands contribute 90% sales Net income fell by 41.67% in FY 2015 Single point responsibility for strategies, plans & results of brands To simplify structure To increase employee empowerment To cut down costs of using marketing channels Speed , flexibility & agility are the three prime requirements to sustain in the FMCG business To gain the lost market share by introduction of innovative products
- 6. Emerging Economies •Product differentiation •Price positioningin economy range •Taping rural market of emerging economies Distribution Channel •Parapharmacies/drugstores in markets like Brazil & China •Direct Internet retailing Inclusive Innovation •Consumer price at starting point of innovation Economy brands 8 premium brand segments have shown constant decline in margins PROBABLE STRATEGIES
- 7. Strategic Approach ⊸Type ofstrategy: Normative Re-educative ⊸ Two way communication - regular feedback & a conducive climate ⊸ Greater degree of customization/localisation (in terms of schemes / products) ⊸Type of typology: Prospective Typology ⊸ Aggressive Planning and implementation so as to get first mover advantage ⊸ Greater empowerment to the lower level executives so as to make them accountable ⊸Type of approach:Adhocratic ⊸ Lean and mean – so as to reduce costs and concentrate the resources on best selling brands ⊸ Focus on innovation and improvement ⊸Type of Control: Implementation ⊸Implementation-adding small elements of innovation into everyday P&G processes in order to enact cultural change. Proactive Defensive Profensive
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- 9. Introduction- Unilever 1929 Euro53.3bn 26 >400 RevenueEstd. No.1 FMCG brand country wise No. of Brands Organizational Structure over the years Then Now Jointly owned by two parent companies; Unilever N.V. and Unilever PLC Comprehensive restructuring of operations and businesses Focus on fewer, stronger brands to promote faster growth. Acquisitions playing a big role. Profit Increased by 16%, Share price recovered by 30% Its Leading brands now accounted for 88%, up from 75%. Focus on big products, reduce stock keeping units (SKUs), improve working capital management, cut headcount. Each level within the hierarchy serves a different function allowing the other levels of the organisation to concentrate on their core roles Acquisitions will continue to play a big role Resilience in challenging economic conditions Results Forced Adoption Decline in Profit Results Organisation flexibility Cross sectional representation
- 10. NV Share HoldersPLC Share Holders DIRECTORS NV PLCEqualisation & other agreements NV owned companies PLC owned companies Jointly owned companies LEGAL STRUCTURE Strategic Groups Home & Personal Care Food & Beverages Innovation & Sustainability
- 11. STRENGTHS WEAKNESSES OPPORTUNITIES THREATS • Strong Parentageand hence Strong Brand Equity • Strong Brand Portfolio • Unmatched Distribution Network • Excellent Research and Development • Losing Market Share in most categories due to competitors strong Brands • High Advertising Costs • Declining Export Level • Mimic Brands • Large Domestic Market • Large Untapped Market available • Changing Lifestyle and Rising Income Levels • Export Potential- expansionist Policies • Opportunity in Food Sector • Increasing cost of Raw Material • Intense and increasing competition from local as well as MNC Players • Competition from unbranded Products • Competition from its own brands
- 12. Profitable volume Growth & Scalability Cost Leverage +Efficiency Innovation & Marketing Investment Pathto Growth Building Brand Equity in both rural & urban markets Strategies Followed
- 13. Current Issues withHUL • Hindustan Unilever's aggressive advertising and discounts failed to lift sales(Sales fell by 2.7% in 2014) • Absence of a funnel of new products in the pipeline( New product success rate fell by 5%) • Weakening of emerging markets last year that made Unilever's third quarter sales the weakest in five years(Profit margin fell by 4.4%in 2014) • Sustainability challenges •Attempt to shrink the environmental footprint( Carbon foot print reduction was 12 % in 2014-2015 compared to targeted 32%)
- 14. Accelerate Premiumisation for developed markets ImprovedSCM & 100% sustainable sourcing of raw materials More focus on “Cause Marketing” Reduce usage of fossil fuel in operations Improved dynamic in pricing & differentiation strategies in emerging markets •Normative Re-educative TYPE •Prospective-Operations •Analyser -Sustainability TYPLOLGY APPROACH Adhocracy CONTROL Implementation-Operations Premise- Sustainability Recommended Strategies Strategic Approach
- 15. + HYBRID STRUCTURE +Departmentalization Product, geographic and Functional + Moving from Centralized to Decentralized structure + Moving from narrow span of control to wider span of control
- 16. COMPARATIVE ANALYSIS P&G ⊸ Over50 brands ⊸ Vision of P&G is be, and be recognized as, the best consumer products and services company in the world ⊸ P&G serves 650 million customers in India directly through 1.3 million outlets ⊸ P&G works on 5 specific sustainable strategies i.e. Products, Operations, Social Responsibility, Employees and Stakeholders. ⊸ P&G doesn’t have the strong supply chain to reach out to all the customers. In terms of emerging market expansion, it suffers from lack of brand coverage in economy ranges where some of its rivals have an edge. HUL ⊸ Over 35 brands ⊸ Vision of HUL is primarily to help people feel good and develop new ways of doing business that will allow it to double its size while reducing our environmental impact ⊸ It has robust supply chain and distribution network covering over 3400 distributors and 16 million outlets to reach out to customers ⊸ HUL has Unilever Sustainable Living Plan (USLP) that comprises of 4 things i.e. Winning with Brands & Innovations, Winning in the Marketplace, Winning through Continuous Improvement and Winning with People. ⊸ HUL is over dependent on Indian market and depends on it for majority of revenue generation
- 17. RECOMMENDATIONS ⊸Further decentralization ofresponsibilities to respond flexibly to internal and external changes ⊸Tannenbaum and Schmidt continuum-collaborative style of leadership to continue growing ⊸Motivate and engage employees to extract constructive criticism and feed back for growth of Unilever ⊸While organizational changes are not implementable overnight, adaptation to newer technology is essential ⊸Comparative advertising is there to stay. In real terms, it must be used often as it makes it easy for consumers to evaluate and chose the best among several available options. ⊸Increasing economies of Scale(Production Orientation) ⊸Higher bottom lines which can be used in R&D(“ Think globally, act locally”) and M&A target Non Users and ⊸New opportunities. ⊸This leads to Blue Ocean Approach with High value low cost ⊸Cross-departmental task force ⊸High concentration on Emerging market.
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