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Unilever 100510232545-phpapp02

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Unilever 100510232545-phpapp02

  1. 1. UNILEVERA TROUBLED GIANT
  2. 2. SOURCE : UNILEVER.COM, 2009
  3. 3. MANAGEMENTSOURCE : UNILEVER.COM, 2009
  4. 4. SOURCE : UNILEVER.COM, 2009
  5. 5. SOURCE : UNILEVER.COM
  6. 6. SOURCE : UNILEVER.COM
  7. 7. BACKGROUND NOTE
  8. 8. UNIE In 1872, two Dutchmen, Jurgens and Van Der Berghhad ventured into the margarine business In 1927, they decided to merge to form twocompanies, Margarine Unie NV, based in theNetherlands and Margarine Union Ltd, based in the UKSTRATEGY : GROWTHTOOL : MERGER
  9. 9. LEVER William Hesketh Lever founded ‘Lever Brothers’ in 1885 By 1887, introduced ‘SUNLIGHT’, the world’s 1st packaged laundrysoap Lever & Co. was making 450 tons of Sunlight soap a week He expanded his business from UK to Australia, North Americaand other parts of Europe In 1890, Lever & Co became a limited company –LEVERBROTHERS LTD, by 1894, they went PUBLIC Diversified into other businesses, acquired Pears soap and Wall’s Launched its innovative product , VIMSTRATEGY : GROWTHTOOL : ACQUISITION
  10. 10. UNIE LEVERUnilever GROUP
  11. 11. UNILEVER PLC UNILEVER N.V.B.O.D. B.O.D.
  12. 12. PROBLEMS WITH THESTRUCTURE Unable to sustain the great depression Incapable of striking a balance between British and Dutchinterests Lack of co-ordination between the board of directors of thetwo holding companies Two Masters - Confused Followers (Coalition Governance)
  13. 13. 1930 to 1979 In 1937 , acquired Thomas J. Lipton In 1944, acquired Pepsodent In 1957, acquired Bird’s Eye In 1961, acquired Good Humor In 1978, acquired National Starch and ChemicalCorporationSTRATEGY : rigorous GROWTHTOOLS : integration ( fwd & back)acquisitionDiversification ( related & unrelated)
  14. 14. ORGANIZATIONAL STRUCTURE(1930 to 1979) Concept of strategically independent units- local initiative anddecentralized control A special, 3-member committee was formed in September 1930,above the two boards of directors of the company Matrix organizational structure was opted
  15. 15. UNILEVER PLC UNILEVER N.V.B.O.D. B.O.D.SPECIAL COMMITTEE (3)
  16. 16. PROBLEM WITH THESTRUCTUREConcept of strategically independent units ledto high cost structure from duplication ofmanufacturing facilities at various locations
  17. 17. 1980 to 1995“the sleeping giant” Rationalized manufacturing approach Product divisions established to co-ordinate regional operations Focus on the following four industries, as a part of core strategy– Foods, Personal Care, Home Care and Specialty Chemicals,divesting from all other businesses Between 1992-1996 , Unilever made around 100 acquisitions,during 1995 alone the company acquired 38 companies The company decided to target D&E marketsSTRATEGY : FOCUSED GROWTHTOOLS : DIVESTMENTACQUISITION
  18. 18. List of acquisitions 1984 - BROOKE BOND 1986 - NAARDENINTERNATIONAL 1987 - CHESEBROUGH-POND’S 1989 - FABERGE 1989 - ELIZABETH ARDEN 1989 - CALVIN KLEIN’SFRAGRANCE BUSINESS 1990 - NORDSEE FAST-FOOD 1993 - EMPIRE OFCAROLINA INC. 1993 - PHILIP MORRISKRAFT GENERALFOODS UNITList of Divestments 1980 - SERVICE ( TRANSPORT)& ANCILLARY BUSINESS 1985 - PALM LINE, SHIPPINGCOMPANY 1990 - PLANT BREEDING &OTHER AGRICULTURALPRODUCTS 1990 - PACKAGING &PROFESSIONALCLEANING PRODUCTS
  19. 19. BEFORE afterBUSINESSES BUSINESSESFOOD HCPC SC
  20. 20. PROBLEMS WITH THESTRUCTURE The unending acquisitions made the operations cumbersome andthe company became inflexible to adapt to the market dynamism Performance drift Organizational fatigue Excess of bureaucracy Confusion – of accountability and responsibility Conflicting priorities in the special committee Decision making became constipated Structural detritus , accumulated over decades Absolute chaotic condition Extra levels of complexity were imposed on an already convolutedstructure
  21. 21. 1996 TO 1999breakthrough restructuring 3- Member special committee which existed since the birth ofUnilever got dissolved , to give way to a 7- Member Executivecommittee The company appointed its 1st Chairman (Niall FitzGerald, anIrishman) not carrying a British or a Dutch passport Two layers of the organizational structure consisting of the world-wide business coordinators and the network of RegionalDirectors were swept away to form a single team of 14 businessPresidents Company’s operations were grouped by product , instead ofgeographical regions From Centrally – Driven expansion to branched expansion
  22. 22. …STRATEGY : SUSTAINABILITYTOOL : restructuring Unilever wanted to grow as much by localpull as by global push Focus on Company’s Core Competences Introduction to the new managementincentive system (Variable Pay)
  23. 23. ACQUISITIONS 1996- HELENE CURTIS INDUSTRIES, INC., PERSONAL CAREPRODUCTS 1996- NORTHBRROOK DIVERSEY CORP., CHEMICAL CLEANSER &SANITIZER 1999- KIBON S.A. INDUSTRIES ALIMENTICA, ICE-CREAMCOMPANYDIVESTMENTS 1996- CATERPILLAR INC., HEAVY EQUIPMNET, U.K.FRANCHISEE 1997- NATIONAL STARCH & CHEMICAL CORPORATION 1998- PLANT BREEDING INTERNATIONAL CAMBRIDGE LTD.
  24. 24. UNILEVER PLC UNILEVER N.V.BP’s BP’sEXECUTIVE COMMITTEE (7)
  25. 25. PROBLEMS WITH THESTRUCTURE Unilever’s Market Capitalization of about £ 51 Billion (~ $ 82 Billion) inJune 1999 shrank to £ 20 Billion by January 2000 (Stock pricesPlunged) Company’s Existing brand structure had lost its Focus (Too manyBrands) Unilever was criticized for spending large amounts of funds due tofrequent restructuring over the years Unilever’s market share was taking a big time hit (Dip) There was no Fit between the company’s organizational structure andits strategies (Persil Power shook the giant to its foundations) It was believed that, every big organization that is running into troubleneeds a crisis to convince it of the necessity for fundamental change,and that for Unilever this situation had already arrived long ago
  26. 26. 2000 TO 2004PATH TO GROWTH STRATEGY In February 2000, the company announced a € 5 Billion Five –Year Growth Strategy Unilever was “Shrinking to Grow” Laying off over 25, 000 employees ( ~ 10% of the employeebase) Unilever was split into two, separate global units : Foods andHome & Personal Care (HPC), headed by two executiveDirectors separately Unilever reorganized its 300 operating companies into 10Regional Groups Unilever Further Decentralized its Control over its subsidiaries Unilever Shut down more than 100 manufacturing units forcost reduction
  27. 27. …STRATEGY : CONSOLIDATIONTOOL : restructuring More than half of its Top Executives were replaced with youngblood Brand Portfolio of 1, 600 was pruned to 400 (For better focuson leading brands) Company came up with a Brand Focus Strategy “Nourishing theCore” Unilever started to exploit brands within the existing productcategories but outside their scope
  28. 28. UNILEVER- REGIONAL GROUPSDivision Regional GroupsFoods Foods north America, Middle east and TurkeyUnilever Bestfoods AsiaUnilever Bestfoods Latin AmericaUnilever Bestfoods North America & slimfast WorldwideUnilever Bestfoods , EuropeHome & Personal Care Home & Personal care, AsiaHome & Personal care, EuropeHome & Personal care, North AmericaHPC North Africa, Middle East & TurkeyHPC Division, Latin AmericaSOURCE: WWW.UNILEVER.COM, 2009
  29. 29. ACQUISITIONS In 2000 - BESTFOODS , U.S.A. In 2000 - GROUPO CRESSIDA CENTRAL AMERICA FOODSCORPORATION, CENTRAL AMERICA In 2000 - AMORA MAILLE, CULINARY PRODUCTS, FRANCE In 2000 - JABONERIA NA, FOODS & HPC In 2000 - BEN & JERRY’S HOMEMADE INC., ICE CREAM In 2000 - CRESSIDA, FOODS, SOAPS & DETERGENTS In 2000 - CODEPAR/SPCD , HPC In 2000 - SLIM FAST, SLIMMING PRODUCTS , U.S.A In 2000 - ENGLEWOOD CLIFFS, FOODS, NEW JERSEY
  30. 30. BEFORE afterBUSINESSES(FOOD & HPC) BUSINESSESFOOD HPCED ED
  31. 31. BENEFITS OF THISSTRATEGY Focused and Effective streamline decision making Sales shot up by 16 % Unilever’s Share price had recovered by 30 % Company’s Turnover rose from € 40, 977 Million in1999 to € 47, 582 Million in 2000 Supply Chain Restructuring saved € 1.75 Billion Annual Top line Growth of about 4 % to 5 % wasachieved Average Earnings Per Share increased by 9 %
  32. 32. UNILEVER FINANCIALS (IN € MILLION)BY GROUP1998 1999 2000 2001 2002Group Turnover 40,437 40,977 47,582 51,514 48,270Group Operating Profit:Group operating Profit BEIA 4,293 4,595 5,729 7,149 7,165Exceptional items 125 (269) (2,113) (588) (879)Amortization Of Goodwill andIntangibles(8) (23) (435) (1,387) (1,245)Total Gross Operating Profit 4,410 4,303 3,181 5,174 5,041Income from Fixed Investments 37 52 53 96 111Interest 156 (14) (632) (1,646) (1,173)Profit On Ordinary ActivitiesBefore Taxation4,603 4,341 2,602 3,624 3,979Profit On Ordinary ActivitiesAfter Taxation3,088 2,972 1,320 2,077 2,441Net Profit 2,944 2,771 1,105 1,838 2,129Source : Unilever Annual reports 1998 - 2002
  33. 33. BY GEOGRAPHIC REGIONSGEOGRAPHIC REGION 1998 1999 2000 2001 2002Group Turn Over:Europe 18,165 18,040 18,967 20,119 19,573North America 8,417 8,838 11,631 13,767 12,446Africa, Middle East and Turkey 3,034 3,048 3,296 3,191 3,139Asia and Pacific 5,803 6,723 8,038 7,846 7,679Latin America 5,018 4,328 5,650 6,591 5,433Total 40,437 40,977 47,582 51,514 48,270Group Operating Profit:Europe 2,254 2,131 1,693 2,689 1,750North America 942 847 48 1,092 1,435Africa, Middle East and Turkey 268 302 321 202 286Asia and Pacific 457 642 776 862 1,077Latin America 489 381 343 328 493Total 4,410 4,303 3,181 5,174 5,041Source : Unilever Annual reports 1998 - 2002
  34. 34. BY OPERATIONSOPERATION 1998 1999 2000 2001 2002Group Turn Over:Food 20,919 20,339 23,898 28,155 26,937Home & Personal Care 18,783 19,781 22,825 22,739 20,801Other Operation 735 857 859 620 532Total 40,437 40,977 47,582 51,514 48,270Group Operating Profit:Food 1,801 1,788 1,735 2,303 2,185Home & Personal Care 2,093 2,361 1,415 2,823 2,814Other Operation 516 154 31 48 42Total 4,410 4,303 3,181 5,174 5,041Source : Unilever Annual reports 1998 - 2002
  35. 35. 2003UNWELCOME LOSS OF WEIGHT FORUNILEVER Sales dropped by 15 % Profits fell by 13 % Annual Top line Growth of about 4 % to 5 % camedown to 3 % Share Price fell by 7 % Company was unable to cope up with theCompetitive Market Dynamics
  36. 36. 2004 to 2010growth to vitality strategy Brand Portfolio of 400 Brands would be reduced to 40 MegaWorld Brands, the retained ones would have sales in excess of aBillion Dollar High Concentration on Developing and Emerging markets (D & E) 3 to 5 % of Organic Growth was targeted Margin Enhancement through portfolio mix Business on strict Value creation criteria First Non – Executive Chairman was appointed Concept of “ONE UNILEVER” Unilever started soft selling under this ‘VITALITY’ strategySTRATEGY : FOCUSED GROWTHTOOLS : DIVESTMENTACQUISITION
  37. 37. 0%1%2%3%4%5%6%7%Q12005Q22005Q32005Q42005Q12006Q22006Q32006Q42006Q12007Q22007Q32007Q42007UNILEVER SALES GROWTH
  38. 38. Turnover & Profit Last 12 yearsFigure in € mln Turnover OperatingProfitNet Profit1996 39,840 3,412 1,9081997 42,926 3,432 4,9571998 40,437 4,410 2,9441999 40,977 4,303 2,7712000 47,582 3,302 1,1052001 51,514 5,174 1,8382002 48,270 5,041 2,1292003 47,421 6,066 2,9422004 37,168 5,721 2,7552005 38,401 5,074 3,3052006 39,642 5,408 3,6852007 40,187 5,245 4,136SOURCE : UNILEVER ANNUAL REPORTS 1996 - 2008
  39. 39. 2008restructuring again Announced 20, 000 Job Cuts Combined its two Global units Food & HPC into asingle one Focus on personal care Products Division
  40. 40. UNILEVER & FEW CLOSECOMPETITORSA COMPARATIVE STUDY
  41. 41. 050000100000150000200000250000UNILEVER P & G NESTLE KRAFTMARKET CAPITALSALESOPERATING INCOMENET INCOMEALL FIGURES IN MILLION USD, MARCH 2008
  42. 42. SHARE LISTINGS, EPS &DIVIDENTSSOURCE : UNILEVER.COM, 2008
  43. 43. WHATS IN THE NEWSACQUISITIONS IN 2009 UNILEVER ACQUIRED SARA LEE’S PERSONAL CARE &EUROPEAN DETERGENT UNIT FOR $ 1.9 BILLION,GAINING SANEX SHOWER GEL IN ADDITION , UNILEVER IS BUYING SEVERAL OTHERSTRONG REGIONAL BRANDS LIKE RADOX BUBBLE BATH ;DUSCHDAS, GERMAN SHOWER GEL & SWITZAL,BABY SHAMPOO
  44. 44. REFERENCES Renewing Unilever – Transformation and Tradition, Geoffrey Jones Munching on Change, Economist, January 06, 1996 Unilever to create “Power Brands”, http://news.bbc.co.uk, September21, 1999 Rohan Mike, Refocused Unilever on Global Acquisition Spree, www.Itsfood.com, January 04, 2000 Unilever Changes Track, http://news.bbc.co.uk, February 22, 2000 Unilever to Axe 25,000 Jobs in Cost Overhaul,www.industrysearch.com.ai , February 23, 2000 Shrinking To Grow, Economist, February 26, 2000 Harvilicz Helen, Unilever Undertakes Massive Restructuring, ChemicalMarket Reporter, February 28, 2000 Stevens Robert, Unilever to Shed 10 Percent of Workforce in GlobalRestructuring, www.wsws.org, March 01, 2000 Fat & Thin, Economist, April 15, 2000
  45. 45. ?? ???? ???? ?????????????
  46. 46. 1. What was the need for unilever to haveseparate legal identity but operate as a singleentity ?? Can unilever plc and unilever nv fuse, infuture ???
  47. 47. 2. What was the reason for, the need of frequentrestructuring at unilever ??
  48. 48. 3. Have unilever’s top brands paid the debt forthe Structural detritus of unilever ???
  49. 49. 4. Did unilever’s investment of £ 5 billion on “pgs”payoff ???
  50. 50. 5. Had unilever grown more than its cradle ??
  51. 51. 6. Should unilever opt for umbrella branding everin future ? If yes, why?? If no, why???
  52. 52. thanKs…

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