Case Scenario: Unilever Unilever is one of the world\'s oldest multinational cor

Question

Case Scenario: Unilever Unilever is one of the world's oldest multinational corporations with extensive product offerings in the food, detergents excess of $50 billion and a wide range of branded products in virtualy every country Detergents, which account for 25 per cent of corporate revenues, include well-known names such as Omo, which is sold in more than 50 countries. Personal care products, which account for at least 15 per cent of sales, include Calvin Klein Cosmetics, Pepsodent toothpaste brands hair care prodacts and Vaseline Skin lotions. Food products account for the remaining 60 per cent of sales and inchude strong offerings in margarine (where Unilever market share in most 70 per cent), tea, ice cream, frozen foods and bakery products and personal care businesses. It generates annual revenues in Historically, Unilever was organized on a decentralization basis. Subsidiary companies ineach major national market were responsible for the production, marketing, sales, anddistrib ution of product in that market. In Western Europe, for example, the company had 17subsidiaries in the early 1990's, each focused on a different national market. Each was a profit centre and each was held accountable for its own performance. This decentralization was viewed as a source of strength. The structure allowed local managers to match product offerings and marketing strategy to local tastes and preferences and to alter sales and distribution strategies to fit the prevailing retail system. To drive the localization, Unilever recruited local managers to run local organizations; the U.S. subsidiary (Lever Brothers) was run by Americans, the Indian subsidiary by Indians and so on By the mid-1990s, this decentralization structure was increasingly out of step with a rapidly changing competitive environment. Unilever's global competitors, which includes Swiss Firm, Nestle, Proctor and Gamble from the United States, has been more successful than Unilever several froats- building global brands reducing cost structure by consolidating manufacturing operations at a few choice locations, and executing simultaneous product launches in several national market. Unilever's decentralization structure worked against efforts to global and regional brands. It also meant lots of duplication, particularly in manufacturing; a lack of scale economies, and a high-cost structure. Unilever also found that it was falling behind rivals in the race to bring new products to the market. In Europe, for example, while Nestle and Proctor and Gam launches, it could take Unilever four to five years to persuade its 17 European Operations to adopt a new product. ble moved toward pan-European product Unilever began to change all this in the mid-1990s. In 1996, it introduced a new structure based on regionmal business groups. Each business group included a number of focusing on a specifie category of products. Thus, the European Business Group had a division focused on detergents, another on ice cream and frozen foods, and so on. These roups drive down operating costs and speed up the process of developing and introducing nesw products and divisions coordinated the activities of national subsidiaries within their region to

Explanation / Answer

Unilever, a $50 billion company, sells more than 1200 products in every country of the world has a long history. Its history shows that it was arranged as a decentralized subsidiary in all the major markets around the world. This decentralization allowed its native managers to repsond to the unique local market conditions and that was one of the biggest strength they had.

1.         Discuss the rationale Unilever’s decentralized structure made sense in the     1950’s-1970’s. Discuss the key reason caused this tructire started to create problems for the company in the 1980’s

The decentralized arrangement of Unilever made sense in the 1950’s-1970’s because all its subsidiaries were spread out and decentralized and independently catered to the needs of the local customers. There was no major competition for Unilever and that time as it maintained the largest market share in local arkets as well. This helped the company to make the strategies and offered products and services as per the local needs, tastes and likings. Its distribution plans were as per the prevailing retail system and indigenous to each market. This structure changed in the 1980’s-1990’s beacause there was huge competetition in the local markets and company faced huge pressure of reducing their operational costs. There were other companies who were offeringglobal products and reduced prices. Due to decentralization, Unilever was unable to build its product or brand image and their were duplicate Unilever products coming into the market.

2.         Discuss what Unilever was trying to do when it introduced a new structure based on the business groups in the mid-1990’s. Give your opinion why this structure failed to cure Unilever’s ills.

By mid 1990’s Unilever had introduced a new structure which was based on regional groups rather than local groups. They had introduced seperate dividion to handle their different products like division handling detergents, division handling frozern foods, division for toilet soaps etc. But, this system did not work out as it was clear that the focus had to be on cutting costs and reducing their operational expenses. Therefore, Unilever, once again streamlined its brand by offering global products, reduced its manufacturing plants and focussed on new organizational structure.

3.         In the 2000’s Unilever had switched to structure based on global product divisions. Discuss whether the shift to this structure had made sense given the nature of competition in the detergents and food business.

The shifting of sense made a lot of sense on part of Unilever. They seperated the divisions which reduced the costs and sped up their processes of new global products being introduced in the market. They cut down on the products they sold and concentrated on only those products that could be marketed on regional or global level markets. They reduced number of manufactruing plans. It established two global products – Food products and Home and Personal Hygeine products. Therefore, each dividion had to concentrate on either the food products or the hygeien products division. This shift of resources helped Unilever gain dcent growth percentage comapred to previous year’s figures. Additional restructring of the brands division by eeliminating significant products and focussing on few of them helped in focussing on few products which were globally accepted.

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