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Organization Change at Unilever hushan !atil "andesh #ade$ar Rajesh
%udali&ar '(
)he Case discusses a long organization restructuring e*ercise underta$en
+& Unilever, a Old -ultinational glo+al .ast -oving consu-er goods /0%C12
co-pan&. 3t e*a-ines in details the i-portant ele-ents o. the restructuring
progra--e )he Case .ocuses on the changes -ade with respect to the
organizational structure, various Unilever +usinesses, +randing strategies and
suppl& chain -anage-ent practices. 3t discusses the results o. the
restructuring e*ercise and e*a-ine the co-pan&4s .uture prospects in the
light o. its .alling %ar$et share and the .aster growth o. -an& o. !51 +rands
Unie v 3n 16(7, two 8utch-en, 9urgens and :an 8er ergh had ventured
into the -argarine +usiness v 3n 197(, the& decided to -erge to .or- two
co-panies, %argarine Unie ;:, +ased in the ;etherlands and %argarine
Union <td, +ased in the U= "trateg&: 1rowth )ool: %erger
<ever v#illia- >es$eth <ever .ounded ?<ever rothers in 166@ v& 166(,
introduced ?"U;<31>), thee worlds 1st pac$aged <aundr& soap v<ever 5 CO.
was -a$ing A@0 tons o. "unlight soap a wee$ v>e e*panded his +usiness
.ro- U= to 'ustralia, ;orth '-erica and other parts o. Burope v3n 1690,
<ever 5 CO +eca-e a li-ited co-pan& C <B:BR RO)>BR" <)8, +& 169A,
the& went !U<3C v8iversiDed into other +usinesses, acEuired pears soap and
wall4s v<aunched its innovative product, :3% "trateg&: )ool: 1rowth
' ;ew eginning v Unilever was .or-ed in 19F0 .ro- two co-panies v 3t
was a .ull +usiness -erger, operating as a single +usiness entit& v )wo
separate legal parent co-panies were -aintained: Unilever ;:/;etherlands2
5 Unilever !<C /U=2 v )his wor$s through an eEualization agree-ent and
other contracts +etween the two co-panies
'+out Unilever v'round 1(F000 B-plo&ee at the end o. 7017 vOn a given
da&, 7 +illion consu-er worldwide use Unilever product v!roduct OGerings:
!ersonal Care, 8etergent, .ood etc v'nnual revenue: in e*cess o. H @1 +illion
v"ells -ore than A00 products in virtuall& 190 countr& v8etergents accounts
.or 7@I o. the revenue vO-o is one such detergent which is sold in over @0
countries v!ersonal Care products account .or 1@I sales v3t includes
Cos-etics, Oral care 5 s$in care lotion v0ood products account .or J0I sales
v3t includes tea, ice crea-, .rozen .oods 5 +a$er& products v3n this Unilever
-ar$et share in -ost o. the countries e*ceeds (0I
>U< 3; 3;83' 3n 19F1, Unilever set up its Drst 3ndian su+sidiar&, >industan
:anaspati %anu.acturing Co-pan&, .ollowed +& <ever rothers 3ndia <i-ited
/19FF2 and United )raders <i-ited /19F@2. )hese F co-panies -erged to
.or- >U< in ;ove-+er 19@J >U<4s rands li$e <i.e+uo&, <u*, "ur. B*cel, Rin,
#heel, 0air 5 <ovel&, !ond4s, "unsil$, Clinic, !epsodent, Close-up, <a$-e,
roo$e ond, =issan, =walit& #all4s C are household na-es across the
countr&. )he& are -anu.actured over A0 .actories across 3ndia )he operation
involve over 7,000 suppliers and associates. >U<4s distri+ution networ$,
co-prising a+out A,000 redistri+ution stoc$iest, covering J.F -illion retail
outlets reaching the entire ur+an population, and a+out 7@0 -illion rural
8ecentralized "tructure o. Unilever +e.ore 19904s v Unilever was organized
on a decentralized +asis v 3n Burope the co-pan& had 1( su+sidiaries in the
earl& 1990s, each .ocused on a diGerent national -ar$et v "u+sidiar&
co-panies in each -ajor national -ar$et were responsi+le .or the
production, -ar$eting, sales and distri+ution o. products in that -ar$et v
Bach was a proDt center and each was held accounta+le .or its own
per.or-ance v )he structure allowed local -anagers to -atch product
oGerings v %ar$eting strateg& to local tastes and pre.erences v )o alter sales
and distri+ution strategies to Dt the prevailing retail s&ste-s v )o drive to
localization, Unilever recruited local -anagers to run local organization v )o
+uild a co--on organizational culture a-ong its -anagers
Reason .or, the need or .reEuent restructuring at UnileverKKK "trateg&
!eriod 0eatures 3ndependent units at %atri* Organizational 19F0 - 19(9
various location "tructure 'dvantages 8isadvantages <ocalization >igh Cost
structure, duplication o. -anu.acturing .acilities at various locations
Concentration on A )oo -an& acEuisitions, industries, 100 concentration on
+oth accounta+ilit& 5 0ocused 1rowth 1960 - 199@ acEuisition, F6 developed
5 B-erging responsi+ilit&, co-ple*it&, co-panies acEuired in -ar$ets
diLcult& in decision -a$ing 199@ :aria+le !a&, F 0ocus on core ;o Dt
+etween structure 5 -e-+er co--ittee co-petencies, strategies, 8ip in
-ar$et was dissolved, ( rea$through Operations were share prices, too
-an& 199J - 1999 -e-+er co--ittee "ustaina+ilit& "trateg& grouped +&
product +rands resulted in M<ast was appointed, 1st co-+ination o. M1lo+al
0ocusM. ig dip in -ar$et ;on 8utch 5 ritish !ush 5 <ocal !ullM share
Chair-an appointed
!ath to 1row "trateg& 1999 - 700A 1rowth to vitalit& "trateg& 700@ - 7010
"ales dropped +& 1@I, !roDts .ell +& 0ocus on core 1FI, )op <ine rand
port.olio o. co-petencies. A00 1rowth reduced to 1J00 +eca-e A00 .or
+rands contri+uted FI, "hare price +etter .ocus. 1@0 9FI "ales increased
.elled down +& (I, units closed down +& F0I, .ocus on B!" eGected, >igh .or
cost control, +rands 5 decision cost 5 advertising @@000 e-plo&ees -a$ing.
!roDt +udget .or la&ing oG increased +& A-@I -aintaining non per.or-ing
1700 +rands >igh concentration on B-erging A1I revenues were -ar$ets.
Co-pan& generated in si-pliDed its developing -anage-ent countries.
0ocus on structure, 70000 jo+ advertising and cuts in Burope. pro-otion
)arget: F - @ I Organic growth
#h& there was a need .or ;ew Organizational "tructureKKK N N N N Barl&
1990s the co-petitive environ-ent was changing Creation o. a single -ar$et
in 1997 in Buropean Union )his -ade it possi+le to -anu.acture certain ite-s
such as detergents and -argarine at .avora+le central Unilever introduced a
new organizational architecture +ased on regional +usiness groups, each o.
which contained product division N Un.ortunatel& .or Unilever, so-e o. its
glo+al co-petitors -oved -ore rapidl& to e*ploit this changes in the
co-petitive environ-ent N )o reesta+lish a Dt +etween co-petitive
environ-ent, Unilever had to e-+race the diLcult process o. strategic 5
Organizational Change
Centralized Unilever O 0acilitate Coordination O 8ecision %a$ing O 'uthorit&
5 !ower O 'void 8uplication o. "u+units O Cut .ro- 10 to 7 O %anu.acturing
at Onl& One "ite O !an-Buropean 'dvertising & ta$ing these "teps, Unilever
esti-ated it -a& save as -uch as HA00 -illion a &ear in its Buropean
!ro+le-s at Unilever vUnilever4s %ar$et Capitalization o. a+out P 67 illion
in 9une 1999 "hran$ to P 70 +illion +& 9anuar& 7000 /"toc$ !rices !lunged2
vCo-pan&4s e*isting +rand structure had lost its .ocus vUnilever was
criticized .or spending large a-ounts o. .unds due to .reEuent restructuring
over the &ear vUnilever -ar$et share was ta$ing a +ig ti-e hit v)here was no
Dt +etween the co-pan&4s organizational structure and its strategies
Current "tructure v )he 8a& to da& operation are supervised +& the
;ational %anage-ent co-prising the :ice Chair-an, %anaging 8irector
/>!C2, %anaging 8irector /0oods2 and the 0inance 8irector v Bach division is
sel.-suLcient with dedicated resources and assets in sales, -ar$eting,
co--ercial, and -anu.acturing v 3n %ar$eting each categor& has a
%ar$eting %anager who heads a tea- o. rand %anagers dedicated to each
or a group o. +rands v Unilever grouped its worldwide operations into 7 glo+al
division. 0oods and >o-e and !ersonal Care. 3t uses the worldwide
geographic area structure
'"3' 'ustralia United "tates '.rica <atin '-erica %ultinational >ead
Quarters Burope
3n 7017, we continued to -a$e good progress in the trans.or-ation o.
Unilever to a sustaina+le growth co-pan&. #e e*ceeded R@0 +illion turnover,
with all regions and categories contri+uting to growth. =e& 0inancial
3ndicators Underl&ing "'<B" 1rowth Underl&ing :olu-e 1rowth Core
Operating %argin J.9I F.AI 1F.6I 7011: J.@I 7011: 1.JI 7011: 1F.@I
)urnover +& 1eographical 'rea A0I FFI 7(I 'sia/'%B)/RU )he '-ericas
Burope F6I F@I 7(I 0ree Cash 0low R A.F+illion 7011: RF.1I Operating
!roDt 1eographical 'rea 'sia/'%B)/RU )he '-ericas Burope
Challenges o. Unilever 5 Our <earning Challenges in 71st Centur& O
8ivest-ent/Reduce ;u-+er o. )arget O Cost Cutting 5 i-proving -argins O
"trea-line the -anage-ent 5 <eadership to Dght ris$ 5 co-petition O
Concentration o. A00 rands O 'cEuisitions O Concentration on 'sian 1iants
Our =e& <earningSs O 3-portance o. Organization structure in 1lo+al
co-petitive -ar$et O 3-portance on ?'cEuisitionT as an "trateg& O
'dapta+ilit& o. Unilever in 1lo+al %ar$et O 8&na-ics o. changing
international -ar$et O 3-portance o. B-plo&ee )raining
#hat was the need .or unilever to have separate legal identit& +ut operate
as a single entit& KK Can unilever plc and unilever nv .use, in .uture KKK #hat
was the reason .or, the need o. .reEuent restructuring at unilever KK !an
Buropean 'dvertising #or$edKKKK >ad unilever grown -ore than its cradle KK
"hould unilever opt .or u-+rella +randing ever in .uture K 3. &es, wh&KK 3. no,