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UNILEVER CASE ANALYSIS

Presented by:
Chun Wai, Daryl, Gabriel, Minh, Kai Wen, Song Yu

PRESENTATION OUTLINE
Company Analysis

Industry Analysis
Presentation Focus: Strategic Change
Pre-Polman Unilever
Polman Changes
Post-Polman Analysis

Recommendations

Conclusion

COMPANY ANALYSIS

BRIEF HISTORY

Source: Youtube

CORPORATE CULTURE

Innovation

Collaboration

PURPOSE

Health & Well Being


Improving human health
through brands

Environmental impact
Lower pollutants emitted from
manufacturing

Enhancing livelihoods
Fairness in workplace,
empowerment of women

VISION

PRODUCT PORTFOLIO

Fast Moving Consumer


Goods (FMCG)
Consumer defensive stock

PRODUCT PORTFOLIO

18%
36%

19%

Revenue

27%

Personal care

Foods

Refreshment

Home care

BUSINESS MODEL R & D

Innovation in
products, both in
formulation and
packaging

How would you innovate?

BUSINESS MODEL - INNOVATION

Innovation in
Packaging Design!

BUSINESS MODEL - MARKETING

Excellent marketing for brands, won


accolades at Cannes for their
campaigns

Stems from their innovation in


formulation

BUSINESS MODEL IS R&D SUFFICIENT?

ARM
Unilever products
difficult to licence

Unilever commands lower


margins, IP protections

BUSINESS MODEL MANUFACTURING


CORE CAPABILITY
Distribution handled by
regional partner network to
supermarket chains &
independent grocers

Possesses manufacturing
plants worldwide

COMPETITIVE ANALYSIS

UNILEVERS MAIN COMPETITORS

P&G
Similar FMCG operations and
product categories and
sustainability plans
Recently announced to drop
100 brands to concentrate on
the remaining 85 brands.

Nestle

2013 Revenue:
USD$84.17
billion

2013 Revenue:
USD$99.41
billion

2013 number of
employees :

Biggest food company in the


world by market capitalization
2013 number of Main shareholder in LOral
employees:
333,000

121,000

UNILEVERS MAIN COMPETITORS

We dont see Proctor & Gamble as our


toughest competitor. [] Most of our
competitors in the emerging markets
are regional players.
-Paul Polman, CEO of Unilever, in a FT
article on Jul 30th

CLASS DISCUSSION
All three companies place huge emphasis on their global
sustainability plan. However, for Unilever, products are
individually branded. Consumers know very little of the
company behind the product.
Should Unilever put forward its company brand in order to
improve the success of its sustainability program?

SWOT ANALYSIS
Strengths

Weaknesses

- Presence in high-growth markets

-Ranking as employer
-Product recalls

- Operates its own manufacturing


plants for greater flexibility

Opportunities

Threats

- Integration of technology in
business model

- Strong local competitors

- Acquisitions in emerging markets

-Currency variance risks


-Counterfeit market

PORTERS FIVE FORCES


Threat of
substitute:
High
Buyers
bargaining
power:

Threat of
new
entrants:

Porters
Five
Forces

Relatively
low

Suppliers
bargaining
power:
Low

Very High

Industry
Rivalry:
Very High

E-COMMERCE
Various opportunities and quickly growing

Unilever Food Solutions, selling grocery products online


Other suppliers could allow to increase the product offer and provide all
grocery products

Multiple other platforms available


Is retailing a good idea, or should it be left out?

PRE-POLMAN UNILEVER

EVOLUTION OF UNILEVERS STRATEGIES

Concentration of Core Activities

One Unilever

Path of Growth

1980-2000

2000-2004

2005-2009

To select a few core product groups

Refocus on its core-competence of

Focus on healthy eating & lifestyle to meet trends

Buying and selling companies seemed

to be Unilevers main activity

marketing and producing FMCG


Strong focus on branding

1990s- Aggressive globalisation policy

in the core activities

New logo
Major restructuring of organizational structure and

supply chain

Reducing the number of brands from

1,900 to 400

Disposal of businesses once considered core but

not fulfilling the Vitality mission

STRATEGY FROM 1980 TO 2000


Concentration of Core Activities

Rapidly growing emerging markets


P&G and Nestle

Impetus for
Change

A sharper focus on core activities.

STRATEGY FROM 1980 TO 2000


Concentration of Core Activities
Expand worldwide in the selected core-product activities
During this period, many of the product divisions have been disposed of; Eg:

Specialty Chemicals (Quest / Unichema / Crossfield), which was sold in 1997 to ICI
Increase growth in North America and major developing countries; diminish the high

Predominant
Strategy

dependency on Europe (60% sales and profits)


All activities were structured into 3 product groups: Lever / Foods Executive

/Personal Products.

STRATEGY FROM 1980 TO 2000


1990s: Aggressive Globalisation Policy in the Core Activities
Aggressive acquisition policy in emerging markets

Main Strategic
Elements

Priority regions to attack: China, India, Indonesia, Eastern Europe, Latin America
To generate some 30% of its total turnover in 1995 from developing countries

Acquired market leadership status in the ice cream market in China, India, Indonesia,

Illustration of the
1990s Policies

Thailand, Brazil, Argentine, Mexico, and the US. (1992-1999)


Culinary products in Argentina and Brazil by purchasing Cica; and Kissan in India (both

very important tomato-based product companies)

FOOD FOR THOUGHT


What are the modes of international entry used by Unilever?
And why?

FOOD FOR THOUGHT


Case: Ice-cream
-First entry into the Hong Kong market through the acquisition of the ice
cream interests of A.S.Watson in 1999
-Unilever said the second factory, like the first, will be built by Wall's (Beijing)
Co., a joint venture in which Unilever has an 85% stake and its Chinese
partner Sumstar has a 15% stake
-Unilever said it currently has eight joint ventures in China, in the detergents,
personal products, ice cream, bakery fats and tea sectors (1994)
-Constrained by Law?
-A 50-50 joint venture agreement in the Philippines with the Manila-based
Selecta Dairy Products Inc to form a new company Selecta Wall's to produce
ice cream

FOOD FOR THOUGHT


Would you want to work for Unilever in this period?
This policy plus the fact that Unilever was not prepared to
inform its workers about this policy or even discuss it with them
made workers feel insecure and angry. This provoked a unique
trade union action when some 4,000 Unilever workers, from
some 10 countries demonstrated in front of the Unilever
headquarters in Rotterdam against this strategy

STRATEGY FROM 2000 TO 2004


A Period of Consolidation and Retrenchment

P&G and Nestle


Focus on cost-cutting

Impetus for
Change

Unilevers complex structures during the 1980s and 1990s


Intense competition on all fronts

STRATEGY FROM 2000 TO 2004


Path to Growth
Targeted annual growth figures of 5-6% in sales volume and operating margins of

over 16%.
Concentration of investment, innovation, and marketing support on a limited number

of about 400 worldwide brands


Key Elements of
the Strategy

Switching from local/national to global buying or sourcing.


Two major product divisions: foods and home & personal care (HPC)

More resources from research to advertising to be dedicated to brand development

PATH TO GROWTH
Success Milestones
Volumes and profit margins went up in the first few years
Transform the business into one with regional competitive strength
Lever Europe progressively integrating 17 country operations, retaining the local market
intimacy while rationalizing marketing expertise and supply chains across the region
Driving a dramatic reduction in the number of brands with 1,900 cut to 400
Failed to Deliver
The momentum got lost in 2003 and in 2004
Instead of having growth rates of 5-6% overall, the figure for the first 3 quarters of 2004
came only to 1.5%
In the third quarter of 2004 sales in Foods declined with 1.5% and in HPC with 0.2%
Market shares declined and analysts regarded Unilever a lumbering giant

PATH TO GROWTH
Despite meeting most of the set milestones, Path to Growth failed to
deliver on its title growth by 2004 had stagnated
Why??

FAILURE TO EXECUTE CHANGE


Path to Growth was right strategy
Sharper Portfolio
Increase Operational Efficiencies
Brand Focus
Something More Fundamental
Execution
Path to Growth right strategy but not executed well enough
New strategy had to be compelling but it would need close attention to the execution
process
Why was execution weak?
Culture
Complex Structure
Behavioural

STRATEGY FROM 2005 TO 2009


One Unilever

Failure of Path to Growth


Long-held domination within a host of emerging economies was seriously under

threat from the actions of rivals


Impetus for
Change

Fall in share price in 2004 (a result of profit warning)


Seen as a lumbering giant with a solid image

Decentralized management

STRATEGY FROM 2005 TO 2009


One Unilever

Change in Structure

Key Elements of
the Strategy

Vitality in Business Concept


Strategy into action (SIA)

VITALITY CONCEPT
Vitality for who?

Our mission is to add vitality to life. We meet everyday needs for nutrition, hygiene, and
personal care with brands that help people feel good, look good and get more out of life
New mentality emerged from a market opportunity and need
Healthy eating and lifestyle in developed world
Evolved as a challenge to the way Unilever worked
Vitality in the business and vitality in the people working in the business

VITALITY CONCEPT
Consolidation of Brands
Disposal of brands once considered core but not fulfilling Vitality mission
An example is the frozen foods category, including Birds Eye/Igloo, once the product
heart of the foods business. In addition, the prestige cosmetics business, several olive

oil brands, Boursin cheese and Lawrys seasoning have gone


Selective acquisitions were made to strengthen areas of the Vitality position new
strategy

Particularly in the developing markets, with a major ice cream business in Russia, fruit
drinks in Indonesia and soaps in West Africa

UNILEVER UNDER PAUL


POLMAN

OVERALL AIMS

Short-term

Long-term

Close the gap with


competitors

Bring Unilever into a


leading position

OVERALL APPROACH
Change in
organizational
structure

Change
in
strategy
Change in
culture

Change in
people

CHANGE IN STRATEGY
Compass
strategy

Strategy
Increasing
volume
growth

Sustainable
Living Plan

COMPASS STRATEGY
Winning

Brands and innovations

Market place

Continuous improvement

People

WINNING WITH BRANDS AND INNOVATION


12 brands generate more than
1 turnover and another 8
deliver more than 0.5 billion
turnover
100 new brand country
launches in 2010
Acquire brands that strengthen
market positions and support
existing strategies (e.g. fast
growing categories)

WINNING WITH BRANDS AND INNOVATION

Great
products

Great
innovation

Great
marketing

WINNING WITH BRANDS AND INNOVATION

Global innovations

Genesis programme

Disruptive technology

Global marketing

WINNING IN THE MARKET PLACE

Lead market development

Increase market penetration

Trade up products
Increase consumption

WINNING IN THE MARKET PLACE


Combine global scale with local
market knowledge to help
retailers ambitions
Expanded network of Customer
Insight and Innovation Centres

Be an execution powerhouse by
focusing on sales fundamentals

WINNING THROUGH CONTINUOUS


IMPROVEMENT
Cost competitive

Simplifying the supply chain

Fast and flexible

Quality

Superior service

WINNING THROUGH CONTINUOUS


IMPROVEMENT

Single global supply strategy


European Supply Chain Responsiveness Programme
Alternative sourcing, collaborations with suppliers, advanced technology and improved production efficiency

Superior service

On-shelf availability
Right product, right shelf, right time
Collaborate with retailers through the 5 Step Approach

Quality

Consumer perceived quality is key


Focus on quality at every level of the organisation and at every step in processes
Fewer consumer complaints and market quality incidents

Simplifying the
supply chain

WINNING WITH PEOPLE


Quantity
Major markets
doubling in size
every five to six
years

Quality
Global scale with
local consumer
intimacy
Consumer
understanding
and speed of
execution

Diversity
Products sold in
over 180
countries

WINNING WITH PEOPLE


Talent and
organisation
readiness
programme

Investing in
learning

Diversity

Assess talent, organisation, skills, culture and capabilities of businesses


Focus on revising recruitment strategy, culture and employee engagement
Success in China

Online training through Learning Management System


All employees with corporate intranet have a learning passport
Unilever Leadership Development Programme

Six nationalities represented on Unilever Executive team


Five on the Board of Directors
Number of women in senior positions increased from 23% to 27%

INCREASING VOLUME GROWTH

Financial data
Group
Turnover

2004

2005

2006

2007

2008

2009

2010

37168

38401

39642

40187

40523

39823

44262

2011
46467 ( million)

INCREASING VOLUME GROWTH


Profitable
volume
growth

Cost savings

Reinvestment
in R&D and
marketing

Operating
leverage

Growth in
operating
income

INCREASING VOLUME GROWTH

Best volume growth in the past 30 years

Volume growth in emerging markets 10%

SUSTAINABLE LIVING PLAN


WHAT?

Improve
health and
well-being

Reduce
environmental
impact

Enhance
livelihoods

SUSTAINABLE LIVING PLAN


WHY?

Consumers want products that are sustainably sourced and protect the Earths
natural resources
Sustainability is an untapped area for product and packaging innovations

Managing businesses sustainably generate cost savings for company and


consumers

SUSTAINABLE LIVING PLAN


HOW?
Improve health
and well-being

Reduce
environmental
impact

Enhance
livelihoods

Deliver good nutrition and improved hygiene


Lifebuoy success in reducing diarrhoea and cardiovascular diseases

Halve environmental footprint in production and usage


Halve greenhouse gases impact, water used and waste
Source 100% of agricultural raw materials sustainably

Work with many smallholder farmers and small-scale distributors


Help them improve skills and productivity

CHANGE IN ORGANISATIONAL STRUCTURE


Pre-2004

2005-2009

Dual Chairman/CEO structure

One Group CEO and one nonexecutive chairman of Unilever

7 executive directors

4 executive directors

Executive Committee, HPC divisions


and 11 business groups

3 Regional Presidents, 2 Category


Presidents of Foods and HPC, CFO
and Chief Human Resources Officer

CHANGE IN ORGANISATIONAL STRUCTURE


Paul Polman
Put focus on 4 categories and 8 geographical clusters
Goal to close or streamline 50 to 60 manufacturing sites

Brought all logistical and supply chain operations in Europe together


All research dedicated to a particular category
Appointments of the first Chief R&D Officer, Global Supply Chain Officer and Chief
Procurement Officer

CHANGE IN ORGANISATIONAL STRUCTURE


WHY?
Global company with local operations
Differing ways of operating

Compass strategy focused on global aspects


Need for centralization of structure

CHANGE IN CULTURE

Day-to-Day
Management

CHANGE IN CULTURE
Strategy Into Action
Unilevers
Strategic
Ambitions

Day-to-Day
Management

Detailed operating framework drawn up


Centralized decision-making strategic units.

Relevance to
the local
market

Source: Unilever

CHANGE IN PERSONNEL
Human Resource Committee
Set up to identify future skills and capability needs
Conduct regular performance reviews underpinned by:
Common set of leadership behaviors, skills and competencies

Remuneration Package
Good employees get more; Bad employees get less.
Key performance indicators changed to reflect long-term focus

POST-POLMAN UNILEVER

UNILEVERS CURRENT POSITION


TURNOVER

OPERATING PROFIT

EARNINGS PER
SHARE

CO2 EMISSION

CLASS DISCUSSION

Can Unilever sustain its success for the future?

RECOMMENDATIONS
KEY ISSUES

Slowing Economy in
Developed Markets

RECOMMENDATIONS

RESULTS

Engagement with
Customers

Develop long-term
relationships with
customers

ENGAGEMENT
2

Rise of
BRICS countries

Enhancement of
Value Proposition
ENHANCEMENT

Strengthen foothold in
Developing Markets

KEY ISSUES
Objective: Ensure Unilevers success and sustainability in the next decade

1
Slowing Economy
in Developed
Markets

Expected
2-4% growth

Competitive
Marketplace

Eroding
Profit
Margins

Rise of
BRICS Countries

Population
growth &
increasing
affluence

Local
Dynamos

Hierarchy of
Consumers

ENGAGEMENT
OF CUSTOMERS IN DEVELOPED COUNTRIES
1

Process Improvement

Customer-based Strategy

Innovation by leveraging on entire value chain


Working with suppliers and consumers in coming up with new
products

Tap on Unilevers extensive global distribution channels


Getting the right products at the right place at the right quality at
the right price

Build up E-commerce
Potential $1 billion in revenue

ENGAGEMENT
OF CUSTOMERS IN DEVELOPED COUNTRIES
1

Process Improvement

Customer-based Strategy

Build customer brand loyalty


Marketing strategy to promote Unilevers brand
Promote placement strategy in key retail stores

Environmental sustainability
Halve Unilevers environmental impact by 2020

Consumer Feedback

ENHANCEMENT
OF VALUE PROPOSITION IN EMERGING MARKETS

Population and
Affluence
Growth

Local Dynamos

De-average
Consumers

ENHANCEMENT
OF VALUE PROPOSITION IN EMERGING MARKETS

Population and
Affluence
Growth

Local Dynamos

De-average
Consumers

Expansion
in BRICS

Moving up the
ladder
Growing
middle class in
World
China and India
population to
will spend
reach 8 billion
US$10 trillion
by 2030
by 2020

Potential in the
Next Eleven:
Indonesia
Mexico
Pakistan

Vietnam

ENHANCEMENT
OF VALUE PROPOSITION IN EMERGING MARKETS

Population and
Affluence
Growth

Local Dynamos

De-average
Consumers

Hindustan Lever Limited

Strategic
Alliance

Acquisition

ENHANCEMENT
OF VALUE PROPOSITION IN EMERGING MARKETS

Population and
Affluence
Growth

Local Dynamos

De-average
Consumers

Reach Up Premiumization

Reach Wide - Expand


Reach Down - Frugal
Innovation

CONCLUSION
What is the business model of Unilever?

What products do Unilever sell?


Who are Unilevers competitors?
What were Unilevers strategies before 2009?

What did Polman change?


Will the new strategies be successful?