Unilever

Home and Personal Care Division

Market Overview
Market includes
Liquid & powder detergents Shampoos, body washes, personal care items Perfumes Cosmetics

Market Trends
During 1990s tight competition in established markets Economic slowdown in global market Strong competition to develop new products Need to control costs and price

Market Trends
Acquisitions or joint ventures to solidify global position Strong need to be able to satisfy changing consumer preferences Laundry detergents form the largest component 50%

Products

Unilever manages over 400 leading brands and just under 250 tail brands. These range from food to home and personal care.

Food Products
Ben & Jerrys Breyers Country Crock Hellmanns Ragu Slim Fast Lipton Others

Home and Personal Care

Dove Caress Ponds Snuggle Wisk All Others

Technological Scope
Global integration of SAP software Standardized corporate computer services includes intranet Standardized corporate e-mail Warehouse management systems using bar code technology

Markets and Distribution

Unilever Divided into 2 Major Divisions
Foods Home and Personal Care
Improved Focus Globally and Regionally Faster Decision Making Strengthened Innovation Capacity

Markets and Distribution

Home and Personal Care Divisions
North America Europe Asia North Africa Turkey Middle East Latin America

Manufacturing and/or Processing

Operations has 2 divisions
Foods Home & Personal Care

Employs 265,000 people Has 2 parent companies

Unilever NV Unilever PLC

Corporate Centers
London Rotterdam

Manufacturing and/or Processing (cont)

One of largest users of packaging among consumer goods companies
Works with others to ensure public concerns are understood Provides the best solutions possible

Trends in manufacturing
Fewer production centers More efficient production centers

Manufacturing and/or Processing (cont)

Pilot project to improve logistics of incoming raw materials to manufacturing locations
Carried out in Warrington, UK Combine/optimize loads Seek more direct deliveries

Some plants are making own bottles for liquid detergent

Reduced number of deliveries Saving around 1,000 trips a month

Manufacturing and/or Processing (cont)

Uses many forms of transport
Railroad Ships Trucking

Have minimized the environmental effects of transport

Ensuring vehicles are used efficiently Shifting goods from road, to rail and water

Industry Attractiveness & Business Strengths

Nature of Competitive Rivalry Unilever and P&G globally highly competitive Sales driven by marketing Bargaining Power of Suppliers/Customers Carry clout with suppliers due to large consumption of supplier goods Customer available shelf space Threat of Substitute Products Low consumer differentiation New Entrants Large capital barrier to new entrants

Industry Attractiveness & Business Strengths

Economic Factors Large Market U.S. Market spends discretionary income on personal care products Financial Norms Personal care products carry higher profit margin Customers tend to pay late Socio Political Environmental concerns recyclable packaging Community programs such as Forest Park CleanUp

Industry Attractiveness & Business Strengths

Cost Position
Economies of scale due to large consumption of raw materials Supply chain teams to control costs

Level of Differentiation
Recognition for key brands Dove, Snuggle Extremely effective in defending product patents

Response Time
In U.S. due to competition has had to improve flexibility Continuing to combine business functions

Industry Attractiveness & Business Strengths

Financial Strength
Strong cash reserves Striving to improve growth of revenues

Human Assets
Promotes high level of training and empowerment Manufacturing becoming more non-union

Public Approval
Low recognition in U.S. Highly recognized oversees especially in third world countries

Mission Statement
At Unilever we are dedicated to meeting the everyday needs of people everywhere. We provide washing powder, shampoo and toothpaste, teas, ice cream, oils and spreads for consumers all over the world.

Corporate Philosophy
Unilever's Corporate Purpose states that "to succeed requires the highest standards of corporate behavior towards our employees, consumers and the societies and world in which we live. This is our road to sustainable, profitable growth for our business and long-term value creation for our shareholders and employees."

SWOT Analysis
Strengths
Finance 1) Strong Cash Reserves 2) Global Purchasing 3) International Exchange Rate

SWOT Analysis
Strengths
Marketing
1) Extensive product lines make Unilever a formidable competitor 2) Strong image for well-known brand products 3) Use of creative advertising and promotions on website and commercials

SWOT Analysis
Strengths
Operations
1) Two Major Divisions Foods and Home & Personal Care 2) #1 in many consumer product categories 3) Well developed supply chain

SWOT Analysis
Strengths
Human Resources
1) High level of training in place for employees 2) Employ approximately 265,000 people 3) Enterprise culture developing employee to be more customer friendly

SWOT Analysis
Strengths
Information Systems
1. Corporate intranet and e-mail 2. All laptops and desktop machines organized the same (Sunrise hardware program) 3. SAP software used globally 4. Total Business Productivity each category has website example Accounting

SWOT Analysis
Weaknesses
Finance
1. Since it is an overseas stock not included in US market analysis 2. Business acquisitions affect overall profit

Marketing
1. Lack of innovation in several categories has caused slippage in market share 2. Reduced marketing expenditures in television commercials

SWOT Analysis
Weaknesses
Operations
1. Innovation time cycles continues to need improvement 2. Consolidation of facilities is causing production turmoil

SWOT Analysis
Weaknesses
Human Resources
1. Expensive labor due to high benefit package 2. Union contracts limit flexibility

Information System
1. Global help desk India & Ireland 2. Deferred updating due to leased hardware 3. Insufficient software package training

SWOT Analysis
Opportunities
Demographics
1. Products appeal to wide range of population 2. Product loyalty through generations

Technology
1. Automated manufacturing facilities 2. Already using product innovation needed for front loading washing machines

SWOT Analysis
Opportunities
Economy
1. Goods are durable in any economic environment 2. Use of international exchange rate

Global
1. Largest consumer manufacturer 2. Integration of international employees bring broad cultural and business experience in all processes

SWOT Analysis
Opportunities
Environment
1. Maximize recycled packing materials 2. Processes environmentally friendly 3. Products are biodegradable

SWOT Analysis
Threats
Demographics
1. Low product differentiation tends to make consumers reluctant to change products 2. Consumer purchasing base on cost

Technology
1. Competitors manufacturing technology innovations 2. Reduction in innovations due to patent constraints

SWOT Analysis
Threats
Economic
1. Internal turmoil in third world countries 2. Ventures in developing countries are jointly owned

Global
1. Internal business in country may be given preference 2. Knockoffs

SWOT Analysis
Threats
Environment
1. Increased regulations 2. Pressure to reduce utility consumption

Strategic Plan: Increase profitability from 6% to 12% in next 4 year

12%

6% growth

6%

Assumptions
Prime Rate is 4% Available Market Growth is ongoing at 1 2% per year Assume our vendors will accept late payments Assume our customers will pay net 30 Existing computer hardware will be able to support new computer software Outsourcing of production has acceptable sources

Strategic Plan
Action Plan #1:
Reduce costs in production of laundry detergents by 3 5% over next 4 years

Action Plan #2:

Strengthen market share in personal care products by increasing market share by 10% points

Action Plan #1
Information Systems:
Upgrade information systems to achieve improve forecast of sales
Improvement in forecasting should result in a change from 10 week product coverage to 9 week product coverage

Improve scheduling
Improvement in raw material inventory Reduces storage time 10 15%

These improvements would reduce storage time 10 15% Storage equates to $1 to $2/sq ft Results in a 10% savings

Action Plan #1
Finance
Change payment on Accounts Payable from normal 30 day cycle to 45 day cycle This allows capital to remain invested for a longer period Example - $1M invested at prime (4%) results in $1643 additional revenue in the extra 15 days

Action Plan #1
Marketing
Reduce marketing on cash cow brands such as Rinso, All, Final Touch and others These brands can effectively be marketed in Club Pack stores examples Cosco, Dollar General, Sams Allows for reallocation of cash cow brand marketing budget to key brands only should result in an additional $8 M available

Action Plan #1
Marketing Anticipated 2004 advertising cost increases
16% 14% 12% 10% P e rce n ta g e o f In cre a se 8% 6% 4% 2% 0% National TV rates Loc al TV rate Radio News papers

Ad ve rtisin g M e dia

Action Plan #1
Production
Initiate process changes to increase utilization of assets and reduces fixed costs Increase automation to reduce manual labor on production lines reduction in staffing from 5 per line to 3 per line
Average hourly pay $15/hr plus benefits Costs savings of $62,400/per worker

Outsourcing of production to reduce 2 production lines per facility

Action Plan #1
Production
Increase quality control to reduce over pack example
On a 50 oz package reduce your over pack from 2% to 1% Assuming cost of $5/lb Resulting savings of $3.4 Billion/year

Action Plan #1
Research & Development
Reduce cost by alternative formulation Reduce builder in powder detergents by 2%
Cost savings reduce raw material cost from 0.15/lb to 0.09/lb Total cost savings - $29 M/year

Human Resources
Provide additional staff and line worker training Training with help lines run more efficiently

Pros and Cons

Gives cost reduction desired By increasing efficiency makes business more competitive Focuses marketing on key brands Sets corporate culture for future growth in this area

Pros and Cons

Disruptive to business
Contracts for raw materials need to be renegotiated R&D diverted from innovation to cost savings emphasis

Negative reaction from laid-off workers

Cost of Reversibility
Many of these changes would not have a cost of reversibility associated with them If the outsourcing of production needed to be reversed loss of workers and the need to divert capital back into production facilities would be costly

P je t Ativ Sh d leP je Rin o ro c c ity c e u ro ct a b w Ya Oe er n Ya T o er w Ya Tre er h e Ya F u er or 1 t Q 2 dQ 3 Q 4 Q 1 t Q 2 dQ 3 Q 4 Q 1 t Q 2 dQ 3 Q 4 Q 1 t Q 2 dQ 3 Q 4 Q s tr n tr rd tr th tr s tr n tr rd tr th tr s tr n tr rd tr th tr s tr n tr rd tr th tr IS F ac in n e Mrk tin ae g P d ctio ro u n RD & H R

Summary
In order to meet the strategic goal both action plans must be implemented Personal care products have the higher profit margin Upcoming changes in laundry detergent market necessitate reduction in production costs to maintain current profit margin