PESTEL ANALYSIS: A REPORT ON UNILEVER

INTRODUCTION TO THE COMPANY

The Fast Moving Consumer Goods (FMCG) environment is rapidly changing.

Especially, the increasing popularity of line extensions seems to depend on advantages

inherent in brand leveraging. FMCG manufacturers go into R&D in order to come up

with the product that best satisfy consumers because customers become more critical

about attaching themselves to a particular brand. They will also like to buy less

expensive product due to current economic tide. Unilever is one of the biggest Fast

Moving Consumer Good (FMCG) companies in the world. I have always been

inquisitive about Unilever’s operations because I use some of its products, even right

from childhood. This together with the current environmental challenges being faced by

FMCG manufacturers motivated me to find out about Unilever’s operations and the

current challenges it faces in the volatile business environment.

Unilever was founded in 1930 through merger by the British, Lever Brother; and the

Dutch, Margarine Unie; now Unilever PLC in London, U.K and Unilever N.V in

Rotterdam, Netherlands respectively. In 1872 before the merger, Jurgens and Van den

Bergh, the Dutch, built factory in Netherlands for the production of Margarine made

from milk and fact. In 1927, they formed Margarine Unie (margarine Union) together

with two European Businesses, Centre and Schicht. Lever & Co on the other hand was

founded in 1884 by British William Hesketh Lever and his brother James, and was

producing soap – Sunlight soap for people in England especially for women. William

Lever wrote: “to make cleanliness commonplace; to lessen work for women; to foster

health and contribute to personal attractiveness, that life may be more enjoyable and

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© 2008 Codewit.com. All rights reserved.
rewarding for the people who use our products”. In 1890, Lever & Co become a limited

company known as Lever Brothers.

Unilever, Unilever N.V and Unilever PLC comprise Unilever group . Both companies

have the same directors. Its annual turnover in 2005 was €39.672 billion and employs

206,000 employees around the world.1 Unilever brands consist of Food and Beverage,

and Home and Personal Care. Some of these products are Knorr, Breyer’s and Magnum,

Lipton, Omo (detergent) etc. Knorr has the biggest sales of €2.3 billon in 2005.

Though it is very difficult to get vital information as to Unilever’s managerial tactics

and strategy, most of the information was gathered from the internet through

companies’ websites and encyclopedia. This report takes a look at the company’s

business environments, internationalization strategy, the role of the company’s

subsidiaries, and its future challenges.

IMPACT OF INTERNATIONAL BUSINESS ENVIRONMENT ON

UNILEVER

Every MNC is measured by the standard it set in the environment in which it operates.

Unilever is not an exception. Unilever has a mission to add value to life of both its

present and potential customers. Accomplishing this mission will not take place in a

vacuum, but in an environment which is very turbulence.

1
http://www.unilever.nl/Images/final%202005_Annual_Report_English_tcm20-35889.pdf
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 POLITICAL/LEGAL ENVIRONMENT

Unilever, as a matter of policy, set a standard as to the way of tackling political issues.

Unilever has its tactical way of handling political issues. First, in the 1960s, many

countries began to nationalize foreign firms which also affected Unilever.

This was a call for local equity participation in foreign firms. Thus, so many companies

were subject to local control on prices, imports, employment of expatriates and so on.

As a result of the adverse effect of nationalization policy, in the 1970, many US

companies e.g. IBM and coca cola left India. There was fear by foreign companies on

certain issues such as knowledge leakage, loss of trademark etc.2 this was also hazardous

for Unilever as its control over operation in the market was reduced. For example UAC,

a subsidiary of Unilever, whose operation was in many African countries (Cameroon,

Ghana, Ivory Coast, Nigeria, etc.), was focused on as its profit margin and rate of easy

remittance of profit to its Anglo-Dutch parent was enormous. Nationalizing UAC

hampered Unilever’s control over the market where UAC operates.3

However, Unilever use its experience and goodwill to make contacts in many countries

to bargain with government so as to modify their regulations.

In central and south America, Unilever only engaged in lobbying rather than active

politicking. In other words, Unilever never get involved in sponsoring political parties.

Today, Unilever has gained political ground using its tactical strategy and experience.

Unilever is a member of many organizations all over the world.4 The aim is to create

favorable business environment, and also facilitate corporate reputation management.

2
http://www.hbs.edu/research/pdf/06-061.pdf#search=%22uaal%20meetingof%20osc%20unilevr%22
3
http://www.corporatewatch.org/?lid=260
4
http://www.corporatewatch.org.uk/?lid=259
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 ECONOMIC ENVIRONMENT

Unilever market environment is becoming highly competitive especially in the Western

Europe. Procter & Gamble (P&G) is one of the major competitors in the European

market. More so, there are so many discounters in the European market resulting from

EU free trade policy. This has had adverse effect on Unilever’s profit potentials.

Retailer’s are pressurising FMCG producers to reduce prices of their products.5

Consumers on the other hand would not want to buy expensive product or brands due to

current economic tide. Competition in EU has grown so strong that Unilever is facing

difficulties in places like France, Netherlands.

In the developing countries and the emerging economies (Asia and Africa), where there

are political instability, Unilever has adopted its company strategy to ensure that its

profitability drive is sustained. Some Products are packaged in small size for low or

regular income earner, for affordability.

In some developing countries, Nigeria to be precise, there was uncertainty about duties

to be paid by companies due to inflation and fluctuation of currency. The effect on

Unilever was a decrease in profit in 2005 compared to 2004, though there was increase

in turnover. In 2004 and 2005 the profit after tax were N2.167 billion (naira) and

N1.616 billion (naira) respectively, while in the turnover in 2004 and 2005 were N28.6

billion (naira) and N33.4 billion (naira) respectively, which indicates increase in

turnover but decrease in profit.

Also the low per capital income of people affects Unilever’s market. Over 30% of

Africa population lives on less than $1 per day.

5
http://www.igh.nl/level3.asp?level2id=1&id=26&sector=SCM&taal=EN
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 SOCIO-CULTURAL ENVIRONMENT

Unilever has continued to maintain momentum in its socio-cultural environment in line

with its sustainability drive. The company is working relentlessly to bring improve

hygiene and better nutrition to people in Asia, Africa and Latin America, especially the

poor and obesity.6 Over 30% of Africa population lives on less than $1 per day. By this,

Unilever strengthens it goodwill. However, the low literacy of consumers affects

marketing vehicles such as advertisement in print media. This therefore requires

employment of more resources, for instance to enhance face-to-face communication.7

Besides, Unilever employs about 100 nationalities. It ensures that diversity works for

everybody both employees and consumer alike.8 In order to achieve and ensure that

diversity works amongst employees, Unilever employed the strategy of diversity toolkit9

so as to manage and leverage diversity. Unilever is focused on building an exclusive

culture and embracing difference, which resulted in high demand of its products in the

developing and emerging markets.

TECHNOLOGICAL ENVIRONMENT

Right in the 1930s, Unilever continue to diversify. Business continue to boom in the

1950s with new technology being invented to boast production and enhance quality

products for consumer, competitors improving their products using new inventions.

Unilever did not relent its effort in R&D. Since 2000, Unilever has been spending on IT

to improve its business especially in the area of e-business so as to improve brands

6
http://www.unilever.com/ourvalues/environmentandsociety/env_social_report/introduction.asp
7
http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=Published/EmeraldFullTextArtic
le/Articles/0200220406.html
8
http://www.unilever.com/ourvalues/environmentandsociety/news_speeches/speeches/u
nderstandingpeopletobuildbrands.asp
9
Toolkit = Training programme, guides and learning package to support wide range of diversity
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© 2008 Codewit.com. All rights reserved.
communication and market through internet, making transaction simple along chain.

Today, Unilever is trying to minimize cost through IT efficiencies at global level. In

addition, Unilever Technology Venture works in collaboration with Unilever R&D

group to help Unilever meet consumers’ needs. Area of concern is genomics, advanced

bioscience, advanced materials science and nanotechnology. In 2003, Unilever installed

and commissioned “pallet live storage system” from Bitto Storage System Ltd. This was

meant to store its frozen products. The facilities include: pallet live storage systems,

carton live storage systems, pallet racking, boltless shelving, plastic bins and containers,

wide span and heavy load shelving, cantilever racking, and multi-tier shelving

systems.10

ENVIRONMENT

In recognition of local legislation, and to keep its corporate responsibilities, Unilever

designed management system. Unilever has respect for consumer health and safety. This

policy is to ensure all Unilever operators establish a formal environmental management

system. Training programs are being arranged in various regions/business groups to

ensure compliance with the company Standard for Occupational Health and Safety

Environmental Care (SHE). This framework is based on the ISO 14001 management

standard.11 Unilever had also worked in conjunction with government of countries of its

operation as regards waste management. For instance in Ghana, 2004, over 21 tones of

10
http://www.bito.co.uk/bitoWeb/www_root/documents/2003_05_Unilever_1_1.pdf
11
http://www.unilever.com/ourvalues/environmentandsociety/env_social_report/environment/managemen
t_system.asp
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wastes were supplied to small and medium size recycling businesses in Accra, Ghana,

by Unilever to reduce the amount of plastic waste sent to landfill12.

INTERNATIONAL STRATEGY

Prior to the merger, in 1888, Jurgens and Van den Bergh had already entered Germany

through FDI and established factories because of market prospect, before merging with

two European companies, Centra and Schicht, to form ‘Margarine Unie’ ( Margarine

Union) in 1927. In the mid 1890s, Lever brother also expanded its operations to Europe,

America and British colonies through FDI (established factories for soap

manufacturing), and exports. These were rational decisions due to economic prospect of

these areas at that time.13 Lever began to diversify into food business through

acquisition in 1917. Margarine Unie on the other hand also grew through merger with

other margarine companies. The merger in 1930 thereafter gave room for improved

technology. After the merger, the first company was lunched in Latin America.

Unilever international strategy is driven by competitive advantage and technology.14

Today there is a serious competition between Unilever and producers of similar

products. Thus Unilever’s strategy is to sell some of its business line and focus on

priority portfolio. Unilever has shifted concentration to developing and emerging

markets, Africa and Asia where it has more competitive advantage.15 Besides, Unilever

is back to Zambia in Africa after experiencing some set back in past years. Unilever

bought 79% share of Refined Oil Product (ROP) of Zambia for US $4.5million in its

12
http://www.unilever.com/ourvalues/environmentandsociety/casestudies/wasteandeffluent/ghanareusing
wasteplastictomakejewelleryandflowerpots.asp
13
http://www.unilever.com/ourcompany/aboutunilever/history/1920s.asp
14
Adam Smale & Tiina Jokinen: International management hand-out
15
http://www.unilever.nl/Images/final%202005_Annual_Report_English_tcm20-35889.pdf
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course of internationalization.16 In this regard, Unilever will provide technical and

managerial training to the staff of ROP in consonant with the company’s international

standard.17

Since in the 1990s, Unilever has been facing competitive problem in Europe. Unilever is

investing more on R&D so as to provide goods that best satisfy customers and at

reasonable price. Unilever is also connecting its business unites to promote cross-border

synergies. In 1999, Unilever lunched “the Heart Brand” (slightly modified 2002).18 This

is a logo strategically designed to create international brand awareness and promote

international synergies in manufacturing and marketing – centralization drive. This

strategy is to provide recognition of Ice-cream brands and to show that other units are

integral part of Unilever. Global brand can carry the same brand name and logo, but

with dissimilar product standard (Mooij, 2005). Unilever has set a 5-year program since

2004 which focuses to cut 1200 underperforming brands, caused by lack of clear brand

recognition in the market, so as to yield six percent of sales growth.19 Further, Unilever

opened a global procurement centre in Shangai China in 2002.20 The reason is that this

centre will serve as a source of raw material to Chinese companies so as to compete

favorably internationally. It should be noted that since 1989 when Shangai Van Den

Bergh; a joint venture between Unilever and Shangai Sugar, Cigarette and Wine

Company, was established, Unilever has expanded tremendously in China through joint

venture and acquisition.21

16
http://www.zpa.org.zm/uniliver.htm
17
http://www.zpa.org.zm/uniliver.htm
18
http://en.wikipedia.org/wiki/Unilever
19
http://www.cosmeticsdesign-europe.com/news/ng.asp?Id=61653-lonza-frost-sullivan
20
http://www.icmr.icfai.org/casestudies/catalogue/business%20strategy2/BSTR131.htm
21
http://www.icmr.icfai.org/casestudies/catalogue/business%20strategy2/BSTR131.htm
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© 2008 Codewit.com. All rights reserved.
 UNILEVER OPERATIONS AND STRATEGY IN NIGERIA –

UNILEVER NIGERIA PLC

Lever Brother (West Africa) Ltd was incorporated in Nigeria on 11-04-1923 by Lord

Lever Hulme. In 2001, the name Lever brother was changed to Unilever Nigeria PLC.

The history of Unilever international strategy in Nigeria has been a success based on its

international experience. The reason is that, first; the company has a strong customer

relationship, having able to study local culture and the market. Second, good quality

products which meet the standard of the customers are being maintained. The company

has put up a remarkable performance in the area of brand development, which has

boosted the quality of life of the people. There is hardly any home in Nigeria where you

do not find Unilever Products. Today Unilever has diversified in Nigeria through

acquisition and Mergers.22 The result of this was Lipton Nigeria Ltd, and Cheesebrough

Pond Industries Ltd. The success of Unilever in Nigeria was also facilitated by its

corporate responsibilities. So many TV programs are sponsored by Unilever e.g. “one

love”, “supper story”, etc. these are enlightenment programs, which keep people aware

of the existence of Unilever and its products. The company has, in other words, proved

its entrepreneurship by way of community assistance in area of health, education, and

potable water/hygiene.

22
http://www.wizetrade.com.ng/index.cfm?newsID=45
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 INTERNATIONAL ORGANIZATIONAL STRUCTURE OF

UNILEVER

Today Unilever operates a dual organizational structure for easy control and to avoid

complications. This dual structure is made up Unilever NV and Unilever PLC, with a

unified Board structure. The unified board consists of one chairman and one group chief

executive.23 This is meant to provide transparency/accountability from a single stand

point. Meanwhile, before this new hierarchical arrangement in 2005, the board structure

was such that there were so many joint executive directors as well as joint executive

chairman. This new arrangement gave room for single non-executive chairman and a

single group chief executive. Today the structure have been adjusted in such away that

personnel holding joint position are reduced. The number of executive directors have

been reduce from seven (7) to four (4)24 Besides, the group CEO, Patrick Cescau and a

new team made up of three regional presidents drawn from Asia/Africa, Americas and

Europe; two categories of presidents of Food and Home and Personal Care (HPC), the

chief Financial officer, and chief Human Resources have now assumed the position of

Executive committee. The former eleven business group is dissolved.25 The CEO is

responsible for all operations (see figure 1), while the non executive chairman is

responsible for managing the boards.

Unilever, today, operates in about 100 countries around the world. These countries are

in three regions of operation, Europe, Americas, and Asia/Africa. Each region is headed

by a president. The structure clearly defines positions and responsibilities to ensure

23
http://www.unilever.se/ourcompany/newsandmedia/pressreleases/pressreleases/Unilever_retains_and_st
rengthens_its_dual_structure.asp
24
http://www.unilever.com/ourcompany/newsandmedia/pressreleases/2005/unileverstreamlinesitsleadersh
ipstructure.asp
25
http://www.unilever.com/ourcompany/newsandmedia/pressreleases/2005/unileverstreamlinesitsleadersh
ipstructure.asp
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© 2008 Codewit.com. All rights reserved.
quick flow of information as regards decision making and implementation. In these

regions of operations, most subsidiaries are fully owned by either Unilever PLC or

Unilever NV (see annual report 2005). The only exception in this case are some

companies in India, Nigeria, Ghana, Indonesia and some few other countries, where

there are various degrees of share holdings between Unilever and local share holders.

For instance Hindustan Lever in India, Unilever PLC owns 51.5%, 24.5% are owned by

institutional shareholders and 24% by individual shareholders.26

The product structure is divided into two the Food, and Home & Personal Care (PHC)

division. This structure was designed 1999/2000 so as to focus on its core portfolio, with

each category having its growth target (see figure 2). At country level, each category is

headed by a managing director.27 Further more, Unilever PLC London is the

headquarters of Home & Personal Care division, while Unilever NV is the headquarters

of the Food division.

REASON FOR THE STRUCTURE

The most important reason for the dual organizational structure of Unilever is to provide

adequate focus on business portfolio in the challenging business environment, to make

Unilever more competitive in the market environment and profitability. This was also

ensured by reducing the number of brands to be focused on to 400 out of 1600 brands.28

Second, to give room for easy allocation of assets between the two parent companies,

the structure is considered to enhance effective implementation of policies to the benefit

26
http://www.somo.nl/html/paginas/pdf/Company_profile_Unlilever_2005_NL.pdf
27
http://www.rediff.com/money/2004/may/03hll.htm?zcc=ar
28
http://en.wikipedia.org/wiki/Unilever
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of stakeholders. Third, the adjustment was to improve transparency and accountability

in the organization.

GLOBAL AND LOCAL STRATEGY

A clear distinct of Unilever’s global and local approaches in achieving its goals and

objectives can not be over emphasized. In short, there is no clear cut between them. The

reason is that one approach leads to another. However, one may ask, what are the factors

that pushed Unilever to local or global approaches? There are some key factors that

drive Unilever towards local approach. It uses divergence to tackle local dilemma.

DIVERGENCE FACTORS TO LACAL APPROACH

1) Unilever does not retail under its own name. It uses brand name to illustrate

diversity. For instance in UK, several customers would think they have different brands

of margarine to choose from; Blue Band, Stork, Summer County, Flora etc. these are

products of Unilever. Unilever uses this strategy to capture and satisfy various groups of

people. They can make their choice from available brands.

2) Another reason is that when ever Unilever modify its product, it makes sure each

country retain the local brand. This is so because the company wants top keep standard

built over the years. Some of these brands are: Algid, Italy; Bresler, Chile; HB, Ireland;

Miko, France; GB Glace, Finland/Sweden etc. The success of Unilever locally is also

buttressed by the fact that each country was allowed to choose its logo e.g. the old logo

used in UK was a yellow logo with Wall’s in blue print.29

29
http://en.wikipedia.org/wiki/Unilever
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3 Unilever also has a strong relationship with customers based on the local culture

and market. For example in Nigeria where there are different ethnic groups, Unilever

had built a strong relationship with customers by maintaining high standard of corporate

behavior towards local employees and customers.

4) Another factor was legal factor. In the 1950s, developing countries started

nationalization drive. The direction was intended to allow indigenous workers to

manage foreign companies. This was in the best interest of Unilever. We should note

that in the 1930s, Unilever appointed the first local managerial position in developing

countries – India and China.30 In the 1960s, Unilever had over 296 managers who were

drawn from local countries. This drive was for local autonomy, and as such the people

who know the local tradition were allowed to manage the company.

FACTORS PUSHING UNILEVR TOWARDS GLOBAL APPROACH

One of the factors that pushed Unilever toward global approach is stimulated by

opportunities. This can be viewed from the company’s historical antecedent. In the

1940s and 1950s, investments were booming in political safe British colonized

countries. Some countries in Africa and Asia were opportunity for Unilever to invest. In

recent time, 2002 to be precise, Unilever established procurement center in Shangai

China, which is a global processing centre to increase opportunities for Chinese raw

material providers.31 This was also meant to boost Unilever global business.

Another push factor was in the area of research and development (R&D). Thus, it was a

deliberate action by Unilever to develop new product and to enter new market. This is

30
http://www.hbs.edu/research/pdf/06-061.pdf#search=%22uaal%20meetingof%20osc%20unilevr%22
31
http://www.icmr.icfai.org/casestudies/catalogue/business%20strategy2/BSTR131.htm

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an ambitious program holding in Unilever. Through R&D, Unilever carries out

environmental audits within regions of operation so as to improve on the environmental

performance in the area of cost reduction, resource allocation etc. through R&D,

Unilever form synergy with Hindustan lever, India, which is one of its subsidiaries.

The third factor is to promote brand awareness and cross border synergies in

manufacturing and marketing. In order to achieve this; Unilever started, in 1999 when it

strategically lunched the “Heart Brand” logo of ice-cream product,32 to modify its

products. The reason for this is to embrace integration amongst subsidiaries to facilitate

control – centralization. Furthermore, the advent of new technologies especially in the

European communities appeared to have pushed Unilever globally to open new markets

especially in the emerging market – Asia. It should be noted that Unilever uses global

experience to satisfy local needs of consumers. This is evidence upon the provision of

varieties of products for local consumers’ satisfaction.

STRATEGIC ROLES PLAYED BY UNILEVER’S SUBSIDIARIES

Unilever has numerous subsidiaries cut across the globe. Their strategic roles vary in

accordance with their locations and what they do. Unilever is being operated by two

parent companies, Unilever NV, Netherlands and Unilever PLC, UK – all made up

Unilever group. Some of Unilever subsidiaries are established as a source of technical

expertise. Take for instance Unilever UK Home and Personal Care. This subsidiary was

formally known as Lever Faberge Ltd. It was established in 2001 through a merger of

Elida Gaberge and Lever Brother. This company succeeded in UK through the provision

32
http://en.wikipedia.org/wiki/Unilever
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of specific products. Some of these products are Lynx, Persil, Domestos, and Dove.33

Hindustan Lever is also a source of expertise. They are into R&D with impressive

abilities in the area of productive employment and adding values to agricultural

produce, and research on how to sustain export performance.34 Hindustan Lever helps

other subsidiaries in Asia in area of brand development and innovation, R&D, Brand

building and communications.35 Another role of subsidiaries is sources of employment

so as to benefit local economy. Unilever South East Africa, Zambia Ltd is an example.

This is done through the employment of local people. Over 100 local people are

employed directly and about 150 people indirectly.36 Prior to the new strategy that is

being implemented, “Path to Growth” strategy, every subsidiary work around

decentralization framework. Product diversification and market adaptation were the

keys to subsidiary success.37 Subsidiary companies have autonomy to adapt products to

the needs of local consumers. Products were well positioned to suit local cultures, which

satisfies the needs of the consumers; putting in mind the corporate mission to add

vitality to life.38 Besides, social responsibilities are being embraced by showing

commitment to employees, consumers, and the general environment. It should be

reiterated that company’s success locally is based on the local strategy adopted.

Unilever subsidiaries have a systematic way of embracing local culture, even by their

promotional strategy. Unilever subsidiaries strategy is based on international experience

which helped them to respond quickly to customers’ needs in order to compete

33
http://www.hoovers.com/unilever-cosmetics/--ID__122624--/free-co-factsheet.xhtml
34
http://www.hll.com/mediacentre/release.asp?fl=speeches/growing_india.htm
35
http://timesofindia.indiatimes.com/articleshow/1890872.cms
36
http://www.zpa.org.zm/uniliver.htm
37
http://www.wizetrade.com.ng/index.cfm?newsID=45
38
http://www.unilever.com/ourcompany/
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© 2008 Codewit.com. All rights reserved.
favourably with competitors. This has been the basis for MNC subsidiaries, which

makes no distinction, and regarding them as integral part of the full organization.

FUTURE TREND OF UNILEVER

Unilever operates in about 100 countries around the world with number of employees

up to 206000 in 2005.39 Unilever is aiming at penetrating more into the Big Emerging

Economies (Africa/Asia) where its business is currently better as compared to European

market. The reason is that more than one third of Unilever turnover in 2005 comes from

the developing and emerging economies. Though these economies have a very

turbulence environment, it is very challenging for Unilever to closely monitor it and

respond quickly to changes in market performance so as to safeguard business.

It is pertinent to say that today Unilever is facing competitive problem in the European

market. Unilever has since initiated the “Path to Growth” strategy, which is one of the

headway toward actualizing the dream of the organization. This system is designed as a

key control strategy through IT. The reason for this strategy is because of the

underperformance of some of Unilever’s product line especially the frozen food (non

ice-cream). The strategy is to increase effectiveness, reduce cost structure improve

market competitiveness.

The integration strategy – Path to Growth has challenges in the area of operation,

management and structure,40 which are outlined below:

a) Global challenge – the operational of the strategy in the three regions where

Unilever operates i.e. Americas (north and Latin America) Europe and AMET (Africa

39
http://www.unilever.nl/Images/final%202005_Annual_Report_English_tcm20-35889.pdf
40
http://www.unilever.nl/Images/final%202005_Annual_Report_English_tcm20-35889.pdf
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© 2008 Codewit.com. All rights reserved.
/Asia), which have been successful with their household names, since Unilever is

adopting universal brand name.

b) Varying view of region in finding solution to global challenges - how effective

would they execute this strategy? The reason is that there are differences in the global

environment, especially cultural background.

c) What are the benefits and the effectiveness of this IT driven strategy?

The time to actualize this transformation is challenging. Global transformation of

existing structure is not easy for such company like Unilever whose operation is within

diverse political, socio-cultural and economic influences.

Be that as it may, it is expected that many benefits are attached to this. Some of the

benefits are to improve the lives of the workers, consumers and the communities in

which Unilever operates. It will also make management easier. More so, it will help

provide high standard of products that can be accepted globally. Irrespective of these

challenges and benefits, I will like to suggest that Unilever should not totally centralize

every aspect of its business. There should be some element of decentralization to

combat global environmental challenges; while, in the long-run, still maintaining global

standard.

Figure 1: Unilever Executive Committee Structure

CEO

President President Chief Human Chief Regional

Food HPC Resource Finance Divisions

President President President

Americas Europe - 17 - Asia/Africa
© 2008 Codewit.com. All rights reserved.
 Source: Own drawing based Unilever Annual report 2005.

Figure 2: Geographical structure of Unilever

Unilever
PLC/NV

Americas Europe Asia/Africa

Latin North Western Central Eastern Africa Asia Middle Turkey Australa
Americ Americ Europe Europe Europe East sia
a a
The three regions Americas, Asia/Africa, and CountryA Food
Europe are the divisions where Unilever
numerous subsidiaries are. Each region is head
by a president. The regional presidents are to B PHC
ensure profitability of their regions and are
charged with the responsibility of implementing C
proven brand mixes in their regions across the
two product divisions (Food, and HPC). They Source: Own drawing based
are to focus on customers, assume responsibility Unilever company report
for brand development, innovation, R&D, brand and account, 2005.
positioning, communication and category
strategies
At the country level, the Food, and the PHC
divisions are headed each by a managing
director.

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© 2008 Codewit.com. All rights reserved.
 Figure 3 Unilever Brand Structure

NV/PLC

Food PHC

Savoury Spread and Beverages Ice-Cream Home Personal

and cooking and frozen Care
Dressing products food

Source: Own drawing based Unilever company report and account, 2005.

Note: From the food category, the dressing and savoury are snacks, salad dressing,
soup, etc. some of these brands are Knorr, Amora, etc. Beverages include tea e.g. Lipton
Tea. The spreads and cooking products are the margarine, e.g. Blue Band, Bece &Flora
Rame etc. The Ice - cream under the Hearth brand are Birds Eye, Magnum etc.
The Home category is laundry products, and washing product for plates, hand and
machines.
Personal care includes bathing soap, like dove; Body cream; Hair dressing cream; Oral
care, like Close Up; etc

Table 1: Number of Employees Year ended in thousand

Number of 2005 2004 2003 2002 2001

Employees
Year ended in
thousand
Europe 49 52 55 60 71
Americas 47 47 50 53 60
Asia/Africa 110 124 129 134 134
Total 206 223 234 247 265

Source: Own drawing based Unilever company report and account, 2005.

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© 2008 Codewit.com. All rights reserved.
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