Unilever has always had two chairmen, one from Netherlands and the other from Britain until the restructuring of it management in 2005. Patrick Cescau, the British joint chairman became the sole Chief Executive. This alteration of Unilever’s management was to ensure that instructions are received from one single point and minimize the likelihood of conflicts and unnecessary confusions. In China, Unilever has three companies, each had a chairman to report to the regional presidents. This was changed, and currently, all divisions are headed by one person.
When there is one leader, decisions are likely to be made faster as consultation can be eliminated. This is particularly crucial when the decision has to be made urgently. Revenues in Unilever China increased soon after the changes, and in 2006, it reported sales of about i?? 600million, and currently has an annual growth rate of between 20% and 30%. Previously, it used to report an annual growth rate of between 8% and 9%. Unilever has a personal care division that does most of its sales. The sales are also mostly done in emerging markets.
This division has knowledge of how to discover and penetrate into new markets. This is an advantage that Unilever has over its competitors. For example, about thirty years ago, deodorants were unpopular and rarely seen in supermarkets. Today, the total sales of deodorants reached i?? $400million. Unilever had 50% of the deodorant market in Argentina in 1999, the market share had increased in 7 years to 70%. The company is still keen on increasing revenues through further penetrating markets. Unilever as a huge company has plans to acquire other smaller companies in a bid to expand its operations.
It is also planning to do away with brands that are not aligned with its plans to produce healthy foods. In line with these plans, in 2007, it sold Boursin, which is a brand of cheese to a French company. Basically, under the management of Cescau, brands are packaged and marketed alike as opposed to the past where every market did its own packaging and marketing. This reduced complexity and eliminated duplication of efforts. This is because everything is centralised and decisions are made by one person as opposed to the past practice.
Unilever has strong controls in its manufacturing process since the company does the whole manufacturing process. High standards of safety are guaranteed at the source due to absence of outsourcing. This is an advantage since in the case of safety fears, its products are not affected, for instance, recent safety scares about Chinese toothpaste. The weakness comes in the long supply chain, which exposes Unilever’s products to the possibility of being tampered with. This may cause an influx of counterfeits. INTERNATIONAL HUMAN RESOURCES MANAGEMENT
The organisational structure at Unilever has one CEO and then managers below him. This ensures that there is a clear chain of command when issuing and implementing decisions. Unilever is currently aiming to increase efficiency of its operations. Many changes have been made that affect its human resource. Since 2004, the company has reduced its staff by close to 44,000 and it is still planning to reduce its workers further. Its plan is to close 50 more factories and 75 regional centres. Further job cuts revealed in 2007 include a reduction of the workforce by 20,000 within four years from then.
All these changes appear drastic, but there is an advantage that the company will reap from all this. The company is likely to increase its efficiency and it is estimated that the changes will save at least i?? 1. 5 billion annually. GLOBAL MANUFACTURING & MATERIALS MANAGEMENT Unilever has a distinct advantage in its nature of operation in the manufacturing sector, which is manufacturing and selling household goods, personal-care products and food. Its competitors usually deal in one of these, but not all. An example is Nestle, from Switzerland, which is the largest of its kind in the world, only deals in food.
Unilever has competitive advantage in the fact that it tailors its products to specific markets. It practices product differentiation, since most markets have unique needs that have to be satisfied. This has worked very well for it, for example, in India, before women wash their hair, they oil it. Most shampoos from Western countries are unable to remove oil and for that reason, they do not report good sales. Unilever focused on that strength and re-invented its shampoo, thereby satisfying the needs of the market. Hindustan Unilever is one of the branches that generate most revenues.
It is the largest ompany in India that produces consumer goods a well as being the biggest advertiser. Its major strategy is product differentiation, and it produces different products to suit the needs of different classes in society. For example, when producing laundry detergents, ‘Surf Excel’ is made for the well off people, ‘Rin’ for the middle class and ‘wheel’ for the poor. Over 70% of its shampoo is in the form of sachets that are only used once, and are cheap. This kind of product differentiation ensures that all classes in society are catered for and no one is left out.
It is a great strategy of meeting the needs of the market as well as maximising the revenue received. In addition to product differentiation, Unilever uses the ‘micro-marketing’ approach in some of its markets. This is a strategy where a product that fits the whole market is produced. For example, its branch in Indonesia, markets hair conditioner in Makafar where strong emphasis is placed on the sea minerals in the product, however, it has less effects in Jakarta. Unilever discovered that its competitor, P&G was ahead in the US$40 billion shampoo market.
Since the company has strong roots in emerging markets and these are the major users of such products, Unilever introduced a new product ‘clear’. This shampoo has done very well in the market and was introduced to seven different markets in the first six months of 2007. After five months, this brand overtook P&G’s brand to acquire roughly 16% of the market. This brand is about to be taken to Western markets and it would make it the first brand that has been launched in an emerging market. APPLICATION OF TRANSNATIONAL STRATEGY Transnational strategy allows benefits to be attained in global strategies.
Overseas structures are integrated with business structure and empowered to be innovative. It is an approach where the management brings its subsidiaries, headquarters and operations together so that these components can cooperate in their functions. In such strategies, companies create alliances with suppliers, customers and other stakeholders in the business thus creating relationships that work well for the business and to balance the pressure for local responsiveness and global integration. In the case of Unilever, Patrick Cescau needs to balance demand for local management of the company, with demand for foreign management.
Local responsiveness demands or pressures exist as a result of the differences in preferences and tastes among the local market. Other demands include the differences in distribution channels in different countries. He should be careful to balance the pressure present for local responsiveness and simultaneously transfer the core competencies. Further reduction of costs makes their products more affordable to consumers than those of competitors. The CEO should also ensure that value is added to the products that are produced by Unilever, so as to be able to sell more, than those of the competitors.
This is because the modern world consumers insist on quality when purchasing products. This is consistent with the absolute advantage theory, which advices firms to produce what they are good at. Unilever has many years experience in producing household goods and has good reputation. The CEO has a choice of either using a strategy where he make sure that his company sells more products to the existing markets, or adopt the strategy where he penetrates new markets in order to increase sales. The CEO should advice the management of his company to study and understand the global trends concerning the products that are produced.
He should also make sure that the management studies trends that occur in other branches since some valuable skills may arise from one of the many branches and might be useful in running of the company. This is in line with the international theory, which states that the world economy consists of sets of interconnections between markets and countries and multi-nationals, serve to link the separate world economy parts. Branches in different parts of the world may gain from knowledge that is acquired in other parts of the world since the world is interconnected, according to the international theory.
The CEO should make sure that any valuable knowledge is transferred from the home country to other branches of the company and vice versa. This will ensure that all branches gain equally from any technology or knowledge that may arise in future. The CEO should however be prepared to face difficulty in balancing the contradictory demands that the company is expected to fulfill. CONCLUSION Unilever has grown to be a multi-billion company through the leadership of the CEO, Patrick Cescau. He has introduced changes in the operations and structure of Unilever that has seen the company grow faster than its competitors.
He can help the company grow further by using the transnational strategy, which links the local pressures and international pressures. This will facilitate transfer of technology from overseas branches to local branches and vice versa. The years ahead could be difficult not only for Unilever, but also its competitors. This can be attributed to the problems that the US economy is currently facing. These problems are likely to be replicated in the world markets and prices of food are expected to rise. The company may be forced to raise its prices in order to cover the production cost associated.
This may lead to a decrease in sales particularly in emerging economies. The growing concerns of healthy diet and the organic food trend may also increase the challenges in Unilever’s food sector as most of its food products are cholesterol and preservatives laden. Continuous effort in managing its big distribution network and large supply chain is also a notable factor determining the company’s success in the future. Nevertheless, Patrick Cescau has proved to be an effective CEO and will lead Unilever through these challenges.