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Organizational Change at Unilever

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by

Perrine Bossat

on 3 December 2014

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Transcript of Organizational Change at Unilever

A decade of organizational change
Decentralized basis
1930-90's
In 2000, Unilever is still behind his competitors and therefore develops more structural changes.
Since early 2000
Why did this structure start to create problems for the company in the 1980's ?
To drive localization, Unilever recruited local managers to run local organizations
Each one was a profit center and was held accountable for its own performance
Each subsidiary was responsible for the production, marketing, sales and distribution of the product in that market
In Europe, the company had 17 different subsidiaries, each focusing on a national market
Concept of strategically independent units, local initiative and decentralized control
Marketing strategy to local tastes and preferences
Why did Unilever's decentralized organizational structure make sense from the 1950's through the 1970's ?
Group questions
But in the 80's, it created some problems because...
High cost structure
: duplication in manufacturing plants, lack of scale economies and resources synergy
It made sense because...
National culture
was the dominant culture because of consumer’s low levels of international exposure :greater need to cater to domestic tastes
Due to
high trade barriers
(tariffs), producing locally was a strength
Inefficient/inadequate logistic and communication infrastructure for international distribution
Trade barriers reductions :
greater competition
between local and international players
Consumer preferences became more global
Centralization vs. Decentralization
PROS AND CONS
Centralized Strategy
Assets of decentralization
Local responsiveness
Assets of a centralized strategy
Core competencies transfer
Coordination and objectives
Location curve economies
Experience curve economies
Weaknesses of Centralization
No local responsiveness
Less empowerment of workers
Conflicts of interest
Decentralized Strategy
Weaknesses of decentralization
More empowerment
Decision-Making
Duplication of activities
Coordination problems
The cost of such an organization

Introduction of a new organization
Cut the number of brands from 1600 to 400
Reduce manufacturing plants from 380 to 280
Goal :
optimizing synergies across the product portfolio
Different branches are managed by regional business groups
2001
2005
2006
2010
Simplification into a matrix structure
2 global product divisions
The regional groups of the divisions were merged, with the regional level responsible for go-to-market executions.
The two divisions are responsible for strategy and brand development.
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
Defining a new clear mission
Ever since, the company has been able to grow and increase their revenues
CEO announces: “Unilever is now fit to (globally) compete”
Questions
Does the structure make sense given the nature of competition in the detergents and food business?
In the 2000´s Unilever switched to a structure based on global product divisions.
What do you think is the underlying logic for this shift?
No trade barriers within Europe, only very few worldwide
Efficient logistic and communication infrastructure for international distribution
Consumer preferences are very globally oriented
By cutting down the number of brands and manufacturing plants, they can focus more on less brands
In the detergent and food business, there is a major competition between local and international players.
Therefore, global structure is making a lot of sense.
Average consumer wants a variety of different foods such as American Burgers, Italian Pizza, Norwegian Fish, Argentinean Steak
BRANDS
Double the size of Unilever, whilst reducing their environmental footprint and increase their positive social impacts
What about Unilever ?
Facts
Founded in 1929/1930
Business
merger
between Margarine Unie (Netherlands) and Lever Brothers (UK)
Legal Structure
Executive Officers
Jean-Marc Huët
Paul Polman
General Facts
Headquarters in London, England and in Rotterdam, the Netherlands
174,000 employees
Nestlé : 339,000 employees
Procter&Gamble : 118,000 employees
Unilever's annual turnover in 2013 amounted to €49.8 billion
KNORR
Unilever's biggest brand
Sold in more than 100 countries
Also called Royco or Continental
LIPTON
World's best selling tea brand
DOVE
Founded in 1957 in the US
Dermatologists' n°1 health care product
OMO
Laundry Products
Also known as Persil, Ship, Breeze, Surf
Why different brand names for the same product ?
Mergers & Acquisitions
Consumer orientation
Language and culture
Legal Structure
VISION
Sustainable Living Plan 2010
Drive climate change into the right direction
Establish food security
Provide water, sanitation and hygiene
Unilever Today
Numbers and figures today
Organization today
Sustainability
Competitors
Future
Unilever might create one single huge division in order to create many global product divisions
2013
3% decrease in turnover
57% of the growth from emerging markets

2012

€50 billion turnover
55% of total business with its 400 brands
1990's
2013
In Fast Moving Consumer Goods Companies
(2012)
Transnational strategy
Matrix structure with individual managers and a common sense
Increasing economies of scale
“Think globally, act locally.”
Unileverization
Keeping ecological footprint low
Work to create a better future
“Compass strategy” : 3 pillars
Driving Change
More globally oriented
Unilever Bestfoods Europe, Unilever Home and Personal Care Europe
1990's
1994
Persil Power Fiasco
1996 : Introduction of a new organizational structure
Goals:

speed up the development and introduction of new products
reduce operating costs

Measures taken (example Lever Europe)
Consolidation of national operations
Regional business groups
Four core divisions: Foods, Home Care, Personal Care, Speciality Chemicals
12 business groups
Harmonization of product strategy
“Bargain”
Structure of the presentation
Short Overview of the company
Development of the company
1930-1980 : Decentralized basis
1990's : Decade of change
Until 2000 : Matrix structure
Centralization vs. Decentralization
Unilever today
What was Unilever trying to do when it introduced a new structure based on business groups in the mid-1990’s?
Globalization led to more homogeneous markets
Product harmonization by consolidating national markets on a regional level : reduction in manufacturing and marketing costs
BUT: regional differences and preferences still relevant, therefore no complete abolishment of regional focus
Why do you think that this structure failed to cure Unilever’s ills?
Although 1996 reorganization was a huge step towards a more globalized and standardized structure, Unilever was still too fragmented into small regions and brands
Impossibility to benefit from globalized markets and impediment from achieving economies of scale : higher cost structures and less efficient manufacturing concepts than competitors
Unilever was moving into the right direction, but it was lagging behind its competitors
Thank you for your attention !
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