Business Environment and System Report on Unilever PLC

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Unilever is the third largest Anglo-Dutch multinational organization with its headquarters based in London and Rotterdam, Netherlands. It is involved in the production, distribution and selling of fast-moving consumer goods ranging from food, personal care products, beverages and cleaning agents. Being one of the oldest multinational companies, and third largest one after Proctor & Gamble and Nestle, it owns around 400 brands sells and distributes its products worldwide in around 190 countries. Their portfolio ranges from everyday household products, affordable soaps, shampoos, detergents, nutritionally balanced food, indulgent ice creams and various other products. One of their major brands include Omo, Blue Band, Hellmanns, Knorr, dove, Axe, Pureit, Ponds, Cornetto, Surf Excel, Sunsilk, Fair & Lovely, Rafhan, Brooke Bond Supreme, Lifebuoy shampoo, Lux, Walls, Rin, Pepsodent, Toni & Guy meet wardrobe and many more.

Table Of Contents 1) Introduction.3 2) History (Series Of Events)..3 3) Size, Markets and Products4 4) Acquisitions and Divestments.5 5) Post 2000 Acquisitions.5 6) Post 2009 Acquisitions.6 7) Organizational Structure Of Unilever...6 8) Re-Structuring phase 1996-19997 9) More Problems with Re-Structuring.8 10) Another growth strategy phase 2000-2004..8 11) Pros of this Strategy9 12) Unexpected decline in Unilevers performance in 2003..9 13) Growth Strategy 2004 to 2010..10 14) Summary of Frequent Re-structuring..11 15) Production Process.11 16) Organizational Quality system..12 17) Compliance with regulatory bodies...12 18) Ethical Practices..13 19) Manufacturing Cycle..14 20) Employee Relations.15 21) References16

Introduction
Unilever is the third largest Anglo-Dutch multinational organization with its headquarters based in London and Rotterdam, Netherlands. It is involved in the production, distribution and selling of fast-moving consumer goods ranging from food, personal care products, beverages and cleaning agents. Being one of the oldest multinational companies, and third largest one after Proctor & Gamble and Nestle, it owns around 400 brands sells and distributes its products worldwide in around 190 countries. Their portfolio ranges from everyday household products, affordable soaps, shampoos, detergents, nutritionally balanced food, indulgent ice creams and various other products. One of their major brands include Omo, Blue Band, Hellmanns, Knorr, dove, Axe, Pureit, Ponds, Cornetto, Surf Excel, Sunsilk, Fair & Lovely, Rafhan, Brooke Bond Supreme, Lifebuoy shampoo, Lux, Walls, Rin, Pepsodent, Toni & Guy meet wardrobe and many more. In 2013 Unilever had a turnover 49.8 billion pounds with sales growing by 4.3% and gross margins increasing by 1.1%. although the sales grew last year, the decline of 3.0% was due to the negative impact from foreign exchange of 5.9%.

History (Series of Events)

Margarine Business venture started in 1872 by two Dutchmen Jurgens and Van Der Bergh. Merger formed in 1927 by those partners into two companies Margarine Unie NV and Margarine Union Ltd based in UK and Netherlands. Lever Brothers founded in 1885 by William Hesketh Lever.

Worlds first packaged laundry soap introduced in 1887 called SUNLIGHT.

About 450 tons of that soap was being produced by Lever & Co Business expanded from Uk to other parts of Europe Australia and North America Lever & Co became a limited company in 1890 LEVER BROTHERS LTD and than they went public in 1894. They later diversified into acquiring Walls and Pears Soap

Launched VIM Unilever formed in 1930 from a full merger of Unilever NV and Unilever PLC Acquired the lipton brand Thomas J. Lipton in 1937 Pespodent acquired in 1944 Birds Eye acquired in 1957 Good Humor acquired in 1961 National Starch and Chemical Corporation acquired in 1978 Later adopted the rationalized manufacturing approach New product divisions established in order to coordinate regional operations A core strategy was used as an Intense focus was observed in four different industries Specialty Chemicals, Personal Care, Home Care and Foods. Around 100 acquisitions were made during the period between 1992-1996 followed by 38 acquisitions alone during 1995. After successful acquisitions and productions of unique brands, the company decided to target Developing and Emerging Markets.

Size, Market and Products

The size of the company as of 2013 includes a large amount of workforce of 174,381 employees working worldwide in around 190 countries, which comprise of 119,139 male workers and 55,242 female workers. The senior workforce comprise of 115 senior leadership executives of which 96 are male and 19 are female. If the directors of the company around the world are included, the amount goes up to 681 males and 181 females. Unilever I also renowned for maintaining gender-balanced workforce from different cultures by winning two golds at the tenth Stevie Awards for women in business and also being mentioned In the times top 50 Employers for women in the UK. Apart from these awards they are also mentioned in the Working mother 100 best companies in the US and have earned the corporate empowerment for women award from cosmetics executive women, North America.

Acquisitions and Divestments.

Brooke Bond 1984 Naarden International 1986 Cheserbrough Ponds 1987 Faberge 1989 Elizabeth Arden 1989 Calvin Kleins Fragrance Business 1989 Nordsee Fast food 1990 Empire of Carolina Inc 1993 Philip Morris Kraft General Foods Unit 1993 Service (Transport) and Ancillary Business Palm Line, Shipping Company 1985 Plant Breeding and Agricultural products 1990 Professional Cleaning Products and Packaging 1990 After the restructuring phase more acquistions and divestments took place Helen Curtis Industries Inc for personal care products in 1996 North Brook Diversey Corp, Sanitizer and chemical cleanser in 1996 Caterpillar Inc Heavy equipment in 1996 National Starch and chemical corporation 1997 Plant breeding international Cambridge 1998 Kibon S.A industries Alimentica, ice-cream company 1999

More post 2000 acquisitions

Bestfoods USA Group Cressida Central America Foods Corporation

Jaboneria NA, Foods and HPC Cressida Foods, Soaps and detergents Slim fast, slimming products USA Amora Maille, Culinary Products France Ben and Jerrys Homemade Inc, Ice Cream CodePar/SPCD Inc Englewood Cliffs, Foods, New Jersey, USA

Post 2009 Acquisitions

Sara Lees personal care and European detergent unit and Sanex Shower Gel acquired by the company for $1.9 billion. Strong regional brands bought including German Shower Gel and Switzal Baby Shampoo Radox Bubble Bath Duschdas

Organizational chart of Unilever

These two images explain a general organizational structure of Unilever due to its global existence, the whole structure cannot be explained in a single chart. The earliest structure during the 1930s when Unilever was actually formed due to a Merger between Unilever NV and Unilever PLC, had problems due to various independent events such as the being unable to sustain with the great depression, maintaining a balance between the interests of the Dutch and the British, improper coordination channels between the Board of Directors of the two entities, confused followers due to having two masters from two entities.

Unilever had used both backwards and forward integration in channeling and distributing their products worldwide. Their organizational structure comprised of strategically independent units, decentralized control and local initiative. During September 1930 a special three-member committee was formed, which was above the two boards of directors of the two entities. As a result they had formed a Matrix organizational structure as shown in figure 3 above. After this structure was opted, there were problems with it due to the strategically independent units. This had led to incurring high costs with the duplication of manufacturing facilities in many locations. After various acquisitions and divestments in the 1990s, the structure grew even more complex as well as giving rise to a series of problems with it. Due to expansion into vast markets through rigorous acquisitions, the company became inflexible to adapt to the market dynamism Drift of performance due to market dynamism Organizational fatigue due to a vast and complex structure Larger organization lead to excess bureaucracy Lack of accountability and responsibility led to a confusion Conflicts in priorities within the special committee Chaotic working conditions Constipated decision making More complexity imposed in an already complex structure

Re-structuring phase 1996-1999

Three-member committee dissolved in order to form a seven-member executive committee 1st neutral Irish chairman appointed not carrying either a Dutch or British Passport. The name was Niall FitzGerald Regional Directors and worldwide business coordinators from the two layers of structure were removed to form a single team of 14 business presidents Operations were re-grouped by product instead of regional grouping Expansion was now done from Centrally-Driven to Branch-driven

This led unilever to grow by local market forces instead of global market forces The company focused more on core competencies A new management incentive system was introduced (also known as Variable Pay

More Problems with restructuring

Market capitalization shrank from 51 billion pounds to 21 billion pounds in 1999 causing stock prices to decline Too many brands led to losing focus on the existing brand structure Company was criticized for spending too much on frequent restructuring Market share started to decline suddenly No parity between the companys organizational structure and their strategies due to excessive bureaucracy

Another growth strategy phase 2000-2004

A five billion euros five year growth strategy announced in February 2000 Shrinking to Grow strategy adopted 25000 employees laid off Unilever again split into two separate units, the Foods, and Home & Personal Care (HPC) Headed by two executive directors Three hundred operating companies worldwide reorganized into ten regional groups Further decentralization took place to have more control over their subsdiaries In order to reduce costs, over hundred manufacturing units worldwide were shut down More than half top executives were replaced with young and dynamic executives Brand portfolio was shrunk from sixteen hundred to four hundred, in order to have better focus on their leading brands A new brand focus strategy introduced called Nourishing the Core Exploitation of existing brands outside the companys scope took place within the companys existing product categories

The Pros of this strategy

Effective, efficient and focused streamline decision making This boosted sales revenues by 16% Stock prices recovered by 30% Turnover increased from 40,977 million euros in1999 to 47,582 million euros in 2000 Restructuring of Supply chain management system saved the company about 1.75 billion euros EPS increased by 9% Growth rate accelerated from 4% to 5%

Unexpected decline in Unilevers performance in 2003

Sales declined by 15% Growth rate declined from 5% to 3% Profit margins declined by 13% Stock prices plunged by 7% The new structure was unable to cope up with the new market dynamics

Another Growth Strategy Phase from 2004 to 2010

Due to the unexpected series of events that lead to a decline in the companys performance, the company developed a set of newer strategies to cope up with the new market trends and dynamics: Further reduction of the brand portfolio of four hundred to forty MEGA World Brands, which would grow sales in excess of $1 billion. Growth rate soared up from 3% back to 5% More focus on developing and emerging markets A diversified portfolio mix helped enhance Margins First-non executive chairman appointed

First time in History of Unilever a concept of One Unilever entity was implemented Business would be conducted on strict value creation criteria Soft Selling strategy adopted under the new VITALITY strategy The main purpose of this strategy was focused growth

More restructuring happened in 2008 Foods and HPC global unit combined into a single unit Twenty thousand employees laid off More focus on personal care products Summary of frequent restructures
Unilever when started, originally operated as a decentralized structure which had to change during the 1990s, as it was unable to cope with the changing market trends and dynamics, which led to the introduction of a new structure in 1996 which was more regional based, in order to be run by local market forces rather than being driven by global market forces, which helped them focus more on their large portfolio of brands. The decentralized structure worked more sensibly during the 1950s and 1970s because it allowed the company to adapt to their consumers taste, as the post world war era created much more economic conditions. However the structure started creating problems because this structure was caused business processes to be duplicated leading to high costs and causing diseconomies of scale. In order to restructure the company, operating costs had to be reduced in order to have rapid development and introduction of new products by having a streamline operations. This structure again failed as the managers lost power to modify the products for local markets consumer tastes and preferences. In order to allow flexibility to adjust to local preferences by creating global brands and reducing costs, the structure was changed again, as consumers demanded renowned brands in order to meet their different needs and wants.

Unilevers Production Process

Due to its global presence and unending consumer demands, Unilever produces its brands in Mass production in order to produce large volumes of identical and standardized products in order to cater the mass markets they are operating in globally. In order to reach local markets, sometimes Unilever has to cater the needs of a relatively smaller population of consumers with different tastes and preferences, so for these markets, Unilever sometimes produces goods in batches.

Organizational Quality System

Unilever has to adhere to a strict quality management system, and so they have achieved the ISO 9001 certification over ten years ago. They apply ISO 22000 food safety system to their food and beverage manufacturing process also making it certified for ISO 14001 Environmental Management Standard. Their top priority is the product safety, for which they have established a Safety and Environmental Assurance Center that it uses to assess and assure on both products and their processes involved. They also ensure quality in their supply chain by making their suppliers go through a series of rigorous audit of their quality management and reliability. All their supplies are screened through various checkpoints to ensure their safety in compliance with regulatory and legal requirements. Their new technology and products all go under a rigorous independent safety process, and their entire production process is assessed through stringent safety and health assessment and legal and regulatory assessments.

Regulatory Bodies and standards Unilever has to comply with

Unilever has to conduct their operations with openness, integrity and honesty, while respecting human rights and interests of their employees and with whom they maintain relationships. They are also required to obey with the laws and regulations of various countries in which they operate, respecting their cultures, environment, ethnic groups, values, health and safety since they are the sole producers of health care and personal care products. They have to maintain fair competition while supporting the development of appropriate corporate laws, conducting business with the principles of fair competition and applicable local regulations. They make sure that their employees avoid any personal activities and financial interests that would conflict with

their vision and misson and sole responsibilities of the company. They maintain the use of these principles throughout their organization through Compliance-Monitoring and reporting, which is done by delegating responsibilities to the senior management in different regions down to the managerial and supervisory levels. This assurance of compliance and monitoring is given annually, and reporting is done in confidence so that no employee suffers. Unilever is also required to promote and defend their legitimate interests by co-operating with other NGOs and governmental organizations through trade associations, and avoiding to support any political parties or contributing funds to groups whose interests promote the interests of these parties. Unilever also has ensure that they are making continuous improvements in their management to have a positive environmental impact and developing a sustainable business environment, by working in partnership with others, to promote environmental care and increase awareness of environmental issues to implement ethical practice.

Ethical Practices
Unilever imposes ethical practices in their business operations through a series of Code Of Business Princicples: Standard of Conduct: opreations conducting with honesty integrity and openness, while respecting human rights and interests of employees Obeying the Law: complying with laws and regulations of the countries they operate in Employees: Mutual trust and respect between employees, by having an effective communication Shareholders: providing reliable and accurate information about activities and financial performance to the general public Business Partners: mutually beneficial relations with suppliers and business partners expecting them to adhere to business princicples Community Involvement: being a corporate citizen, fulfilling responsibilities to the societies and communities in which they operate in Public Activities: encouraging to promote and defend legitimate business The Environment: awareness of environmental issues and executing good practice Innovation: applying rigorous standards of product safety.

Competition: fair competition in accordance with principles of fair competition and applicable regulations Business Integrity: avoiding bribes and other financial and non-financial gains for personal interests Conflicts Of Interests: ensuring employees avoid personal activities for personal gains and interests Compliance Monitoring and Reporting: ensuring principles are being used down to the workers level, through delegation of responsibilities to senior, managerial and supervisory levels.

Whistle Blower mechanism: reporting any breach of conduct or any other ethics violation. Internal Control: regular documentation and review of internal control procedures Internal Audit Unit: assessing any exposure to risks and improving risk management and control system External Audit: Accounts are audited by public accountants such PwC and other local accounting firms. Consumer Care: complaints are taken through a consumer care service, and responding immediately in order ensure strong relationships with the consumers Procurement of Goods and Services: procurement is done under the Business partner code and the sustainable agriculture code of unilever.

Manufacturing Cycle

Employee Relations
A working environment which ensures mutual trust and respect is maintained at uniliver where all employees feel responsible for their performance and reputation of their company. All staff is recruited on the basis of their qualifications and abilities needed for the work. Safe and healthy working conditions are ensured for all employees, avoiding any enforcement or compulsory child labor. Employees are trained to develop and enhance their skills and capabilities, and good communication with and between employees and senior management is maintained in order to avoid conflicts, misunderstanding and build strong relations.

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