Unilevel Strategy and Structure Essay Example

objective of Unilever to enforce and address environmental and social issues in their organization. The company started a sustainable agriculture programme in 1998 and continued forward from there after Jan-Kees Vis made a proposal to Ben de Vet after Vis was elected to the Foods Executive Committee.

De Vet went along with this proposal and Unilever has been striving towards sustainability ever since. Unilever elected specific areas that they had a direct interest in like agriculture and fisheries and partnerships became central to Unilever’s approach. Back in 1998, Unilever began using life cycle assessment techniques with their products in order to find ways of reducing the environmental impacts of making, using and disposing their products.In 2005, Unilever extended their life cycle assessment beyond environmental impacts to broaden social and economic issues. By working through their brand, Unilever wanted to raise awareness of sustainability and integrate it in to their product design and innovation process.

In the area of fisheries, Unilever pledged by 2005 it would purchase its fish exclusively from fisheries that compiled with MSC certification criteria and would be allowed to carry a MSC logo on their products. All of Unilever’s efforts link closely to consumer confidence.Vis was quoted in an interview as saying “Marinating consumer confidence in the quality and safety of our goods is absolutely necessary. What do you think would happen if tomorrow people lost confidence in our product? It would be disastrous”.

Building up awareness of Unilever’s products through sustainability and social and environmental issues has greatly enhanced their reputation as a company. In 2007, the fourth quarter was a strong finish to a good year. 2007 marks the third successive year of

accelerating sales growth and came with an underlying improvement in margin.This is clear evidence that Unilever’s strategy of focusing resources on faster growing and profitable segments such as “Environmental” and “Social” issues is succeeding. (Ethical & Environmental Challenges to Engineering; pp146-173) (Unilever’s Annual Report, 2007 – 4th Quarter)

Brand Portfolio & Divestment

Brand portfolios of a company are brands that companies manage on a day to day basis and can increase or decrease their brands at any stage through strategies like new product development, research and development and diversification. Divestment” is a term that relates to under performing areas of a business, in which companies look for other companies that they can sell to and move area from that specified area and focus on their core and better performing areas. Plans to restructure Unilever’s were set out in 1999 to be achieved by 2004. The aim involved cutting down on its product portfolio of 1,600 brands and focusing on its top 400 brands. This involved cutting back on their portfolio from four to two divisions to focus on increasing growth and margins.

This all began when Unilever sold its Bio-technology business (Plant Breeding Company), a British based company that was a leader in genetically modified strains, in 1997/1998 and divested away from bio-technology allowing them to focus on their key brands and core products such as margarine, tea and ice cream. Even though Unilever is a company that has pursued diversification strategies, it has divested away from two main divisions to focus on food and personal care, Unilever’s two remaining divisions and has diversified within these marketing segments to produce new and innovative products.The bio-technology business was seen

as sluggish and under performing, and as a result Monsanto; a US based bio-technological giant acquired this business from Unilever allowing them move away from this area. The restructuring of brand their brand portfolio was brought about as a result of the company being unable to manage its brands and so was scaling back growth plans.

According to reports, Unilever's market capitalization of about ? 51 billion ($82 billion) in June 1999 shrank by almost ? 20 billion by January 2000.As a result, the company lagged far behind its competitors like Nestle and Procter & Gamble (P) in market capitalization. In February 2000, the company announced a €5 billion five-year growth strategy, aimed at bringing about a significant improvement in its performance. The initiative was named the 'Path to Growth' Strategy (PGS).

The exercise involved a comprehensive restructuring of operations and businesses. While many industry observers welcomed the move, some were skeptical about the slow-moving old economy giant's ability to regain its momentum in time to meet the intensifying competition.Since the announcement of the PGS, Unilever's share price had recovered by 30% to $59 in August 2001, and this seemed to highlight the positive results of its restructuring exercise. By July 2002, Unilever's 400 leading brands accounted for 88% of the sales, up from 75% in 1999. Brand focus continues apace with 88% of our turnover now attributable to leading brands. These brands are showing great resilience in a tough economic environment and will drive accelerating top line growth. (Restructuring Unilever: The 'Path to Growth' Strategy; February 2000) .

Globalised Strategy

Various companies pursue a new direction in their business through joint ventures. A company such as Unilever’s expertise

is in the consumer products based segment of the market (foods and personal care) and a company wants to strive forward in other specified areas, companies must merge with other established companies that are successful in other areas of business and management, for example technology were Unilever’s knowledge is not as strong.Globalised companies are always looking for new opportunities by entering different emerging economies/markets and implementing different strategies by entering joint ventures or merging with established companies and using their economies of scope to increase their geographic spread in the world market.

Unilever signed a global enterprise agreement with SAP to aid its global business transformation project, the "One Unilever" program, which aimed to streamline and standardize business processes across the companies' three operating regions; Asia/Africa, Middle East and Turkey, Europe and the Americas.Unilever's IT team has in-depth contact with SAP's consumer products experts, drawing upon SAP's more than 20 years of industry experience serving consumer goods companies, for guidance and support throughout the IT transformation process. “This agreement enables Unilever not only to accelerate business transformation, but also drive significant IT simplification as we move towards our destination IT architecture, and further strengthen our global market presence” said Neil Cameron, chief information officer at Unilever. Unilever’s steady underlying improvement in Europe has continued, with 2.8% growth in the year.The fourth quarter was particularly strong, at 5. 5%, against a weaker comparator. The Americas were up by 4.1% in the year, with Brazil and Mexico improving through the year, while the US grew solidly at 3. 2%. Asia Africa has shown consistent, broad-based growth across countries and categories throughout the year, up by 11. 1%.

This demonstrates

that merging with globalised technologically advanced companies such as SAS, and using their expertise, is paying dividends for Unilever. (Unilever’s Annual Report, 2007) (Drinks Business Review, “Unilever selects SAP as standard for global IT Strategy”, May 2007)