What strategy was Unilever pursuing before its early 1990s reorganization? What kind of structure did the company have? Were Unilever’s strategy and structure consistent with each other? What were the benefits of this strategy and structure? What were the drawbacks? For decades, Unilever managed its worldwide detergents activities in an arm’s length manner. A subsidiary was set up in each major national market and allowed to operate largely autonomously, with each subsidiary carrying out the full range, of value creation activities, including manufacturing, marketing and R & D.
Unilever had a high-cost and a decentralized structure right from duplication of work and facilities to loss of competitive edge because of too many brands and high cost. Unlike its competitors, Unilever was unable to capitalize on the scale of economies The strategy and the structure were highly inconsistent with the following drawbacks – * Operation and Strategies were combined leading to conflict * No Corporate Image * Limited adaptability to change The only benefit of this structure were the following – * Local Know-how, taste etc. * Diverse Products Customized Products 2. By the 1990s, was there still a fit between Unilever’s strategy and structure and the operating environment in which it competed? If not, why not? In the 1980s the company’s archrival, Procter & Gamble repeatedly stole the lead in bringing new products to market. This prompted the shift and Unilever’s realization that its traditional way of doing business was no longer effective in an arena where it had become essential to realize substantial cost economies, to innovate, and to respond quickly to changing market trends
Unilever established product divisions to coordinate regional operations. The 17 European companies now report directly to Lever Europe. As a consequences of these changes, Achieved the unity that had been missing in the previous organization and effective global product management, However, history still imposes constraints. Procter & Gamble’s leading laundry detergent carries the same brand name across Europe, but Unilever sell its product under a variety of names. The company has no plans to change this.
Having spent 100 years building these brand names, it believes it would be foolish to scrap them in the interest of pan – European standardization 3. What kind of strategy and structure did Unilever adopt in 1990s? Is this appropriate given the environment in which Unilever now competes? What are the benefits of this organizational and strategic shift? What are the costs? By the mid-1990s, the decentralized structure was increasingly out of step with a rapidly changing competitive environment. To coordinate its operations across many regions and time zones, developed a global network.
Benefits Enhances flexibility Enhances cooperation between functional unit and team Gives top management useful vehicle for decentralization Employees learn new skills Strategic Shift To coordinate its operations across many regions and time zones, developed a global network. Single European market Produce standard products for the whole of Europe from the most efficient factory site Results – Saving of 400 Million USD. Manufacturing units down from 10 to 2. Production units concentrated on a few key locations. Development of a Pan European strategy.