Case 8 - Unilever
As one of the largest and oldest multinational corporations in the world, Unilever’s products include foot, detergent, and personal care items. Overall revenues total an excess of $50 billion with its food products leading the way in total sales. Food products account for 60% of sales, while detergent accounts for 25% and personal care products for 15%. With sales of Unilever’s food products account for the highest percentage of sales, their main focus was on sales of margarine, tea, ice cream, frozen foods, and bakery items.
In the past, Unilever was organized by decentralization. This meant that each subsidiary was responsible for production, marketing, sales, and distribution of their own products. Unilever felt that by allowing each subsidiary to be accountable for its own performance would strengthen the overall company structure. Managers were able to develop their own marketing strategies to match their clients and region. By the mid-1990s, Unilever fell into issues of cost, global brand expansion, and product release. With the current decentralization structure, Unilever determined that there was too much duplications, a lack of scales economies, and overall too high of costs.
In 1996, Unilever set forth with a new structure strategy based on regional business groups. These groups were introduced in order to drive down operating costs and speed up the process of introducing and developing new products/brands. For example, Lever Europe (one of these regional business groups) would consolidate all detergents in Europe, which proved to reduce production costs and speed. With this new structure, new costs of transportation and storage would need to be taken into account. However, this new strategy did identify costs, but also increased uniform branding in packaging and advertising for Unilever. With this change, statistics suggest Unilever saved an estimated $400 million a year from just this change in the European detergent structure.
By 2000,
In the past, Unilever was organized by decentralization. This meant that each subsidiary was responsible for production, marketing, sales, and distribution of their own products. Unilever felt that by allowing each subsidiary to be accountable for its own performance would strengthen the overall company structure. Managers were able to develop their own marketing strategies to match their clients and region. By the mid-1990s, Unilever fell into issues of cost, global brand expansion, and product release. With the current decentralization structure, Unilever determined that there was too much duplications, a lack of scales economies, and overall too high of costs.
In 1996, Unilever set forth with a new structure strategy based on regional business groups. These groups were introduced in order to drive down operating costs and speed up the process of introducing and developing new products/brands. For example, Lever Europe (one of these regional business groups) would consolidate all detergents in Europe, which proved to reduce production costs and speed. With this new structure, new costs of transportation and storage would need to be taken into account. However, this new strategy did identify costs, but also increased uniform branding in packaging and advertising for Unilever. With this change, statistics suggest Unilever saved an estimated $400 million a year from just this change in the European detergent structure.
By 2000,
References: Robinson, W. T., & Min, S. (2002). Is the First to Market the First to Fail? Empirical Evidence for Industrial Goods Businesses. Journal Of Marketing Research (JMR), 39(1), 120-128.