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UNILEVER STRATEGIES ASSESSMENT

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Introduction

Unilever is the globe’s second largest company selling consumer processed products. Its current

market capitalization is 119.63 Billion. The company has over 400 brands divided into four

groups, namely, foods, refreshments, personal care and home care. These brands encompass

Axe, Knorr, Lipton, and Heartbrand, reaching 70 percent households worldwide and operating in

more than 190 countries. Unilever was established in 1929 through a merger between Dutch

Margarine Union and British Lever Brothers. It has two headquarters one in Netherlands and

another in the United Kingdom. The company delivers sustainable services and product as parts

of its major mission as an organization. This paper aims to assess the strategic changes between

2010 and 2017.

Need for Strategic Changes at Unilever

Companies undergo changes because of different reasons such as performance gaps, opportunity

identification, reaction to external and internal pressure, mergers and acquisitions, and new

technology thus there things that a company can change to ensure that all its operations are

running smoothly. These encompass mission, vision, and strategy, technology, human-behavioral

changes, task-job design, organizational structure and culture (Barney and Hesterly 2014).

According to the case study, Unilever had shown some performance gaps from 2004-2008,

which prompted the board of directors to appoint a CEO from outside the company. In 2009,

Paul Polman was appointed Unilever’s CEO to help improve the company’s performance.

Polman suggested that the company had excellent elements for success but changes needed to

occur in order to propel the company towards the growth he was envisioning for the company.
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Polman’s had to deliver a strategic plan that helped him establish the foundations against which

Unilever could create, measure, monitor success. First, Polman had to understand the firm and

the industry in order to comprehend the company’s core capabilities, strengths, pinpoint, and

address weaknesses as well as mitigate risks. This allowed him to focus on the right things,

which were most likely to deliver the best performance, profit, and productivity currently as well

as in the future. Polman had to comprehend what was taking outside the company or the external

world in order to grow in a changing. Thus, he helped the company prepare a strategy, which

would guarantee long-term profit and growth. Comprehending changes, which are occurring in

the industry or the market, is critical to the success of the strategy. With change rates becoming

rapid each year, it was increasingly crucial for Polman to comprehend the trends that were going

to impact Unilever and its industry, as well as how the company was going to respond to them.

Companies must understand which changes are going to affect their business whether

technological, social or political. Such comprehension allow the organizations to find prospects

for growth as well as sustained profitability as well as can help pinpoint as well as point to

changes, which could make organization (Bartlett and Beamish 2014).

Lastly, Polman had to create a vision as well as a direction for the entire organization. He

attained this by ensuring that the company including the employees understood their objective,

their destination, as well as the course they were going to take to get there. Offering a company

with a common purpose, objectives, as well as a set of actions to attain the objective permits that

everybody is working towards the same outcome and that resources and time are being allotted

to the same objectives and goals. Polman aimed to streamlined Unilever’s business as well as

ensure each minute and dollar spent on the business was in the direction a sustained success

(Daniels, Radebaugh and Sullivan 2014).

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Specific Strategic Changes Introduced by Polman

Polman’s strategic plan comprised of two goals, namely, closing the gap with competitors who

were performing better than Unilever and secondly make company the market leader in the fast

moving consumer goods industry. For Unilever to achieve, the company needed to undergo some

strategic changes in the personnel, strategy, structure, and culture. This plan involved identifying

the strategy, the right people, aligning the strategy with the organizational structure, as well as

transforming the culture of the company.

Organizational Strategy

Looking at the Polman’s strategy, some key factors emerged that are crucial to the success of any

organizational strategy, namely, clear choices, an aligned system of activities, and

implementation by highly performing company. Unilever strategy is characterized by growth and

innovative products. The implementation of the strategy from 2010 to 2017 focused

performance. Unilever achieves this strategy in fours, namely, winning with innovation and

brands, winning in the market, winning via continuous improvement, and winning with the

people. Unilever wins with innovation and brands through innovating faster in order to respond

to their customers’ needs because they understand that their preferences are constantly changing

and they take different paths when buying (Johnson, Whittington and Scholes 2011). Unilever

understands that science is a key driver of its success and hence the company invests billions in

research and development and the budget has continued to increase since 2010.

Unilever wins with the market by reaching for more customers. In 2011, the company had 2

billion customers using their products and by 2017, the number has growth to over 2.5 billion,

and expects to reach 7.6 billion customers by 2020. This increase is attributed to the company’s
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constant evolvement of their portfolio through their C4G (Connected 4 Growth) approach of

reaching to consumers in all income brackets that includes providing sustainable products to

consumers and focusing on shoppers. Unilever uses various channels to reach to the customers

including e-commerce, hypermarkets, and small retail shops.

From 2010 to 2017, Unilever has been winning with people by leveraging its operation

framework for competitive advantage, having an organized and diverse talent pool that matches

its growth ambition, and a performance culture, which respects the company’s values. The

establishment of C4G helps the company create long-term value though collaboration, more

experimentation through testing and learning, embracing failure to obtain insight and obsessing

with consumers and customers. Over the years that company managed to established Brand

communities and CCBBTS, which transfer innovations from global teams into the markets. They

are also able to rapidly create local innovations.

Unilever also wins with continuous improvement through lean, responsive, and customer-led

products. The company understands that consumers are constantly changing and to meet these

needs, Unilever understands that it must provide high quality goods and excellent services, and

provide them better, rapidly, as well as more efficiently. The company also wins with continuous

improvement through being agile and cost-competitive, which entails making their

organizational operations responsive to demand changes, fast launch of products, optimizing

capital investment, and winning market shares. This is attained through better margins, managing

cash, and partnerships with suppliers (Peng 2014). Lastly, Unilever wins with continuous

improvement by investing in promotions and advertisements in each brand, category, and market

by focusing on the best conceivable returns. Unilever evaluates the effectiveness of its marketing

and adopts cost-effective marketing models that increase its competitiveness in the market. The
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C4G plays a key role in driving competitive growth, margin expansion in order to bring

profitable growth. Though financial discipline, which governs the company’s spending as well as

the company’s zero-budgeting approach, the company has managed to reduce costs while

establishing novel and innovative means of working. For example, in the supply chain, the

company launched a 5s program for cost savings in all categories. In 2017, the smart program

saved €450 million. Its customer development uses virtual reality tools to conducts test before

launching new products, and cost saves, and reduces project time. In marketing, the company

creates its content in-house (Confino 2012). Currently, the company has over seventeen U-

Studios within 12 countries, which facilitates faster content creation by brand teams.

Personnel Restructuring

The success of Paul Polman’s strategy rested on having the right people to implement it. He

needed the right people to help execute the strategy effectively and so he recruited three

employees for the following positions, CFO, Chief Legal Officer, and Chain Supply Officer.

This restructuring has been crucial in the implementation of the strategic changes implemented

since 2010 all through to 2017. The company’s incredible performance and growth over the past

eight years can attest to their crucial contribution to the success of Polman’s strategy.

Additionally, Polman shuffled the management and insisted on the need for them to comprehend

the importance of innovation in the market, robust customer development, and knowledge of

market background (Iwamoto 2011).

Organization Restructuring

The organizational restructuring took place in 2011 where the company moved from a

decentralized organization to a multi-country company. The new structure comprised of 22

regional centers functioning in eleven categories. Moreover, products were grouped into four
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categories, namely personal care, refreshments, homecare, and foods. The market was grouped

into eight geographical clusters. The impact of these changes was improved resource allocation

and faster decision-making. This permitted for rapid transfer of best practices across categories

and regions, which ultimately supported growth. The company also established a marketing and

innovation hub to facilitate fast decision making and share best practices (Leitner 2014).

Programs were initially established in 2010 and 2011 include Project Half, Project Sunset,

Customer Insight and Innovation Centers, International Management Training Center, Unilever

Learning Academy, and Global Leadership Training Center was opened in 2013. Recent

programs include 25 People Data Centers, CCBTs, and Brand communities. These programs and

centers are located in different geographical areas. All these work towards creating growth for

the company while ensuring smooth running of operations through increased collaboration and

fast decision-making. The geographical clusters had a new responsibility of bringing profit and

hence the need for a decentralized structure of decision-making. However, the new changes gave

birth to a company that was category-driven, which brought about centralized decision-making,

which eradicated fragmented product introduction in different nations and increased production

and marketing costs. These are some of the disadvantages associated with decentralized

decision-making (Lingard 2012). Unilever’s personal care category has a global reach and a

centralized decision making system can help reduce fragmented launches while reducing costs.

Culture

Polman’s final strategy could not have been successful without a change in culture. The

company needed to embrace new ways of doing things and to achieve the company’s systems

needed to change in order to transform the behavior of people at each organization level. The

company changed its remuneration and performance target establishment. Restructuring of

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remuneration arrangements included reduction of bonus payout (Murthy 2013). Change in

performance target establishment encouraged such better long-term behaviors as winning

customers back into Unilever’s business model, cost effectiveness through focusing on cash

flow, market share, and cost levels. Other targets included investment in product formulations,

promotion and advertisements, and research and development, which in turn reflected in gains in

market shares. Innovations were changed from small to fewer, bigger, as well as better projects

that were rolled out fast (Trebilcock 2014). These changes led to a centralized company that was

highly efficient with a consumer-focused global chain of supplies (Parnell 2017).

Sustainability

Unilever is demonstrating the business example of sustainability. The company made a firm

commitment to inclusive growth, which bears in mind environmental changes. Its strategy of

inclusive business is implemented through three pillars of sustainable living plan (Lingard,

2012). They include improving wellbeing and health, decreasing environmental impact, as well

as improving livelihoods. The plan is employed to all brands within all marketplaces the

company operates, and drives its whole business strategy, encompassing novel innovation,

sourcing, marketing, and manufacturing (Ignatius, 2015).

One major growth from this plan was the change of operations to reduce Unilever’s carbon

footprint via energy, water, and waste reduction initiatives. The operational changes led to a 20

percent reduction in CO2 emissions since 2008 as well as saved €244M. Furthermore, the

company recognized that fifty percent of customers now want to purchase more sustainably as

well as the company has been financially rewarded for manufacturing these types of products. In

2015, the company had twelve sustainable living brands, which grew 40 percent faster than the

rest delivering virtually half of the growth of Unilever. Unilever’s Sustainable Living Plan is the
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company’s blueprint for attaining its visions (Unilever, 2015). Through spurring innovation,

fortifying its supply chain, reducing costs, lowering risks, as well as building trust, the company

has managed to create value for society and itself (Unilever, 2016).

By 2017, Unilever had proven that its business model is that, which supports long-term,

intensifying growth as well as creation of sustainable growth. Its business activities span an

intricate, international value chain. The company tracks changing consumer sentiments via its 25

Data Centers that are located all over the globe. Using close collaborations between R&D and

marketing, the company uses these insights to inform development of products, leveraging its

annual €900 million R&D expenditure (Unilever, 2017; Ignatius, 2015).

Impact of Polman’s Strategic Changes

Polman’s strategic changes between 2010 and 2017 indicate a tremendous growth in the

company’s performance. In 2010, the company’s turnover was €44, 262 million with a net profit

of €4, 598 million, which was an improvement from the past years. The turnover continued to

increase until 2013 when it dropped from €51, 324 million to €49,797 million. Then it picked in

2014 and 2015 then dropped in 2016. It also increased from €52,713 to €53, 715 million in 2016

and 2017 respectively. The company’s turnover average growth is 1.0 percent. The net profit

continued to increase from 2010 to 2014 only to drop slightly in 2015. The operating profit

continued to increase from 2010 to 2014 and dropped in 2015. The drop might be attributed to

market and economic disruptions. Both the operating profit and the net profit increased 2015 all

the way to 2017. The percentage of total turnover of Asia, AMET, and RUB, the Americas, and

Europe all increased by 1.0 percent from 2010 to 2017 (See figure 1). In the product areas, the

personal care turnover has been increasing and performing better than the other three categories

with refreshments having the least performance (figure 1).

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Based on the above findings, it is evident that the company has been performing consistently and

this has rendered the company to be one of the best performing organizations in its industry with

shareholders return in the last eight years of nearly 300 percent. Its growth is broad-based, which

has provided the company with absolute profitability, which has been assisted by robust delivery

against major savings as well as efficiency programs such as Connected for Growth. This has

helped stay ahead of competitors. The company has also seen an increase in underlying operating

profit (see figure 2), which has seen an increase in delivery of free cash flow.

The company’s turnover increased from 2010-2017 compared to the previous years because of

the implementation of the new strategies established by Paul Polman. For example, the new

organizational strategy has been characterized by clear decisions that aligned with the company’s

operations and implemented in the right way. The company has over the years continued to

provide innovative products and this was part of the overall strategy of the company. Unilever

not only provides innovative products, but goes out of its way to offer goods that meet the needs

of the customers in the most effective manner. For example, in Brazil and some parts of Africa,

the company understands that there is a lack is a shortage of water and thus, its shampoo

products, for example, do not require a lot of water to use. Its sustainable products are also

another reason for the increased turnover.

The implementation of the overall organization strategy required a change in culture and change

in people. Unilever needed to stop doing things the way it used to in the previous years before

the period 2010-2017. That period was characterized by poor performance, low profitability, and

turnover. After the company changed its culture and people, which included a change and

reshuffle in the management, the company’s performance improved between 2010 and 2010. The

management have a crucial role of motivating employees and shifting the company in the right
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direction and Polman understood this very well. The new management knew that they needed to

change their way of doing things and they also needed to deliver otherwise they would get fired.

The company’s increased performance from 2010-2017 compared to the previous years could be

attributed to the ability of management to implement the strategies outlined in the right way.

The increase in turnover from 2010-2017 could also be attributed to the company’s change in

marketing and promotional strategies. Before this period, the company hardly invested in good

marketing strategies, which meant that the company was not reaching the right customers and its

market share was not growing. Currently, the company’s market share stands at 2 billion and this

has been attributed to increased and heavy investments in effective marketing strategies.

Unilever’s marketing strategies aim to reach the right client in order to increase the market share.

Conclusion

Unilever is highly competitive firm and this has been facilitated by the strategies implemented by

Paul Polman in the last eight years. The strategic changes implemented involved in culture,

organizational structure, change in people, organizational strategy, and established a

sustainability plan that has helped it stay ahead of the competition while providing innovative

products that meet customers’ needs. The strategic changes have allowed the company to be one

of the best performing companies in the fast moving consumer goods in the industry.

Recommendations

Unilever needs to anticipate customers’ desire for authentic and natural products and for their

brands, which serve a deeper purpose. The markets will always be challenging and the company

has to find ways to overcome the wide-raging marketplace disruptions. Thus, being able to

overcome these disruptions while providing unique goods will continue to help the company

perform and grow better.

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Unilever must work towards a long-term focus on many stakeholders assisted by a sustainable

business model, which is driven by purpose will be sure to provide future success. Thus, the

company must strive to find new businesses in order to strengthen its portfolio in different ways.

Investing in new businesses can allow the company access to emerging markets.
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References

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Appendix

Figure 1

Figure 2
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