International Business Unilever Student information: Rutger Vis 1006834 Leroy Chin-A-Loi IBMS 1F Teacher: Mr. Imeson Summary Unilever is one the World’s oldest multinational corporations with extensive product offerings in food, detergent, and personal care businesses. Unilever was organized on decentralized bases, maintaining subsidiaries in each major national market. Only in Europe it maintained 17 subsidiaries accountable for its performance in the national market. In the 1990’s this strategy lacked behind on its competitors in the rapidly changing competitive environment.
In 1996 it introduced a new structure based on regional business groups, each specifying on a specific category of products. Lever Europe consolidated the production of product ins a few key locations to reduce costs and speed up product introduction. The 17 companies responded directly to Lever Europe and helped building the Pan-European strategy. In 2000 it found itself still lagging behind, hence another reorganization set the aim to cut the number of brands that Unilever sold from 1600 to 400 that could be marketed on regional or global scale.
To support this a new organization was established focusing on 2 global product divisions; a food division and a home personal care division. Within each division consist business groups focusing on business within a given region. Questions: 1. Why did Unilever’s decentralized organizational structure make sense from the 1950’s through the 1970’s? Why did this structure start to create problems for the company in the 1980’s?
Because then there was almost no competition in the markets Unilever was targeting, they mostly maintained the largest market share and there was probably not so much international influence from other multinationals. It began to create problems for the company because influencing other multinationals started to offer global brand products, for cheaper because they maintained lower production costs and executed these in simultaneous product launches in several national markets.. 2. What was Unilever trying to do when it introduced a new structure based on business groups in the mid-1990s?
Why do you think that this structure failed to cure Unilever’s ills? Unilever tried to keep up with the competition and therefore reduce costs by having business groups only focus on specific product categories. This way they drove down operating costs and speeded up the process of introducing and developing new products. I think this didn’t cure Unilever’s ills because doing this it lost autonomy in the regional markets and also still maintained many products instead of the global brands that competitors launched on the markets.
Though it was a wise step to focus production on specific product categories but they still needed to smaller the product range as they did later. 3. In the 2000s Unilever has switched to a structure based on Global product divisions. What do you think is the underlying logic for this shift? Does the structure make sense given the nature of competition in the detergents and food business? By doing this, the company could easily focus on the smaller product range and thus close a number of manufacturing plants, which saves in costs and then maintain a more international focused operation.
By producing the products at one place the company saves a lot, then the business groups (divisions) focus on particular markets in their region of operating. The structure makes sense since other competitive companies are also offering global brand products. The products they are offering are all the same; only the marketing and distribution might differ from region to region. In a market where costs matter a decentralized organizational structure doesn’t work when competitive companies target economies of scale.