Organisational Change at Unilever

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Unilever is a very old multinational with worldwide operations in the detergent and food industries. 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. The company had 17 autonomous national operations in Europe alone by the mid – 1980s. In the 190s, Unilever began to transform its worldwide detergents activities from a loose confederation into a tightly managed business with a global strategy. The shift was prompted by 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.

The point was driven home in the 1980s when the company’s archrival, Procter & Gamble repeatedly stole the lead in bringing new products to market. Within Unilever, “persuading” the 17 European operations to adopt new products could take four to five years. In addition, Unilever was handicapped by a high-cost structure from the duplication of manufacturing facilities from country to country and by the company’s inability to enjoy the same kind to scale economies as P & G. Unilever’s high costs ruled out its use of competitive pricing.

To change this situation, Unilever established product divisions to coordinate regional operations. The 17 European companies now report directly to Lever Europe. Implicit in this new approach is a bargain : The 17 companies are relinquishing autonomy in their traditional markets in exchange for opportunities to help develop and execute a unified pan – European strategy.

As consequences of these changes, manufacturing is now being rationalized, with detergent production for the European...
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