Unilever

1
Unilever

• Home and Personal Care Division

2
Market Overview

• Market includes
• Liquid powder detergents
• Shampoos, body washes, personal care items
• Perfumes
• Cosmetics

3
Market Trends

• During 1990s tight competition in established
  markets
• Economic slowdown in global market
• Strong competition to develop new products
• Need to control costs and price

4
Market Trends

• Acquisitions or joint ventures to solidify global
  position
• Strong need to be able to satisfy changing
  consumer preferences
• Laundry detergents form the largest component
  50

5
Products Unilever manages over 400 leading
brands and just under 250 tail brands. These
range from food to home and personal care.
6
Food Products

• Ben Jerrys
• Breyers
• Country Crock
• Hellmanns
• Ragu
• Slim Fast
• Lipton
• Others

7
Home and Personal Care

• Dove
• Caress
• Ponds
• Snuggle
• Wisk
• All
• Others

8
Technological Scope

• Global integration of SAP software
• Standardized corporate computer services
  includes intranet
• Standardized corporate e-mail
• Warehouse management systems using bar code
  technology

9
Markets and Distribution

• Unilever Divided into 2 Major Divisions
• Foods
• Home and Personal Care
• Improved Focus Globally and Regionally
• Faster Decision Making
• Strengthened Innovation Capacity

10
Markets and Distribution

• Home and Personal Care Divisions
• North America
• Europe
• Asia
• North Africa
• Turkey
• Middle East
• Latin America

11
Manufacturing and/or Processing

• Operations has 2 divisions
• Foods
• Home Personal Care
• Employs 265,000 people
• Has 2 parent companies
• Unilever NV
• Unilever PLC
• Corporate Centers
• London
• Rotterdam

12
Manufacturing and/or Processing (cont)

• One of largest users of packaging among consumer
  goods companies
• Works with others to ensure public concerns are
  understood
• Provides the best solutions possible
• Trends in manufacturing
• Fewer production centers
• More efficient production centers

13
Manufacturing and/or Processing (cont)

• Pilot project to improve logistics of incoming
  raw materials to manufacturing locations
• Carried out in Warrington, UK
• Combine/optimize loads
• Seek more direct deliveries
• Some plants are making own bottles for liquid
  detergent
• Reduced number of deliveries
• Saving around 1,000 trips a month

14
Manufacturing and/or Processing (cont)

• Uses many forms of transport
• Railroad
• Ships
• Trucking
• Have minimized the environmental effects of
  transport
• Ensuring vehicles are used efficiently
• Shifting goods from road, to rail and water

15
Industry Attractiveness Business Strengths

• Nature of Competitive Rivalry
• Unilever and PG globally highly competitive
• Sales driven by marketing
• Bargaining Power of Suppliers/Customers
• Carry clout with suppliers due to large
  consumption of supplier goods
• Customer available shelf space
• Threat of Substitute Products
• Low consumer differentiation
• New Entrants
• Large capital barrier to new entrants

16
Industry Attractiveness Business Strengths

• Economic Factors
• Large Market
• U.S. Market spends discretionary income on
  personal care products
• Financial Norms
• Personal care products carry higher profit margin
• Customers tend to pay late
• Socio Political
• Environmental concerns recyclable packaging
• Community programs such as Forest Park Clean-Up

17
Industry Attractiveness Business Strengths

• Cost Position
• Economies of scale due to large consumption of
  raw materials
• Supply chain teams to control costs
• Level of Differentiation
• Recognition for key brands Dove, Snuggle
• Extremely effective in defending product patents
• Response Time
• In U.S. due to competition has had to improve
  flexibility
• Continuing to combine business functions

18
Industry Attractiveness Business Strengths

• Financial Strength
• Strong cash reserves
• Striving to improve growth of revenues
• Human Assets
• Promotes high level of training and empowerment
• Manufacturing becoming more non-union
• Public Approval
• Low recognition in U.S.
• Highly recognized oversees especially in third
  world countries

19
Mission Statement

• At Unilever we are dedicated to meeting the
  everyday needs of people everywhere. We provide
  washing powder, shampoo and toothpaste, teas, ice
  cream, oils and spreads for consumers all over
  the world.

20
Corporate Philosophy

• Unilever's Corporate Purpose states that "to
  succeed requires the highest standards of
  corporate behavior towards our employees,
  consumers and the societies and world in which we
  live. This is our road to sustainable, profitable
  growth for our business and long-term value
  creation for our shareholders and employees."

21
SWOT Analysis

• Strengths
• Finance
• 1) Strong Cash Reserves
• 2) Global Purchasing
• 3) International Exchange Rate

22
SWOT Analysis

• Strengths
• Marketing
• Extensive product lines make Unilever a
  formidable competitor
• Strong image for well-known brand products
• Use of creative advertising and promotions on
  website and commercials

23
SWOT Analysis

• Strengths
• Operations
• Two Major Divisions Foods and Home Personal
  Care
• 1 in many consumer product categories
• Well developed supply chain

24
SWOT Analysis

• Strengths
• Human Resources
• High level of training in place for employees
• Employ approximately 265,000 people
• Enterprise culture developing employee to be
  more customer friendly

25
SWOT Analysis

• Strengths
• Information Systems
• Corporate intranet and e-mail
• All laptops and desktop machines organized the
  same (Sunrise hardware program)
• SAP software used globally
• Total Business Productivity each category has
  website example Accounting

26
SWOT Analysis

• Weaknesses
• Finance
• Since it is an overseas stock not included in
  US market analysis
• Business acquisitions affect overall profit
• Marketing
• Lack of innovation in several categories has
  caused slippage in market share
• Reduced marketing expenditures in television
  commercials

27
SWOT Analysis

• Weaknesses
• Operations
• Innovation time cycles continues to need
  improvement
• Consolidation of facilities is causing production
  turmoil

28
SWOT Analysis

• Weaknesses
• Human Resources
• Expensive labor due to high benefit package
• Union contracts limit flexibility
• Information System
• Global help desk India Ireland
• Deferred updating due to leased hardware
• Insufficient software package training

29
SWOT Analysis

• Opportunities
• Demographics
• Products appeal to wide range of population
• Product loyalty through generations
• Technology
• Automated manufacturing facilities
• Already using product innovation needed for front
  loading washing machines

30
SWOT Analysis

• Opportunities
• Economy
• Goods are durable in any economic environment
• Use of international exchange rate
• Global
• Largest consumer manufacturer
• Integration of international employees bring
  broad cultural and business experience in all
  processes

31
SWOT Analysis

• Opportunities
• Environment
• Maximize recycled packing materials
• Processes environmentally friendly
• Products are biodegradable

32
SWOT Analysis

• Threats
• Demographics
• Low product differentiation tends to make
  consumers reluctant to change products
• Consumer purchasing base on cost
• Technology
• Competitors manufacturing technology innovations
• Reduction in innovations due to patent
  constraints

33
SWOT Analysis

• Threats
• Economic
• Internal turmoil in third world countries
• Ventures in developing countries are jointly
  owned
• Global
• Internal business in country may be given
  preference
• Knockoffs

34
SWOT Analysis

• Threats
• Environment
• Increased regulations
• Pressure to reduce utility consumption

35
Strategic Plan Increase profitability from 6
to 12 in next 4 year
36
Assumptions

• Prime Rate is 4
• Available Market Growth is ongoing at
• 1 2 per year
• Assume our vendors will accept late payments
• Assume our customers will pay net 30
• Existing computer hardware will be able to
  support new computer software
• Outsourcing of production has acceptable sources

37
Strategic Plan

• Action Plan 1
• Reduce costs in production of laundry detergents
  by 3 5 over next 4 years
• Action Plan 2
• Strengthen market share in personal care products
  by increasing market share by 10 points

38
Action Plan 1

• Information Systems
• Upgrade information systems to achieve improve
  forecast of sales
• Improvement in forecasting should result in a
  change from 10 week product coverage to 9 week
  product coverage
• Improve scheduling
• Improvement in raw material inventory
• Reduces storage time 10 15
• These improvements would reduce storage time 10
  15
• Storage equates to 1 to 2/sq ft
• Results in a 10 savings

39
Action Plan 1

• Finance
• Change payment on Accounts Payable from normal 30
  day cycle to 45 day cycle
• This allows capital to remain invested for a
  longer period
• Example - 1M invested at prime (4) results in
  1643 additional revenue in the extra 15 days

40
Action Plan 1

• Marketing
• Reduce marketing on cash cow brands such as
  Rinso, All, Final Touch and others
• These brands can effectively be marketed in Club
  Pack stores examples Cosco, Dollar General,
  Sams
• Allows for reallocation of cash cow brand
  marketing budget to key brands only should result
  in an additional 8 M available

41
Action Plan 1

• Marketing Anticipated 2004 advertising cost
  increases

42
Action Plan 1

• Production
• Initiate process changes to increase utilization
  of assets and reduces fixed costs
• Increase automation to reduce manual labor on
  production lines reduction in staffing from 5
  per line to 3 per line
• Average hourly pay 15/hr plus benefits
• Costs savings of 62,400/per worker
• Outsourcing of production to reduce 2 production
  lines per facility

43
Action Plan 1

• Production
• Increase quality control to reduce over pack
  example
• On a 50 oz package reduce your over pack from 2
  to 1
• Assuming cost of 5/lb
• Resulting savings of 3.4 Billion/year

44
Action Plan 1

• Research Development
• Reduce cost by alternative formulation
• Reduce builder in powder detergents by 2
• Cost savings reduce raw material cost from
  0.15/lb to 0.09/lb
• Total cost savings - 29 M/year
• Human Resources
• Provide additional staff and line worker training
  
• Training with help lines run more efficiently

45
Pros and Cons

• Gives cost reduction desired
• By increasing efficiency makes business more
  competitive
• Focuses marketing on key brands
• Sets corporate culture for future growth in this
  area

46
Pros and Cons

• Disruptive to business
• Contracts for raw materials need to be
  renegotiated
• RD diverted from innovation to cost savings
  emphasis
• Negative reaction from laid-off workers

47
Cost of Reversibility

• Many of these changes would not have a cost of
  reversibility associated with them
• If the outsourcing of production needed to be
  reversed loss of workers and the need to divert
  capital back into production facilities would be
  costly

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Summary

• In order to meet the strategic goal both action
  plans must be implemented
• Personal care products have the higher profit
  margin
• Upcoming changes in laundry detergent market
  necessitate reduction in production costs to
  maintain current profit margin