ORGANIZATIONAL CHANGE AT UNILEVER

kind of scale economies as P&G. Unilever's high

Unilever is a very old multinational with costs ruled out its use of competitive pricing.
worldwide operations in the detergent and food
industries. For decades, Unilever managed its To change this situation, Unilever
worldwide detergents activities in an arm's-length established product divisions to coordinate
manner. A subsidiary was set up in each major regional operations. The 17 European companies
national market and allowed to operate largely now report directly to Lever Europe. Implicit
autonomously, with each subsidiary carrying out in this new approach is a bargain: The 17
the full range of value creation activities, companies are relinquishing autonomy in their
including manufacturing, marketing, and R&D. traditional markets in exchange for opportunities to
The company had 17 autonomous national help develop and execute a unified pan-European
operations in Europe alone by the mid-1980s. strategy. As a consequence of these changes,
manufacturing is now being rationalized, with
In the 1990s, Unilever began to trans- detergent production for the European market
form its worldwide detergents activities from a concentrated in a few key locations. The number
loose confederation into a tightly managed of European plants manufacturing soap has been
business with a global strategy. The shift was cut from 10 to 2, and some new products will be
prompted by Unilever's realization that its manufactured at only one site. Product sizing and
traditional way of doing business was no longer packaging are being harmonized to cut purchasing
effective in an arena where it had become costs and to pave the way for unified pan-
essential to realize substantial cost economies, European"advertising. By taking these steps,
to innovate, and to respond quickly to changing Unilever estimates it may save as much as $400
market trends. million a year in its European operations.

The point was driven home in the 1980s Lever Europe is attempting to speed its
when the company's archrival, Procter & Gamble, development of new products and to synchronize
repeatedly stole the lead in bringing new the launch of new products throughout Europe. Its
products to market. Within Unilever, efforts seem to be paying off: A dishwasher
"persuading" the 17 European operations to detergent introduced in Germany in the early 1990s
adopt new products could take four to five years. was available across Europe a year later—a distinct
In addition, Unilever was handicapped by a high- improvement.
cost structure from the duplication of
manufacturing facilities from country to country But history still imposes constraints. Procter &
and by the company's inability to enjoy the same Gamble's leading laundry detergent carries the
same brand name across Europe, but Unilever
sells its product under a variety of names. The
company has no plans to change this. Having
spent 100 years building these brand names, it
believes it would be foolish to scrap them in the
interest of pan-European standardization.
http://www.unilever.com

Sources: Guy de Jonguiercs, "Unilever Adopts a

Clean Sheet Approach," Financial Times, October
21,1991, p. 13; and C. A. Bartlett and S. Ghoshal,
Managing across Borders (Boston: Harvard
Business School Press, 1989).