Restructuring Unilever: The 'Path To Growth' Strategy
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Case Details:
Case Code : BSTR095
Case Length : 17 Pages
Period : 2000 - 2003
Organization : Unilever
Pub Date : 2004
Teaching Note :Not Available
Countries : Europe
Industry : FMCG
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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EXCERPTS
What 'PGS' is all About
To achieve the objectives of the PGS, Unilever decided to concentrate on the following areas - modify the existing organizational structure, focus on leading brands, support these leading brands with strong innovation and focused marketing strategies; rationalize the supply chain; simplify business processes; and restructure or weed-out under-performing businesses and brands (See Exhibit III for the key drivers of value creation in the PGS).
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Unilever expected the PGS to result in annual cost savings of €1.5 billion by 2004. An additional €1.6 billion in savings was to come from global procurement by the end of 2002.
Apart from this, the PGS was to involve laying off over 25,000 employees (approximately 10% of the employee base) by 2004, on account of divestments or site closures, and restructuring and simplification of processes.
The company announced that though the restructuring would be worldwide, it would mainly focus on the US and Europe...
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Results of PGS (Till 2003)
In 2000, the company witnessed a dramatic increase in its turnover with sales increasing by 16% to €47.6 billion. This was mainly attributed to the acquisition of the Bestfoods, Slim-fast, Ben & Jerry's and Amora Maille businesses.
Since the announcement of the PGS, Unilever's share price had recovered by
30% to $59 in August 2001, and this seemed to highlight the positive results
of its restructuring exercise.
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By July 2002, Unilever's 400 leading brands accounted for 88% of the sales, up from 75% in 1999.
By then, over 30,000 employees had been laid-off. Commenting on the positive results of the PGS in mid-2002, FitzGerald said, "We have now reached the mid-point in the PGS and we continue to be confident about delivering our program.
Brand focus continues apace with 88% of our turnover now attributable to leading brands. These brands are showing great resilience in a tough economic environment and will drive accelerating top line growth..." |
Excerpts Contd... >>
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