Unilever Restructures its Supply Management Practices

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Case Details:

Case Code : OPER027
Case Length : 15 Pages
Period : 2001 - 2003
Organization : Unilever
Pub Date : 2004
Teaching Note :Not Available
Countries : USA

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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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Background Note

Unilever (called the Unilever Group) functioned as the operational arm of Unilever NV (Netherlands), and Unilever Plc., (UK), its two parent companies. Though these companies (Unilever NV and Unilever Plc), operated as separate legal entities (with separate stock exchange listings), they operated as a single business, with a single set of financials and a common board of directors.

Unilever was formed in 1930 as a result of the merger of a Dutch margarine company, Margarine Unie, and a British soap company, Lever Brothers. Margarine Unie had been formed by merging many margarine companies during the 1920s and was a leading global player in the business.

Operations Management Case Studies | Case Study in Management, Operations, Strategies, Marketing Management, Case Studies

Lever Brothers was a name worth reckoning with in the worldwide soap market and had factories all over the world. It had diversified into many other businesses (primarily related to foods). At the time of the merger, the two companies, together, had operations in over 40 countries.

During the 1960s and 1970s, Unilever rapidly expanded its operations through vertical and horizontal integration, emerging as a diversified conglomerate by the early 1980s. Diversification into different businesses was prompted in one way or the other by the existing business lines.

For instance, oil seeds crushed for use in the margarine and soap businesses yielded a by-product called 'cattle cake,' which led the company into the animal feeds business. Likewise, by-products such as glycerine and fatty acids, formed from processing oil for use in margarine and soap production, prompted the entry in the chemicals business.

The company operated twenty-four packaging plants (for its consumer products) in six European countries, from where goods were distributed worldwide. This activity made it one of the largest truckers in Britain and one of the largest shipping company owners in the world.

In the 1980s, Unilever decided to have a more focused approach towards business, which it referred to as the 'core strategy.' As part of this, the company decided to focus on the following four industries - Foods, Personal Care, Home Care and Specialty Chemicals.

The decision to focus on these industries involved acquisition and divestiture of brands and companies as well. In 1984, Unilever acquired Brooke Bond, a leading tea brand, to strengthen its presence in Europe's tea market. In 1985, the company sold Palm Line, its shipping company and in 1987, it acquired Chesebrough-Pond's Inc. to establish itself strongly in the US personal products market and to strengthen its position in the world skin care market...

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