Localization Strategies of Unilever in China *

Abstract:

Inspite of major difficulties, Unilever was committed to building and sustaining a successful business in China. The company therefore adopted several measures like enhanced research and development, modern management systems and large scale organizational restructuring to anticipate and integrate the needs and aspirations of the Chinese customers into its growth plan. In the mid 1980s and 1990s, the large number of joint ventures entered by the company failed to earn profits for the multinational and also proved unsuccessful in integrating Unilever to mainstream Chinese economy. Therefore, in 1999, the company entered into large scale consolidation and integrated its various units under one holding company. Special localized strategies like hiring of local employees, setting up an R&D unit, and planning for stock market listing were initiated to strengthen the company's position in China. Unilever China responded to the complex needs of the country's consumers by developing a portfolio of brands-both local and global, and incorporated traditional Chinese sciences with technological enhancements. The company aimed to identify itself as the brand that was quality conscious and consistently endeavored to meet local needs and tastes. Global brands-Dove, Lux, Ponds, Lipton-promised international expertise in their formulation and development but had local professionals to manage them to ease communication between the company and its customers. Similarly, local brands such as Hazeline and Lao Cai soy sauce benefited from Unilever's extensive knowledge and resources, without losing their local character. Thus, Unilever China endeavored to balance global and local needs by developing solutions that satisfied the demands of its target consumer segment.

Issues: » Understand the approach taken by multinationals to tap new markets » Determine the various issues involved in the setting up of a new company in a foreign market » Appreciate the localization strategies that need to be adopted to counter local issues and problems. » Appreciate the complexity of a growing market like China » Evaluate the growth of a European FMCG major in China » Discuss the strategies that Unilever adopted in China and examine the reasons for its initial failure. » Compare and discuss Unilever's market expansion policies viz-a-viz that adopted by Procter and Gamble

Questions for Discussion:

1. Unilever adopted the joint venture route to enter the Chinese market. Procter and Gamble also adopted a similar strategy, but while P&G was a success, Unilever's joint venture policy failed. Describe in details what went wrong with Unilever's strategy.
2. In your opinion, what are the various issues that multinationals should keep in mind before entering a new market? Do you think it is possible for established players to fail in a foreign market if they continue with a pre-existing strategy without heeding local needs? How can a player ensure maximum synergy between established practices and local market requirements?
3. Discuss the various localization strategies adopted by Unilever to strengthen its position in China? What is your opinion on the effectiveness of these strategies?

Key words:
Case, Unilever Plc., Unilever China, Niall FitzGerald, Alan Brown, Joint Ventures, Unilever (Shanghai) Co. Ltd., Wholly Owned Subsidiaries, Restructuring, Distribution System, P&G, Cultural Mismatch, Expatriates, Localization Strategies, Synergies, Shanghai Stock Exchange

*Note : This case is a simplified version of a longer case study, and is intended for learners for whom English is a foreign language. The longer version of this case study (BSTR131) is available at: http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy2/BSTR131.htm