"Vitality is at the heart of everything we do. It's in our brands, our people and our approach to business".(2)
"If the adage 'two heads are better than one' applies to business, then certainly Unilever is a prime example. The food and consumer products giant actually has two parent companies: Unilever PLC, based in the United Kingdom, and Unilever N.V., based in The Netherlands. The two companies, which operate virtually as a single corporation, are run by a single group of directors and are linked by a number of agreements." Unilever is the second largest consumer goods firm in the world, behind Philip Morris Companies Inc, producing numerous brand name foods, cleaning products, and personal care items. About 52 percent of Unilever's revenues are generated in the foods sector; brands included are Imperial and Promise margarines, Lipton tea, Lawry's seasonings, Birds Eye and Gorton's frozen foods. One-fourth of sales come from the personal care area which have big brands such as Caress and Dove soap, Pears and Pond's skin care products, Suave and Salon Selective hair care items, Close-Up, Mentadent, and Pepsodent oral care products, and Calvin Klein, and Elizabeth Arden as well as miscellaneous brands as Q-Tips and Vaseline. Unilever's third major sector is that of cleaning products, which is responsible for about 22 percent of the total sales it has brands included are Wisk and All laundry detergents, Snuggle and Final Touch fabric softeners, and Sunlight dish detergents, and this area also includes the company's line of institutional cleaning products. Unilever maintains production facilities in 88 countries and sells its products in an additional 70. About 47 percent of revenues originate in Europe, 21 percent in North America, 14 percent in the Asia-Pacific region, 12 percent in Latin America, and six percent in Africa and the Middle East.(1)
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160 million times a day someone in someplace uses a Unilever product, it is either for one to serve his family or for keeping the house clean. Unilever products are everyday products. Unilever has been constantly pumping in money, investing close to £1 billion every year in research and development, and have around five laboratories around the world coming up with new ideas and innovations to develop their products. Unilever has a total staff of close to 174000 people in around 100 countries and is supporting the jobs of the many distributors, contractors and suppliers.(2)
Unilever's purpose is to meet the everyday needs of people everywhere and to anticipate the aspirations and expectations of all their customers and consumers by responding creatively and competitively with branded products and services that would raise the value of life.
They believe that their deep roots in local cultures and markets around the world are unparalleled inheritance and the foundation for their future growth. They believe in bringing the wealth of knowledge and international expertise to the service of all the customers hence calling itself a true multi-local multinational.
Unilever's belief is in order to succeed one requires high standard of corporate behavior towards its employers, customers, the society and the world we live in.
This is Unilever's road to success and sustainable, profitable growth for their business and long-term value creation for its shareholders and employees. They thus have created a lot of goodwill and a Big Brand Image.(3)
The story behind the brands has been presented also. Dove and Sunsilk, Omo and Surf, Rama and Flora were great consumer products, but they became worldwide brands because of the capabilities of Unilever. Their success rested on the choices made on strategy and organization, on the recruitment and development of managers, on the allocation of spending between capital investment, acquisitions, and innovation, and on the negotiation of safe paths through the complexities of official regulations and government.
Unilever possessed, first, strong capabilities in branding and marketing. It understood local markets, and it knew how to market to them. It was at the frontier of market segmentation strategies in packaged consumer products. It opened up new product categories in deodorants and household cleaners. Unilever's brands were not strong enough to prevent the growth of private labels in Europe, but they were sufficient to maintain Unilever's strong position in higher margin products. It was able to leverage knowledge of brands and products between countries throughout the world, matching them to income levels and changing aspirations.
Always on Time
Marked to Standard
Secondly, Unilever developed strengths in the acquisition of other firms, and their subsequent "Unileverization." After the failed merger attempts of the late 1960s, Unilever professionalized its capabilities in this respect. It was conservative, missing opportunities as a result, but also avoiding disasters. The ice cream and other foods businesses were built patiently by the acquisition of one local firm after another, and their melding into the Unilever model. Following the National Starch acquisition, larger targets were pursued. The acquisition of Brooke Bond demonstrated that Unilever could make a hostile acquisition, while the acquisition of Chesebrough-Pond's two years later showed that Unilever could move quickly and decisively if it wished. Effective procedures were put in place to absorb acquired firms, which were flexible enough to take into account individual circumstances. From the 1980s Unilever also honed skills in divesting businesses. Unilever's ability to identify acquisition targets, and to absorb the capabilities of acquired companies, became one of its principal competitive advantages.
Unilever's research base was a third strength and source of coherence. The research laboratories in Britain, the Netherlands, the United States, and India were major sources of innovation. From gum health toothpaste to household cleaners, and from insect pollination of oil palms cloning to pregnancy tests, Unilever researchers were responsible for major innovations. The science base was high quality and deep. Research on animal feeds could lead over time into a successful pregnancy test. Unilever's knowledge about edible fats and detergents was second to none in the world. This research base not only provided the foundation for the development of new products, but was also indispensable for the constant upgrading and renewal of brands. Unilever's main problem was the time it took to turn scientific knowledge into successful branded products.
Finally, and most important, Unilever had distinctive strengths in management. Unilever invested heavily in its management. It recruited some of the best available graduates in each generation, not only from its home economies, but in many other countries also. Its early "localization" policies opened up the most senior positions within operating companies to nationals, enabling Unilever to tap high-quality staff all over the world. Unilever managers were given extensive training, and their career development was watched over carefully. A strong corporate culture, which coexisted with numerous subcultures, helped turn Unilever's management into the central binding force of the company, preventing it from becoming a "conglomerate" even at its most diversified. There were few "weird" people in the higher ranks of Unilever, yet compared to most companies, Unilever was distinguished worldwide by competent and professional management.
The challenge was to translate these strengths into a competitive performance that matched its peers, and delivered appropriate levels of return to shareholders. Unilever's historical legacy provided organizational and cultural constraints on the options available. It entered the 1960s with an organization that was so decentralized as to be fragmented. The British and Dutch components coexisted only loosely with one another. There was limited central direction, resulting in an excessive number of brands and factories organized nationally in a Europe undergoing economic integration, and a virtually autonomous business in the United States. There were barriers to flows of knowledge, especially across the Atlantic, but even between European countries. Unilever managers determined to see the differences between markets, when competitors saw the similarities. It was regarded as legitimate for all components of Unilever to pursue diversification opportunities with limited consideration for overall corporate priorities or capabilities. Research projects were pursued with little dialogue with the marketing function. Although Unilever had a strongly networked senior management, the tradition of decentralized authority created in some respects one of the world's least cohesive large businesses, and one in which establishing priorities in the allocation of resources was difficult.
In March 2001, residents of Kodaikanal uncovered a dumpsite with toxic mercury-laced waste from a thermometer factory run by Unilever's Indian subsidiary, Hindustan Lever. The 7.4 ton stockpile of crushed mercury-laden glass was found in torn sacks, spilling onto the ground in a busy scrap yard located near a school. Despite the visible evidence, Subramaniam, Hindustan Lever's export marketing manager, dismissed charges of indiscriminate dumping. "No hazardous wastes have left the factory site," he said.
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The exposure, which spurred 400 area residents as well as members of Greenpeace India to protest at the factory gates, marked the beginning of an ongoing saga of dishonesty and botched cover-up efforts by Unilever.
"It's been a learning experience that a reputed multinational could behave this way," says Minoo Awari, a Kodaikanal resident. "As a host community we feel cheated."
Mercury, which Unilever is accused of handling without taking environmental or worker safety precautions, is a toxic metal that converts to deadlier forms such as methyl mercury when released into the environment. Mercury accumulates in the liver, kidneys, brain and blood and can cause birth defects and serious disorders of the nervous system and kidneys.
Responding to public pressure and the weight of the evidence, the company announced the closure of the factory on June 21, 2001. But residents, workers and environmental groups like Greenpeace say that Unilever still has a lot of work to do. Health care and financial compensation for workers, environmental clean-up, and an apology to the community are key among their demands to Unilever.
Unilever maintains that their operations have damaged neither the environment outside the factory, nor their workers' health.
The Unilever factory, which is said to be the largest thermometer plant in the world, is located on a ridge whose slopes form the highly biodiverse Sholas forest ecosystem. The Sholas also form part of a watershed that drains into the Pambar river.
Last year, Unilever sold between 7.4 tons and 15 tons of broken thermometers containing mercury to a local scrap yard dealer.
In June, 2001, Unilever was made to clean up the toxic wastes at the scrap yard under supervision of the community and the authorities under a protocol designed to US standards. A company statement dated June 21 stated that: "Hindustan Lever Limited has retrieved, for secure storage at the site, the 5.3 tons of mercury containing glass scrap currently stored on a scrap dealers premises in Kodaikanal, which had been inadvertently removed from the factory in breach of established procedures."
In January 2001, an investigation team discovered yet another dump where Unilever had discarded mercury-containing waste. This dump was in the part of the Shola forests within the company's property. An environmental audit commissioned by the company in response to the controversy found that the "estimated offsite discharge to the Pambar Shola forests is approximately 300 kg." Additionally, the consultants also say that 70 kg were released through airborne emissions.
Immediately after the controversy became public in March 2001, Unilever also had its workers unearth more than 40 tons of waste from unlined pits within the factory compound.
Workers engaged in the unearthing operation say that contrary to Unilever's claims that only "non-mercury glass wastes had been buried," the waste unearthed had visible quantities of mercury. If this is true, the fact that none of the workers engaged in unearthing the wastes wore any protective clothing constitutes a serious violation of worker safety norms. Unilever claims that its environmental and worker safety standards are applied uniformly in all their facilities worldwide.
However, current and former factory workers say that Unilever's casual attitude towards the toxic mercury extended to worker safety at the shop floor.
"When I worked there, they used to suck up the mercury from the floor using a vacuum cleaner once a day. In another section, where they heat thermometers in an oven, workers are exposed to gusts of mercury vapor every time the oven door is opened," says Mahendra Babu, an ex-worker who has been active in organizing the workers against the company's lax occupational safety practices.
"Most of those working there [at Unilever] get affected, mainly in the kidneys. I advise all of them that the only cure is to quit their jobs, and many do. Others suffer stomach pains, burning sensation while passing urine," said a local doctor who spoke on condition of anonymity. Mercury exposure is known to cause kidney disorders. According to the doctor, the symptoms reported - stomach pains and urinary problems - can indicate kidney problems.
Responding to claims that mercury exposure in the workplace may have damaged workers' health, the company conducted a medical check-up in March 2001. "No workers in the factory is (sic) suffering from any illness which could be attributed to mercury exposure," according to the company. Based on the findings of that study, the company says that "no further tests are warranted since we believe that all necessary tests have been carried out as per the protocol."
However, a preliminary health survey conducted in July by two occupational and community health specialists from Bangalore-based Community Health Cell tells a different story.
In their survey of 30 workers and ex-workers, the specialists found many people with "gum and skin allergy related problems which appeared to be due to exposure to mercury." Another significant finding, the survey reports, is the high rate of absenteeism and resignations from the job due to health problems. "The preliminary assessment... indicates that there is a need to assess all the exposed workers in greater detail for health effects of mercury," the experts conclude.
Supply Chain Management
Supply Chain Management in India
How do you ensure that Mr. Ramesh in Kanyakumari gets his Lifebuoy soap and Mrs. Kulkarni in Jammu gets to know how Bru coffee tastes even before she has bought it? Well, you need to have a cutting edge distribution network in place.
Hindustan Unilever's distribution network is recognised as one of its key strengths. Its focus is not only to enable easy access to our brands, but also to touch consumers with a three-way convergence - of product availability, brand communication, and higher levels of brand experience.
HUL's products, manufactured across the country, are distributed through a network of about 7,000 redistribution stockists covering about one million retail outlets. The distribution network directly covers the entire urban population.
The general trade comprises grocery stores, chemists, wholesale, kiosks and general stores. Hindustan Unilever services each with a tailor-made mix of services. The emphasis is equally on using stores for direct contact with consumers, as much as is possible through in-store facilitators.
At the supermarkets: Self-service stores and supermarkets are fast emerging in metros and large towns. To service modern retailing outlets in the metros, HUL has set up a full-scale sales organisation, exclusively for this channel. The business system delivers excellent customer service, while driving growth for the company and the store. At the same time, innovative marketing initiatives are taken to provide consumers with experience of our brands at the store itself, through product tests and in-store sampling.
In the villages: HUL has also revamped its sales organisation in the rural markets to fully meet the emerging needs and increased purchasing power of the rural population. The company has brought all markets with populations of below 50,000 under one rural sales organisation. The team comprises an exclusive sales force and exclusive redistribution stockists, under the charge of dedicated managers. The team focuses on building superior availability, while enabling brand building in the deepest interiors. HUL's distribution network in rural India already directly covers about 50,000 villages, reaching about 250 million consumers, through about 6000 sub-stockists.
Harnessing Information Technology: An IT-powered system has been implemented to supply stocks to redistribution stockists on a continuous replenishment basis. The objective is to catalyse HUL's growth by ensuring that the right product is available at the right place in right quantities, in the most cost-effective manner. For this, stockists have been connected with the company through an Internet-based network, called RSNet, for online interaction on orders, despatches, information sharing and monitoring. RS Net covers about 80% of the company's turnover. Today, the sales system gets to know every day what HUL stockists have sold to almost a million outlets across the country. RS Net is part of Project Leap, HUL's end-to-end supply chain, which also includes a back-end system connecting suppliers, all company sites and stretching right upto stockists.
Hindustan Unilever, which once pioneered distribution in India, is today reinventing distribution - creating new channels, and redefining the way current channels are serviced. In the process it is converging product availability, with brand communication and brand experience.
In the end it could be said that HUL's SCM is one of the best in the world and it is quite difficult for any company to challenge it. In India if we see, we will find that LUX is available everywhere and it is through this SCM only that HUL is able to do that.