P&G and Unilever Organizational

StructureLessons to Learn Presented byGROUP 7 SECTION-BHimanshu Dhamija UM15081Saif Hasan Rizvi UM15105Rahul Kumar Jena UM15101Sibasis Mohapatra UM15111Varanasi Arjun UM15121Yasasvi Santosh UM15123

Procter and Gamble

Introduction – Proctor & Gamble

1837 $83.06bn 180 300RevenueEstd. No. of countries

-Global Presence

No. of BrandsOrganizational Structure over the

yearsThen Now

Proposed by Jager, then CEO of P&G

Followed a Geographic Divisional Structure

To increase production , innovation & technology support

To decentralize power referring decision making to lower level managersTo encourage learning and sharing from each other yielding innovation, brainstorming & empowerment

GBU’s grouped into 4 Industry Based Sectors – Industry-wise and geographic focus

Streamlining the resources by concentrating on few brands

Focus on common consumer benefits, share common technologies, and face common competitors P&G’s initial thought of Transactional Change cascading to more Holistic Transformational Change.

Results Forced Adaption

Decline in Profit Results Wide Focus Increased

revenue

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

• Robust innovation capabilities• Global outreach to 180

countries• Brand value worth 24 bn $• Organizational structure

promoted Speed , flexibility & agility• Very strong marketing channel• Invests close to 500 mn$ for Understanding consumer behavior

• Declining expenditure in Innovation

• Big product breakthrough fell by 6%

• 14% decline in operating Income Between 2011-2013• 3 major organizational

restructuring in 8 years• Low degree of Employee

empowerment • Net earning from core products

fell by 6%

• CAGR of 23% in 4 years from emerging markets

• Profensive strategic approach• Use of own website to sell

products• Ensure more employee

empowerment • Greater rural penetration in

emerging• markets• Products to cater to regional

tastes

• Lack of product line in the economy end as compared to competitors like HUL weakens its positioning in emerging markets

• Falling market share form 11.75 to 11.25 % in three years

• Presence of cheap substitutes• Lack of cross functional linkages

between GBUs & shared services leading to lesser innovation

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Major Strategic Initiatives

• P&G launches direct sell website

•P&G cuts down digital roster

• Improving productivity

•P&G invests 2 bn $ in R&D in 2015

• Includes sustainability into its areas of core strength

•Restructures Marketing Organisation as “Brand Management”

•3 major organisational restructuring

•P&G to sell of 43 brands worth 12.5bn$

•P&G cuts down the number of agencies it works for by 40%

•Focus on billion dollar brandsTo cut costs

79/80 brands contribute 90%

salesNet income fell by 41.67% in FY 2015

Single point responsibility for

strategies, plans & results of brands

To simplify structure To increase employee

empowerment

To cut down costs of using marketing

channels

Speed , flexibility & agility are the three prime requirements

to sustain in the FMCG businessTo gain the lost market share by introduction of

innovative products

Emerging Economies

•Product differentiation•Price positioning in economy range•Taping rural market of emerging economies

Distribution Channel

•Parapharmacies/drugstores in markets like Brazil & China•Direct Internet retailing

Inclusive Innovation

•Consumer price at starting point of innovation

Economy brands

8 premium brand segments have shown constant decline in margins

PROBABLE STRATEGIES

Strategic Approach

⊸ Type of strategy: Normative Re-educative⊸ Two way communication - regular feedback & a conducive climate⊸ Greater degree of customization/localisation (in terms of schemes / products)

⊸ Type of typology: Prospective Typology⊸ Aggressive Planning and implementation so as to get first mover advantage⊸ Greater empowerment to the lower level executives so as to make them accountable

⊸ Type of approach:Adhocratic⊸ Lean and mean – so as to reduce costs and concentrate the resources on best selling

brands⊸ Focus on innovation and improvement ⊸ Type of Control: Implementation⊸ Implementation-adding small elements of innovation into everyday P&G processes in order

to enact cultural change.

Proactive Defensive Profensive

Unilever

Introduction- Unilever

1929 Euro 53.3bn 26 >400RevenueEstd. No.1 FMCG

brand country wise

No. of Brands

Organizational Structure over the yearsThen Now

Jointly owned by two parent companies; Unilever N.V. and Unilever PLCComprehensive restructuring of operations and businessesFocus on fewer, stronger brands to promote faster growth. Acquisitions playing a big role.Profit Increased by 16%, Share price recovered by 30%Its Leading brands now accounted for 88%, up from 75%.

Focus on big products, reduce stock keeping units (SKUs), improve working capital management, cut headcount.

Each level within the hierarchy serves a different function allowing the other levels of the organisation to concentrate on their core roles

Acquisitions will continue to play a big role

Resilience in challenging economic conditions

Results Forced Adoption

Decline in Profit Results Organisation

flexibilityCross sectional representation

NV Share Holders PLC Share Holders

DIRECTORS

NV PLCEqualisation & other agreements

NV owned companies PLC owned companiesJointly owned companies

LEGAL STRUCTURE Strategic Groups

Home & Personal Care

Food & Beverages

Innovation & Sustainability

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

• Strong Parentage and hence Strong Brand Equity

• Strong Brand Portfolio• Unmatched Distribution

Network• Excellent Research and

Development

• Losing Market Share in most categories due to competitors strong Brands

• High Advertising Costs• Declining Export Level• Mimic Brands

• Large Domestic Market• Large Untapped Market

available• Changing Lifestyle and

Rising Income Levels• Export Potential-

expansionist Policies• Opportunity in Food

Sector

• Increasing cost of Raw Material

• Intense and increasing competition from local as well as MNC Players

• Competition from unbranded Products

• Competition from its own brands

Profitable volume

Growth & Scalability

Cost Leverage

+Efficiency

Innovation & Marketing

Investment

Path to Growth

Building Brand Equity in both rural

& urban markets

Strategies Followed

Current Issues with HUL• Hindustan Unilever's aggressive advertising and discounts

failed to lift sales(Sales fell by 2.7% in 2014)

• Absence of a funnel of new products in the pipeline( New product success rate fell by 5%)

• Weakening of emerging markets last year that made Unilever's third quarter sales the weakest in five years(Profit margin fell by 4.4%in 2014)

• Sustainability challenges

• Attempt to shrink the environmental footprint( Carbon foot print reduction was 12 % in 2014-2015 compared to targeted 32%)

Accelerate Premiumisation for developed markets

Improved SCM & 100% sustainable sourcing of raw

materials

More focus on “Cause Marketing”

Reduce usage of fossil fuel in operations

Improved dynamic in pricing &

differentiation strategies in

emerging markets

•Normative Re-educative

TYPE

•Prospective-Operations•Analyser -SustainabilityTYPLOLGY

APPROACH Adhocracy

CONTROLImplementation-OperationsPremise- Sustainability

Recommended Strategies Strategic Approach

+ HYBRID STRUCTURE+ Departmentalization

Product, geographic and Functional+ Moving from Centralized to Decentralized structure+ Moving from narrow span of control to wider span of control

COMPARATIVE ANALYSISP&G⊸ Over 50 brands⊸ Vision of P&G is be, and be

recognized as, the best consumer products and services company in the world

⊸  P&G serves 650 million customers in India directly through 1.3 million outlets

⊸ P&G works on 5 specific sustainable strategies i.e. Products, Operations, Social Responsibility, Employees and Stakeholders.

⊸ P&G doesn’t have the strong supply chain to reach out to all the customers. In terms of emerging market expansion, it suffers from lack of brand coverage in economy ranges where some of its rivals have an edge.

HUL⊸ Over 35 brands⊸ Vision of HUL is primarily to

help people feel good and develop new ways of doing business that will allow it to double its size while reducing our environmental impact

⊸ It has robust supply chain and distribution network covering over 3400 distributors and 16 million outlets to reach out to customers

⊸ HUL has Unilever Sustainable Living Plan (USLP) that comprises of 4 things i.e. Winning with Brands & Innovations, Winning in the Marketplace, Winning through Continuous Improvement and Winning with People.

⊸ HUL is over dependent on Indian market and depends on it for majority of revenue generation

RECOMMENDATIONS⊸ Further decentralization of responsibilities to respond

flexibly to internal and external changes⊸ Tannenbaum and Schmidt continuum-collaborative style of

leadership to continue growing⊸ Motivate and engage employees to extract constructive

criticism and feed back for growth of Unilever⊸ While organizational changes are not implementable

overnight, adaptation to newer technology is essential⊸ Comparative advertising is there to stay. In real terms, it

must be used often as it makes it easy for consumers to evaluate and chose the best among several available options.

⊸ Increasing economies of Scale(Production Orientation)⊸ Higher bottom lines which can be used in R&D(“ Think

globally, act locally”) and M&A target Non Users and ⊸ New opportunities.⊸ This leads to Blue Ocean Approach with High value low

cost⊸ Cross-departmental task force⊸ High concentration on Emerging market.⊸ Sustainability: Keeping ecological footprint low(Recycle, bio

degradable) Social positioning

CONCLUSION

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