Unilever Strategy for Organising and Structuring Its Global Operations.

Unilever is a complex global organization that has a portfolio of 400 brands, pning 14 categories in home and personal care and food products. The company has 163,000 employees in the 170 countries within which it operates (Unilever, 2010). Organizations such as Unilever face the challenge of configuring a global structure that “works well in diverse locations but also brings units together in a coordinated fashion” (Shenkar & Luo, 2007, p. 312).

Given its wide range of products and the diversity of countries in which it operates, Unilever has to employ a global organizational strategy that addresses its global complexity and the diversity of its product portfolio. In its portfolio, there are some product lines that can be extended to new markets with little or no modification, while there are others that need to be modified to suit the local preferences. For example, chemical products are highly standardized and require little variation for local markets (Child, 2005, p. 45). Standardization of such products creates economies of scale in production and requires a “high level of global coordination and integration” (Child, 2005) and centralized R&D. On the other hand, some of Unilever’s products, such as packaged foods, require modification to suit local tastes and cultures. There are no production economies of scale for such categories and product development has to be facilitated locally.

These factors present two scenarios for the company – striving for high global integration in the case where products can be introduced to new markets without modification and striving for high local responsiveness where there is need for modification to meet local preferences. Unilever has to therefore adopt a global organizational structure that addresses the two scenarios. The organization employs a transnational strategy, which is best suited for Unilever’s global operations, as it is faced with high pressure for both local responsiveness and global integration (Child, 2005, p. 43; Shenkar & Luo, 2007, p. 312). Unilever also uses the transnational strategy to organize its functions. Its sales, distribution and promotional tasks are locally responsive and are decentralized to suit individual markets, whereas the R&D function is globally integrated to leverage learning in the different markets. The transnational strategy enables Unilever to leverage the advantages of low cost in conjunction with the advantages of differentiation. Unilever adopted the transnational strategy mainly in esponse to competition from Procter and Gamble, which was already pursuing a transnational strategy by 1990 (Child, 2005, p. 247). However Unilever is still lagging behind P&G, in terms of revenues, marketing and innovation, because it has faced difficulty in reorganizing its activities to meet the requirements of a transnational strategy. The transnational strategy is both demanding and expensive to implement. It also requires a “flat” hierarchy (Child, 2005, p. 249) and Unilever has gone through a process of reorganizing its structure through the “One Unilever” programme, which was launched in 2005.

The programme resulted in “better allocation of resources, faster decision-making and a lower cost level” (Unilever, 2007) and enables the organization to leverage its scale both globally and locally. References: • Child, J. (2005) Organisation: contemporary principles and practice. Malden, MA: Blackwell Publishing, pp. 241-253 • Shenkar, O. & Luo, Y. (2007) International business. 2nd ed. Thousand Oaks, CA: Sage Publications. • Unilever Website. Available from: http://www. unilever. com