At Unilever, three main groups used to be involved in strategic management: operating companies, management groups that oversee them, and the corporation as a whole. To be a suc¬cessful global company, the strategies at different levels needed to interrelate, considering bottom-up and top-down approaches. The dilemma is to find the right equilibrium between instructions from the top and inputs from the bottom in order not to stifle management creativity at the bottom as well as to provide sufficient direction to achieve the interests of all the corporation’s stakeholders.
The company’s culture and philosophy influence this equili-brium. Unilever, for example, used to be highly decentralized, with individual operating companies, with their own identity, linked by a common corporate culture and some common services such as research, finance, and management development. After having experimented with various organizational structures to encourage global strategic management, Unilever has adopted a full-time Corporate Development board member, who is on staff with an advisory role, free from major line responsibilities.
In 2005, Unilever Chief Executive Patrick Cescau kicked off an ambitious restructuring program. He ditched under¬performing brands, divested Unilever’s frozen-foods business,and stripped out layers of bureaucracy, including half the ranks of top management, which had for years kept the company lagging behind fleeter-footed rivals. Under Cescau’s ‘‘ One Unilever’’ plan, unnecessary complexity was removed. Brands now rely on one formulation, one packaging design, and one marketing strategy, instead of the fragmented approach of the past. Local managers no longer run the autonomous fiefdoms where they were responsible for everything from marketing and sales to running factories and back-office operations. Instead, these functions have been largely centralized, elim¬inating duplication and allowing for faster decision-making and global economies of scale. Equally important, emerging markets, where Unilever historically has been strong, were made a higher priority. To ensure products meet the needs of local consumers around the world, nearly one-third of the company’s home and personal products brand development resources now are based in the developing world.
The changes are paying off. Unilever posted its best annual results in five years on February 7 2008, with sales up 5.5 percent, to $15 billion, and net profits of nearly $8 billion. ‘‘The transformation of Unilever continues apace,’’ Cescau says. Unilever’s London-traded shares are up 12 percent since a year ago. What’s more, developing markets now account for nearly 45 percent of revenues, up from 38 percent in 2005.
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