PROCTER & GAMBLE AND UNILEVER

Competitor Analysis: P&G

William Procter (a candle maker from England) and James Gamble (a soap maker from Ireland)founded Procter & Gamble Company when, through a series of events, the two strangers traveled to theUnited States, met and married sisters. At their father-in-law’s urging, Procter and Gamble pledged$3,596.47 each, and formed the Procter and Gamble Company in 1837.23 The Company, headquartered inCincinnati, Ohio, has reported revenues of $56.8 billion for the fiscal year ended June 2005.24 Thisrevenue comes from sales in over 160 countries, balanced worldwide with one half from the domesticmarket and one half from the international market.25Today, P&G markets more than 300 brands, of which 22 are $1B sales producers, 26 and has MarketDevelopment Organizations in 80 countries, leading teams to build brands organized in sevengeographies: "North America, Western Europe, Northeast Asia, Latin America, Central and EasternEurope/Middle East/Africa, Greater China and ASEAN/Australasia/India".27 Their products are soldprimarily in grocery stores, discount stores, through mass merchandisers, membership club stores, andhigh frequency stores (neighborhood stores in developing countries).28 The Company and its 110,000employees are organized into three global business units, P&G Household Care (33% net earnings), P&GFamily Health (30% net earnings), and P&G Beauty (37% net earnings).29 These global business units aredistributed into five segments, Health Care, Baby and Family Care, Snacks and Coffee, Fabric Care,

Home Care, and P&G Beauty30 (See Appendix O, Value Chain Analysis, for an overview of P&Gstructure and primary activities). The business segment being examined in this report, P&G Beauty;encompasses personal cleansing, antiperspirants or deodorants, cosmetics, colognes, hair care, feminineprotection, hair color, and skin care, includes five $1Billion brands, and achieved double digit growth for2005, with a net profit margin of 13%, ROI of 12%, and ROE of 42% on 7.257M Sales31,32 (SeeAppendix Q, Financial Analysis, for a P&G company overview).P&G’s competitive advantages arise from several key factors, one of which is innovation. Spending$2B annually on R&D and deploying approximately 7,500 researchers in technical centers around theworld, P&G is a leader in innovation.33 They have 29,000 patents, and over the past eight years, haveintroduced the #1 or #2 new non-food products in the US.34 Key to their success is knowledge sharingand cross-borders replication of innovations, reducing costs and quickly expanding the companyknowledge and line offerings.35 Another factor contributing to their competitive advantage is their largescaleoperations and go-to-market capabilities that provide first mover advantage and limit the ability ofcompetitor’s to copy ideas and replicate them.36 Additionally, economies of scale and scope inpurchasing, distribution, business services and merchandising provide financial and trade advantages.Lastly, P&G is well known for its brand management and brand leadership capabilities, which aresignificant advantages for customer loyalty and market penetration (See Appendix O for P&G's RBVAnalysis). Supplementing their innovations, facilitating their rapid go-to-market capabilities, as well astheir customer and partner management is P&G's significant use of IT and tracking systems, includingCRM, EDI, and RFID, that improve R&D speed and capabilities, communications, information tracking

and sharing, and inventory management37 (See Appendix O, Value Chain Analysis, for an overview ofP&G supporting technologies and awards for excellence).In order to sustain their competitive advantage, P&G must continue to utilize their acknowledgedstrengths, as well as continue to exploit international growth, especially in emerging markets, as P&G iscurrently overexposed in the US and Western Europe.38 Additionally, the company is moving away fromthe commoditized household products and food businesses and should continue its focus on personal carehealth and strong household businesses that provide for more profitable growth.39 P&G has also beensuccessful with its mergers and acquisitions strategy, such as the recent acquisitions of Clairol in 2001,Wella in 2003, and Gillette in 2005, and should continue this strategy.40 Active portfolio management,using divestiture and acquisition strategies, has been shown to increase stakeholder value;41 P&G needs toreview longer held businesses and lower earners for their continued value to the organization, divesting ifneeded.P&G has been diligently participating in activities that should ensure a good future of sustainability.Their R&D has enabled ongoing introduction of new lines, as well as expansions and adaptations ofcurrent lines to meet local needs. Their Corporate Standards System application provides for innovativeR&D methods to reduce costs while increasing quality and enhancing go-to-market capabilities.42 Theyneed to successfully fold in Gillette, and have recognized $1B in cost synergies as this integrationoccurs.43 Additionally, a strong focus on expansion in developing countries is being undertaken andshould provide significant growth opportunities, in conjunction with their maintenance of market shareand line extensions in developed countries. P&G needs to look at their businesses, however, and ensuregood fit and value-added, and continue activities that have been driving organic growth and increasing

EPS (2.831 basic normalized EPS; 2.662 diluted normalized EPS 2005), as well as increase free cashflow, ROI, and profits, which their activities are focused on to accomplish Competitor Analysis: Unilever

Unilever was officially formed in 1930, through the merger of Lever Brothers, a British soapmanufacturer and Margarine Unie, a Dutch margarine manufacturer.44 It has since become one of thelargest direct investors in the United States.45 Unilever is unique in that it has maintained a dualownership structure since its inception, governed by an equalization agreement.46 Although the companyhas two legal entities as its parents, one Dutch (Unilever NV), and one British (Unilever plc), it has onlyone board of directors47 and reports one set of financial statements.48Today Unilever is present in 150 countries, employs over 223,000 people, and has numerous wellknownbrands, 12 of which each have worldwide sales exceeding €1 billion.49 Unilever has products forthree markets, home, food, and personal care,50 which fall into 6 primary categories: home care (17%),spreads (12%), savory & dressings (21%), beverages (8%), ice cream & frozen foods (16%), and personalcare (26%)51 (See Appendix Q for Unilever's structure and primary activities).In the area of personal care, one of the segments where Unilever competes directly with P&G,Women's Wear Daily ranked Unilever ($9.3 billion) the third largest cosmetics company behind L'Oreal($17.7 billion) and P&G ($16.5 billion).52 Company-wide, P&G's sales are around $70 billion andUnilever's are around $50 billion.53 P&G's sales are nearly 40% greater than Unilever's, withapproximately 40% of Unilever's employee headcount.54 Clearly there are fundamental operationaldifferences between Unilever and P&G.Unilever's competitive advantages arise from strong brand recognition, such as Dove and Bird's Eye,

strong R&D initiatives for line expansion, and leading brands in personal care, deodorant and personalwash.55 Their renewed focus on strong line expansion (especially after reducing their number of brandsfrom 1600 products to approximately 400 in 2003),56 and alliances with strong corporate partners such asPepsi are also advantages. In order to sustain their competitive advantage, Unilever has several issues toresolve (See Appendix Q for RBV Analysis). First, it has been a complex company, with two CEO's,separate organizational structures (PLC and NV), and earnings reported in two venues, Euro andDollars.57 This complexity increased costs, and impacted opportunities for efficiency economies of scaleand scope, not to mention the potential concern in transparency in reporting.58 The 2004 figures reflecteda net profit of 5%, ROI of 6%, ROE of 37%, sales of 48,204M and net income of 2468.5M (SeeAppendix S, Unilever Financial Analysis). Sales were flat in 2004, and Unilever began a major push forelimination of non-productive lines, cost elimination, share buybacks, focus on core products and regionalactivities with increased spending on R&D, marketing, and advertising, resulting in increased salesgrowth in many regions.59In 2005, Unilever initiated consolidation efforts (One Unilever) including development of oneexecutive group (from three), a decrease in the number of executive managers by one-third, a flattening ofthe organization, and a restructuring that created global groups, such as a global brand strategy group.60One such effort at consolidation is the 2005 sale of Unilever Cosmetics International unit to Coty forapproximately $800 million.61 For future sustainability, Unilever needs to continue their operationalenhancements, including additional outsourcing when needed (as was done in business support services),add line extensions with core brands while guarding against negative impacts should an extension fail,

look to mergers and acquisitions to support their growth and development, protect against exchange ratefluctuations, and continue to expand globally, especially in India and China, the identified locations forsubstantial growth.

Strategy: P&G

Business-level Strategy

P&G, with the largest product portfolio in the consumer products industry, faces significantchallenges maintaining cost efficiency and scale economies while creating innovation anddifferentiation.62,63 With their recent acquisition of Gillette, P&G now has 22 brands that each exceed $1Bin annual sales, with a balance of ten- $1B brands in Beauty and Health, and twelve-$1B brands in Baby,Family and Household lines.64 The company is divided into four pillars: Global Business Units, MarketDevelopment Organizations, Global Business Services and Corporate Functions, each working separatelyand together to bring competitive advantage to P&G.65 As competition from other major global and smalllocal companies are vying for market share, a sound business strategy, with a focus on flexibility andresponsiveness, is required to maintain and grow their leadership position.66P&G's business strategy focuses on large-scale operations, strong product branding, and productinnovation to develop competitive advantage.67 P&G is the global leader in its four core categories, BabyCare, Feminine Care (35%), Fabric Care (approximately 30%), and Hair Care (greater than 20%).68 Toachieve sustainability and continued growth, P&G's strategy is to continue to innovate and sell productsthat appeal to retail trade customers and consumers, providing pricing and product that adds value for thecustomer, while improving efficiencies in sales and operations with their ongoing restructuring and

technology enhancements, and quickly responding to competitive advancements.69 Their comprehensiveresearch network and $2B of research spending annually support their innovative focus, and they havereceived awards for supply chain management (#1 in 2004), are leaders in inbound logistics, and aretechnology innovators for improving efficiencies and reducing costs, such as with bar coding and wirelesstechnologies.70 With their market knowledge and focus on efficiencies, they excel at "demand chainplanning," identifying their "target market's requirements and designing the supply chaining backwardfrom that point. 71 Additionally, P&G uses business development structures combining sales, logistics,finance, marketing, and IT to work with trade customers for ways to add value to the consumer, includingMarket Development Organizations in 80 countries, to provide focus and management for increasingcustomer concentration at the retailer and country levels, growing volume in developed and developingmarkets, and focusing on higher profitability lines for growth; Beauty and Health Care.72P&G has been awarded #1 best category management and consumer marketing, another competitiveadvantage, and continues to concentrate on relationship management with customers and suppliers.73 Useof the Siebel CRM solutions has improved efficiencies and reduced costs, and needs to be furtherimplemented beyond the US and Western Europe.74 With ongoing improvements in resourcemanagement, planned divesture and ongoing acquisition strategies, and continued maximization of theirproduct innovations, marketing, and rapid go-to-market strategies, P&G should continue to meet (andexceed) its business goals.75

Global Strategy

P&G has made substantial investments globally, and used acquisitions, joint ventures, and alliances to

expand their market understanding and reach. Key to expansion are three competencies P&G hasdeveloped: 1) understanding of the foreign marketplace, 2) ability to manage people in foreign markets,and 3) skills at managing foreign subsidiaries.76 Their global strategy includes innovation, increasingmarket share on base business while focusing on each business as well as on each industry, and investingin the developing marketplace.77P&G has gained substantial market knowledge, has innovative databases including over 100 millionconsumers across 30 countries, utilizes a blend of local and expatriate managers, and provides training,global resource centers, and partnerships and alliances for managing foreign subsidiaries, all successfulactivities that promote local acceptance and a climate enabling knowledge transfer.78 Their flattenedstructure and focus on relationship management with stakeholders provides for efficient and rapidcommunications throughout the value chain.79 These capabilities have afforded P&G the opportunity toleverage insights from the local shopper, consumer, and retailer to generate cross-business unit plans andcreate efficiencies across the breadth of P&G lines. 80 With their marketplace knowledge and researchcenters strategically located throughout nine countries, P&G focuses on 360-degree innovation,identifying significant opportunities and acting on them quickly.81 For example, P&G modified productsin their upper tier and launched middle tier level products in Russia, driven by their identification of thebeauty-conscious orientation of women in that marketplace.82 Other examples of their approach tolearning, knowledge transfer, and rollout based on market understanding is the learning from SK-11 storecounters in Asia. Knowledge from that rollout was then integrated into the Olay launch in Spain,83demonstrating a reduced risk method of global expansion, where launches are first piloted on a limitedbasis, then expanded upon.84

Overall, P&G has a well-developed knowledge base and global mindset, and with innovation a keycomponent of their global strategy, they have created the ability to implement distribution systems thatcan move innovations across borders.85 P&G has been an early adopter and substantial user ofinformation technologies, and has been recognized by CIO Magazine for its “Corporate Standards Systemapplication” that revolutionizes the way their employees and partners collaborate, reducing costs,improving product quality, and getting products quickly to the marketplace.86P&G has had success expanding globally with its strategies of acquisition, strategic partnering,innovation, and rapid go-to-market strategy (See Appendix V for the History of Global ExpansionP&G).87 P&G has coordinated activities to provide a global network with all activities, structure andcoordination driving for a global competitive advantage. However, P&G is at risk due to overexposure inthe US and Western Europe, and needs to continue growing globally.88 It is estimated that 90% of theworld's population will be in developing countries by 2010.89 P&G has been working to expand rapidlyin these markets, and in fact, their presence in high frequency stores has grown 50% in 4 years, and inChina alone, P&G serves 2000 cities and 11,000 towns.90

E-Business Strategy

P&G’s CEO wants P&G “to be known as the company that collaborates – inside and out – better thanany other company in the world”91 P&G’s strategy and e-business focus is three-fold: “one-to-onecommunications, real-time and predictive business intelligence, and ‘virtualization’ of businessprocesses.”92 Sales and distribution is through retail partners – drug stores, grocery stores, and wholesaleclubs (such as Costco). P&G does not have direct selling of its products through the internet, however,

P&G does utilize the internet as a valuable resource tool for its domestic and global operations to improvethe efficiency and effectiveness of managing its supply chain, internally share R&D information, logisticsfor retail partners, transportation, billing and payment, and for video conferencing and customerinformation and feedback. These resources all interact electronically to provide real-time access toinformation to those who need it, creating a competitive advantage. Such a system can provide real-timeinformation regarding costs and other metrics in order to more quickly identify problems or issues andimplement a resolution (See Appendix X For network details).P&G has also created such centralized e-business sites for the business-to-business (B2B) side.P&G’s website PGEDI.com provides an electronic exchange of information between P&G and its tradingpartners, suppliers, current and prospective retail partners, financial institutions, and transportationcarriers. P&G fully utilized its Electronic Data Interchange (EDI) as a hub of doing business. The WebOrder Management System and Customer Portal assist partners in purchasing, managing and promotingproducts by providing critical data, product information, order status and invoices 24 hours a day, everyday. There are also links to track shipments, make payments, receive invoices, and share data.P&G has invested in Yet2.com Inc., an Internet company that has launched a web site that allowscompanies to post their technologies for license or sale.93 P&G has taken a “use it or lose it” approachsince many of its patents are not being used. P&G has also invested in a marketing collaborative softwaredevelopment company called Emmperative, formed in February 2001, which provides a way of sharingsignificant information share data; working simultaneously on the same files; even pulling up researchcollected by colleagues in other countries for various brands and re-applying it to other product

developments.”94 Creating this central library for accessing information allows for faster turnover andmore efficient use of time and information. P&G also sells basic marketing and management techniqueson the web site. Initiatives and investments such as these, in accordance with the Dynamic ResourcebasedModel of Competitive Advantage,95 are valuable resources that enable P&G to increase itsefficiency and effectiveness, and if complex enough, are difficult for the competition to easily imitate.Such early involvement and sizable investment in e-business as a tool reinforces P&G's position as aleader in the industry.From an end-user standpoint, customers can visit PG.com and sign up for P&G’s monthly emailedpublication, Everyday Solutions, which offers tips, promotions, and free samples, or seek expert adviceabout personal care, household, health & wellness, baby & family, or pet care. P&G also has numerousinternet sites for specific brands and products where customers can obtain information, coupons, andsamples, as well as provide feedback, such as pampers.com, charmin.com, iams.com, tide.com and manyothers.96

Corporate Strategy

P&G markets over 300 products in 160 different countries. P&G groups its business into twocategories, foundation business and higher growth business. Foundation Business includes Fabric, Home,Baby, Family care, and snacks and coffee. P&G also has a Market Development Organization organizedin seven97 geographical areas, and among others, a commercial product segment, P&G Chemicals, HealthSciences, and P&G Europe98 (See Appendix CC for list of businesses and product group descriptions).P&G’s portfolio includes other ventures related to its core products, i.e., P&G Chemicals, Inc. which

vertically integrates ingredients for some of its products and P&G Health Science which is a research labfor product development.P&G divested its juice business in August 2004, acquired Wella in 2003, and most recently, acquiredGillette.99 Internationally, in 2005 P&G acquired a Pharmaceuticals business in Spain, a Fabric carebusiness in Europe and Latin America, and increased ownership in its Glad venture with the CloroxCompany. P&G continues to both look for acquisition opportunities that are related to its core businessP&G and Unilever 15and develop new products, and they do it well. “In a rapidly globalizing world, focusing on core expertiseand collaborating with partners in innovative ways are the keys to growth”100 which is exactly what P&Gis doing. P&G is aware of their core products and business foundation, but also understands that thedevelopment of new products through innovation, research and development is the key to maintaining itscompetitive advantage. P&G should continue its current successful strategy.

Strategy: Unilever

Business-level Strategy

Most companies that hold a market leadership position do so by achieving the right balance betweendifferentiation and low cost.101 In the consumer products industry, consumers have many choicesregarding which brand they select. With twelve brands that each exceeds €1 billion in annual sales,102Unilever's market leadership cannot be sustained if costs are significantly higher than a competitor'sproducts. Similarly, without adequate differentiation, brand loyalty could be difficult to maintain.For Unilever, the current business-level strategy would be characterized as a differentiation strategy,

where the emphasis is on branding, advertising quality and new product development. Unilever holds theworld number one position in five of six food segments, and two of six segments in Home & PersonalCare (skin and deodorants).103 Unilever holds the (world) number two position in two of the six Homeand Personal Care segments (Laundry and Daily Hair Care) and is number three or less in HouseholdCare and Oral Care.104 Company resources have been divided into two primary functions, oneresponsible for brand development, innovation, and brand strategy ("Categories"), and the other formanaging the business, effective deployment of brands and innovations, and winning with customers("Regions").105 Their commitment to R&D and innovation is clearly stated through their missionstatement ("Add vitality to life") and their corporate purpose ("Vitality Innovation").106 The alignment ofcompany resources with its strategy is an important component for sustaining a competitive advantage.107With its resources aligned and a commitment to funding its significant R&D spending, Unilever shouldbe well positioned to sustain and improve their current standings. Perhaps the greatest risk to sustainingtheir competitive advantage is the high SG&A costs of Unilever's current organizational structure.

Global Strategy

Unilever’s global presence has deep roots, beginning with the founding companies (See Appendix Wfor a history of Unilever’s global expansion). At various stages throughout the course of Unilever’shistory, there is evidence that the firm was driven by nearly all five global expansion imperatives -- thegrowth imperative, the efficiency imperative, the knowledge imperative, the globalization of customers,and the globalization of competitors108 -- in its efforts to globalize. However, Unilever’s progress in

exploiting global presence may in fact be hampered by the lack of an overarching global strategy.With 223,000 employees in over 150 countries,109 Unilever is proud of its deep roots in local culturesand markets worldwide, which enables it to bring its wealth of knowledge and international expertise tolocal consumers. In doing so, Unilever labels itself as a “multi-local multinational”110 and truly believesthat it is creating value through global expansion by adapting to local market differences and tapping themost optimal locations for activities, resources and product launches.In an effort to “win Latin America,” Unilever embarked on a number of transformational initiatives,with the goal of “One ULA” (Unilever Latin America) and a regional approach based on fourcornerstones -- strategic leadership; innovation, market share and brand health; excellence in reachingconsumers and customers; and implementing common processes, systems and shared services. In threecountries in this region, Unilever is the market leader for four out of six primary HPC categories.111With 44 operating companies in the Asia/Africa region, and brands sold in 98 countries, Unilever isthe market leader in most priority categories in countries where it has a presence (key markets includeIndia, South Africa, Indonesia, Thailand, Vietnam and the Philippines). In this region, Unilever placesemphasis on: serving and delighting consumers; deepening partnership with customers; and buildingrelationships with local communities.112Unilever’s current expansion plans call for a focus on the developing and emerging markets, where thecompany enjoys a long-established presence, has established consumer intimacy, and prides itself onaffordability. Thirty-five percent of Unilever’s turnover is in developing and emerging markets, productsare tailored to different income levels, and Unilever’s distributions systems reach deep into these areas.113

Unilever is aiming for “seamless global development,”114 with system-wide automation and datasynchronization, among other things, to make this possible. Further, in at least one of its brands, it hasopted to consolidate its advertising accounts into one global agency network -- an example of centralizingkey business functions -- which, though cost effective, runs counter to being sensitive to local markets,and “global box-ticking can’t match intuitive knowledge of local markets.”115 However, despite all thereferences that Unilever has made to global strategy and its acknowledged global presence, the companyhas not articulated an overarching global strategy that clearly outlines the alignment of all functions in thevalue chain to that strategy. While it has taken steps to adapt to local markets, and capture economies ofglobal scale and global scope, as Trevor Gorin, press officer for Unilever has stated, Unilever needs to“counter threats in specific markets” and transplant learning's from one place to another.116 Unileverneeds to take the next steps in ensuring global competitive advantage, by evaluating the “optimality of itsglobal network for each activity in its value chain,”117 along each of three dimensions: activityarchitecture, locational competencies and global coordination. 118

E-Business Strategy

Unilever’s e-business strategy continues to evolve, from its early membership in a B2B marketplace,to participation in the GDSN, the implementation of RFID technologies,119 and the creation of an onlinebuying system for making certain types of purchases from suppliers.120 The firm’s e-business strategyfocuses primarily on the use of the internet and information technologies (IT) to achieve operationalefficiencies in dealing with suppliers and in utilizing its distribution network. The firm’s e-businessstrategy is progressing, but its IT initiatives are not unique or rare within this industry, nor are they

inimitable. Unilever has made significant advances – most notably its alliance with Safeway, however,according to the Dynamic Resource-based Model of Competitive Advantage (DRMCA) (See AppendixX), Unilever will need to continue to add new and industry-leading IT resources to build and sustain aresource-based advantage. 121Many of the products in the personal products industry fall under the category of “experience goods”– that is, the qualities and characteristics of those products are only recognized after consumption.122 AsP&G and Unilever 18such, those products by and large do not lend themselves well to e-commerce – purchases by consumersvia the internet. However, as early as February 2000, Unilever was making plans to invest heavily inelectronic commerce, in an effort to slash costs, radically change its supply chain, and reach out toconsumers. The company recognized that it could achieve significant savings by using the internet to“buy everything from raw materials to cardboard.”123 Unilever also began using the internet to targetconsumers of its products by advertising selected products on websites catering to specific consumermarkets (See Appendix Y for Unilever's early use of the Internet).124Unilever and P&G are members of Transora,125 a B2B marketplace consisting of 49 companies.126Transora merged with UCCnet to form 1SYNC, which offers a cost-effective data pool with solutions andservices that support user needs, and helps the industry maximize the value of data synchronization.127Unilever, as a member of Transora, was part of an enterprise-wide effort in 2004 to test the GDSN – aninternet-based supply chain initiative launched to streamline communication of product information128(See Appendix Z). Furthermore, in June 2004, Safeway and Unilever heralded the success of their jointGlobal Data Synchronization initiative; the first time that product information had been “synchronized

between the leading supply side and demand side data pools” (See Appendix AA). 129 Other examples ofUnilever’s forays into e-commerce and information technologies include: the implementation of radiofrequency identification (RFID) tags,130 the Unilever Private Exchange (which provides secure linksbetween operating companies and suppliers’ and customers’ systems and to external electronicmarketplaces),131 Ariba, Unilever’s online buying system (which “enables purchases of non-productionitems to be made at volume-negotiated prices from selected suppliers”)132 and ISIS, Unilever’s supplymanagement information system (which helps local, regional and global supply managers to gather andanalyze information quickly, and make appropriate sourcing decisions)133 (For additional informationabout Unilever’s utilization of information technology, see Appendix BB).

Corporate Strategy

Corporate strategy addresses the scope of the firm's activities, including the portfolio of businesses thata firm chooses to engage in, the locations or geography it will cover, and the amount of verticalintegration it employs.134 Unilever's strategy is to have strong customer relationships at the local level,everywhere they do business, and to be seen as "a truly multi-local multinational".135 Unilever's activitiesare spread across six primary business categories, including home care, spreads, savory & dressings,beverages, ice cream & frozen foods, and personal care,136 and are sold in 150 different countries.137 Aspreviously mentioned, Unilever is number one or two in all but three segments in which they compete. Inthe segments where they are not number one or two, they face intense competition and weak consumerspending, particularly in Europe.138 Further, the business is in an area that is relatively mature andsegmented.139 It is in cases like this where companies might benefit from a divestiture of low-growth,

under-performing business units in order to free up resources to focus on higher growth, higher profitopportunities.140 (For additional details see Appendix U: Unilever SWOT Summary).A decision to divest the brands that are under-performing would not be foreign to Unilever; over thelast several years the brand count has been reduced from over 1,200 to around 400 as part of an overallrestructuring campaign.141 With a stated focus on developing and emerging markets, particularly in thearea of personal care,142 divesting the European frozen foods units would free up resources, provide cashfor additional debt reduction, and help reduce their high SG&A costs. Such a move would better positionUnilever for sustained profitability, however, should Unilever wait too long before executing thisdivestiture, they risk a reduction in the value of the business due to further brand depreciation.143Another option for the cash that would be generated through the divestiture of low-growth businesseswould be to seek out potential acquisitions that offer growth or complimentary products, and would helpconsolidate a market. Consolidating markets can help provide sustained competitive advantage byreducing the overall level of competition.144

Conclusions and RecommendationsThis comparison clearly shows why P&G is a leader in the industry. Unilever can learn from P&Gand further develop itself as a leader. Taking into consideration the analysis provided, Global StrategyAdvisors believe that there is considerable opportunity for Unilever to strengthen its profitability andsustainability; however it will require strong discipline and careful analysis in terms of pursingappropriate acquisitions and divestitures, cost reduction programs, product and brand differentiationinitiatives, and alignment of strategies. Unilever must remember to base its strategies and activities on

three fundamental questions: Who are our target customers? What value do we want to deliver to thesecustomers? How will we create this value? Based on the results of our analysis presented in this report,we recommend the following plan of action for the next 5 years (with annual reviews of progress to date):• Align Unilever resources to strategies; align strategies to optimize all value chain components.Regional Unilever strategies are individually strong; develop an overarching global strategy thatprovides consistent direction and ensures global synchronization and pooling of knowledge andbest practices. E-Business strategy progressing; continue to invest in IT and internet solutions toachieve global efficiencies in negotiations, electronic transactions, and communications related tosuppliers, distribution networks, and retailers/customers. Look for opportunities for verticalintegration: cost savings and increased efficiencies can be created with this modification in theUnilever portfolio.• Strengthen consumer research and brand differentiation. Continue consumer research efforts toensure an understanding of the global marketplace. Continue consumer research to ensure thatproducts and brands are meeting target customer needs, while identifying new opportunities.Utilize partnerships and alliances for market understanding and product development.• Continue investments in R&D initiatives for increasing line extensions and new products;develop fallback plans should line extension efforts fail, and pursue increased efficiencies andcost reduction strategies.• Balance differentiation with low costs and continue reducing SG&A costs. Market leadershipcannot be sustained if your costs continue to exceed that of your competitors’ products. Seekopportunities to out-source, where economically feasible and ROI is highly probable.

• Aggressively pursue acquisitions and divestitures. Sell off under performing businesses or slowerperforming brands (European frozen foods businesses, for example). Identify potentialacquisitions that would help consolidate markets and thereby enhance Unilever’s marketleadership. Use proceeds from divestitures to acquire businesses. Identification of optimalacquisitions is beyond the scope of this paper; a market analysis is required to identify bestacquisition options that would complement existing brands and product lines, and promote marketconsolidation.• Exploit and expand global presence. Conduct (or contract for the development of) in-depth globalexpansion study to identify risks/benefits of potential regions and focus on markets with growthopportunities. Exploit markets where consumption of household products is low; identifylocations where first mover advantage is possible, and where that competitive advantage can besustained. Explore increasing global research centers, but only when alliances/investments arealigned with Unilever strategies and where projected ROI will enhance pursuit of goals ofprofitability and sustainability. Seek alliances that may produce ways to increase speed-to-marketand leverage global opportunities while increasing protection against exchange rate fluctuations.• Continue to pursue strategic corporate alliances for R&D, when such alliances fit with and addvalue to Unilever’s strategies and where ROI justifies cost.• Increase focused advertising, especially for higher profit line and expansion in emergingcountries.

P&G SWOT Summary*Strengths• Significant scales of scope and economiesin their operations

• Excellent brand recognition and brandmanagement• Good product innovations• Good overall performance• Supply Chain excellenceP&G and Unilever 66Weaknesses• Reductions in cash flow levels• Mature Markets• High customer concentrations• High SG&A costs• Low R&D expendituresOpportunities• Good growth potential in the Health andBeauty segment• Growth opportunities in developingcountries and markets• Growth potential of domestic retailersThreats• High levels of competition• Raw material and energy price increases• Potential Gillette integration issues

Unilever SWOT Summary*Strengths• Strong brands and brand management• Significant economies of scope and scale• Abundant resources

Weaknesses• Very high SG&A costs• Complex organizational structure• Decreasing sales/revenues

Opportunities• Product portfolio simplification• Developing markets in developing countries• Significant debt reduction• internal growth initiativeThreats

• Foreign currency exchange fluctuations• Competitors growing through acquisition• Potential failure of internal growthinitiative