The Competitiveness among Unilever and Proctor and Gamble - Term Paper Example

1.1 Introduction Unilever mainly focus on personal care, foods and home care business. Proctor and Gamble is the first largest consumer goods company and Unilever is the second. Unilever operates through seven segments i.e. exports, foods, beverages, soap, detergents and personal products. While P&G business segments include fabric and home care, feminine, heath care, beauty care, beverages and food. Therefore there exist vast differences in the management of both the companies. The main objective of this paper is to study the competiveness among Unilever and Proctor and Gamble in the light of Henry Fayol’s 14 principles. It also focuses to identify the differences and similarities among these two companies. 1.2 Unilever It is a British multinational corporation which incorporates many consumer brands in beverages, foods, personal care and cleaning agents. It was formed by the merger of Lever Brothers and Margarine Unie. It is a dual listed company which comprises of Unilever PLC in UK and London and Unilever N.V. in Rotterdam. It operates efficiently as a single business. Its main international competitors are Proctor and Gamble and Nestle. Unilever have conducted many advertising campaigns such as Flora London Marathon, Dove campaign for real beauty, comfort pure recommended by mother care etc. Unilever claims that corporate social responsibility is the heart of its business. It provides sustainability to a company. Its goal is to develop the company’s environment by helping people to improve their health, promoting environmental footprints of all its products and to have sustainability in the sources of agricultural raw materials (Cescau, 2006). Products Through acquisitions Unilever owns 400 brands. However, it focuses on only those brands which are called billion dollar brands. Presently it is focusing on its famous 13 brands, which are generating annual sales of $1 billion. Its top 20 brands generate, more than 70% of its total sales. These brands fall in two categories i.e. home and personal care, and food and beverages. 1.3 Proctor and Gamble It is an American multinational corporation having headquarters in Ohio and downtown Cincinnati. It deals in the manufacturing of consumer goods. Sales of P&G in 2011 are around $62.6 billion. In 2010 company was ranked fifth in the list of world most admired companies. It was the only fortune 500 company which issued C share common stock. P&G was given a name of greater Toronto’s top employers due to its efficient management and staff. It is a member of Washington D.C. the US global leadership coalition. This coalition is based on 400 NGOs and companies which deal in international budget affairs. These funds are used to support American development and diplomatic efforts abroad. It was the first company to sponsor and produce a prime time show on the spinoff of daytime soap opera which is commonly known as our private world. It is considered as a global innovation leader. It focuses on one goal i.e. maximizing its potential (Jain, 2002). . Products P&G is the brand building leader in the overall industry. It deals with many products such as beauty and grooming, household care etc. P&G provides consistent standards and excellent quality products. It continuously markets its products in the community. It has 400 brands, which is a wide product line and its 132 products ranks top in the pacesetters list. It has a strong portfolio of brands, having 50 leadership brands, which are one of the best known household brand and 90% of P&G sales are drawn from these products. 1.4 Henri Fayol’s 14 principles of management Henri Fayol developed theory of management. He emphasized on the idea that management excellence is based on a technical ability. He was pioneer in the formal education of management. Fayol’s fourteen principles of management fulfill all the modern requirements of management (Drucker, 1998). These points were offered in 1916. So, the fourteen principles of management developed by Henri Fayol are discussed below: 1. Division of work One person is not capable to do all kind of work, i.e. it should be divided among capable individuals. Proctor and Gamble and Unilever both work on the bases of divisional structure. Each job is assigned to a person who is specialist in that area. Both the companies operate on the basis of divisions. Unilever has ice-cream division, food division, personal care division, beverage division etc. whereas P&G has health care division, future work division, research division etc. as compared to Unilever, proctor and gamble have more formalized and advanced divisional structure (Sanford, 2006). 2. Authority and responsibility If anybody is given responsibility of a job, then one should also have an authority. Both the companies operate on the basis of division and employees are given authority to make decision in their particular division. Employees are themselves responsible for all of their actions. Higher managers in the companies have more authority as compared to employees. 3. Discipline This involves sincerity in the work as well as the enterprise. Unilever and P&G have disciplined supervisors at all levels. Both the companies have not done fair agreements in their businesses. Therefore, they both were subjected to a penalty by country lawmakers. They are not considering fair agreements in their organizations. 4. Unity of command This means that an employee should take order only from his boss. Unilever and P&G mainly work on the basis of divisions. Employees work on the basis of orders given by the head of each division. Head of each division focus on one particular goal and make employees work accordingly in order to achieve those goals. 5. Unity of direction Organization should have one common objective and direction. Unilever focuses on improving the company’s environment in relation to health of employees and sustainability of the products. P&G focuses on maximizing its potential in relation to its volume and employees. This means both the companies emphasize on its workforce and products. 6. Subordination of individual interest Importance should be given to the interest of a group rather than an individual. Both the companies have specific goals in relation to every particular division. Each division evaluates performance of employees accordingly and compensation and other benefits are allotted to all employees on the basis of employee’s performance rather than considering interest of employees (Neff, 2005). 7. Centralization There should be a balance in the organization some mattes should be centralized while other should be decentralized. P&G have effective management system. All strategic decisions are taken by the CEO of the company. Divisional heads are given specific goals to accomplish which are communicated to all employees. Heads of each division have an authority to take decisions regarding all the practices in that division. Unilever is presently facing many financial problems. CEO of the company is not directing the company efficiently due to which there exist conflicts in the management system of the company. 8. Remuneration Compensation is the main motivator for employees. In Unilever and P&G remuneration of employees is mainly determined by the board and these should be within the limit as prescribed by the shareholders. Pay increment of employees in both the companies is done after every six months on the basis of performance. 9. Scalar chain Managers are a part of the chain. They have the main authority. In both these companies each man from CEO to the bottom line staff, have certain amount of authority. The CEO of both the companies has more authority than any other manager or employee in the company. But in spite of that Unilever is presently facing many financial crises. There may be a deficiency either in the management of CEO or the divisional heads. 10. Order Both social and material order is necessary. Both the companies focus on material handling, through efficient management of all its resources and maximizing their product line. Unilever and P&G achieve social order through selection and organizing. But as compared to Unilever, P&G have a more efficient social and material order system (Jones, 2002). 11. Equity All members in Unilever and P&G are treated equally. There are no differences on the basis of designation. Employees are motivated on their performance and management training programs are conducted for all employees to enhance their abilities. 12. Stability of tenure Employees will work efficiently only if they are provided continuous growth and job security. P&G provides security and continuous increment in the salaries of employees, due to this reason employee turnover have reduced rapidly. Unilever have insecure tenure and high rate of employee turnover which have affected the organization adversely (Buerkle, 2000). 13. Initiative Unilever and P&G give necessary level of freedom to all their employees in order to share their plans and ideas with other people in the organization. 14. Esprit de crops P&G have created a unity and team spirit in the organization; therefore, it is ranked among the top ten companies in employee management. Unilever unity and team spirit is gradually reducing down due to the lack of improper guidance and management systems 1.5 Similarities and differences Unilever and P&G have many differences and similarity. Some of which are discussed below: Marketing strategy ` Unilever and P&G focus on the same marketing strategy. Both the companies have direct contact with their clients. They establish stalls in malls and markets. Seminars are conducted in colleges and schools. Free demos are provided to clients to market their products. Both the companies believe in satisfying their customers on the spot. Proctor and Gamble and Unilever focus on the policy that their commercials should not be executed after or before the commercial of other competitors. Growth P&G have beaten the earnings estimates of Unilever. It estimates 5% growth in sales and 6% growth in earnings, in spite of higher commodity cost which is around $3 billion. Its volume growth wasn’t mush great, but was able to manage maximum profits. As compared with Unilever it currently has a negative volume growth. Management Management team of Procter is better than Unilever’s. Presently, Unilever is in the turnaround phase and nobody knows who will be the new CEO of the company. While Procter CEO Alan Laffley, have a proven strong track record. P&G was named as one of the Canada’s top 100 employers and was also featured in Maclean’s news magazine. Unilever board of directors consists of eleven members (Dranikoff, 2002). Control cost One of the main practices of businesses is to control cost. Sales of P&G is double than Unilever. Operating margin of Unilever is 13%, while P&G is at 18%. Proctor is a leader in all its product categories; therefore, company finds it easier to raise the prices in order to cover the cost. Presently, cost of production has reduced very rapidly, which have provided an opportunity to company to make more profits (About Unilever, 2004). Ethical marketing Both Unilever and P&G know that substantial gains are available in their bottom lines. Most of the efforts are made for internal consumption rather than retaining customers. They have an opportunity to retain and attract customers through ethical marketing. Price fixing controversy In April 2011, Unilever and P&G was fined 104m and 211.2 m euro respectively, by European commission. This fine was charged due to the practice of price fixing cartel in Europe by both the companies. This was a huge amount; therefore, both the companies’ admitted that they had been running the cartel due to which they were allotted a discount of 10% of the total amount. In order to control their images, Unilever and P&G jointly launched laundry detergents in order to reduce the environmental impact. These efforts were made to reduce the energy, selling space and storage, shipping and packaging, and to assist in waste disposal. Later, companies also introduced cold water concentrated detergent in order to reduce the energy usage of washing machines (Graul, 2006). 1.6 Conclusion Henri Fayal’s fourteen principles mainly focused on convents of peace. Unilever and Proctor and Gamble both are leading companies dealing with consumer foods. But if they are compared on the basis of management principles there exists vast differences among the two companies. The management structure of Unilever is facing many problems, which is affecting profitability of the company. On the other hand Proctor and gamble is considered to be leader of the industry as it has one of the best management structure and culture within its company premises. References About Unilever, 2004. Unilever Annual Report and Accounts Buerkle, T, 2000. Consumer goods giant to cut 25,000 workers and push e-commerce: Unilever to jettison brands and trim jobs. International Herald Tribune. Retrieved February 11, 2006, from: http://www.iht.com/articles/2000/02/23/unilever.2.t.php. Cescau, P, 2006. Unilever results presentation for full year 2005. Retrieved February 6, 2006 from: http://www.unilever.com/Images/Q4%202005%20Speech_ul%2Ecom_tcm13-32067.pdf. Dranikoff, L, at ell, 2002. Divestiture: Strategy’s missing link. Harvard Business Review, 80(5) Drucker, Peter F, 1998. Management's New Paradigms. Graul, Lee Ann, at ell, 2006. Procter & Gamble, Unilever and the Personal Products Industry, Global strategy advisors, pp. 1-94. Jain, V.K, 2002. Note on industry structure. Retrieved January 9, 2006, from http://info.umuc.edu/mba/public/AMBA607/IndustryStructure.html. Jones, G, 2002. Unilever-a case study. HBS Working Knowledge. Retrieved February 7, 2006, from http://hbswk.hbs.edu/tools/print_item.jhtml?id=3212&t=finance. Neff, J, 2005. Unilever 3.0: CEO not afraid to copy from P&G. Advertising Age, 76(44). Retrieved February 5, 2006, from: Business Source Premier Electronic Database. Sanford, L, 2006. Business Week Online. Retrieved February 15, 2006, from Business Source Premier. Read More