hul ppt in word

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50925919 strategies-of-hul

1.1. STUDY OF HINDUSTAN UNILEVER LTD With respect to Strategic model

2.2. Contents: I. Company overview a. Mission b. Corporate purpose c. ObjectivesStrategic

position II. Environment a. Porter’s five forces b. SWOT c. Market segments and strategic

customers:STPIII. Value chainStrategic choicesIV. Corporate level strategies a. Takeovers b.

Joint ventures c. Organic growth d. Integration V. Business level strategies a. Product

innovation b. Market development c. Pricing strategies

3.3. d. Ad spending and sales promotions e. Investors interests VI. Operational level strategies

a. Institutionalizing talent b. Capability building c. SCM d. ROMI e. IT Strategy into action VII.

Organization structureVIII. Balance score card IX. Managing people

4.4. Introduction

5.5. I. Company overview:HUL (HUL) is India’s largest fast moving consumer goods company,

with leadership in Home &Personal Care Products and Foods & Beverages. HULs brands,

spread across 20 distinctconsumer categories, touch the lives of two out of three Indians.

They endow the companywith a scale of combined volumes of about 4 million tonnes and

sales of Rs.13,718 crores. The mission that inspires HULs over 15,000 employees is to "add

vitality tolife". With 35 Power Brands, HUL meets every day needs for nutrition, hygiene, and

personal carewith brands that help people feel good, look good and get more out of life. It is

a mission HULshares with its parent company, HUL, which holds 52.10% of the equity. A

Fortune 500transnational, HUL sells Foods and Home and Personal Care brands in about

100 countriesworldwide.

6.6. Mission:HULs mission is to add Vitality to life. We meet everyday needs for nutrition,

hygiene, andpersonal care with brands that help people feel good, look good and get more

out of life.Corporate Purpose:Our deep roots in local cultures and markets around the worldgive us our strongrelationship with consumers and are the foundation for our future growth.

We will bringour wealth of knowledge and international expertise to the service of local

consumers - atruly multi-local multinational. Our long-term success requires a total

commitment toexceptional standards of performance and productivity, to working

togethereffectively, and to a willingness to embrace new ideas and learncontinuously. To

succeed also requires, we believe, the highest standards of corporatebehavior towards

everyone we work with, the communities we touch, and theenvironment on which we have an

impact.

7.7. Strategic position

8.8. Whether the new entrant can get it ν Given the amount of capital investment needed toenter certain segment in house hold consumer products, the threat of new entrant is fairly

low. ν Verdict: limited supply powerThreat of new entrants: ν Suppliers that do a large

amount of business with these companies are also beholden to their customers. ν Consumer

product faces some amount of supplier power simply because of the cost they incur when

switching suppliers. ν Verdict: strong buyer power from retailers.Supplier power: ν

Considering buyer power retailers it is very high since they are able to negotiate the price

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with the companies. ν Consumer faces weak buying power because customers are

fragmented and have little influence on price or product. νII. Environment: a) Porter’s five

forcesBuyer power: Verdict: low threat of new entrants. νs products on the shelves of the

same retailers as its much larger rivals.

9.9. It does not cost anything for a consumer to buy one brand of shampoo instead of another,

making the industry quite competitive. ν Consumer in this category enjoy multitude of

choices. ν Verdict: high threat of substitutes.Degree of rivalry: ν Within the consumer product

industry, brand succeeds in helping to build a competitive advantage, but even the pricing

power of the brands can be eroded. νThreat of substitutes:

10.10. Deep roots in local culture νb) SWOTStrengthsHUL enjoys a formidable distribution

network covering over 3400 distributors and 16 millionOutlets. This helps them maintain

heavy volumes, and hence, fill the shelves of most outlets. TheNew sales organization

named one hll brings "household and personal care" and foodsDistribution networks

together, thereby aligning all the units towards the common goal ofachieving success. Hll has

been continuously able to grow at a rate more than growth rate forFMCG sector, thereby

reaffirming its future stronghold in Indian market.Project Shakti - Rural India is spread across627,000 villages and possesses a serious Distributionchallenge for FMCG cos. Hll has come

up with a unique and successful initiative wherein thewomen from the rural sector market hll

products, and hence, are able to reach the samewavelength as of the common man in

village. Apart from product reach, the initiative alsoCreates brand awareness amongst the

lower strata of society. This has brought about phenomenalresults. & markets & Wealth of

local knowledge νgreat understanding of consumer needs. & New innovative ideas ν

Exceptional high quality standard products. νinternational expertise helps it to be globally

competitive. & Excellent distribution network ν Highly professional management. νproducts.

& good relationship with the wholesalers & Continuous efforts to reduce cost νretailers. &

Good reputation νpass on benefit to consumers. & Good advertisements so as to make theconsumers aware of its products, uses νgoodwill in the market for its products. & price & also

have a lasting impression by catchy ads.

11.11. Ability to provide good quality goods to middle class at reasonable rates ν Excellent

brand making capability. It has 110 brands out of which 30 are power brands (ie, leader in

market share with high growth potential) ν & Excellent research ν Having Unilever as parent

company gives it a global presence. ν Ability to manage diverse business ν Excellent past

performances for a number of years. ν Good cash reserves. ν Continuous increase in earning

per share (EPS) ν Steady increase in the return on capital employed. ν Good returns by way

of dividend per share every year. Last year 5/- rs dividend per share. ν Very high market price

per share compared to the face value. νalso cater to the premium segment for the upperclass. & Excellent financial support from banks ν Using information technology to connect

supply chain ν Use of rs-net a web enabled customer management system to establish two

way connectivity with stockist. νdevelopment. & Good financial liquidity νfinancial institutions.

& Good export earnings νalso ability to complete projects on time.

12.12. WeaknessHULs market dominance, originating from its extensive reach and strong brand

presence,allowed it to raise the prices even as raw materials were getting cheaper. Hence,

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though thevolumes decreased, the margins grew, and company was able to earn more

profits. But highermargins attracted competition in areas of operations. HULs strategy

remained focused oncreating power brands and earning higher margins. It was not left with

any other option but to trycutting down the costs in order to protect volumes, if not increase

it.As shown in above figure, the key differentiators for an fmcg player are ability to call shots

andpricing power, and hll has shown weakness over both these factors. Hlls weakness was

itsinability to transform its strategies at the right time. They continued with the same old

strategywhich helped them gain profits but was not genuine in this changed environment.

Hlls riskaversion and market myopia led to stagnation of business, and ferocity of competition

forced itinto a defensive mode. Lack of pricing power in core business and absence of

growth drivershave put HUL on a deflationary mode.

13.13. Non FMCG products are losing ground ν High competition from established brands which

has resulted in reduction in profit margins. ν Diversification into various lines in which it does

not have much knowledge would be very risky proposition. ν & their market share &

Competition from its own brands ( lux, liril, lifebuoy )OpportunitiesOpportunities India is one

of the worlds largest producer of FMCG goods but its exports areminiscule as compared toproduction. Though Indian cos. Have been going global, their focus ismore towards Asian

countries because of the similar preferences. Hll is one of the top companiesexporting

FMCG goods from India. An expansion of horizons towards more and more countrieswould

help HUL grow its consumer base and henceforth the revenues.Opportunity in food sector -

the advent of modern trade has opened up greater opportunities ForHUL to diversify its

brand and strength its food division. It could look at introducing products.From its parents

stable like margarines and could also look at expanding its more range ofproducts. ν Unable

to make a big impact in rural areas. ν Working capital turnover is negative. νsales have been

declining.

14.14. Good source of revenue ν Growth potential is high for the power brands. ν Big untappedmarket available., especially the rural areas. νWell-placed to take advantage of future fmcg

growth - hll reach out 80% of 207 millionHouseholds in the country through various brands. It

has a very well-defined product portfolioSpread across many product categories. Penetration

levels for some major categories like skin-cream (22%), shampoo (38%), toothpaste (48%)

and processed foods, continue to remain lowofferings but great growth opportunities

products. & Due to good reputation it may experiment ν Its competitors don’t have the

financial banking like it so it can take advantage of this. νforeign exchange available by way

of exports of its products. & The food, culinary νintroduce new innovative products in the

market. & ice-cream category have a lot of growth potential available

15.15. High competition from established brands.(Nirma,Colgate, P νThreatsITC has reduced itsdependence on the cigarettes business - contribution of the core business Inrevenues has

come down from 87% in fy99 to 70% in fy05. Over a period of five years, ITC hasextended its

presence into areas like foods, retailing, hotels, greetings, agri, paper, etc. These

arebusinesses that can give it growth impetus in the long run. With ITC gaining momentum in

eachof these businesses, it is turning into a consumer monolith, and hence, the Greatest

threat toHULs business.Sski india has gone on to say, "we maintain out performer on itc with

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a price target of rs. 2200,while our under performer call on HUL remains unaltered (price

target of rs. 160)." & Competition from its own brands.( lux,breeze,liril) (pepsodent ν

Competition from unbranded products. νG ) & Its food, culinary, ice-cream segment ν

Negative working capital turnover may lead to short term instability. ν Poor monsoon leads to

poor growth due to lack of purchasing power by the rural areas. νclose up) & beverage

segment are facing reduction in sales & hence innovation required to meet threats of

competitors.

16.16. c) Market segments and strategic customers: STPIndia offers tremendous opportunities

to global companies. A brief look at the Indian landscapewould prove why - an estimated 1.2

million affluent households that is expanding at 20% a year,40 million middle income

households (earnings of US$20,000 to US$45,000 adjusted for PPP)growing at 10% a year,

more than 110 million households with earnings of US$7,500 toUS$20,000 (adjusted for

PPP) and more than 70% of the population below the age of 36. It is nowonder then, that

global brands are making a bee line to the Indian market to grab a share of thegrowing

pie.This alluring face of the Indian business landscape has another facet to it and that is the

presenceof highly discerning and demanding customers. In spite of the booming economyand theincreasing disposable income, Indian consumers are very cautious and clear in their

priorities.Consumers are still not ready to splurge on branded goods at premium prices.

Added to this is agrowing number of Indian brands that offer superior quality at affordable

prices. In such ascenario, global brands can win only if they attune themselves to the local

conditions.Unilever is a classic example of a global brand which has pioneered serving the

locals withproducts that address the local sensitivities. Unilevers Indian subsidiary Hindustan

Lever Limited(HLL) has been the leader in recognizing the tremendous opportunity lying at

the bottom of thepyramid - customer base that aspires to consume products but in smaller

quantities and at lesserprices. HLL literally invented the shampoo sachets - small plastic

packets of shampoo for as lessas INR 1 (USD0.022). This became such a rage among therural consumers that many otherbrands started offering products such as detergent, coffee

and tea powder, coconut oil and toothpaste in sachets. Even though the unit price was

higher, rural consumers were able to afford topurchase the smaller quantity at their

convenience.

17.17. HUL is the market leader in Indian consumer products with presence in over 20

consumercategories such as soaps, tea, detergents and shampoos amongst others with over

700 millionIndian consumers using its products. Sixteen of HUL’s brands featured in the

ACNielsen BrandEquity list of 100 Most Trusted Brands Annual Survey (2008). According to

Brand Equity, HULhas the largest number of brands in the Most Trusted Brands List. It has

consistently had thelargest number of brands in the Top 50, and in the Top 10 (with 4brands).The company has a distribution channel of 6.3 million outlets and owns 35 major

Indian brands Itsbrands include Kwality Walls ice cream, Knorr soups & meal makers,

Lifebuoy, Lux, Pears,Breeze, Liril, Rexona, Hamam and Moti soaps, Pureit water purifier,

Lipton tea, Brooke Bond (3Roses, Taj Mahal, Taaza, Red Label) tea, Bru coffee, Pepsodent

and Close Up toothpaste andbrushes, and Surf, Rin and Wheel laundry detergents, Kissan

squashes and jams, Annapurna saltand atta, Ponds talcs and creams, Vaseline lotions, Fair

and Lovely creams, Lakmé beautyproducts, Clear, Clinic Plus, Clinic All Clear, Sunsilk and

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Dove shampoos, Vim dishwash, Alableach, Domex disinfectant, Modern Bread, Axe

deosprays and Comfort fabric softeners.HUL doesn’t target a single line of customers but

customers of all segment are targeted by itsproducts. The variety of its products targets from

premium customers to the customers of ruralIndia. Its aim is to cater the local customers.

E.g. Hul have Dove Shampoo and soaps a product forthe premium customer and the

products like lifeboy and clinic plus for the lower end customers.Demographic variables:

essentially refer to personal statistics such as income, gender,education, location (rural vs.

urban, East vs. West), ethnicity, and family size. Hul has focused onthe customers of the

urban India with the premium products life Dove, Lux, Surf excel etc and atthe same time a

focused penetration can be seen in the rural market with economic products. Hulhas a strong

distribution network which is the main tool to reach to its customer. Even a smallretailer in the

rurals of India is having HUL product.

18.18. Behavioral segmentation: Some consumers are “brand loyal”—i.e., they tend to stick

withtheir preferred brands even when a competing one is on sale. Some consumers are

“heavy” userswhile others are “light” users. So HUL with the unique range of its products

have focused thisaspect too. All the products of HUL are available in small packs andsachets. The companyintroduces the sachet form especially for the rural market so the

people started buying even theexpensive products and HUL the untapped market of rural

was taken by HUL.HUL’s corporate position its “to meet the everyday needs of people

everywhere.”So a StrongDistribution was imperative.HLL’s distribution network is recognized

as one of its key strengths-- that which helps reach out its products across the length and

breadth of this vast country.HLLs products, manufactured across the country, are distributed

through a network of about7,000 redistribution stockists covering about one million retail

outlets. The distribution networkdirectly covers the entire urban population and the company

has also begun an e-tailing service,called Sangam, which can home-deliver on order by

phone or through the Net, a diverse range ofabout 5000 branded and unbranded products.The service is now available in select areas ofMumbai and Navi Mumbai, besides Thane.

19.19. III. Value Chain Process:HUL’s business processes and brands have an impact at every

stage of the value chain - fromsourcing raw materials, manufacturing, distribution, to

consumer use and disposal. Therefore,they implement changes in their processes that will

positively influence the entire value chain.The demands of a competitive market require a

solution that supports process-centriccollaboration internally and across its value

chain.Primary & Product Development: HUL has concentrated in a very wide way on the

product development factor. The product has been focused on various segments from low

price products to premium products. Most of our products are developed on a global scale by

following the policies and procedures laid down by Unilever. They have entered untappedmarkets and tried to focus on products which νSecondary Activities:

20.20. Service and Logistics:Hindustan Unilever, which once pioneered distribution in India, is

today reinventingdistribution - creating new channels, and redefining the way current

channels are serviced. Inthe process it is converging product availability, with brand

communication and brandexperience. Services and Logistics of HUL is very efficient. The

sales services of HUL arevery efficient as their supply chain management is very efficient.

Hindustan Unileversdistribution network is recognized as one of its key strengths. Its focus is



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not only to enable ν Procurement and Manufacturing:The procurement procedure undertaken

by HUL is followed by a combination of backwardintegration and with suppliers. HUL has its

own farms for the production of agri basedproducts. HUL has a strong network of suppliers

which supply materials for the productionpurpose. HUL has a speedy process of

procurement to make it reach to production as it isneeded to meet the growing demand. HUL

has its own 19 tea estates which produces tealeaves which are certified by Rain Forest

Alliance. HUL has a speedy process ofmanufacturing. Material consumed and Purchase of

goods is round about INR 8,901 crores in2009-10. HUL has its own production departments

which focus only on packing of goodsproduced. ν Inbound logistics of HUL is very efficient in

the manner it excels itself the form of storing in warehouses and in the form of maintain the

goods manufactured. The logistics management is very efficient with respect to rural areas.

The focus of HUL is to make available the goods to the shops and retail outlets which

supplies HUL products to its consumers. νcan satisfy the demands of all class of customers.

Their product ranges are health care,personal care, household care, beverages etc. They

have developed products which focus onall ranges.

21.21. Marketing Activities:It focuses on short supply chain for distribution. It also focuses tomeet the every need ofpeople everywhere. It also uses Direct selling channel, franchisee to

reach everyone e.g.Unicare. For long term benefits, HUL started Project Streamline in 1997.

They appointed6000 Sub-stockists that directly covers about 50,000 villages ν Outbound

logistics in the villages: HUL has also revamped its sales organisation in the rural markets to

fully meet the emerging needs and increased purchasing power of the rural population. The

company has brought all markets with populations of below 50,000 under one rural sales

organisation. The team comprises an exclusive sales force and exclusive redistribution

stockists, under the charge of dedicated managers. The team focuses on building superior

availability, while enabling brand building in the deepest interiors. HULs distribution network

in rural India already directly covers about 50,000 villages, reaching about 250 millionconsumers, through about 6000 sub-stockists. ν Outbound Logistics: The general trade

comprises grocery stores, chemists, wholesale, kiosks and general stores. Hindustan

Unilever services each with a tailor-made mix of services. The emphasis is equally on using

stores for direct contact with consumers, as much as is possible through in-store

facilitators. νeasy access to our brands, but also to touch consumers. HULs products,

manufactured acrossthe country, are distributed through a network of about 7,000

redistribution stockists coveringabout one million retail outlets. The distribution network

directly covers the entire urbanpopulation. & 250 million customers. Theyalso undertook

PROJECT SHAKTI, partnership with Self help groups of rural women &covers 5000 villages

in 52 districts in different states to make available HUL products inrural areas. HUL has alsoa portal named: ISHAKTI portal which focuses on the activities ofPROJECT SHAKTI. Shakti

has already been extended to about 15 states, 80,000 villages inwith 45,000 women

entrepreneurs and generating Rs.700-1000 per month to each woman.

22.22. Focus on product innovation/ relaunches/ development of new markets:Successful

relaunch of Lux helped volume growth in the soaps segment and market shareseems to be

stabilizing now. Fair νIV. Strategies of HUL in Competitive Environment: & Lovely winter

fairness cream was relaunched and thecompany is seeing good growth. In the hair & oil



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category, Dove and Clinic Plus grewstrongly and the former is now the No. 1 brand in

modern retail. Sunsilk was relaunched inNovember 2009 and growth momentum continues in

this category as well. Launch of Cifcontinues to see good momentum.Brooke Bond

Sehatmand was launched to attract down trading customers. The tea alsoprojects additional

health benefits and should lead to filling up of the void in the discount teasegment. Knorr

soup is registering good growth post relaunch. In the ice cream category,HUL launched the

Litchi Zap and 85 swirl parlours are in operation now, recordinggood growth in the segment. •

Recent price cut in Rin/ price war in laundry: Currently, the price cut in Rin is just a price

promotion/offer over the near term. This will be evaluated again. HUL took a 30% price cut in

Rin washing powder (to INR 50 from INR 70). Price cuts could also lead to upgrading to mid

segment from lower price points. Growing India opportunity means competition will increase.

However, HUL remains focused on leadership. It remains confident of growth over medium

and long term. Impact on HUL, if any, depends on cost scenario, competitive intensity. •

Market share improvement is the key objective over near term: HUL will focus on competitive

growth over near term. However, profitable growth remains the key objective over the

medium and long term. There is a change in strategy from a competitive and profitablegrowth to competitive growth over the near term. HUL is focused on speed to market and

determined to grow ahead of the market. • New products/ innovations which have done well:

Fabric conditioner, hair conditioner, OOH consumption of ice creams, water, premium skin

lightening.

23.23. • Raw material costs: HUL has forward cover for key commodities and keepsreviewing

the time lines. The company will relentlessly drive down costs.• Ad spends: The level of ad

spends will depend on competitive intensityand product innovations. Launches and

relaunches will keep happening. However, overthe near term, ad spends are likely to remain

high. Ad spends are unlikely to go back to10% of sales. • Down trading in tea and

detergents: HUL has introduced a new variant in low end of tea which is competitively pricedwith respect to regional players. The new brand is Brooke Bond Sehatmand and has been

introduced in UP, Bihar, and MP. Penetration is high in these two segments which partly

explains the down trading. Prices of tea as a commodity have shot up so uptrading

decreased from packets to lose consumption.

24.24. Strategic choices

25.25. In Cosmetics and personal care HUL acquired Lakme sin care through joint venture

50:50 first in 1995 and formed a marketing company as Lakme- Lever Company. It used all

its ready made dedicated nationwide distribution chain of lakme to market all its products.the

dedicated shelf spaces and salons in network greatly enhanced HUL ‘s launchof top line

products like Elizabth Arden, Rimmele and Calvin Klein.susequently HUL took over lakme in1998 trademarks/brands and manufacturing leaving lakme just a shell company.Joint

ventures:HUL derived the expansion route throught joint ventures also first being LAKME.

inCosmetics and personal care .a joint venture 50:50 in year 1995 enabled HUL to

haveready made dedicated nationwide distribution chain of lakme to market all

itsproducts.the lakme lever company successful thus launched products like Elizabth

Arden,Rimmele and Calvin Klein throght the dedicated shelf spaces and salons in

lakmenetwork later in 1998 all the trademarks /brands and manufacturing also merged



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intoHUL form the shell company lakme and greatly enhanced the network and market

shareof HUL in Indian market. ν In food and beverages section the takeover of UB group’s

Kissan Products and Dipy’s.brook bond was spearheading the acquisition which absorbed

Kissan. It was followed by Kothari general foods (KGF) instant coffee and Pepsi’s tomato

paste plant. ν Unilever considered takeovers as a prefeered moe inits strategy of rapid

expansion in all its major businesses. For e.g. in soaps and detergents industry it took Tomco

for consideration of 21 crores. The prices and benefits of Tomco constantly enhanced HUL s

position in market share. νV. Corporate level strategy:Strategy for expansion of

businessTakeovers:

26.26. HLL invested some 40 crores in skin care factory at silvasa in dadra and nagar haveli.

This unit became one of the largets manufacturing facilities ofr skin care products with

capacity to manufacture entire line and range of skin care compounds and Ingriediets.this

facilities enabled HUL to produce Fair♣ Start up route: backward integration strategy

νORGANIC GROWTH ROUTE & Integration strategy: • HUL like the parent company

UNILEVER carried out regrouping and integration of existing businesses and company in the

country into a single mega firm.It took two companies at a time – two companies whichenjoyed the closest synergy were merged into a single entity, and subsequently merged into

another company to form a larger group. This continued till a stage where there remained

one and sole single company in India - HUL i. Brookbond merger- two of the exixting HUL’s

company Doom Dooma India and tea estates India and two taken over companies Kissan

General Foods and Brook Bond were merged into one company. Lipton was also

subsequently merged into one with now BBLIL- brooke bond lipton india ltd. ii. Quest

international Indian ltd was merged with pond’s brand . QIL was engaged in perfumery and

flavours which enabled pond’s expertise in launching many unique perfumes and fine

fragrances. iii. HUL took over Stepan chemical ltd. And its detergent business (wheel) mainly

to create a low cost popular segment detergent base and mainly to compete with Nirmadetergents. Stepan Ltd was a BIFR company and HUL tok over 60 % νLovely cream and

lotion, shampoo bases and lotion bases for the brand Pond’s and lakme.

27.27. Fair ν The successful relaunch of Lux helped volume growth in the soaps segment and

market share seems to be stabilizing now. ν Focus on product innovation/ relaunches/

development of new markets HUL has undertaken hands on focus on developing new

markets and products brands.¬holding in equity merging chemical and detergents under

one roof, inspite of the wheel brand still licensed with Stepan chemicals.VI. Business level

strategy: & In the hair νLovely winter fairness cream was relaunched and the company is

seeing good growth. & Higher ad spending to prop up volumes and market share Hindustan

Unilever’s (HUL) first level of aggression was to increase ad spends from 12.5% in Q1FY10to 13.5% of sales in Q2FY10. Ad spend in Q3FY10 increased further 60bps Q-o-Q to 14.1%

of sales. The company is also trying to improve product/mix with¬ In the ice cream category,

HUL launched the Litchi Zap and 85 swirl parlours are in operation now, recording good

growth in the segment. Moreover, there were recent media reports that noodles will be

launched soon. ν Knorr soup is registering good growth post relaunch. ν Brooke Bond

Sehatmand was launched to attract down trading customers. The tea also projects additional



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health benefits and should lead to filling up of the void in the discount tea segment. ν Launch

of Cif continues to see good momentum. ν Sunsilk was relaunched in November 2009 and

growth momentum continues in this category as well. νoil category, Dove and Clinic Plus

grew strongly and the former is now the No. 1 brand in modern retail.

28.28. High investment in Advertising and Sales Promotions Several competitors increased

ASP (as % of sales) spending Q2FY10 and in Q3FY10 HUL thus also did not want to stay

behind the curve.¬ After several quarters, HUL has been successful in arresting the loss of

market share in Q3FY10. Its strategy to rejuvenate brands seems to be paying off as market

share in soaps increased 10bps, while volume share in laundry and bars increased 100bps

and 60bps, respectively Q-o-Q. ν HUL’s global management has emphasized the importance

of a “strong foothold in its own backyard” and the recent price cuts indicate the company’s

strong commitment to continue as market leader in the soaps and detergents segment, while

maintaining profitability. As a reminder, the company still holds 45% market share in toilet

soaps and 37% in washing powder as per industry data. ν In this high inflationary

environment, regional players will be under cost pressure as they do not have HUL’s

international sourcing acumen and scale. The company insisted that “competitive growth isthe No. 1 priority” and thus the company’s price cut in Rin (~2% of sales) and other

segments will help it record higher volume growth. ν Aggressive price cuts: HUL’s second

level of aggression was to cut prices sharply in the soaps and detergents category.¬superior

high growth margin products (through new product launches, rebranding, etc.) and this

predicts that HUL will be able to deliver volume growth and market share gain through this

strategy.

29.29. In skin care, Pond’s White Beauty and Fair ν Dove grew rapidly across shampoo and

conditioners, becoming the No.1 hair care brand in modern trade while Dove sachet has

captured ~5% of the market. ν New product launches (in ice cream and foods) as well as the

recent price cut in Rin are possible opportunities to uptrade customers to midsegment fromlower price points. ν Premiumization of customersHUL is focused on market development as

well as uptrading consumers in certain categories.¬ HUL has underperformed the Sensex

and BSE–FMCG Index in the past six months by 22% and 19%, respectively. Recent

correction has been overdone and these levels provide a good entry for investors looking for

defensive names and a likely turnaround in fortunes. At CMP of INR 237, the stock is trading

at P/E of 20.9x and 18.3x of FY11E and FY12E, respectively.. On relative return basis, the

stock is rated ‘Sector Performer’. ν The company is investing heavily in its brands, realigning

its sales and distribution strategies and it will start regaining market share, a trend which has

already begun in Q3FY10. ν Outlook and valuations: investors’ entry made easier¬ HUL is

the biggest FMCG player and has the scale to absorb increased ASP costs. Thereforeincreasing brand awareness for new and existing products improves brand equity in the

longer run and HUL believe this is the right strategy at this point of time. This should also

enable the company to focus on other high margin business such as personal products ν &

Lovely’s ‘winter fairness cream has received good response from the market.Clearly, HUL is

benefitting from the ‘premiumisation trend’ of Indian consumers.



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30.30. Apart from this, today most of its production lines have developed the capability of quick

changeovers to meet the market demand. ν For example, in some of its detergent factories

HUL are running twin track on single production lines.This has helped us to nearly double its

production thus enabling better customer service while improving operating efficiencies. ν

Supply chain managementHUL prioritise speed and flexibility in its supply chain to deliver

growth. HUL are doing thisthrough simple ideas.¬ Besides on the job training, they undergo

up to eight man-days of training every year. On a conservative basis, this implies a

staggering one lakh man-days of training across the organisation every year.The same

emphasis on skills training is extended sales and distribution network to have invest another

one lakh man-days of training every year. ν HUL does capability building across functions and

at every level of the organisation. For example, HUL has ‘skills-maps’ against which the

workforce in its manufacturing units and its sales force are benchmarked.¬ Instil values ν

Reward top performance ν Encourage diversity ν Build careers ν Train them well ν Get them

early ν HUL has institutionalized the process of attracting, developing and retaining top

talent. Some steps in this process are:¬VII. Operational level strategies

31.31. Similarly, HUL s merchandisers have been equipped with hand-held devices to improvein-store display of products so that its products are top-of-mind whenever a shopper makes a

purchase. ν All its salesmen are equipped with hand-held devices which help to improve on-

shelf availability of its products while also building assortment at individual store level. ν HUL

has deployed an end-to-end technology solution which helps reduce inventory cycles while

enabling optimum service levels. ν In 2009, HUL have enhanced this capability for analytics

and intelligent sales calls. As part of the thrust of further improving its direct coverage in rural

areas, HUL are leveraging geospatial aids extensively. HUL have also established an IT

enabled consumer interaction centre for addressing complaints and suggestions ν As part of

the backbone IT capability for Sales and Customer Development, HUL successfully

established a common transaction system that is used by all Redistribution Stockists and thatis fully integrated with Companys systems. Distributor salesmen use a Hand Held Terminals

as an aid for taking retail orders. ν IT¬ For example, HUL have identified the media elasticity

of each of its brand which helps us to optimise its advertising spends ν HUL have developed

advanced marketing mix modeling techniques that allow us to assess all the marketing levers

to drive growth and superior yields from marketing investment. ν Return on marketing

investments (ROMI) : An area where we drive continuous improvement ROMI is about

maximizing the effectiveness of its advertising, promotional and trade investments.¬ Supply

Chain service levels as measured by CCFOT (Customer Case Fill On Time) HULre the

highest achieved in the recent past. IT solutions based on SAP application systems led to

significant improvements in planning and logistics efficiencies ν32.32. HUL Distribution Network:HLL’s distribution network is recognised as one of its key

strengths -- that which helps reach outits products across the length and breadth of this vast

country. The need for a strong distributionnetwork is imperative, since HLL’s corporate

purpose is “to meet the everyday needs of peopleeverywhere.”HLLs products, manufactured

across the country, are distributed through a network of about7,000 redistribution stockists

covering about one million retail outlets. The distribution networkdirectly covers the entire



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urban population.In addition to the ongoing commitment to the traditional grocery trade, HLL

is building a specialrelationship with the small but fast emerging modern trade. HLLs scale

enables it to providesuperior customer service including daily servicing, improving their range

availability whilstreducing inventories. HLL is using the opportunity of interfacing more

directly with consumersin this retail environment through specially designed communication

and promotions. This isbuilding traffic into the stores while yielding high growth for the

business.An IT-powered system has been implemented to supply stocks to redistribution

stockists on acontinuous replenishment basis. The objective is to catalyse HLL’s growth by

ensuring that theright product is available at the right place in right quantities, in the most

cost-effective manner.For this, stockists have been connected with the company through an

Internet-based network,called RSNet, for online interaction on orders, despatches,

information sharing and monitoring.RS Net covers about 80% of the companys turnover.

Today, the sales system gets to know everyday what HLL stockists have sold to almost a

million outlets across the country. RS Net is part ofProject Leap, HLLs end-to-end supply

chain, which also includes a back-end system connectingsuppliers, all company sites and

stretching right upto stockists.RS Net has come as a force multiplier for HLL Way, thecompanys action-plan to maximise thenumber of outlets reached and to achieve leadership

in every outlet, by unshackling the field¬ This year, HUL rolled out a unique and innovative

concept of Perfect Stores as part of its endeavor to win with consumers at the point of sale. ν

33.33. 5/ Profile – January 2003 force to solely focus on secondary sales from the stockists to

retailersand market activation. HLL Way has also led to implementing best practices in

customermanagement and common norms and processes across the company. Powered by

the IT tools ithas further improved customer service, while ensuring superior availability and

impactfulvisibility at retail points.For rural India, HLL has established a single distribution

channel by consolidating categories. Ina significant move, with long-term benefits, HLL has

mounted an initiative, Project Streamline,to further increase its rural reach with the help ofrural sub-stockists. It has already appointed6000 such sub-stockists. As a result, the

distribution network directly covers about 50,000villages, reaching about 250 million

consumers.Distribution will acquire a further edge with Project Shakti, HLLs partnership with

Self HelpGroups of rural women. The project, started in 2001, already covers over 5000

villages in 52districts of Andhra Pradesh, Karnataka Madhya Pradesh and Gujarat, and is

being progressivelyextended. The vision is to reach over 100,000 villages, thereby touching

about 100 millionconsumers. The SHGs have chosen to adopt distribution of HLLs products

as a business venture,armed with training from HLL and support from government agencies

concerned and NGOs. Atypical Shakti entrepreneur conducts business of around Rs.15000

per month, which gives her anincome in excess of Rs.1000 per month on a sustainablebasis. As most of these women are frombelow the poverty line, and live in extremely small

villages (less than 2000 population), thisearning is very significant, and is almost double of

their past household income.For HLL, the project is bringing new villages under direct

distribution coverage. Plans are beingdrawn up to cover more states, and provide

products/services in agriculture, health, insurance andeducation. This will both catalyse

holistic rural development and also help the SHGs generateeven more income. This model

creates a symbiotic partnership between HLL and its consumers,some of whom will also

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draw on the company for their livelihood, and helps build a self-sustaining virtuous cycle of

growth. ManagementStyle: HUL has a totally centralized structure wherein all the decisions

are taken from the HQ.

34.34. Sustainability Strategy:Small individual actions multiplied with our large consumer base

will m¬ake a big difference incombating the issues society faces. For example, if one

household uses Surf Excel detergent, it canconserve two buckets of water per wash. A

million Indian households using Surf Excel can saveenough water for meeting the basic

hygiene needs of many Indians. Small innovations in HULbrands and business processes

can lead to a big difference in society as they touch the livesof two out of every three

Indians.In HUL, its Brands, customers and processes are the key drivers for sustainable

growth andimprovement in business processes. So HUL considers these factors as change

elements inbringing BIG DIFFERENCE to the nation through their contribution by involving in

the lives ofevery two out of every three Indians.

35.35. Strategy into action

36.36. VIII. Organizational structureUnilever represents another common organizational

structure; the hybrid form. This companyoperates with three divisional regions, two productsegments, and five functional segments.Unilever developed and implemented this

organizational structure for their company to improvecommunication and to take advantage

of resources that are available to them. Typically this kindof structure is organized in a top-

down manner. Once the executive level is satisfied with thestructure, it flows down to

management. In some cases the organizational structure may not bevisible, but judging by

actions and specified reporting protocol the structure is intact and in use.

37.37. High degrees of conflict ν Unclear cost and profit responsibilities ν Unclear job and task

responsibilities ν Length of time required for decision making νDisadvantages ν Allows for

dual dimensions ν Flexible ν Integrated knowledge νAdvantages

38.38. A comparison within structures:Most businesses choose to begin their internationalventures with exports. This is exactly thecase with unilever (ball at al, 2005, pg. 446). To

inexpensively test foreign markets andcompetition, unilever experimented with different

strategies and investments by exporting toAfrica over 100 years ago. Sunlight soap was the

first wrapped, branded soap in the region.Because their products were readily received,

unilever expanded their venture by building a soapmaking plant in the country just a few

years later. By the 1960s, the company had investments inhalf a dozen additional African

regions.

39.39. IX. Balance score cardHul follows a very good balanced score card system. Every

department right from marketing,logistics, sales, finance and human resource are internally

connected. It is very important for anorganization like hul to have an internal fixed process ina company which has very less profitmargin. Every department is very well connected. With

the indian retail boom started already hulhas identified the flaws in the system and has

successfully modified entire system of sales andmarketing internally.it has had good

competition from proctor and gamble but it has emerged outas a leader in the fight between

both of them.Hr strategy of hul is so good that the employee satisfaction is to the highest

level whichEnhances the motivation in the employees and allows them to be vry open in their

minds for theEffectiveness of the organization. X. Managing people:An organization that is

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serious about leadership development makes it a way of life. HindustanUnilever has been

consistently producing CEOs and corporate leaders for India INC for morethan 25 years now;

the leadership development process at Levers is more of a tradition,institutionalized over the

last many decades. With more than 1000 alumni sitting on boardsglobally, HUL is a source of

inspiration for many companies.The key tenets of this solid tradition have been --

commitment from top leadership, a robust andconsistent process, strong linkage between

individual development and level of exposure offered,mentoring, training – all fostered in a

culture of transparency and equal opportunity. Thecompany uses what it calls a “70-20-10”

model for developing its workforce: 70% of learninghappens on the job, 20% through

mentoring, and 10% through training and coursework.Leadership development is one of the

core tasks of the Management Committee at HindustanUnilever. “Senior management

devotes enormous time in the leadership development process,”says Leena Nair, Executive

Director HR. In every fortnightly management review meeting, talent

40.40. review session is an integral part of the overall agenda. Top management at Hindustan

Unileverinvests anywhere between 30 to 40% of their time in grooming and mentoring

leaders for thefuture. They get involved at various stages -- from redefining the talentidentification process, toidentifying talent, to grooming and coaching, to creating

opportunities for growth and exposure.The critical role of a “leader” at HUL is to create talent

and capability for the future. Eachidentified leader is expected to create leaders within and

draft their succession plan. “As Head ofHuman Resources, I need to ensure that I have

identified and am grooming a couple of peoplewho can take over my role today, another

couple who could take over my role in 2 to 3 years andin 5 to 7 years -- that is my

responsibility as a leader,” says Leena Nair.In the process of identifying leadership talent,

Performance and Behavior are considered equallyimportant. “You need to be delivering great

performance, but just that is not sufficient. Thedemonstrated behaviors or ‘Standards of

Leadership’ as we call them at Unilever, will alsodetermine your potential for future growthand success,” says Leena. Unilever uses theLeadership Differentiation Tool (LDT), a 3x3 grid

of performance vs potential to differentiateamongst its talent pool. These principles are

applied to around 5,000 people as part of talentassessment across the company.Information

on performance is taken from the appraisal review process & KRAs on the job,while

information on behaviors and potential is taken from multiple sources: a 360 degreeprofiling

(done once every two years), behaviors demonstrated on the job & GPS (Global

PeopleSurvey) results. GPS is an employee survey that captures insights into employee

engagementlevels across various teams, thus giving information and feedback at the

organizational level.LDT & the assessment of future potential of employees leads to

identifying High Potential (HP)and Sustained High Performers (SHP) talent pool. “We identify15% of our talent pool as HP &another 10% as SHP,” says Leena. From this point onwards,

this select pool receivesdifferentiated inputs when it comes to training and development,

career opportunities, coaching,compensation etc.The leadership development has a very

strong component of learning, as emphasized in the 10%of the 70-20-10 principle. The e-

learning options for employees are exhaustive. Senior leaders,

41.41. identified as High Potential also have access to training at Unilever’s exclusive training

center inLondon, Four Acres and programs at top business schools across the world.The

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process also incorporates job rotation- the 70% part of the learning principle. “People learnby

exposure to a variety of jobs, there are career paths defined based on the potential future

roleidentified for the individual,” says Leena Nair. Employees identified in the talent pool will

gothrough planned moves to ensure that they get the right skills and exposure required for

the nextlevel of responsibility. “We believe in building individual capability by providing

opportunitiesto deliver in a wide range of roles which get broader in scope and responsibility.

These are roleswith huge responsibilities and bring with them opportunities for personal

growth,” says Leena.There is also this interesting concept at HUL called “Hot Jobs for Hot

People”. Every year themanagement committee identifies around 50 jobs that could be the

most impactful jobs for theyear, either because it is an area of growth or a strategic pursuit

for the group. “We identify thehot jobs & hot people on an annual basis, roughly 7-10% of

jobs based on their complexity &impact to the business” says Leena Nair. “Hot Jobs are

opportunities with very high visibility inthe company and provide a chance to the employees

in HP/SHP pool to create an impact at theorganizational level. The HP/SHP pool is a

dynamic pool since about 20% of managers in thiswould move into new roles every year.

42.42. Finally, the last 20% is the coaching and mentoring program. This is accomplishedthroughaccess to coaches; both external and internal coaches are available depending on

the requirement.This also includes the role that Line Managers are expected to play as

coaches to their teammembers.In terms of compensation, “employees on the top right box of

the LDT could be receive between175% to 200% more shares that the rest of employees at

the same level”, says Leena Nair. Thiscompensation differential is also reflected in salary

revisions, where employees listed couldreceive double or more than the rest in their base pay

revision; similarly, for variable pay thedifference can also be 100% or more for talent pool

employees.Transparency is paramount for the success of the process. Managers in the

organization are givena capability card after the annual review cycle. This capability card

details all the output of thereview cycle and highlights the path for development for thecoming year.Leadership development is ingrained in the Hindustan Unilever culture and is

aligned to thevision of being a high performance workplace. “The differentiation created

around peopleidentified as leaders creates a culture where people are competitive, they want

to outperform,”says Leena Nair.The success of HUL leadership program has been proven

over decades. The leadership team nowtracks metrics like succession plan compliance,

listing cover, number of positions with ‘readynow’ candidates, number of successors for each

position, percentage of roles with femalesuccessors as potential options etc. The success of

the organization’s efforts in leadershipdevelopment is evident in its 80%+ succession plan

compliance for key roles. “90% of our seniorleaders are groomed internally.” Says Leena

Nair.Indeed, Hindustan Unilever is a model example of how taking talent and itsmanagementseriously across the organization can create a culture of performance,

excellence and leadership.

43.43. Indian employee’s aspect:More than 10 per cent of Hindustan Unilevers (HUL) managers

today work for Unilever invarious countries.A fact that led Chairman Harish Manwani to say

at the companys AGM a couple of weeks backthat HUL is the fountainhead for managerial

and leadership talent for industry in India [ Images].This stupendous success of Indian talent

for Unilever globally is in no small measure on accountof the strong foundations that were



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laid in the early years of the organisation, which iscelebrating its 75th year in India.The

Indianisation of the senior management staff took a while, but the process, chronicled by

ACompany of People, an HUL publication, is fascinating and shows how the erstwhile all-

Britishmanagement overcame its initial doubts about the ability of Indian managers.It was in

1961 that the late Prakash Tandon became the first Indian chairman of HUL (thenHindustan

Lever [ Get Quote ]). In retrospect, 1961 seems too late for the installation of the firstIndian

chairman in a company which had thought about this way back in 1931. The vision

wasarticulated by the then Chairman, Andrew Knox: "The India of today is only a chrysalis for

yetanother India which will develop tomorrow. An Indianised India is at hand and we must

adjustour policy. The part of the goodwill that rested merely on prestige and not on intrinsic

value willdisappear," Knox had said.Knoxs words, however, were taken with a lot of

scepticism at that point. After all, it required aspecial audacity to propose that the best way

for a British company to further its trading interestsin India is by relinquishing a bit of its

expatriate identity.The companys dilemma at that point was as follows: Could the Indian

managers, with theirrelative inexperience, guide the company ahead as its British owners

might have?Tandon captured this dilemma wonderfully in his book, Beyond Punjab[ Images ]. "The olderLever men shook their heads and doubted if it would ever be possible

to train locals to take overresponsibility completely. There were natural limitations which no

amount of training couldovercome, at least not in the foreseeable future".

44.44. This is despite the fact that Tandon was recruited in 1937 and recalls what the then

chairman ofLever Brothers India, W G L Shaw, told him during his interview: "I dont see why

you shouldnot sit in my chair one day."But people like Knox and Shaw were then in a

minority. The majority mindset ensured that theIndianisation process took a long time. It was

only in 1942 that Unilever "considered it desirablethat Indians who prove themselves

qualified to do so would enjoy privileges equal to theEuropeans they substitute."By 1944, 15

out of 57 people in the companys junior and senior management were Indians.Eleven yearslater, there were 97 Indians managers out of 149. But the perception about Indianmanagers

having "natural limitations" ensured that all the members of the ManagementCommittee and

eight out of 11 senior executives were Europeans. So when Andrew Knox visitedIndia in

1955, he recommended a rapid reduction in the number of Europeans to 40 -- roughly

aquarter -- within one-and-a-half years.This time, Unilever listened to Knox. In 1955, Lever

started its management training scheme forIndians. The quality of the training was

recognised by S H Turner, who became chairman of thecompany in 1959. Speaking at the

AGM that year, Turner said "these trainees are homespun, butexcellently spun."Meanwhile,

Tandon, who had already spent 24 years with the company, was feeling he had"come to a

halt on level ground". But an element of destiny pushed him to the top slot. The planhadbeen that when Chairman Hoskyns-Abrahall retired in 1957, he would be succeeded byVice-

Chairman S H Turner, who would later be followed by David Orr. But illness forced Turnerto

return to England [ Images ] in 1961, by when Orr had left the Indian management to join

theOverseas Committee. It was in June that year that Tandon was called to London

[ Images ] andoffered the chairmanship.Later that evening, Knox, by then chairman of the

Overseas Committee, invited Tandon for adrink and spoke to him about the problems he saw

ahead of the companys first chairman -- avision he had articulated 30 years ago. "It baffles

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us that even after your government hassanctioned a project, and we have approved it, you

take ages to do It. What takes nine months tobuild elsewhere takes you five years."

45.45. Tandon left England, taking a BOAC flight, to return to his new assignment in India. When

hetook over the helm of Hindustan Lever, there were 205 senior managers in the company.

Only 14of them were Europeans. And the five years that Knox talked about were soon

compressed toless than nine months.Hindustan Lever had started living up to its name --

finally.

46.46. XI. Pricing StrategiesHUL always believes in customer friendly products with major

emphasis on low cost overallwithout compromising on the quality of the product. They are

leveraging the capabilities andscale of the parent company and focusing on the value of

execution. The entire product portfoliois also being tweaked to include premium offerings

such as Ponds Age Miracle and doveshampoo in skin and hair care. HUL brought sachets

and small bottles which can be used bymiddle income group as well. In each of its products

all range starting from premium price to lowprice range products are arranged.

47.47. CONCLUSION Thus from the study of HUL through strategic model it can be understood

thatbeing so large and so extensive in brands it has allocated equal importance to eachof itsproduct and services. Moreover being so evident in each of its segment which is widely used

by Indian as well as world wide customers; HUL is not only focusing in major brands but also

on those brands which are not performing welland new products are brought into market by

viewing the importance of Innovation in this changing environment. As bees are treated as

social insects, committed to priortising the colony’s needsand working together. Such team

work and a passionate commitment to achieve a shared goal is what helps HUL create

milestones. EVERY SMALL ACTION MAKES A BIG DIFFERENCE

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