There are various key business functions in organizations including finance, marketing, human resources and operations. Each of these business functions have specific objectives and goals that are set to ensure smooth running of the organization. The business functions are interdependent thus causing the objectives and goals of organizations functions to overlap. In operations, there are five key strategic operations performance objectives namely; speed, quality, flexibility, dependability and cost. This manuscript will discuss the application of the five key strategic performance objectives in Unilever.
Introduction to the Company
Unilever is a public limited company that was founded in 1930 by a merger of Margarine Unie (a Dutch margarine producer) and Lever Brothers (a British soap maker). From the merger of the two companies it is apparent that during establishment of the company, they mainly dealt with oils and fats based products such as margarine and soaps. Over the years, the company has made several corporate acquisitions mainly in the United Kingdom and in the United States of America that have helped it shift its focus from only oil and fat based products to health and beauty products (Wubs 2008, p. 154). The company is co-headquartered in the United Kingdom (Unilever House, London) and the Netherlands (Unilever N. V. Rotterdam). The Dutch- British conglomerate deals with the production of consumer goods. It specializes in the production of cleaning agents, foods, personal care products and beverages. Omo, Knorr and Rexona are the most renowned Unilever products and rake in a huge percentage of the revenue (Thain 2014, p. 424).
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The company’s products are distributed and sold in over 190 countries worldwide to approximately two billion consumers. The products target the whole population without a specific target market. With a wide range of products with varying prices and quantity, the products target from low income customers to high- end consumers, the young and the old, women and men alike. The company competes in eleven different market categories whereby it is a global leader in seven of the market categoriesUnilever has a wide range of competitors due to its wide range of products. Every product variation has a wide range of competitors. In food production, the largest Unilever competitor is Nestle which operates in 194 countries. Nestle is considered the largest food and drink company in the world when measured by metrics and revenues. It is an intercontinental company that has its headquarters in Switzerland and mainly deals with drinks and foods. In addition to Nestle, other world competitors include PepsiCo, Coca-Cola and P&G. (Thain 2014, p. 426).
In 2010, the conglomerate had an excess of 44.3 billion pounds in turnover and has been growing consistently since. In 2012, the company was declared the largest consumer goods company when measured by revenue. In 2016, the organization was estimated to have immersed over fifty two billion pounds and a net income of approximately five and a half billion pounds. In addition, the company is the world’s largest producer of food spreads. By 2017, the company has over 169,000 employees all over the world. In addition to its vast employee base, the company spends billions in advertisements and promotions; in 2010, in excess of 6 billion pounds were invested by the company into promotions and advertisements (Unilever Annual Report and Accounts 2016, p. 78). Due to Unilever’s massive scale, numerous operations management strategies are implemented by the company to ensure that the set operations objectives are achieved. As a product manufacturer and a product distributer to the retail market, Unilever has the mandate to make crucial operations objectives that will assist the management to direct and control the operations functions flawlessly.
Literature Review
As stated earlier, there are five principal strategic operations performance objectives as follows: quality, dependability, speed, cost and flexibility.
Quality
The first key operation objective ‘quality’ refers to the quality of all processes and the resulting products. This principle implies that regular assessments are done on the quality of all inputs, processes and the resulting outputs to ensure that improvements are continually made where necessary and possible. Quality as an operation objective is not independent and is typically associated with the price. Consequently, monitoring of quality of processes and products directly translates to the monitoring of pricing and consequently profit maximization (Thinking Business 2012, 1). Companies, whether dealing with manufacturing, distribution or the service industry have to monitor the quality of their inputs, the processes involved as well as the output produced.
Continuous monitoring of the quality of products and processes ensures that the company stays at par with other competitor’s products and the latest technological advancements. Technology changes on a daily basis and companies adopt these changes to improve the quality and quantity of production. Through monitoring of the quality of processes, input and outputs, a company is able to realize the areas to improve as well as ways to alter the operations to maximize their profit. However, as much as quality improvement is required and new technology has to be adopted, the company has to ensure that improvements are not done at the expense of the general profit margin or the environment. Adequate financial calculations have to be made to ensure that whatever change is made in operations do not negatively impact the profit margin.
Dependability
Dependability refers to an aspect of quality that is associated with the certainty, consistency and reliability of goods and services and the entire processes involved in production. Dependability of products leads to creation of a respectable reputation. In the running of a business, reputation is an invaluable intangible asset that adds much needed value to the business. For reputation to be created and maintained, the business has to produce good quality product with compromise at any given point. This implies that dependability as an operation objective is directly dependent on quality thereby directly affects profitability as well as the cash flow. Dependability creates a loyal customer base thus creating steady turn over. When dependability is reduced even by a onetime mistake, the reputation of the company will be tarnished and as a result makes the customer question the standard of the product thus may have long lasting effects (Thinking Business 2012, 1).
Speed
Speed, often termed as lead time, refers to the length of time taken by the producer or distributer to fulfill the order of the customer. Once again, speed as an operations objective is dependent on other objectives particularly cost. A reduction in general time taken to fulfill the customer need translates to an equal reduction in costs. Furthermore, when the time taken for the product to be made and be delivered to the customer is reduced, the speed at which the product can generate revenue for the company is increased thus increasing cash flow. In operations, speed can be successfully improved by eliminating bottlenecks in the overall production process. Bottleneck refers to any part of a process that makes it cumbersome, slow or causes delays (Thinking Business 2012, 2).
Cost
Cost refers to all the expenses that are associated with the processes in operations. In businesses, costs must be wisely managed to ensure margins created in profits are sufficient; this implies higher incomes as compared to the costs. Proper management of costs means that every cent spent in production produces maximum value for the business in terms of output and productivity. Focusing on cost reduces wastage to the outright minimum thus improving the utility of the available costs. Proper management of costs reduces the pricing of products thus reducing the market price for the customer (Thinking Business 2012, 2).
Flexibility
Flexibility refers to how fast a business can adapt to changes in the market. In business, there are times, often predictable, when consumer demand increases and in other times, the demand falls drastically. Flexibility as an operation objective refers to both the predictable and unpredictable cycles in consumer demand. Basically, flexibility refers to the ability of a product to vary as required by the customer to meet their varied demands. Flexibility can be achieved by product diversity whereby the organization produces a variety of the product that will meet the particular demands of the customer. Typically, services are more customized as compared to goods which are more standardized. This implies that, flexibility is of more concern in production of goods than of services. Flexibility is required in goods and service delivery as well as production. Quick and flexible delivery of products increases sales; reduce lead time and lower costs (Thinking Business 2012, 3).
Application of Concept
According to the official Unilever website, the organization states their focus as follows, “Focusing on performance and productivity, we encourage our people to develop new ideas and put fresh approaches into practice... We don’t measure success only in financial terms; how we achieve results is important too. We work hard to conduct our business with integrity- respecting our employees, our consumers and the environment around us” ( http://www.unilever.com.au/about/introductiontounilever/ ) in order for Unilever to achieve their specified goals, they need to take the operations objectives seriously. They address each specific operation objective as follows:
Quality
Unilever takes quality as an intrinsic phase of product design and production. According to statistics, complaints by customers fell by 11 percent in the 2010 financial year and market issues fell by 46 percent. This implies that the company monitored and improved quality of their products hence quantifiably translating to reduced costs. Improvement in quality of products can be attributed to the intense researches conducted by the company for development. For instance, in 2013, the company invested an approximate of 1.1 billion pounds in research and development (Unilever Annual Report and Accounts 2013, p. 30). The benefits of the research and consequent improvement in product quality can be proven by the steady increase in the company’s revenue over the years.
Dependability
Unilever applies the philosophy of ‘continuous improvement’ to ensure unceasing consistency in quality. According to the Geoffrey jones, Unilever defines continuous improvement as improving their processes a little better each and every day. They regard this as their means to sustainable growth. Through improving their daily activities, huge changes are not required thereby reducing the long term cost of production (Jones 2005, p. 362).
Cost
Unilever regularly uses rationalizations of supply chain and minimizations of wastes to reduce costs. In 2009/ 10 financial year, Unilever saved approximately 1.5 billion pounds in savings and cost reductions. Cost is further reduced by material use reductions and decline in environmental wastes. For example, in 2010, Unilever reduced water usage during production by 17 percent and reduced wastes by 3 percent (unilever.com).
Speed
Unilever increases lead time by rapidly introducing their brands into new markets. The company competes in eleven different market categories whereby it is a global leader in seven of the market categories. The advantage that the company has against its competitors is finding new gaps in the markets and filling them before any other competitor decides to. Furthermore, the organization introduces new brands into the market faster than their competitors. For instance, in 2010, the company introduced in excess of 100 new innovations into their markets globally. Other than new innovations, the company takes advantage of rebranding to introducing new brands into the market. The rate at which the company introduces the new products captures the market as well as increase cash flow. For example, it took only 49 days for Unilever to rebrand and rollout into the market a washing powder in India. During this period, the company managed to supply the goods to 25 states and sell over 650,000 tons of washing powder. According to this statistics, it is evident that the company has adequate speed in both production and distribution of products (Abhishek 2013, p. 3).
Flexibility
Through adequate research, Unilever is able to predict the peak and low seasons of the years thus alter their production and distributions of goods and services accordingly. This ability can be seen by the capacity that Unilever had during the 2009- 2011 global downturn. During this period, the company was able to stabilize its sales in the market and manage to create high profit margins to date. Although the company sold some of its brand during this period, such as the Sanex brand, it picked up rather quickly and managed to acquire a large stake (82 percent) of a Russian based beauty company in 2011 (Gorman, 2012).
Organization’s weakness
Unilever has adopted various policies over the years to enable them sustain their growth and accomplish the operations objectives. However, the company has been unable to maintain their reputation in the globe. Although the company has been able to consistently produce high quality goods, it has done so in the expense of the environment and the surrounding communities. For example, for years, Unilever use of palm oil has been accused of causing deforestation and damaging rainforests in Indonesia. Before this case ended, another accusation was made whereby Unilever was accused of supplying cereals spreads that were contaminated with salmonella (Greenpeace International 2003, p. 15). Over the years several law suits have been made against the conglomerate and every time a case is solved, another case arises. The environmental pollution has reduced the market belief in the company thus making them shift their loyalty to other environmentally friendly brands. In addition to this, regular lawsuits and legal fines that the company is made to pay increases huge amounts of avoidable costs.
The company claims that it spends millions of pounds yearly on research. This researches conducted will come in handy in ascertaining what are the environmental effects that the production of their goods and how they will best reduce these effects. The company has often accepted the mistakes they have committed and agreed to pay a lump sum of money to the affected parties. However, the company should not only accept their mistake but undertake measures that will ensure that these mistakes are not repeated. As much as palm oil is the basic ingredient needed for the production of most products, it would be wise for the company to look for an alternative ingredient or embark on measures that will promote afforestation after they have cut down the trees.
References:
Wubs, B. (2008 ). International Business and National War Interests: Unilever between Reich and Empire, 1939- 1945 . Rutledge: 154
Thain, Greg. (2014). FMCG: The Power of Fast Moving Consumer Goods . Design Pub: 426
Unilever Annual Report and Accounts. (2016): 78- 152. [Online] (Updated 2016) available at www.unilever.com/ara2016/downloads [accessed Aug. 12, 2017]
Thinking Business. (2012). Operations- Performance Objectives Demystified : 1- 7. Print
Rushton, Katherine. (2011). Unilever to shake up 5.1 billion pounds in global advertising spend. The daily telegraph. [Online] (Updated 2016) available at www.telegraph.co.uk/finance/newsbysector/diatechnologyandtelecoms/media/8954352/unilever-to-shake-up-5.1bn-global-advertising-spend.html [accessed Aug. 12, 2017]
Unilever Annual Report and Accounts. (2013): 28- 42. (PDF)
Takle, Abhishek. (2013). Unilever Raises Stake in Indian Unit to 67 Percent . Reuters
Jones, Geoffrey. (2005). Renewing Unilever: Transformation and Tradition. Oxford University Press: 362
Gorman, Steve. (2012). Unilever to buy Russia’s kalian in $694 million deal to aid emerging push . Bloomberg [Online] (Updated 2016) available at www.bloomberg.com/news/articles/2011-10-14/uniliver-agrees-to-acquire-82-of-russian-skincare-maker-kalina [accessed Aug. 12, 2017]
Greenpeace International. (2003). How Unilever palm oil suppliers are burning up Borneo: 15 (PDF)
