CASE STUDY 1: TRIGGERING EVENT AT UNILEVER
Unilever, the world’s second largest consumer goods company, received a jolt in 2004 when its stock price fell sharply after management had warned investors that profits would be lower than anticipated. Even though the company had been the first consumer goods company to enter the world’s emerging economies in Africa, China, India, and Latin America with a formidable range of products and local knowledge, its sales faltered when rivals began to attack its entrenched position in these markets. Procter & Gamble’s (P&G) acquisition of Gillette had greatly bolstered P&G’s growing portfolio of global brands and allowed it to undermine Unilever’s global market share. For example, when P&G targeted India for a sales initiative in 2003–04, profit margins fell at Unilever’s Indian subsidiary from 20% to 13%.
An in-depth review of Unilever’s brands revealed that its brands were doing as well as were those of its rivals. Something else was wrong. According to Richard Rivers, Unilever’s head of corporate strategy, “We were just not executing as well as we should have.”
Unilever’s management realized that it had no choice but to make-over the company from top to bottom. Over decades of operating in almost every country in the world, the company had become fat with unnecessary bureaucracy and complexity. Unilever’s traditional emphasis on the autonomy of its country managers had led to a lack of synergy and a duplication of corporate structures. Country managers had been making strategic decisions without regard for their effect on other regions or on the corporation as a whole. Starting at the top, two joint chairmen were replaced by one sole chief executive. In China, three companies with three chief executives were replaced by one company with one person in charge. Overall staff was cut from 223,000 in 2004 to 179,000 in 2008. By 2010, management planned close to 50 of its 300 factories and to eliminate 75 of 100 regional centers. Twenty thousand more jobs were selected to be eliminated over a four-year period. Ralph Kugler, manager of Unilever’s home and personal care division, exhibited confidence that after these changes, the company was better prepared to face competition. “We are much better organized now to defend ourselves,” he stated.
Mission statements vary widely from one company to another. Why is one mission statement better than another? Using Campbell’s questions in this case as a starting point, develop criteria for evaluating any mission statement.
D I S C U S S I O N
1) Why has strategic management become so important to today’s corporations?
2) How does strategic management typically evolve in a corporation?
3) What is a learning organization? Is this approach to strategic management better than the more traditional top-down approach in which strategic planning is primarily done by top management?
4) Why are strategic decisions different from other kinds of decisions?
5) When is the planning mode of strategic decision making superior to the entrepreneurial and adaptive modes?
CASE STUDY 2: DO YOU HAVE A GOOD MISSION STATEMENT?
Andrew Campbell, a director of Ashridge Strategic Management Centre and a long-time contributor to Long Range Planning, proposes a means for evaluating a mission statement. Arguing that mission statements can be more than just an expression of a company’s purpose and ambition, he suggests that they can also be a company flag to rally around, a signpost for all stakeholders, a guide to behavior, and a celebration of a company’s culture. For a company trying to achieve all of the above, evaluate its mission statement using the following 10-question test. Score each question 0 for no, 1 for somewhat, or 2 for yes. According to Campbell, a score of over 15 is exceptional, and a score of less than 10 suggests that more work needs to be done.
1. Does the statement describe an inspiring purpose that avoids playing to the selfish interests of the stakeholders?
2. Does the statement describe the company’s responsibility to its stakeholders?
3. Does the statement define a business domain and explain why it is attractive?
4. Does the statement describe the strategic positioning that the company prefers in a way that helps to identify the sort of competitive advantage it will look for?
5. Does the statement identify values that link with the organization’s purpose and act as beliefs with which employees can feel proud?
6. Do the values resonate with and reinforce the organization’s strategy?
7. Does the statement describe important behavior standards that serve as beacons of the strategy and the values?
8. Are the behavior standards described in a way that enables individual employees to judge whether they are behaving correctly?
9. Does the statement give a portrait of the company, capturing the culture of the organization?