PROCTER & GAMBLE AND UNILEVER Competitor Analysis: P&G William Procter (a candle maker from England) and

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

Home Care, and P&G Beauty30 (See Appendix O, Value Chain Analysis, for an overview of P&G structure and primary activities). The business segment being examined in this report, P&G Beauty; encompasses personal cleansing, antiperspirants or deodorants, cosmetics, colognes, hair care, feminine protection, hair color, and skin care, includes five $1Billion brands, and achieved double digit growth for 2005, with a net profit margin of 13%, ROI of 12%, and ROE of 42% on 7.257M Sales31,32 (See Appendix Q, Financial Analysis, for a P&G company overview). P&Gs competitive advantages arise from several key factors, one of which is innovation. Spending $2B annually on R&D and deploying approximately 7,500 researchers in technical centers around the world, P&G is a leader in innovation.33 They have 29,000 patents, and over the past eight years, have introduced the #1 or #2 new non-food products in the US.34 Key to their success is knowledge sharing and cross-borders replication of innovations, reducing costs and quickly expanding the company knowledge and line offerings.35 Another factor contributing to their competitive advantage is their largescale operations and go-to-market capabilities that provide first mover advantage and limit the ability of competitors to copy ideas and replicate them.36 Additionally, economies of scale and scope in purchasing, distribution, business services and merchandising provide financial and trade advantages. Lastly, P&G is well known for its brand management and brand leadership capabilities, which are significant advantages for customer loyalty and market penetration (See Appendix O for P&G's RBV Analysis). Supplementing their innovations, facilitating their rapid go-tomarket capabilities, as well as their customer and partner management is P&G's significant use of IT and tracking systems, including CRM, EDI, and RFID, that improve R&D speed and capabilities, communications, information tracking

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

EPS (2.831 basic normalized EPS; 2.662 diluted normalized EPS 2005), as well as increase free cash flow, ROI, and profits, which their activities are focused on to accomplish Competitor Analysis: Unilever Unilever was officially formed in 1930, through the merger of Lever Brothers, a British soap manufacturer and Margarine Unie, a Dutch margarine manufacturer.44 It has since become one of the largest direct investors in the United States.45 Unilever is unique in that it has maintained a dual ownership structure since its inception, governed by an equalization agreement.46 Although the company has two legal entities as its parents, one Dutch (Unilever NV), and one British (Unilever plc), it has only one board of directors47 and reports one set of financial statements.48 Today Unilever is present in 150 countries, employs over 223,000 people, and has numerous wellknown brands, 12 of which each have worldwide sales exceeding 1 billion.49 Unilever has products for three markets, home, food, and personal care,50 which fall into 6 primary categories: home care (17%), spreads (12%), savory & dressings (21%), beverages (8%), ice cream & frozen foods (16%), and personal care (26%)51 (See Appendix Q for Unilever's structure and primary activities). In the area of personal care, one of the segments where Unilever competes directly with P&G, Women's Wear Daily ranked Unilever ($9.3 billion) the third largest cosmetics company behind L'Oreal ($17.7 billion) and P&G ($16.5 billion).52 Company-wide, P&G's sales are around $70 billion and Unilever's are around $50 billion.53 P&G's sales are nearly 40% greater than Unilever's, with approximately 40% of Unilever's employee headcount.54 Clearly there are fundamental operational differences between Unilever and P&G. Unilever's competitive advantages arise from strong brand recognition, such as Dove and Bird's Eye,

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

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

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

technology enhancements, and quickly responding to competitive advancements.69 Their comprehensive research network and $2B of research spending annually support their innovative focus, and they have received awards for supply chain management (#1 in 2004), are leaders in inbound logistics, and are technology innovators for improving efficiencies and reducing costs, such as with bar coding and wireless technologies.70 With their market knowledge and focus on efficiencies, they excel at "demand chain planning," identifying their "target market's requirements and designing the supply chaining backward from that point. 71 Additionally, P&G uses business development structures combining sales, logistics, finance, marketing, and IT to work with trade customers for ways to add value to the consumer, including Market Development Organizations in 80 countries, to provide focus and management for increasing customer concentration at the retailer and country levels, growing volume in developed and developing markets, and focusing on higher profitability lines for growth; Beauty and Health Care.72 P&G has been awarded #1 best category management and consumer marketing, another competitive advantage, and continues to concentrate on relationship management with customers and suppliers.73 Use of the Siebel CRM solutions has improved efficiencies and reduced costs, and needs to be further implemented beyond the US and Western Europe.74 With ongoing improvements in resource management, planned divesture and ongoing acquisition strategies, and continued maximization of their product innovations, marketing, and rapid go-to-market strategies, P&G should continue to meet (and exceed) its business goals.75 Global Strategy P&G has made substantial investments globally, and used acquisitions, joint ventures, and alliances to

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

Overall, P&G has a well-developed knowledge base and global mindset, and with innovation a key component of their global strategy, they have created the ability to implement distribution systems that can move innovations across borders.85 P&G has been an early adopter and substantial user of information technologies, and has been recognized by CIO Magazine for its Corporate Standards System application that revolutionizes the way their employees and partners collaborate, reducing costs, improving product quality, and getting products quickly to the marketplace.86 P&G has had success expanding globally with its strategies of acquisition, strategic partnering, innovation, and rapid go-to-market strategy (See Appendix V for the History of Global Expansion P&G).87 P&G has coordinated activities to provide a global network with all activities, structure and coordination driving for a global competitive advantage. However, P&G is at risk due to overexposure in the US and Western Europe, and needs to continue growing globally.88 It is estimated that 90% of the world's population will be in developing countries by 2010.89 P&G has been working to expand rapidly in these markets, and in fact, their presence in high frequency stores has grown 50% in 4 years, and in China alone, P&G serves 2000 cities and 11,000 towns.90 E-Business Strategy P&Gs CEO wants P&G to be known as the company that collaborates inside and out better than any other company in the world91 P&Gs strategy and e-business focus is three-fold: one-to-one communications, real-time and predictive business intelligence, and virtualization of business processes.92 Sales and distribution is through retail partners drug stores, grocery stores, and wholesale clubs (such as Costco). P&G does not have direct selling of its products through the internet, however,

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

developments.94 Creating this central library for accessing information allows for faster turnover and more efficient use of time and information. P&G also sells basic marketing and management techniques on the web site. Initiatives and investments such as these, in accordance with the Dynamic Resourcebased Model of Competitive Advantage,95 are valuable resources that enable P&G to increase its efficiency and effectiveness, and if complex enough, are difficult for the competition to easily imitate. Such early involvement and sizable investment in e-business as a tool reinforces P&G's position as a leader in the industry. From an end-user standpoint, customers can visit PG.com and sign up for P&Gs monthly emailed publication, Everyday Solutions, which offers tips, promotions, and free samples, or seek expert advice about personal care, household, health & wellness, baby & family, or pet care. P&G also has numerous internet sites for specific brands and products where customers can obtain information, coupons, and samples, as well as provide feedback, such as pampers.com, charmin.com, iams.com, tide.com and many others.96 Corporate Strategy P&G markets over 300 products in 160 different countries. P&G groups its business into two categories, foundation business and higher growth business. Foundation Business includes Fabric, Home, Baby, Family care, and snacks and coffee. P&G also has a Market Development Organization organized in seven97 geographical areas, and among others, a commercial product segment, P&G Chemicals, Health Sciences, and P&G Europe98 (See Appendix CC for list of businesses and product group descriptions). P&Gs portfolio includes other ventures related to its core products, i.e., P&G Chemicals, Inc. which

vertically integrates ingredients for some of its products and P&G Health Science which is a research lab for product development. P&G divested its juice business in August 2004, acquired Wella in 2003, and most recently, acquired Gillette.99 Internationally, in 2005 P&G acquired a Pharmaceuticals business in Spain, a Fabric care business in Europe and Latin America, and increased ownership in its Glad venture with the Clorox Company. P&G continues to both look for acquisition opportunities that are related to its core business P&G and Unilever 15 and develop new products, and they do it well. In a rapidly globalizing world, focusing on core expertise and collaborating with partners in innovative ways are the keys to growth100 which is exactly what P&G is doing. P&G is aware of their core products and business foundation, but also understands that the development of new products through innovation, research and development is the key to maintaining its competitive advantage. P&G should continue its current successful strategy.

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

where the emphasis is on branding, advertising quality and new product development. Unilever holds the world number one position in five of six food segments, and two of six segments in Home & Personal Care (skin and deodorants).103 Unilever holds the (world) number two position in two of the six Home and Personal Care segments (Laundry and Daily Hair Care) and is number three or less in Household Care and Oral Care.104 Company resources have been divided into two primary functions, one responsible for brand development, innovation, and brand strategy ("Categories"), and the other for managing the business, effective deployment of brands and innovations, and winning with customers ("Regions").105 Their commitment to R&D and innovation is clearly stated through their mission statement ("Add vitality to life") and their corporate purpose ("Vitality Innovation").106 The alignment of company resources with its strategy is an important component for sustaining a competitive advantage.107 With its resources aligned and a commitment to funding its significant R&D spending, Unilever should be well positioned to sustain and improve their current standings. Perhaps the greatest risk to sustaining their competitive advantage is the high SG&A costs of Unilever's current organizational structure. Global Strategy Unilevers global presence has deep roots, beginning with the founding companies (See Appendix W for a history of Unilevers global expansion). At various stages throughout the course of Unilevers history, there is evidence that the firm was driven by nearly all five global expansion imperatives -- the growth imperative, the efficiency imperative, the knowledge imperative, the globalization of customers, and the globalization of competitors108 -- in its efforts to globalize. However, Unilevers progress in

exploiting global presence may in fact be hampered by the lack of an overarching global strategy. With 223,000 employees in over 150 countries,109 Unilever is proud of its deep roots in local cultures and markets worldwide, which enables it to bring its wealth of knowledge and international expertise to local consumers. In doing so, Unilever labels itself as a multi-local multinational110 and truly believes that it is creating value through global expansion by adapting to local market differences and tapping the most optimal locations for activities, resources and product launches. In an effort to win Latin America, Unilever embarked on a number of transformational initiatives, with the goal of One ULA (Unilever Latin America) and a regional approach based on four cornerstones -- strategic leadership; innovation, market share and brand health; excellence in reaching consumers and customers; and implementing common processes, systems and shared services. In three countries in this region, Unilever is the market leader for four out of six primary HPC categories.111 With 44 operating companies in the Asia/Africa region, and brands sold in 98 countries, Unilever is the market leader in most priority categories in countries where it has a presence (key markets include India, South Africa, Indonesia, Thailand, Vietnam and the Philippines). In this region, Unilever places emphasis on: serving and delighting consumers; deepening partnership with customers; and building relationships with local communities.112 Unilevers current expansion plans call for a focus on the developing and emerging markets, where the company enjoys a long-established presence, has established consumer intimacy, and prides itself on affordability. Thirty-five percent of Unilevers turnover is in developing and emerging markets, products are tailored to different income levels, and Unilevers distributions systems reach deep into these areas.113

Unilever is aiming for seamless global development,114 with system-wide automation and data synchronization, among other things, to make this possible. Further, in at least one of its brands, it has opted to consolidate its advertising accounts into one global agency network -- an example of centralizing key business functions -- which, though cost effective, runs counter to being sensitive to local markets, and global box-ticking cant match intuitive knowledge of local markets.115 However, despite all the references that Unilever has made to global strategy and its acknowledged global presence, the company has not articulated an overarching global strategy that clearly outlines the alignment of all functions in the value chain to that strategy. While it has taken steps to adapt to local markets, and capture economies of global scale and global scope, as Trevor Gorin, press officer for Unilever has stated, Unilever needs to counter threats in specific markets and transplant learning's from one place to another.116 Unilever needs to take the next steps in ensuring global competitive advantage, by evaluating the optimality of its global network for each activity in its value chain,117 along each of three dimensions: activity architecture, locational competencies and global coordination. 118 E-Business Strategy Unilevers e-business strategy continues to evolve, from its early membership in a B2B marketplace, to participation in the GDSN, the implementation of RFID technologies,119 and the creation of an online buying system for making certain types of purchases from suppliers.120 The firms e-business strategy focuses primarily on the use of the internet and information technologies (IT) to achieve operational efficiencies in dealing with suppliers and in utilizing its distribution network. The firms e-business strategy is progressing, but its IT initiatives are not unique or rare within this industry, nor are they

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

between the leading supply side and demand side data pools (See Appendix AA). 129 Other examples of Unilevers forays into e-commerce and information technologies include: the implementation of radio frequency identification (RFID) tags,130 the Unilever Private Exchange (which provides secure links between operating companies and suppliers and customers systems and to external electronic marketplaces),131 Ariba, Unilevers online buying system (which enables purchases of non-production items to be made at volume-negotiated prices from selected suppliers)132 and ISIS, Unilevers supply management information system (which helps local, regional and global supply managers to gather and analyze information quickly, and make appropriate sourcing decisions)133 (For additional information about Unilevers utilization of information technology, see Appendix BB). Corporate Strategy Corporate strategy addresses the scope of the firm's activities, including the portfolio of businesses that a firm chooses to engage in, the locations or geography it will cover, and the amount of vertical integration it employs.134 Unilever's strategy is to have strong customer relationships at the local level, everywhere they do business, and to be seen as "a truly multi-local multinational".135 Unilever's activities are spread across six primary business categories, including home care, spreads, savory & dressings, beverages, ice cream & frozen foods, and personal care,136 and are sold in 150 different countries.137 As previously mentioned, Unilever is number one or two in all but three segments in which they compete. In the segments where they are not number one or two, they face intense competition and weak consumer spending, particularly in Europe.138 Further, the business is in an area that is relatively mature and segmented.139 It is in cases like this where companies might benefit from a divestiture of low-growth,

under-performing business units in order to free up resources to focus on higher growth, higher profit opportunities.140 (For additional details see Appendix U: Unilever SWOT Summary). A decision to divest the brands that are under-performing would not be foreign to Unilever; over the last several years the brand count has been reduced from over 1,200 to around 400 as part of an overall restructuring campaign.141 With a stated focus on developing and emerging markets, particularly in the area of personal care,142 divesting the European frozen foods units would free up resources, provide cash for additional debt reduction, and help reduce their high SG&A costs. Such a move would better position Unilever for sustained profitability, however, should Unilever wait too long before executing this divestiture, they risk a reduction in the value of the business due to further brand depreciation.143 Another option for the cash that would be generated through the divestiture of low-growth businesses would be to seek out potential acquisitions that offer growth or complimentary products, and would help consolidate a market. Consolidating markets can help provide sustained competitive advantage by reducing the overall level of competition.144 Conclusions and Recommendations This comparison clearly shows why P&G is a leader in the industry. Unilever can learn from P&G and further develop itself as a leader. Taking into consideration the analysis provided, Global Strategy Advisors believe that there is considerable opportunity for Unilever to strengthen its profitability and sustainability; however it will require strong discipline and careful analysis in terms of pursing appropriate acquisitions and divestitures, cost reduction programs, product and brand differentiation initiatives, and alignment of strategies. Unilever must remember to base its strategies and activities on

three fundamental questions: Who are our target customers? What value do we want to deliver to these customers? How will we create this value? Based on the results of our analysis presented in this report, we recommend the following plan of action for the next 5 years (with annual reviews of progress to date): Align Unilever resources to strategies; align strategies to optimize all value chain components. Regional Unilever strategies are individually strong; develop an overarching global strategy that provides consistent direction and ensures global synchronization and pooling of knowledge and best practices. E-Business strategy progressing; continue to invest in IT and internet solutions to achieve global efficiencies in negotiations, electronic transactions, and communications related to suppliers, distribution networks, and retailers/customers. Look for opportunities for vertical integration: cost savings and increased efficiencies can be created with this modification in the Unilever portfolio. Strengthen consumer research and brand differentiation. Continue consumer research efforts to ensure an understanding of the global marketplace. Continue consumer research to ensure that products and brands are meeting target customer needs, while identifying new opportunities. Utilize partnerships and alliances for market understanding and product development. Continue investments in R&D initiatives for increasing line extensions and new products; develop fallback plans should line extension efforts fail, and pursue increased efficiencies and cost reduction strategies. Balance differentiation with low costs and continue reducing SG&A costs. Market leadership cannot be sustained if your costs continue to exceed that of your competitors products. Seek opportunities to out-source, where economically feasible and ROI is highly probable.

 Aggressively pursue acquisitions and divestitures. Sell off under performing businesses or slower performing brands (European frozen foods businesses, for example). Identify potential acquisitions that would help consolidate markets and thereby enhance Unilevers market leadership. Use proceeds from divestitures to acquire businesses. Identification of optimal acquisitions is beyond the scope of this paper; a market analysis is required to identify best acquisition options that would complement existing brands and product lines, and promote market consolidation. Exploit and expand global presence. Conduct (or contract for the development of) in-depth global expansion study to identify risks/benefits of potential regions and focus on markets with growth opportunities. Exploit markets where consumption of household products is low; identify locations where first mover advantage is possible, and where that competitive advantage can be sustained. Explore increasing global research centers, but only when alliances/investments are aligned with Unilever strategies and where projected ROI will enhance pursuit of goals of profitability and sustainability. Seek alliances that may produce ways to increase speed-to-market and leverage global opportunities while increasing protection against exchange rate fluctuations. Continue to pursue strategic corporate alliances for R&D, when such alliances fit with and add value to Unilevers strategies and where ROI justifies cost. Increase focused advertising, especially for higher profit line and expansion in emerging countries. P&G SWOT Summary* Strengths Significant scales of scope and economies in their operations

 Excellent brand recognition and brand management Good product innovations Good overall performance Supply Chain excellence P&G and Unilever 66 Weaknesses Reductions in cash flow levels Mature Markets High customer concentrations High SG&A costs Low R&D expenditures Opportunities Good growth potential in the Health and Beauty segment Growth opportunities in developing countries and markets Growth potential of domestic retailers Threats High levels of competition Raw material and energy price increases Potential Gillette integration issues Unilever SWOT Summary* Strengths Strong brands and brand management Significant economies of scope and scale Abundant resources Weaknesses Very high SG&A costs Complex organizational structure Decreasing sales/revenues Opportunities Product portfolio simplification Developing markets in developing countries Significant debt reduction internal growth initiative Threats

 Foreign currency exchange fluctuations Competitors growing through acquisition Potential failure of internal growth initiative