Strategy of Global Corporates in Emerging markets

Here we are presenting an actual case of HUL or Hindusthan Unilever as to how they are shaping themselves for Indian markets. HUL is not doing any radical restructuring in India, but what they are doing is fine-tuning their resources to meet future priorities. This is because they have to ‘shape up or ship out’ if they cannot organize their resources to meet future priorities.

Developing and merging (D&E) markets have emerged as one of the clear priorities where consumer products major Unilever wants to get its growth from. This is not surprising as the region’s contribution to Unilever revenues in the category has gone up to 44% from 36% in three years. D&E is where the economic center of gravity is shifting. HUL’s footprint of growth from D&E is higher than almost their entire peer group. Without a doubt, Unilever will match resources with priorities.

The resources allocation among others will come in the form of a higher expenditure on research and development (R&D) and advertising and promotion (A&P). For the Asia-Africa region, Unilever has spent almost half a billion extra for A&P in the last three years. That is a large chunk of the incremental support that Unilever is putting behind in its brands globally.

Unilever now has more R&D resources in Asia than what it had three years ago. Moreover, 30% of its R&D in Home and Personal Care (HPC) products having the bulk of the business is located in Asia. HUL are making a major shift of resources to match priorities, and is significantly higher than any of their competitors in terms of on ground presence of their R&D resources.

Most global companies are eying the growth opportunity in D&E market, from where 75% of global growth in population is going to come from, and Unilever is no different. Unilever has given a guidance of 3-5% growth or top line, which is expected to be in the upper end of 3-5% in 2008.

D&E will be a key growth driver, and so far as India is concerned, HUL have a huge role to play in this growth agenda. India contributes roughly 6% to Unilever’s revenues.

Plan for India:

Hindustan Unilever (HUL) has emerged as a large talent sourcing pool for the parent, globally. At present, 120 managers from HUL are posted across levels in various Unilever companies outside India. While this is a significant jump from what was being sourced in the previous years, HUL benefits by leveraging upon other resources from Unilever.

Global and regional leverage: HUL will not only leverage technology from Unilever, but will also benefit from Unilever’s regional focus. For instance, even local brands like ‘Hamam’ bath soaps which are not global in presence, will get a boost from Unilever’s global technology to be able to better compete in the market place.

Now HUL are focused on doing more active brand portfolio management where they are trying to make sure that in terms of innovation they are able to leverage global and regional scale behind each and every one of their brands irrespective of whether they happen to be global brands regional brands or local brands.. The company has identified growth opportunity in terms of market development, penetration and conversion of non users into users. HUL hopes to not only lead in a given market, but also lead the growth in the market.

Focus on operational excellence: To win in the marketplace, HUL plans to sharpen its capabilities and competitive edge.

Strategic clarity: In terms of strategic clarity, HUL will make choices where it wants to invest and where it does not want to invest. While UL has restructured some businesses in the past, it is also investing resources and people behind new businesses like water (Pure-it) and modern trade. This is because you have to shape your resources to meet your future priorities. That’s the name of the game.