p&g

Global Strategy Advisors. . .

Challenging boundaries and beyond February 19, 2006 Unilever Unilever House, Blackfriars London EC4P 4BQ, United Kingdom Sent Via Electronic Mail RE: Strategy Analysis Ladies and Gentlemen: At the request of the Board of Directors of Unilever, we provide herein our analysis of the Personal Products Industry and a strategy analysis of both Unilever and its biggest competitor, Procter & Gamble. The enclosed analysis also provides recommendations for Unilever to improve its competitive advantage. Respectfully submitted, GSA

Procter & Gamble, Unilever

and the

Personal Products Industry

Global Strategy Advisors Lee Ann Graul, Sherry Henricks, Steve Olp and Charlene Strohecker

University of Maryland, University College AMBA 607

February 19, 2006

Table of Contents

1. Executive Summary i

2. Industry Analysis-Personal Products Industry 1

a. Introduction 1

b. Industry Defined 1

c. Historical Data Analysis 2

d. Major Competitors 3

e. Trends and Industry Outlook 3

f. Strategic Challenges and Opportunities 5

g. Industry Conclusions 5

3. Procter & Gamble and Unilever 6

a. Competitor Analysis: P&G 6

b. Competitor Analysis: Unilever 8

c. Strategy P&G 10

i. Business Level 10

ii. Global 11

iii. E-Business 13

iv. Corporate 14

d. Strategy: Unilever 15

i. Business Level 15

ii. Global 16

iii. E-business 17

iv. Corporate 19

e. Conclusions and Recommendations 20

4. Appendices 22

A. SIC Code 2844 and Industry Description 22

B. Global Personal Products Industry, Market Segmentation 24

C. Personal Products Industry, Five Force Analysis 25

D. Global Personal Products Industry, Market Share 30

E. Market Growth 31

F. Producer Price Index (PPI) for SIC 2844 32

G. Industry Growth Rate-Sales 33

H. Average Revenue Growth: Industry 34

I. Historical Data-Personal and Household Products 36

J. Household and Personal Prod. Industry, Ranking by Revenues, Profits 38

K. Company Ranking by Personal Care Revenues 39

L. Trend Line, Exports, SIC 2844 40

M. Trend Line, Imports, SIC 2844 41

N. Fastest Growing Markets 42

O. Value Chain Analysis, P&G and Unilever 43

P. P&G, RBV Analysis 51

Q. Unilever, RBV Analysis 53

R. P&G Financial Analysis 55

S. Unilever Financial Analysis 61

T. P&G SWOT Summary 66

U. Unilever SWOT Summary 67

V. History of P&G Global Expansion 68

W. History of Unilever’s Global Expansion 69

X. Dynamic Resource-Based Model of Competitive Advantage 71

Y. Unilever’s Early Use of the Internet, 2000 72

Z. Global Data Synchronization Network 73

AA. Safeway, Unilever Complete Global Data Synchronization Project 74

BB. Unilever Initiatives in Information Technology 75

CC. P&G Portfolio: Product Groups & Businesses 76

DD. Unilever Portfolio: Product Groups & Businesses 79

EE. P&G e-Business Network 84

5. Endnotes 85

P&G and Unilever i

Executive Summary

This paper provides an examination of the personal products industry as a whole, including a review of the historical market share, financial performance, competition, and industry trends. Additionally, a discussion of industry opportunities and challenges is conducted, presenting issues such as increases in the cost of raw materials and operations, a slow recovery of growth due to the economy, changes in government regulations, and the ever changing wants and needs of the consumer. These conditions create the need for companies to respond quickly, develop innovative new products, and find ways to become more efficient while reducing costs. The industry itself is an attractive one, having steady growth, emerging global markets, and repeat purchases (consumables products), but also requires achieving economies of scale, significant investing in R&D, and developing brand loyalty. An examination of two major competitors in this industry, Procter & Gamble (P&G) and Unilever reveals a very competitive industry that is not yet highly consolidated. P&G is an industry leader focused on innovation, knowledge sharing, improved efficiencies, cost reduction, and first mover advantage – i.e. quickly getting new ideas from conception to the shelf. Unilever is primarily focused on strong brand recognition, expansion of its product lines through R&D, and development of alliances. Both P&G and Unilever take advantage of economies of scale and global expansion into emerging markets. P&G’s strategy is flexibility for quick response to market demands and opportunities, development of strong product branding, and new product innovation. To achieve speed and flexibility, P&G has been a leader in e-business implementation, obtaining real-time information and utilizing global knowledge sharing externally from its users, suppliers and buyers, and internally for management and product development. P&G also maximizes its value by investing in global markets through acquisition, joint ventures, alliances, direct investment and direct marketing. P&G understands the importance of local market insights and successful management of people in foreign markets and subsidiaries and has achieved competence in these key aspects of globalization. From a portfolio perspective, P&G’s investments and business developments have remained in or related to the consumer products industry, maintaining its focus. P&G Chemicals and Health Sciences lab reflect the vertical integration of its current product line. While Unilever trails slightly behind P&G in most product segments, its similar focus on branding, product development and quality advertising has helped it hold its position. Unilever’s biggest challenges are in improving efficiencies to reduce costs, especially in its use of people and its time to market. Unilever’s costs and number of employees is much higher than P&G’s. As P&G takes a proactive roll in e-business and innovation, Unilever’s stance is a reactive one. Although Unilever seems to have expanded globally with some success, it seems to be lacking an overall global strategy. Learning and sharing information on a global scale is one of P&G’s strengths, but a weakness for Unilever. Unilever has improved its focus and resource allocations, as it divested itself of non-performers, allowing it to concentrate on performing products. Unilever needs to establish a focused strategy, and ensure activities drive toward strategy achievement. The recent corporate restructuring should continue, with ongoing efforts to achieve a corporate structure, which will maximize strategy achievement. The improvements in overall communications, processes, and market introductions and management will enable Unilever to remain competitive and grow as an industry leader. Additionally, recommendations provided herein include an alignment of strategies, a strengthening of brand differentiation, and continued investments in R&D, global expansion, advertising, and strategic alliances.

P&G and Unilever 1

INDUSTRY ANALYSIS – PERSONAL PRODUCTS INDUSTRY

Introduction

The objective of this report is to provide an overview and examination of the Personal Products

Industry – covering industry structure, competitors, past and future performance trends, and conclusions

about attractiveness for incumbents. Additional objectives include a competitor analysis, comparing

Procter & Gamble and Unilever, an examination of their strategies, and recommendations for future

growth and sustainability. Our analysis includes global operations, financial results, market share and

current initiatives. Information for these analyses was derived from library databases, internet searches

and company websites.

Industry Defined

The industry segment chosen for this analysis has been assigned the SIC code 2844 entitled Perfumes,

Cosmetics and other Toilet Preparations. Companies within this industry have referred to this market

segment as the Personal Products Industry. A complete list of the products included in this industry has

been provided in Appendix A. The SIC 2844 category, when converted to the new North American

Industry Classification System (NAICS) was further divided into 2 categories, 325620 (Toilet Preparation

Manufacturing) and 325611 (Soap and Other Detergent Manufacturing).

The global personal products market encompasses fragrances, hair care, make-up, oral hygiene,

personal hygiene, and skincare products. This highly competitive industry will “derive its future

performance relative to global consumer spending patterns and raw material prices.”1 In 2005, the

leading revenue source in this market was hair care, accounting for 25.5 percent of the global value (See

Appendix B).2 This industry has recently been affected by rising commodity costs which, coupled with

increased marketing spending, put significant pressure on operating margins and earnings in 2005.

Earnings per share (EPS) were expected to improve by 2006, as commodity costs began to stabilize.3

For an analysis of the Industry Structure, Porter's 5 Forces Model4 has been used and provided in

Appendix C. The result of this analysis reveals strong barriers to entry, moderate bargaining power of

http://www.census.gov/epcd/www/naics.html

http://www.census.gov/epcd/www/naics.html

P&G and Unilever 2

buyers and suppliers, considerable threat of substitutes, and substantial rivalry among existing companies.

This industry favors incumbents.

Historical Data Analysis

The CR4 analysis provided in Appendix D shows a total of only 28.7 percent of the market being

satisfied by the top four producers in the industry. Therefore this industry as a whole is not considered

highly consolidated. The market volume has shown an average growth of 2.2 percent for the four year

period, 2000 – 2004. (Actual rates are provided in Appendix E.) This reflects a slow recovery from the

downturn in the economy in the early 2000s, which followed an average 5 percent per year growth

between 1996 and 2000.5 Market growth is expected to continue to grow steadily over the next five

years, with a projected average of 2.7% between 2006 and 2009.6 The Producer Price Index also shows a

slow but steady growth over the past ten years (see Appendix F).

The total value of industry shipments has steadily increased from $19.7 billion in 1994, $22.8 billion

in 1997 to $28.8 billion in 2001.7 The market’s weighted average growth in sales for the past 5 years was

9.95% and for the past three years increased to 11.29%8 (See Appendix G for details). Over the past 3

years, the industry average EPS grew by 19.1% 9 (See Appendix H).

The industry has seen slight increases in gross margin, operating margin, and sales when comparing

the five-year industry average to the most recent one-year average. In most cases, these figures have

exceeded the S&P 500’s averages (See Appendix I). The industry average Return on Assets (ROA),

Return on Equity (ROE) and Return on Investment (ROI) have decreased when comparing the same time

periods, however they still exceeded the S&P 500 Average. The Global Strategy Advisors believe these

decreases were caused by higher operating costs (raw materials and fuel) in the past year and/or required

larger investment in assets or R&D since the Liquidity and Solvency Ratios were below average for the

same time periods. Such factors, however, will vary by company and a more in depth analysis of the

industry leaders would need to be made.

P&G and Unilever 3

Major Competitors

Fortune Magazine and Reuters group “personal products” together with “household products” when

analyzing industries. As of April 2005, Procter & Gamble (P&G) was the leading company in terms of

revenues and profits in the Household and Personal Products Industry, followed by Kimberly-Clark,

Colgate-Palmolive, Gillette and Avon Products (See Appendix J). The October 2005 acquisition of

Gillette by P&G10 solidifies P&G’s number one position on this list. Competitor ranking of the personal

products industry (not combined with household products) as measured by market share is led by L’Oreal

(8.8%), followed by Procter & Gamble (8.5%)11 (See Appendix D for an industry market share overview).

When competitors in the Personal Care Industry are ranked by revenues however, the top three were (1)

P&G, (2) L’Oreal and (3) Unilever (See Appendix K for rankings by revenue).

Competitive advantage in mature industries often manifests itself in cost advantage from economies of

scale or experience and differentiation advantage through brand loyalty12 – all of which are characteristic

of the personal products industry. Companies have instituted cost reduction programs (including the

creation of manufacturing efficiencies, renegotiated supply contracts, and employee and plant layoffs) to

improve margins during the last few years. Facing stiff competition from private labels, personal

products companies rely on a high turnover of products in order to improve performance, thus requiring

the investment of significant resources into R&D. Additionally, many firms view emerging markets

(such as China and India, where consumption of household products is low) as an opportunity to expand

revenues13 (For fastest growing markets in cosmetics and toiletries, see Appendix L).

Trends and Industry Outlook

The household products and personal care segments are expected to be the stronger within the US

consumer products industry – entering 2006 with a strong financial profile. These segments are

characterized as having well-supported, strong brands and superior product development, commanding

premium pricing in sectors that are less cyclical.14

Two events that dominated the landscape in 2005 for consumer product companies will also have an

impact on future performance – the continuation of raw material cost escalations, which in turn prompted

P&G and Unilever 4

price increase announcements, and significant mergers or pending mergers - among them, P&G’s

acquisition of Gillette. Many companies instituted cost reduction programs, but in the end, few

companies were able to fully offset raw materials cost escalation. In addition, industry competition in the

form of advertising has ratcheted upward, largely due to the strong influence of P&G in 2005.15

Changes affecting the demographics and demands of the consumer, such as the aging baby boomers

causing an increase in the demand for age-defying skin care and hair color, or animal rights activists

protesting animal testing, directly affect the industry. The growing need for compliance with more

stringent environmental regulations, and the consumer demand for natural and organic products, have also

changed how products are produced, requiring additional investment and expanded product lines.

Keeping up with changing wants and needs of the consumer in order to remain competitive in this

industry increases the need for investment in research and development. Globalization and the growing

ethnic population in the US will also continue to broaden the industry and create new market segments.

Not only the US economy, but also the global economy, will affect sales for items not considered a

necessity, such as some cosmetics, perfumes, and household items. The consumer will continue to be

influenced by price and convenience for most products. “There is a close correlation between a country’s

consumption of soaps and detergents and its standard of living.”16

Trends in how consumers shop also affect the industry. Beginning in the 1990s into the 2000s,

consumers began purchasing these types of products at mass discount centers, such as Costco and Sam’s

Club, rather than at upscale department stores.17 These macro-level factors – environmental regulations

(government), the global economy, the cost of raw materials, global competition, innovations in research,

consumer demographics, and the ever changing wants and needs of the consumer – will continue to

impact the performance of companies in this industry. Companies expected to fare well in the future are

those with strong momentum from earlier and successful restructuring actions whose cost savings are

ramping up quickly, with less exposure to specific raw materials, and with balance sheet flexibility.18

P&G and Unilever 5

Strategic Challenges and Opportunities

As mergers and acquisitions continue, this industry will likely become more consolidated, which,

along with strong entry barriers and substantial rivalry among existing members, will favor sustainability

for incumbents. Cost and availability of raw materials may continue to pose a threat to smaller firms

lacking adequate capital reserves to compensate for additional costs. Future performance in this industry

will be tied to global consumer spending patterns and raw material prices. Expansion into global markets

will be important for future growth. As is seen by the trends in imports and exports provided in

Appendices L and M, expansion into the global market is not new to this industry. “Low consumption of

household products in emerging markets – such as China and India – represents an opportunity for

companies to expand their revenues and escape from the stale performance of their home markets.”19

The fastest growing and emerging markets include the Pacific Rim20, Latin America, and Eastern

Europe21 (see Appendix N).

While the Asia-Pacific area is noted to be a key emerging market for this industry, one of the main

hindrances in this area has been low income.22 Products designed for areas with higher incomes may not

be suitable for emerging markets; thus companies desiring to expand into this region will need to invest in

development of products that can be priced more affordably. A global expansion study would be

recommended to determine which countries would provide the best opportunity.

The expanding US Market for natural and organic personal care products is an opportunity for

industry to provide products for a growing consumer want and need. Most US Consumers are willing to

pay, and are used to paying, a higher price for natural and organic products. If the personal products

industry can find ways to produce natural and organic products at reasonable costs, the profit margins on

such products are expected to be greater than their non-organic counterparts.

Industry Conclusions The attractiveness of the Personal Products industry includes such elements as steady growth in

consumer demand and repeat purchase of the products, since most are consumables. Some larger current

producers are achieving economies of scale, brand loyalty, and first mover advantage. Other smaller

P&G and Unilever 6

producers have developed a market niche for a specific consumer need and have been successful. The

challenges in this industry include taking advantage of economies of scale in order to compete on price

with current companies, keeping up with changes in customer preferences and government regulations

(e.g., labeling, chemical handling, and environmental impact), and the investment in R&D required to

stay ahead of the competition with new product innovation.

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-law’s 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

P&G and Unilever 7

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&G’s 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 large-

scale operations and go-to-market capabilities that provide first mover advantage and limit the ability of

competitor’s 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-to-market 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,

P&G and Unilever 8

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-to-market 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 (See Appendix R for financials

on P&G and Appendix T: P&G SWOT Analysis).

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 well-

known 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%),

P&G and Unilever 9

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

P&G and Unilever 10

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

P&G and Unilever 11

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

P&G and Unilever 12

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 360-degree 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

P&G and Unilever 13

E-Business Strategy

P&G’s CEO wants P&G “to be known as the company that collaborates – inside and out – better than

any other company in the world”91 P&G’s 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-to-business (B2B) side.

P&G’s 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

P&G and Unilever 14

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 Resource-

based 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&G’s 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&G’s 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 growth”100 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.

P&G and Unilever 16

Global Strategy Unilever’s global presence has deep roots, beginning with the founding companies (See Appendix W

for a history of Unilever’s global expansion). At various stages throughout the course of Unilever’s

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, Unilever’s 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 multinational”110 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

Unilever’s 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 Unilever’s turnover is in developing and emerging markets, products

are tailored to different income levels, and Unilever’s distributions systems reach deep into these areas.113

P&G and Unilever 17

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 can’t 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 Unilever’s 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 firm’s 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 firm’s 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 e-commerce – 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 cost-effective 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

Unilever’s 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, Unilever’s online buying system (which “enables purchases of non-production

items to be made at volume-negotiated prices from selected suppliers”)132 and ISIS, Unilever’s 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 Unilever’s utilization of information technology, see Appendix BB).

P&G and Unilever 19

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

P&G and Unilever 20

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.

P&G and Unilever 21

• 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 Unilever’s 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 Unilever’s strategies and where ROI justifies cost.

• Increase focused advertising, especially for higher profit line and expansion in emerging

countries.

P&G and Unilever 22

APPENDIX A: SIC CODE 2844 AND INDUSTRY DESCRIPTION

2844 Perfumes, Cosmetics, and Other Toilet PreparationsEstablishments primarily engaged in manufacturing perfumes (natural and synthetic), cosmetics, and other toilet preparations. This industry also includes establishments primarily engaged in blending and compounding perfume bases; and those manufacturing shampoos and shaving products, whether from soap or synthetic detergents. Establishments primarily engaged in manufacturing synthetic perfume and flavoring materials are classified in Industry 2869, and those manufacturing essential oils are classified in Industry 2899.

• Bath salts • Bay rum • Body powder • Colognes • Concentrates, perfume • Cosmetic creams • Cosmetic lotions and oils • Cosmetics • Dentifrices • Denture cleaners • Deodorants, personal • Depilatories, cosmetic • Dressings, cosmetic • Face creams and lotions • Face powders • Hair coloring preparations • Hair preparations: dressings, rinses, tonics, and scalp conditioners • Home permanent kits • Lipsticks • Manicure preparations • Mouthwashes • Perfume bases, blending and compounding • Perfumes, natural and synthetic • Sachet • Shampoos, hair • Shaving preparations: e.g., cakes, creams, lotions, powders, tablets • Soap impregnated papers and paper washcloths • Suntan lotions and oils • Talcum powders • Toilet creams, powders, and waters • Toilet preparations • Toothpastes and powders • Towelettes, premoistened • Washes, cosmetic

Retrieved February 7, 2006, from http://www.osha.gov/pls/imis/sic_manual.display?id=614&tab=description

P&G and Unilever 23

APPENDIX A, pg 2: GLOBAL INDUSTRY RANKING BY SIC Current Industry: 2844 - Perfumes, Cosmetics and Other Toilet Preparations Source: Business & CO Resource Center, Toiletries and Cosmetics." Encyclopedia of Global Industries. Online Edition. Thomson Gale, 2006.

Elf Aquitaine Paris La Defense $124,532.10 M Sales

Nestle S.A. (NSRGY) Vevey $63,563.20 M Sales

Sunstar Inc. (4913) Osaka $59,038.00 M Sales

Procter and Gamble Co. (PG) Cincinnati, Ohio $56,741.00 M Sales

Unilever London $53,674.00 M Sales

E. Merck Darmstadt $49,882.00 M Sales

Johnson and Johnson (JNJ) New Brunswick, New Jersey $47,348.00 M Sales

Abbott Laboratories (ABT) Abbott Park, Illinois $19,680.00 M Sales

Pharmachim Holding Sofia $19,563.40 M Sales

Sanofi-Aventis (SNY) Paris $19,024.70 M Sales

L'Oreal SA (LORLY) Clichy $18,317.00 M Sales

Wyeth (WYE) Madison, New Jersey $17,358.00 M Sales

Christian Dior S.A. Paris $17,219.90 M Sales

LVMH Moet Hennessy Louis Vuitton S.A. (LVMHF) Paris $17,108.00 M Sales

CP and P Inc. Atlanta, Georgia $16,083.00 M Sales

Hayel Saeed Anam Group of Cos. Taiz $12,157.90 M Sales

IPP Ltd. Dar es Salaam $11,549.50 M Sales

Colgate-Palmolive Co. (CL) New York, New York $10,584.20 M Sales

Gillette Co. Boston, Massachusetts $10,477.00 M Sales

Kao Corp. (KCRPY) Tokyo $8,723.80 M Sales

Unilever United States Inc. New York, New York $8,000.00 M Sales

http://galenet.galegroup.com.ezproxy.umuc.edu/servlet/BCRC?locID=umd_umuc&srchtp=ind&c=3&cc=4&iType=sic&mode=i&docNum=I2501600038&bConts=16163&vrsn=149&rcd=sic&icd=2844&ste=85&tab=1024&cind=2844+-+Perfumes+Cosmetics&tbst=tsIS&ccmp=Procter+and+G

http://galenet.galegroup.com.ezproxy.umuc.edu/servlet/BCRC?locID=umd_umuc&srchtp=ind&c=1&cc=1&iType=sic&mode=c&docNum=DC1073662&bConts=16163&vrsn=149&rcd=sic&icd=2844&ste=70&tbst=tsIC&tab=1&cind=2844+-+Perfumes%2C+Cosmetics+and+Other+Toilet+Pre

http://galenet.galegroup.com.ezproxy.umuc.edu/servlet/BCRC?locID=umd_umuc&srchtp=ind&c=2&cc=2&iType=sic&mode=c&docNum=DC99&bConts=16163&vrsn=149&rcd=sic&icd=2844&ste=70&tbst=tsIC&tab=1&cind=2844+-+Perfumes%2C+Cosmetics+and+Other+Toilet+Preparat

http://galenet.galegroup.com.ezproxy.umuc.edu/servlet/BCRC?locID=umd_umuc&srchtp=ind&c=3&cc=3&iType=sic&mode=c&docNum=DC217&bConts=16163&vrsn=149&rcd=sic&icd=2844&ste=70&tbst=tsIC&tab=1&cind=2844+-+Perfumes%2C+Cosmetics+and+Other+Toilet+Prepara

http://galenet.galegroup.com.ezproxy.umuc.edu/servlet/BCRC?locID=umd_umuc&srchtp=ind&c=4&cc=4&iType=sic&mode=c&docNum=DC307096&bConts=16163&vrsn=149&rcd=sic&icd=2844&ste=70&tbst=tsIC&tab=1&cind=2844+-+Perfumes%2C+Cosmetics+and+Other+Toilet+Prep


http://galenet.galegroup.com.ezproxy.umuc.edu/servlet/BCRC?locID=umd_umuc&srchtp=ind&c=6&cc=6&iType=sic&mode=c&docNum=DC10&bConts=16163&vrsn=149&rcd=sic&icd=2844&ste=70&tbst=tsIC&tab=1&cind=2844+-+Perfumes%2C+Cosmetics+and+Other+Toilet+Preparat




http://galenet.galegroup.com.ezproxy.umuc.edu/servlet/BCRC?locID=umd_umuc&srchtp=ind&c=10&cc=10&iType=sic&mode=c&docNum=DC462057&bConts=16163&vrsn=149&rcd=sic&icd=2844&ste=70&tbst=tsIC&tab=1&cind=2844+-+Perfumes%2C+Cosmetics+and+Other+Toilet+Pr

http://galenet.galegroup.com.ezproxy.umuc.edu/servlet/BCRC?locID=umd_umuc&srchtp=ind&c=11&cc=11&iType=sic&mode=c&docNum=DC198&bConts=16163&vrsn=149&rcd=sic&icd=2844&ste=70&tbst=tsIC&tab=1&cind=2844+-+Perfumes%2C+Cosmetics+and+Other+Toilet+Prepa




http://galenet.galegroup.com.ezproxy.umuc.edu/servlet/BCRC?locID=umd_umuc&srchtp=ind&c=15&cc=15&iType=sic&mode=c&docNum=DC1073801&bConts=16163&vrsn=149&rcd=sic&icd=2844&ste=70&tbst=tsIC&tab=1&cind=2844+-+Perfumes%2C+Cosmetics+and+Other+Toilet+P





http://galenet.galegroup.com.ezproxy.umuc.edu/servlet/BCRC?locID=umd_umuc&srchtp=ind&c=20&cc=20&iType=sic&mode=c&docNum=DC232&bConts=16163&vrsn=149&rcd=sic&icd=2844&ste=70&tbst=tsIC&tab=1&cind=2844+-+Perfumes%2C+Cosmetics+and+Other+Toilet+Prepa


P&G and Unilever 24

Appendix B: Global Personal Products Industry, Market Segmentation145

Global Personal Products Market Segmentation: % Share, by Value, 2004

25.50%

18.70%

16.50%

13.30%

13.70%

12.30%Oral hygiene

Make-up

Fragrances

Personal Hygiene

Skincare

Haircare

The leading revenue source in the personal products market is hair care, which accounts for 25.5% of the global value.

P&G and Unilever 25

Appendix C: Personal Products Industry, Five Forces Analysis

PERSONAL PRODUCTS INDUSTRY FIVE FORCES ANALYSIS (Industry Attractiveness Analysis from the Perspective of Major Incumbents )

I. Barriers to Entry and/or Mobility

Factor Yes ( )

Comment/Support No ( )

Large firms do not have a cost or performance advantage in your segment of the industry. For example, costs do not decline significantly with volume. (No economies of scale)

Large firms do indeed enjoy economies of scale in this industry – and advantages of size, scale and diversity of products.146

There are no “experience curve” economies in this industry. (This is different from economies of scale. The existence of experience effects in an industry means that incumbents are able to have lower costs due to past learning and experience, and that it would be difficult for less experienced firms to gain the same level of performance without going through the same learning process.)

This industry encompasses a wide variety of products and brands; industry leaders have been masterminds in developing innovative products147 – which suggests that they benefit from experience curve economies – in many aspects of their businesses, to include product development, distribution networks and supply chain.

There are no proprietary product differences in the industry. (For example, existing companies’ products are not protected by patents)

Patents abound in this industry. 148

There are no established brand identities in the industry. (Lack of brand equity for incumbents)

These segments are characterized as having well-supported, strong brands, and superior product development, commanding premium pricing in sectors that are less cyclical. 149

Not much capital is needed to enter the industry. (For instance, used equipment might be available, as in the airline industry, to start operations)

Industry entry requires capital to either acquire an existing company or to construct facilities and purchase all manufacturing (and R&D) equipment.

Newcomers to the industry will be able to access existing distribution channels.

Incumbent companies establish contracts with firms in their distribution channels, and enjoy an advantage (particularly the industry leaders) due to size.

Newcomers to the industry will have little difficulty in obtaining the necessary inputs and resources (e.g., skilled people, materials, or suppliers) to start business operations.

While human resources may be available, establishing partnerships with suppliers and distributors will take time. Incumbent firms have the advantage.

The industry rate of growth is high. “Global personal products market grew by 3.4% in 2004 to reach a value of

P&G and Unilever 26

$152.4 billion.” 150 Market is forecasted to have a value of $182.9 billion in 2009 – an increase of 20.1% since 2004.151 Highest growth area expected in the Asia-Pacific region, due to current low penetration of personal products in large markets (China, India).152

The industry has well-defined product standards or specifications, which newcomers can implement.

Product standards are fairly well-defined; many FDA regulations govern this industry, to include prohibiting manufacturers from making therapeutic claims based on the vitamin content of skin care products. Some U.S. states have instituted regulations limiting the use of volatile organic chemicals (VOCs) as a result of pressure to reduce the use of VOCs for environmental reasons. 153 Government regulation, intervention, consumer concern over animal rights and environmental concerns have affected the industry for more than 100 years.154

Newcomers to the industry will be able to obtain the necessary licenses and permissions to start operations.

Planning and establishing personal products manufacturing facilities involves permits and adhering to environmental and government regulations.

The industry offers newcomers one or more potential point of entry. (Incumbents haven’t attempted all possible viable strategies in the industry)

There are many different market segments and niches where a new entrant might specialize, however competition is fierce, with leaders regularly introducing new products.

The industry has no history of retaliation by incumbents against new entrants. Industry economics (e.g., low fixed, high variable cost, low level of consolidation) is such that incumbents don’t typically react to new entries.

No evidence of retaliation by incumbents against new entrants, however industry leaders are goliaths!

Note: The greater the number of NO checks, the more attractive the industry to incumbents.

P&G and Unilever 27

II. Bargaining Power of Buyers

Factor Yes ( )


The buyer industry is more consolidated than my industry.

Buyer industry will continue to grow, as companies continue to expand globally. Many products in this industry are fundamental to health and cleanliness, and of use to people of all ages. Product lines target males and females.

Buyers buy in large quantities. A draw here – consumers buy in small quantities; distributors (Wal-Mart, etc.) purchase in large quantities.

My product is a small part of the buyer's cost of inputs. Yes, for consumers as well as distributors.

The buyer does not face any significant costs in switching suppliers. (That is, my buyers can easily purchase from my competitors.)

No significant costs associated with switching suppliers.

Does the buyer need a lot of important (technical) information to inform its purchasing decision? (In such situations, buyers tend to be more knowledgeable about what they are buying.)

While some products are becoming more sophisticated (anti-aging products; products with vitamins; natural products), technical information is not required in making purchasing decisions.

The buyers can vertically integrate backwards into your business.

Many firms are vertically integrated in this industry – large multinational firms are engaged in every aspect of the production process.155 It is difficult for buyers to vertically integrate backwards into these businesses.

III. Bargaining Power of Suppliers

Factor Yes ( )


The supplier industry is more consolidated than my industry.

Supplier industry is not any more consolidated than personal care industry.

My business is not important to the suppliers. Business is important to suppliers.

The quality of inputs is critical to my finished product.

Many firms in industry are vertically integrated156; quality is of prime concern in each step of production chain.

P&G and Unilever 28

My inputs (materials, labor, supplies, services, etc) are unique or differentiated. That is, I cannot switch suppliers quickly and cheaply.

Each market has its own unique preferences and needs; one-size-fits-all approach will not work when supplying global markets. Therefore, supplies, services must be differentiated.157

I don't have many supplier alternatives. There are many, many personal care contract manufacturing suppliers for this industry.158

My suppliers can vertically integrate forward into my business.

There are many different components and ingredients, from raw materials (cultivation of plants and flora used in fragrances), through the final production stages159 and packaging and distribution. It would not be easy for suppliers to vertically integrate forward.

IV. Threat of Substitutes

Factor Yes

( ) Comment/Support No

( )

My customers have one or more substitutes available to them.(For example, high fructose corn syrup is a substitute for sugar in many industrial applications.)

See appendix D – top four firms make up only 28% of market share; substitutes are readily available.

At least one of the substitutes performs well and could pose a threat to my business.

While brand loyalty exists for some firms, substitute products perform well and can pose a threat.

My customers will not incur much costs or critical uncertainties in switching to a substitute.

Little costs incurred in switching for consumers; distributors/retail giants will need to renegotiate contracts (to possibly include transportation). Proximity of manufacturing plants to distributors/retail stores is an advantage (lower transportation costs).

V. Rivalry Among Existing Competitors

Factor Yes ( )


My industry is not growing rapidly or the industry is in the decline stage of its life cycle.

“Global personal products market grew by 3.4% in 2004 to reach a value of $152.4 billion.” 160 Market is forecasted to have a value of $182.9 billion in 2009 – an increase of 20.1% since 2004.161 Highest growth area expected in the Asia-Pacific region, due to

P&G and Unilever 29

current low penetration of personal products in large markets (China, India).162

The industry is fragmented and exhibits boom-and-bust cycles.

This industry is not fragmented; leading firms in this industry are not small, relative to the size of the industry.163

The industry has excess capacity, or the industry is cyclical with intermittent excess capacity.

Excess capacity not evident; industry is not markedly cyclical.

The industry suffers competition from companies based in low-cost locations.

Not the case.

There are high exit barriers. Investment in facilities, R&D, distribution networks is substantial, making exit pricey.

Major competitors in my industry are of comparable size.

Leading firms (those with comparable levels of differentiation) are similar in size.

There are no significant product differences and brand identities among the major competitors.

Industry is characterized as having well-supported, strong brands, and superior product development, commanding premium pricing in sectors that are less cyclical. 164

My competitors are mostly specialized in my line of business and are not diversified.

Some industry leaders specialize in limited segments, however most provide a variety of brands and products, some of which span multiple industries.

Overall Ratings of the Five Forces

Force

(Relative to the Power of Incumbents)

Yes (#

Checks)

Comment/Support No (#

Checks)

Barriers to entry/mobility 4 8

Bargaining power of buyers 3 4

Bargaining power of suppliers 1 5

Threat of substitutes 3 0

Rivalry among incumbents 2 6

Total No. of Checks 13 23

Note: The greater the number of NO checks, the more attractive the industry is to incumbents.

P&G and Unilever 30

Appendix D: Global Personal Products Industry, Market Share - % Share by Value, 2004165

Global Personal Products Market Share: % Share, by Value, 2004

Other, 71.20%

Unilever, 7.80%

Colgate-Palmolive,

3.60%

Procter & Gamble, 8.50%

L'Oreal, 8.80%

The leading player in the personal products market is L’Oreal, which accounts for 8.8% of the global value. The four-firm concentration ratio (CR4) is calculated by adding the market share of the four largest firms in the industry. The top four companies in the Global Personal Products industry represent 28.8% of the market share. A CR4 of 40% or higher represents a consolidated industry; industries that reach that ratio begin to exhibit oligopolistic behavior.166 While this industry is becoming more consolidated, particularly as industry leaders merge with or acquire other firms, it would not be characterized as an oligopoly. P&G’s acquisition of Gillette in 2005 will very likely change this picture in Datamonitor’s 2006 reports. The following CR4 table shows the total of less than 80% and is therefore not considered highly consolidated.

Company %share L'Oreal 8.8P&G 8.5Unilever 7.8Colgate-Palmolive 3.6TOTAL 28.7

Source: Datamonitor, 2005, May.

P&G and Unilever 31

Appendix E: Market Growth Market Volume Growth 2000 – 2004

Year Billion Units

% Growth

2000 45.5 2001 46.5 2.2 2002 47.7 2.5 2003 48.5 1.9 2004 49.6 2.2

2.2 Market Value Growth

Year

$ Billion Market Value

% Growth

2000 133.6 2001 138.3 3.5 2002 142.9 3.3 2003 147.3 3.1 2004 152.4 3.4

3.3

Source: Datamonitor, (2005, May).

P&G and Unilever 32

APPENDIX F: Producer Price Index (PPI) For SIC 2844 The following was obtained from the US Bureau of Labor website.

A family of indexes that measure the average change over time in selling prices received by domestic producers of goods and services. PPIs measure price change from the perspective of the seller. This contrasts with other measures that measure price change from the purchaser's perspective, such as the Consumer Price Index (CPI). Sellers' and purchasers' prices may differ due to government subsidies, sales and excise taxes, and distribution costs.

Series Id: PDU2844# Industry: Perfumes, cosmetics, and other toilet preparations Product: Perfumes, cosmetics, and other toilet preparations Base Date: 8003

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual 1993 165.3 165.9 166.7 167.2 167.2 166.9 166.7 166.7 167.0 166.9 166.9 166.8 166.7 1994 167.2 167.0 166.1 165.9 167.7 166.0 164.6 168.4 166.2 167.4 165.1 166.8 166.5 1995 168.5 165.2 167.9 167.2 168.2 167.3 167.4 165.1 166.6 166.1 167.4 168.0 167.1 1996 169.2 170.0 167.6 167.8 168.6 168.4 168.7 168.2 167.9 168.3 168.4 168.5 168.5 1997 168.9 169.1 168.8 168.8 169.1 169.1 168.8 168.5 168.7 168.8 168.9 169.1 168.9 1998 169.4 170.0 170.6 170.9 172.3 172.4 172.4 172.1 171.8 172.1 172.4 172.5 171.6 1999 172.5 172.6 173.8 172.9 172.8 176.0 176.0 175.4 175.6 176.2 176.7 176.6 174.8 2000 176.5 176.5 176.4 176.7 177.6 177.5 177.3 178.2 178.9 179.1 179.1 179.0 177.7 2001 179.6 179.4 179.2 179.4 179.4 179.4 179.1 179.0 178.9 179.3 179.0 178.8 179.2 2002 179.3 180.3 180.2 180.4 180.1 180.8 180.8 180.7 180.7 180.7 180.6 180.7 180.4 2003 181.0 181.0 181.9 181.9 181.9 181.8 181.7 181.7 181.8 181.9 181.9 181.9 181.7

P&G and Unilever 33

Appendix G: Industry Growth Rate - Sales Note: this source did not include Unilever in its categorization of Personal & Household Prods. Industry. source: http://www.investor.reuters.com/

Data as of 2/9/2006 72 companies

Name TTM Sales $

3 Yr. Sales Growth Rate%

5 Yr. Sales Growth Rate%

MktCap Weighted Average 44,319.94 11.29 9.95 McKesson Corporation 85,876.80 17.22 17.01The Procter & Gamble Company 61,675.00 12.14 7.27Mitsui & Co., Ltd. (ADR) 32,205.62 12.27 45.65Colgate-Palmolive Company 11,396.90 7.03 4.83

http://www.investor.reuters.com/IndustrySnapshot.aspx?showallrows=1&ord=asc&sectorcode=NONCYC&industry=PERPRD&target=%2findustries%2findhighlights%2findcmprank%2findview13&orderby=2






P&G and Unilever 34

Appendix H: Average Revenue Growth: INDUSTRY

Name Revenue M Revenue Growth Rev Growth, 3 yrs

Industry Average $44,319.9 11.0% 11.3%

1. McKesson Corporation $85,876.8 15.8% 17.2%

2. The Procter & Gamble Company $61,675.0 10.4% 12.1%

3. Mitsui & Co., Ltd. (ADR) $32,205.6 18.2% 12.3%

4. Colgate-Palmolive Company $11,396.9 7.7% 7.0%

5. Avon Products, Inc. $8,149.6 5.2% 9.5%

6. Newell Rubbermaid Inc. $6,479.8 -2.1% -0.5%

7. The Estee Lauder Co. $6,362.9 9.4% 10.4%

8. Shiseido Co. LTD. (ADR) $5,396.2 2.5% 2.7%

9. The Clorox Company $4,508.0 5.4% 2.9%

10. Ecolab Inc. $4,465.9 11.2% 21.7%

EPS

Name EPS EPS Change (1yr) EPS Growth (3yr)

Industry Average 3.5 14.0% 19.1%

1. Mitsui & Co., Ltd. (ADR) 19.6 61.3% 26.4%

2. Pillowtex Corporation 15.6 203.9% NA

3. The Clorox Company 3.0 26.2% 23.8%

4. The Procter & Gamble Company 2.6 14.7% 19.9%

5. McKesson Corporation 2.5 -124.4% NA

6. Grupo Casa Saba, S.A. (ADR) 2.5 6.8% 12.5%

7. Colgate-Palmolive Company 2.4 4.2% 3.6%

8. Alberto-Culver Company 2.3 47.2% 13.6%

9. USANA Health Sciences, Inc. 1.9 54.4% 137.2%

10. Blyth, Inc. 1.8 18.1% 15.4

Name Gross Margin Operating Margin Net Profit Margin

Industry Average 47.8% 15.4% 9.7%

1. China Techfaith Wireless Comm. Tech. Ltd 61.8% 47.6% 48.5%

2. Pillowtex Corporation 4.6% 35.3% 33.0%

3. The Yankee Candle Company, Inc. 57.8% 24.1% 14.2%

http://www.investor.reuters.com/GoTo.aspx?ticker=MCK&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

http://www.investor.reuters.com/GoTo.aspx?ticker=PG&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

http://www.investor.reuters.com/GoTo.aspx?ticker=MITSY&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

http://www.investor.reuters.com/GoTo.aspx?ticker=CL&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

http://www.investor.reuters.com/GoTo.aspx?ticker=AVP&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

http://www.investor.reuters.com/GoTo.aspx?ticker=NWL&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

http://www.investor.reuters.com/GoTo.aspx?ticker=EL&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

http://www.investor.reuters.com/GoTo.aspx?ticker=SSDOY&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

http://www.investor.reuters.com/GoTo.aspx?ticker=CLX&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

http://www.investor.reuters.com/GoTo.aspx?ticker=ECL&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

http://www.investor.reuters.com/business/BusRankingsCompanies.aspx?ord=desc&target=%2f%2fbusrankcomp&industry=PERPRD&rankcategory=4&orderby=1

http://www.investor.reuters.com/business/BusRankingsCompanies.aspx?ord=asc&target=%2f%2fbusrankcomp&industry=PERPRD&rankcategory=4&orderby=2



http://www.investor.reuters.com/GoTo.aspx?ticker=MITSY&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

http://www.investor.reuters.com/GoTo.aspx?ticker=PWTXQ&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

http://www.investor.reuters.com/GoTo.aspx?ticker=CLX&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview


http://www.investor.reuters.com/GoTo.aspx?ticker=MCK&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

http://www.investor.reuters.com/GoTo.aspx?ticker=SAB&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview


http://www.investor.reuters.com/GoTo.aspx?ticker=ACV&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

http://www.investor.reuters.com/GoTo.aspx?ticker=USNA&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

http://www.investor.reuters.com/GoTo.aspx?ticker=BTH&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

http://www.investor.reuters.com/business/BusRankingsCompanies.aspx?ord=desc&industry=PERPRD&target=%2f%2fbusrankcomp&rankcategory=5&orderby=1


http://www.investor.reuters.com/business/BusRankingsCompanies.aspx?ord=asc&industry=PERPRD&target=%2f%2fbusrankcomp&rankcategory=5&orderby=3


http://www.investor.reuters.com/GoTo.aspx?ticker=CNTF&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

http://www.investor.reuters.com/GoTo.aspx?ticker=PWTXQ&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

http://www.investor.reuters.com/GoTo.aspx?ticker=YCC&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

P&G and Unilever 35

4. Playtex Products, Inc. 52.2% 19.7% 9.5%

5. The Procter & Gamble Company 51.0% 19.4% 12.6%

6. WD-40 Company 48.6% 18.6% 11.0%

7. Parlux Fragrances, Inc. 57.9% 18.4% 11.4%

8. Colgate-Palmolive Company 54.4% 18.2% 11.9%

9. USANA Health Sciences, Inc. 37.0% 17.5% 11.9%

10. DAC Technologies Group 35.7% 16.9% 9.5%

http://www.investor.reuters.com/GoTo.aspx?ticker=PYX&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview


http://www.investor.reuters.com/GoTo.aspx?ticker=WDFC&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

http://www.investor.reuters.com/GoTo.aspx?ticker=PARL&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview


http://www.investor.reuters.com/GoTo.aspx?ticker=USNA&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

http://www.investor.reuters.com/GoTo.aspx?ticker=DAAT&.t=%2fbusiness%2fbuscompany%2fbuscompfake%2fbuscompoverview

P&G and Unilever 36

Appendix I: Historical Data – Personal and Household Products Source: http://www.investor.reuters.com Note: The industry being studied in this report does not include household products. However, Financial information on the Personal Products industry as a whole is difficult to obtain without subscribing to a service such as Hoovers or Datamonitor. Profitability

Industry Exceeds S&P

Industry Sector S&P 500

Gross Margin – 1yr 47.90% 44.80% 44.60%

Gross Margin – 5yr 47.10% 45.00% 45.30%

EBITD Margin - 1yr 18.90% 17.40% 23.50%

EBITD Margin - 5yr 18.00% 18.90% 20.90%

Op Margin - 1yr 15.60% 13.80% 23.10%

Op Margin - 5yr 14.20% 14.90% 20.30%

Pre-Tax Margin - 1yr 14.80% 10.10% 18.20%

Pre-Tax Margin - 5yr 13.60% 14.00% 14.50%

Net Margin - 1yr 10.10% 5.60% 12.60%

Net Margin - 5yr 9.10% 9.50% 9.60%

Growth



Sales - 1yr 11.00% 5.80% 16.20%

Sales - 5yr 10.00% 7.10% 9.60%

Op Margin - 1yr 15.40% 10.80% 23.30%

Op Margin - 5yr 14.20% 14.90% 20.30%

Net Margin - 1yr 9.70% 4.40% 12.70%

Net Margin - 5yr 9.10% 9.50% 9.60%

Capital Spending - 5yr -3.30% 1.80% 4.20%

Operational Efficiency



Revenue/Employee $709,062.90 $525,871.90 $690,072.30

Net Income/Employee $59,030.90 $45,140.90 $94,007.40

SGA/Sales 33.2 28.5 19.5

Receivable Turnover 12.1 12 27.5

Inventory Turnover 5.9 6.6 13.6

Asset Turnover 1.2 1 0.9

P&G and Unilever 37

Financial



Returns ROA - 1yr 8.10% 8.50% 7.50%

ROA - 5yr 10.40% 9.30% 5.50%

ROE - 1yr 29.30% 41.60% 26.80%

ROE - 5yr 52.40% 36.40% 17.50%

ROI - 1yr 11.60% 12.60% 12.30%

ROI - 5yr 15.90% 13.70% 9.20%

Liquidity Quick Ratio - qtr 1 0.9 1.4

Current Ratio - qtr 1.3 1.2 1.7

Solvency LT Debt/Equity - qtr 80.4 115.5 90.9

Total Debt/Equity - qtr 105.2 139.9 138.6

Interest coverage - 1yr 16 12.7 38.04

Debt/Equity - 1yr 156 163.4 180.9

Tax Effective Tax Rate - 1yr 32.70% 30.40% 30.20%

Effective Tax Rate - 5yr 33.60% 32.40% 30.70%

P&G and Unilever 38

Appendix J: Household and Personal Products Industry

Industry Ranking by Revenues, Profits (US) 167

Revenues, Profits Profit as % of... EPS, Total return,

Employees REVENUES PROFITS

Rank Company 1,000

revenues rank

$ millions % change from 2003

$ millions

% change from 2003

1 Procter & Gamble 26 51,407 19 6,481 25

2 Kimberly-Clark 135 15,401 7 1,800 6

3 Colgate-Palmolive 210 10,584 7 1,327 -7

4 Gillette 215 10,477 13 1,691 22

5 Avon Products 278 7,748 13 846 27

6 Estée Lauder 346 5,790 13 342 7 7 Clorox 445 4,324 4 549 11

8 Alberto-Culver 530 3,258 13 142 -13

9 Stanley Works 533 3,224 13 367 240

10 Energizer Holdings 593 2,813 26 267 57

11 Solo Cup 729 2,116 N/A -50 N/A 12 Blyth 893 1,586 5 97 12

13 Church & Dwight 929 1,462 38 89 10

14 Rayovac 941 1,439 56 56 260 From the April 15, 2005 issue of Fortune magazine.

http://money.cnn.com/magazines/fortune/fortune500/industries/Household_and_Personal_Products/2.html



http://money.cnn.com/magazines/fortune/fortune500/snapshots/1389.html






















P&G and Unilever 39

APPENDIX K: Company Ranking By Personal Care Revenues Only (Financial Yr 2005). Source: www.datamonitor.com

http://www.datamonitor.com/~927b43b1a6624e8dbcd8e03d52c57dde~/companies/lists/list/?listID=5876A758-E821-4B88-9979-0DEA4C54EA5C

List last updated: 5 April 2005

1 The Procter & Gamble Company

2 L'Oreal S.A.

3 Unilever

4 Global Gillette

5 Kao Corporation

6 Avon Products, Inc.

7 The Estée Lauder Companies Inc.

8 Shiseido Company, Limited

9 Colgate-Palmolive Company

10 Kimberly-Clark Corporation

http://www.datamonitor.com/

http://www.datamonitor.com/~1f86cb37e6604642bb8803201142c9fc~/companies/company/?pid=C895EAE6-25E0-4D36-B30D-69500B939DC1

http://www.datamonitor.com/~1f86cb37e6604642bb8803201142c9fc~/companies/company/?pid=B374D495-445D-4005-BCE0-C39F5071ED41

http://www.datamonitor.com/~1f86cb37e6604642bb8803201142c9fc~/companies/company/?pid=E00C82E3-8DA1-4F1A-B0A1-046B87A8C4BC

http://www.datamonitor.com/~1f86cb37e6604642bb8803201142c9fc~/companies/company/?pid=2F8278D0-BF7B-4D74-BFA7-281F06FE4EBC

http://www.datamonitor.com/~1f86cb37e6604642bb8803201142c9fc~/companies/company/?pid=3DAAF1C3-0769-46D7-9EB1-16C1DE47C372

http://www.datamonitor.com/~1f86cb37e6604642bb8803201142c9fc~/companies/company/?pid=E8B585DB-3BF6-4882-80B3-CB8A102DDAE8

http://www.datamonitor.com/~1f86cb37e6604642bb8803201142c9fc~/companies/company/?pid=8189FCF5-67F2-4065-9321-FAADC0980C3B

http://www.datamonitor.com/~1f86cb37e6604642bb8803201142c9fc~/companies/company/?pid=DC97CF53-4C0C-4BE9-8AD9-21AD2B4ED673

http://www.datamonitor.com/~1f86cb37e6604642bb8803201142c9fc~/companies/company/?pid=8F29C49C-AF39-411A-AF1B-930E67BFA795

http://www.datamonitor.com/~1f86cb37e6604642bb8803201142c9fc~/companies/company/?pid=7810FA91-9B7E-41B0-A5BD-C9AF58F420A0

P&G and Unilever 40

Appendix L: Trend Line, Exports (SIC 2844) (In millions of dollars)

Million US $

500

1000

1500

2000

2500

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

Million US $

Value of exports

2844 Toilet preparations Year Million US $

1989 694 1990 886 1991 1118 1992 1254 1993 1437 1994 1733 1995 1887 1996 2195 1997 2628 1998 2586

Source: US Dept of Commerce: Bur of the Census; Int’l Trade Administration.

P&G and Unilever 41

Appendix M: Trend Line, Imports, SIC 2844 (In millions of dollars)

Imports

YR M$ 1989 5941990 6341991 7121992 8921993 9561994 10351995 11561996 12571997 14101998 1618

Source: US Dept of Commerce: Bur of the Census; Int’l Trade Administration.

P&G and Unilever 42

Appendix N: Fastest Growing Markets, 2004

“Heading into the mid-2000s, the cosmetics and toiletries industry was becoming more global than ever before, as industry leaders continued to capitalize on developing international markets. Indeed, in 2004, Argentina, Brazil, Russia and China were the fastest growing markets for cosmetics, with sales in Argentina alone growing by 17% compared to 2003. China’s cosmetics market grew by 12.5% in 2004, while India’s increased by 7.7%. Together, China and India accounted for US$10 billion in sales in 2004. The leading category in terms of growth was skin care, followed by hair care. Sales of skin care products in Asia reached about US$17.5 billion in 2004, led by Japan.”168

P&G and Unilever 43

Appendix O: Value Chain Analysis, P&G and Unilever

Value Chain Analysis: Worksheet Key Differences between Major Competitors

Industry: Personal Products Industry Date: Feb. 10, 2006

Activity Dimension P & G Unilever Additional Info

Product(s)

P & G Beauty (34% of portfolio) includes personal cleansing, antiperspirants or deodorants, cosmetics, colognes, hair care, feminine protection hair color, and skin care products: Sure, Secret, Old Spice, Max Factor, Covergirl, Tampax, Always, Herbal Essence, Clairol, Infusium, PhysQue, Pert, Pantene, Aussie, Head & Shoulders, Zest, Olay, Camay, Ivory, Noxzema, Safeguard, Hugo Boss, & Giorgio Colognes

Personal care (26% of portfolio) includes skin, hair, deodorant, perfume, and oral care: Axe, Rexona, Dove, Lux, Ponds, Sunsilk, Suave, Vaseline, clear, Signal, Close Up, Calvin Klein & other designer fragrances

Industry includes fragrances, hair care, make-up, oral hygiene products, personal hygiene products and skincare products.

Market Positioning

For each company, explain the dimension.

Use the findings to write an explanation within the body of your analysis comparing the companies.

Target Customer Segments

Lower- income strategy (product lines) for developing markets (affordability). Balanced approach w/ ½ sales from N. America, ½ International.

Balance between retail customers (top 5 sell $ 1B annually, and high frequency stores (developing countries). No dependence on single channel or customer. Targeting of Gillette products into China major initiative. Beauty focuses on providing the customer a “beauty experience”.

Differentiated for different income levels i.e. affordability-Lifebuoy, as well as regional differentiations, i.e. Sunsilk -Europe, Dove- N America

P&G and Unilever 44

Summary of Product-Market Positioning

Strategy to achieve balancing of products, customers, markets, and brands, facilitated by Gillette acquisition.

Products positioned through Market Development Organizations in 80 countries, leading 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". Products sold primarily in grocery stores, discount stores, through mass merchandisers, membership club stores, and high frequency stores (neighborhood stores in developing countries).169

Products are tailored regionally for customer differences, i.e. ponds Malaysia, Rexona ebony- brazil; Sunsilk for Asia, Indonesia, turkey, and Latin America; and further expanded across product lines i.e. Lux is body wash in Europe, hair care in Japan, and massage bar in Brazil

P&G and Unilever 45

Primary Activities

Inbound Logistics

Awarded # 1 in supply chain management 2004, by survey of US retailers. Leaders in inbound logistics. Early in 2000, began compliance labeling mandates for its suppliers to improve efficiencies and reduce costs, with bar coding and wireless technologies. Localized inbound raw materials supply to decrease costs & increase efficiencies.

Unilever logistics organization has been restructuring and consolidating to create uniform regional distribution centers geographically located nearer the customers (within 24 hrs delivery). Also, implemented web-based solutions provider (Transplace) to manage inbound transportation. Have developed transportation leadership team to analyze and improve processes from acquiring raw material through output to customers. Also, with LeanLogistic's Web-native On-Demand TMS implemented value chain solutions flexible warehousing in NA to reduce inventory and Costs, while delivering on-time.

P&G and Unilever 46

Operations

Since 1999, have ongoing restructuring programs to minimize costs in production and sales. Decreased global business services costs over 5 years 15%, increased sales per employee 40%, and increased product supply services. Have strong partnerships with large retailers. Large scale distribution operations in over 160 countries. Large scale manufacturing operations located in 42 countries; deploy latest technologies incl. RFID for supporting operations. Use Value Added Networks for B2B Customers: linking financial institutions, retailers, and transportation carriers. Additionally P & G developed their customer business development structure, which teams sales, logistics, finance, marketing, and IT to work with trade customers for ways to add value to the consumer. Standardized manufacturing platforms, contract manufacturing when available.

"Trade links" with large retailers such as Wal-Mart and Carrefour; SAP & customer management software, regional financial shared services. In 2005, hired IBM Business Consulting Services, operating in India, Poland and Portugal, to provide purchase-to-pay, general accounting and bill-to-cash functions.

P&G and Unilever 47

Outbound Logistics

P & G uses logistics specialists to support its transportation, warehousing, and picking solutions such as it's expanded contract with Exel to service distribution centers in France. Morocco, United States, Argentina, Canada, China and Mexico. Interestingly, P & G also co-developed software for case picking and truck-loading for P & G, and now sells that software through a joint venture with Moore and Associates.

Consolidated transport business, incl. Ocean going internationally, improving efficiencies and decreasing carrier bases 70%. Also implementing web-based B2B solutions for managing transportation information, including carrier contracts, sourcing strategies spend history.

Marketing and Sales

Superior sales and marketing machine. Awarded # 1 best category management and consumer marketing in survey of US retailers. Currently have 22 brands each produce $1B sales annually (10 $1B brands in Beauty & Health). Have focus on word of mouth programs to impact influential teens (Tremor).

Strong international growth from mega brands that are marketed globally, as well as regional marketing campaigns, including partnering for Dove's American Girl with Bath & Body and Mattel Co.'s. and Lynx deodorant, advertised on fantasy airline airplanes. New branding initiatives for all products implemented. Additionally, Unilever provides wireless applications in the field to gather customer information from sales back to the company.

Unilever and P & G have strong programs for corporate social responsibility

Customer Service

Enterprise IT Strategy for positive customer impact and social impact. Awarded # 1 in 2004 for most helpful consumer and shopper information. Global business service organizations l in low cost, high quality locations Costa Rica, Philippines, and UK

Use IT software for order management, and customer relationship management.

P&G and Unilever 48

Firm Infrastructure

4 Pillars of the firm: Global Business Units, Market Development Organizations, Global Business Services and Corporate Functions working separately and together. Additionally, 4 Global divisions: P&G Beauty, P&G Family Health, P&G Household Care, and Gillette; in 7 segments: Beauty, Health Care, Baby Care & Family Care, Fabric Care & Home Care, Snacks & Coffee, Blades & Razors, and Duracell & Braun.

2 Global divisions: foods & home and personal care; further organized into mostly regional business groups w/brand, innovation, and technical centers-heavy resources deployed, incl. # of plants, managers, and support staff (i.e. Brazil has approx. 13,000 workers, 754 managers, and 13 plants)

Support Activities

Human Resources Management

Diverse leadership team- half of the presidents are from outside the US. The number of U.S. minorities and women at the VP and GM level over the last five years has doubled. PG has strong recruiting and "employee for life" history (golden handcuffs) from strong stock purchase plan, profit-sharing plan, comprehensive training at "P&G College", tuition reimbursement program, relocation assistance program and other benefits. Heavy recruiting at business schools and top universities.

One Campaign providing Regional HR activities, i.e. Latin America. Strong recruiting and training program, global employment with blend of local and expatriates in management roles. Managers get global toolkit for diversity training. Developed "Community of Learning Academies" for ongoing learning and knowledge sharing throughout key functions, such as finance, HR, IT, customer development. Unilever has won awards on cultural diversity and leading company to work for. Provide flexible work hours, internal clubs, tuition reimbursement, stock options, and other benefits.

P&G and Unilever 49

Technology/R&D In 2005, spend approx $2B on continuing R & D, and use large network of partners to support R & D efforts. To date PG has 29,000-patented technologies. Have 20 technical centers in 4 continents. Have won the National Medal of Technology for innovative achievement in technology in the US. Have strong B-to-B programs such as "Connect & Develop" program to find innovation partners-strong effort now for packaging initiatives. Created new product categories w/in last 4 years generating $5B retail sales,

In 2004, spent E1040, on select, focused global projects, producing innovations and line extensions of core products. Have network of "global research centers" and are beginning to work with external innovation partners to expand R & D capabilities, and speed to market.

P & G has more Ph.D.'s working in their labs world wide than a combination of faculty from Harvard, Berkeley, and MIT in science and engineering

Procurement

Leverage Buying Power w/global procurement and services (high economies of scale) and software based supply chain management

15 Global Supply Management teams of approx. 120 people from 20 nations-Global purchasing yielded approximately E700M in savings in 2004.

Balance and leadership. 2005 Annual Report. (2005). Retrieved from P & g Website February 1, 2006 at: http://ccbn.mobular.net/ccbn/7/1142/1201/ Case study. Unilver foods.solution for Unilever salesforce. (n.d.). Retrieved February 11, 2006 from http://web.o2.ie/pdf/CR1515_Unilever.pdf Company Spotlight: Unilver. (2005, August). Retrieved February 2, 2006 from www.datamonitor.comDrake, C. (2000, May). Press Release. Retrieved February 11, 2006 from: http://www.lowrycomputer.com/news/press/pg_Release.doc Editorial Staff. (2004, October 7). Unilever Aims to Improve Customer Service with On-demand TMS. Supply & Demand Chain Executive. Retrieved February 11, 2006 from: http://www.sdcexec.com/article_arch.asp?article_id=6181Editorial Staff. (2006, February 11). Procter & Gamble Taps Exel for Logistics Services Supply & Demand Chain Executive. Retrieved February 11, 2006 from: http://www.sdcexec.com/article_arch.asp?article_id=6153 Fantasy airline gives Unilever dream run. (2006, February 9). Syndey Morning Herald. Retrieved February 11, 2006 from: http://www.smh.com.au/news/business/fantasy-airline-gives-unilever- dream-run/2006/02/08/1139379573717.html Hallet, T. (2005, December, 24). IBM wins 7-year Unilever outsourcing deal. Retrieved February 11, 2006 from: http://news.zdnet.com/2100-9589_22-6007859.html Harps, L. (2002, March). Making Dollars & Sense Out of Logistics. Retrieved February 11, 2006 from http://www.inboundlogistics.com/articles/features/0302_feature02.shtml Harps, L. (2002, July). Transformers. Retrieved February 11, 2006 from http://www.inboundlogistics.com/articles/features/0702_feature05.shtml . Minow, N. (2004, September). Procter & Gamble's Tremor Targets Young Girls and Minors for Viral Marketing. Retrieved February 11, 2006 from: http://newmediasphere.blogs.com/nms/2004/10/procter_gambles.html

http://www.datamonitor.com/

http://www.sdcexec.com/article_arch.asp?article_id=6181

http://www.smh.com.au/news/business/fantasy-airline-gives-unilever-

P&G and Unilever 50

Prianti, V. Unilever Brazil: A truly local global company. (site retrieved?) Sobredo, A. Organizing to win in Latin America. (site retrieved?) 2004 Unilever annual review and summary financial statement (citation) Unilever. (2004). Retrieved February 11, 2006 from: http://www.legendarylogistics.com/UniLever.htm Unilever and eSpace: a potentially growing relationship. (2002) Retrieved February 11, 2006 at: http://www.espace.com.eg/unilever.html Unilever jobs, careers and hiring information. (n.d.) Retrieved February 11, 2006 from: http://www.vault.com/jobs-company/Unilever_.htmlWelcome to P & G Solutions. (2006). Company Homepage. Retrieved February 1, 2006 at: http://www.pg.com/en_US/index.jhtml

http://www.vault.com/jobs-company/Unilever_.html

P&G and Unilever 51

Appendix P: Procter & Gamble, RBV Analysis Resources & Sources of Competitive Advantage

Rare Valuable Inimitable Non-substitutable

Core Competencies Innovation: brands & categories; 300 consumer products in 4 areas P&G Beauty, P&G Family Health, P&G Household Care, and Gillette ; in 7 segments: Beauty, Health Care, Baby Care & Family Care, Fabric Care & Home Care, Snacks & Coffee, Blades & Razors, and Duracell & Braun.

Yes Yes Possible, but volume of innovation very hard to imitate

Possible with heavy R & D

Patents: 29,000 patented technologies

Yes Yes Possible, not probable

Possible, not probable. Requires with heavy investment, IP, and focus

Go to Market Expertise Capabilities

Yes Yes Difficult to Achieve

Difficult to Achieve-Unilever working on this now.

Brand Management: Development of Name Recognition and Trust

Yes Yes Possible, but market leadership difficult to overtake

Difficult in market leading, esp. non-commoditized brands

Brand Leadership (i.e. Tide, Downy, Crest, Pampers): 22 brands each produce $1B sales annually (10 $1B brands in Beauty & Health)

Yes Yes Possible, but difficult in non-commoditized markets

Possible but difficult esp. in non-commoditized markets

Resources & Capabilities Ongoing R & D: 20 technical centers in 4 continents

Yes Yes Yes, but high entry costs

Difficult to replace or compete with IP

Global Scope Advantage: Large scale sales and distribution operations in over 160 countries

Yes Yes Yes, but high replication costs

Possible, not probable. high replication costs

Large scale manufacturing operations; locations in 42 countries

Yes Yes Yes, but high replication costs

Possible not probable. high replication costs

P&G and Unilever 52

Economies of Scale with leveraged Buying Power w/global procurement and services, supply chain management w/RFID

Yes Yes Yes Possible, not probable. high replication costs


Economies of Scale with Global operations in finance, marketing, logistics, r & d, technology

Yes Yes Possible, not probable. high replication costs


Growth in Emerging Markets (but weakness in overexposure in US & Western Europe)

Yes Yes Yes Yes

Value Added Networks for B2B Customers: linking financial institutions, retailers, transportation carriers

Yes Yes Yes-requires willing partners & partner management

Yes-requires willing partners & partner management

EDI (Electronic Data Interchange (only in N. America-need to extend reach

Yes Yes Yes Yes

Enterprise IT Strategy for cost reductions, positive customer impact, social impact, ROI, operational efficiency

Yes Yes Yes but difficult to implement and afford enterprise-wide

Yes but difficult to implement and afford enterprise-wide

Adapted from Lucas (2002) Colbert, C. (n.d.) Fact Sheet. The Procter & Gamble Company. Retrieved February 5, 2006 from: http://www.hoovers.com/procter-&-gamble/--ID__11211--/free-co-factsheet.xhtml Company Profile: Procter and Gamble. (2004, May). Retrieved February 1, 2006 from www.datamonitor.com Form 10-Q for PROCTER & GAMBLE CO. (2006, January). Retrieved February 1, 2006 from: http://biz.yahoo.com/e/060130/pg10-q.htmlP & G North America electronics data interchange. (2006, February). Retrieved February 7, 2006 from: http://www.pgedi.com/. Procter & Gamble awarded enterprise value award by CIO Magazine for work with MatrixOne on innovative product lifecycle management application. (2004, February). Retrieved February 10, 2006 from: http://www.matrixone.com/matrixone/press_releases_20040223_p g.html

http://biz.yahoo.com/e/060130/pg10-q.html

http://www.pgedi.com/

http://www.matrixone.com/matrixone/press_releases_20040223_p

P&G and Unilever 53

Appendix Q: Unilever, RBV Analysis Resources & Sources of Competitive Advantage

Rare Valuable Inimitable Non-substitutable

Core Competencies Innovation: NO Yes No No Strong Brand Recognition and Trust: 12 Brands with E1Billion; Dove, Magnum Hellman's, Knorr, Bird's Eye

Yes Yes Yes , but difficult

Yes, but strong brand acceptance

Brand Leadership, i.e. (Dove)


Yes, but strong brand acceptance

Strong relationship with Retailers, incl. Wal-Mart, Carrefour


Yes, but requires resources, relationship management

Resources & Capabilities Ongoing R & D: high spending and ongoing brand extensions


Yes, but requires strong IP, and high spending

Global Scope Advantage: Large scale sales and distribution operations.

Yes Yes Yes , but difficult to imitate

Yes, Difficult to reproduce

Large scale manufacturing operations;

JV's for strong positioning-ie Pepsi, offering additional supply chain management, complementary distribution network

Yes Yes Limited Limited

"Path to Growth" Strategy to focus on core products and R & D for development of them

Yes Yes Opportunity to build in lock outs

Yes, but with continued development further differentiate and strengthen core products

Wide product reach across stores (present in many locations)

Yes Yes Limited Limited

Growth in Emerging Markets, esp. Peru, Chile, Mexico. 35% of sales in developing & emerging countries. (Need to expand into India and China)

Yes Yes Yes but difficult to imitate

Yes but difficult, requires heavy resources

P&G and Unilever 54

Economies of Scale- Vast resources with leveraged Buying Power and supply chain management for reduces costs However, organizational structure & differentiated product lines had been weakness, but brand sell offs & corporate reorganizing improving this.

Yes/emerging Yes/emerging Yes but difficult to imitate

Yes, Difficult to reproduce

RFID technologies-weakess, just developing

Emerging Emerging Limited Yes but costly and difficult to implement

Growth through Acquisition weakness-need to look to this avenue ongoing

No No Limited Limited

Go to Market Expertise Capabilities- current weakness & focus for improvement

No No Difficult Difficult

Adapted from Lucas (2002) Introduction to Unilever. (2005, June). Retrieved February 2, 2006 from: http://www.unilever.com/Images/Introduction%20to%20Unilever_tcm13-15184.pdfUnilever Company Profile. (2004, May). Retrieved February 2, 2006 from: ww.datamonitor.com

http://www.unilever.com/Images/Introduction to Unilever_tcm13-15184.pdf

P&G and Unilever 55

Appendix R: P&G Financial Analysis

P&G Financial Statements

ANNUAL BALANCE SHEET In Millions of U.S. Dollars As of As of As of As of As of(except for per share items) 6/30/2005 6/30/2004 6/30/2003 6/30/2002 6/30/2001 Reclass. Reclass. 6/30/2005 6/30/2004

Cash & Equivalents 6,389.0 4,232.0 5,912.0 3,427.0 2,306.0

Short Term Investments 1,744.0 1,660.0 300.0 196.0 212.0

Cash and Short Term Investments 8,133.0 5,892.0 6,212.0 3,623.0 2,518.0

Accounts Receivable - Trade, Net 4,185.0 4,062.0 3,038.0 3,090.0 2,931.0

Total Receivables, Net 4,185.0 4,062.0 3,038.0 3,090.0 2,931.0

Total Inventory 5,006.0 4,400.0 3,640.0 3,456.0 3,384.0

Prepaid Expenses 1,924.0 1,803.0 1,487.0 1,476.0 1,659.0

Other Current Assets, Total 1,081.0 958.0 843.0 521.0 397.0

Total Current Assets 20,329.0 17,115.0 15,220.0 12,166.0 10,889.0

Property/Plant/Equipment,Total - Gross 26,325.0 25,304.0 23,542.0 23,070.0 22,821.0

Accumulated Depreciation, Total (11,993.0) (11,196.0) (10,438.0) (9,721.0) (9,726.0)

Property/Plant/Equipment, Total - Net 14,332.0 14,108.0 13,104.0 13,349.0 13,095.0

Goodwill, Net 19,816.0 19,610.0 11,132.0 10,966.0 6,969.0

Intangibles, Net 4,347.0 4,290.0 2,375.0 2,464.0 1,331.0

Long Term Investments – – – – –

Other Long Term Assets, Total 2,703.0 1,925.0 1,875.0 1,831.0 2,103.0

Total Assets 61,527.0 57,048.0 43,706.0 40,776.0 34,387.0

Accounts Payable 3,802.0 3,617.0 2,795.0 2,205.0 2,075.0

Accrued Expenses 7,531.0 7,689.0 5,512.0 5,330.0 4,631.0

Notes Payable/Short Term Debt 11,441.0 8,287.0 2,172.0 3,731.0 2,233.0

Current Port. of LT Debt/Capital Leases – – – – –

Other Current liabilities, Total 2,265.0 2,554.0 1,879.0 1,438.0 907.0

Total Current Liabilities 25,039.0 22,147.0 12,358.0 12,704.0 9,846.0

Long Term Debt 12,887.0 12,554.0 11,475.0 11,201.0 9,792.0

Capital Lease Obligations – – – – –

Total Long Term Debt 12,887.0 12,554.0 11,475.0 11,201.0 9,792.0

Total Debt 24,328.0 20,841.0 13,647.0 14,932.0 12,025.0

Deferred Income Tax 2,894.0 2,261.0 1,396.0 1,077.0 894.0

Minority Interest – – – – –

P&G and Unilever 56

Other Liabilities, Total 3,230.0 2,808.0 2,291.0 2,088.0 1,845.0

Total Liabilities 44,050.0 39,770.0 27,520.0 27,070.0 22,377.0

Redeemable Preferred Stock, Total 1,483.0 1,526.0 1,580.0 1,634.0 1,701.0

Preferred Stock - Non Redeemable, Net – – – – –

Common Stock, Total 2,473.0 2,544.0 2,594.0 1,301.0 1,296.0

Additional Paid-In Capital 3,142.0 2,425.0 1,634.0 2,490.0 2,057.0

Retained Earnings (Accumulated Deficit) 13,204.0 13,611.0 13,692.0 11,980.0 10,451.0

Treasury Stock - Common – – – – –

ESOP Debt Guarantee (1,259.0) (1,283.0) (1,308.0) (1,339.0) (1,375.0)

Other Equity, Total (1,566.0) (1,545.0) (2,006.0) (2,360.0) (2,120.0)

Total Equity 17,477.0 17,278.0 16,186.0 13,706.0 12,010.0

Total Liabilities & Shareholders' Equity 61,527.0 57,048.0 43,706.0 40,776.0 34,387.0

Shares Outs - Common Stock Primary Issue 2,472.90 2,543.80 2,594.40 2,601.54 2,591.48

Total Common Shares Outstanding 2,472.90 2,543.80 2,594.40 2,601.54 2,591.48

Employees 110,000 110,000 98,000 106,000 106,000

Number of Common Shareholders 1,608,000 1,426,000 1,234,000 1,004,000 1,090,000

ANNUAL INCOME STATEMENT In Millions of U.S. Dollars 12 Months

Ending12 Months

Ending12 Months

Ending12 Months

Ending12 Months

Ending(except for per share items) 6/30/2005 6/30/2004 6/30/2003 6/30/2002 6/30/2001

Revenue 56,741.0 51,407.0 43,373.0 40,169.0 39,244.0

Other Revenue, Total – – 4.0 69.0 –

Total Revenue 56,741.0 51,407.0 43,377.0 40,238.0 39,244.0

Cost of Revenue, Total 27,804.0 25,076.0 21,760.0 20,481.0 20,962.0

Gross Profit 28,937.0 26,331.0 21,613.0 19,688.0 18,282.0

Selling/General/Admin. Expenses, Total 18,010.0 16,504.0 11,344.0 10,451.0 10,054.0

Research & Development – – 1,665.0 1,601.0 1,769.0

Depreciation/Amortization – – – – –

Interest Expense(Income) - Net Operating – – – – –

Unusual Expense (Income) – – 755.0 1,027.0 1,723.0

Total Operating Expense 45,814.0 41,580.0 35,524.0 33,560.0 34,508.0

Operating Income 10,927.0 9,827.0 7,853.0 6,678.0 4,736.0

Interest Expense, Net Non-Operating (834.0) (629.0) (561.0) (603.0) (794.0)

Interest Income(Exp), Net Non-Operating (834.0) (629.0) (561.0) (603.0) (794.0)

Gain (Loss) on Sale of Assets – – – – –

P&G and Unilever 57

Other, Net 346.0 152.0 238.0 308.0 674.0

Net Income Before Taxes 10,439.0 9,350.0 7,530.0 6,383.0 4,616.0

Provision for Income Taxes 3,182.0 2,869.0 2,344.0 2,031.0 1,694.0

Net Income After Taxes 7,257.0 6,481.0 5,186.0 4,352.0 2,922.0

Minority Interest – – – – –

Equity In Affiliates – – – – –

Net Income Before Extra. Items 7,257.0 6,481.0 5,186.0 4,352.0 2,922.0

Accounting Change – – – – –

Discontinued Operations – – – – –

Extraordinary Item – – – – –

Net Income 7,257.0 6,481.0 5,186.0 4,352.0 2,922.0

Preferred Dividends (136.0) (131.0) (125.0) (124.0) (121.0)

Income Available to Com Excl ExtraOrd 7,121.0 6,350.0 5,061.0 4,228.0 2,801.0

Income Available to Com Incl ExtraOrd 7,121.0 6,350.0 5,061.0 4,228.0 2,801.0

Basic Weighted Average Shares 2,515.60 2,580.10 2,593.20 2,594.80 2,600.60

Basic EPS Excluding Extraordinary Items 2.831 2.461 1.952 1.629 1.077

Basic EPS Including Extraordinary Items 2.831 2.461 1.952 1.629 1.077

Dilution Adjustment 135.0 127.0 116.0 112.0 106.0

Diluted Weighted Average Shares 2,726.20 2,790.10 2,802.60 2,809.80 2,811.20

Diluted EPS Excluding ExtraOrd Items 2.662 2.321 1.847 1.545 1.034

Diluted EPS Including ExtraOrd Items 2.662 2.321 1.847 1.545 1.034

DPS - Common Stock Primary Issue 1.030 0.930 0.820 0.760 0.700

Gross Dividends - Common Stock 2,595.0 2,408.0 2,121.0 1,971.0 1,822.0

Pro Forma Stock Compensation Expense 334.0 325.0 398.0 442.0 310.0

Net Income after Stock Based Comp. Exp. 6,923.0 6,156.0 4,788.0 3,910.0 2,612.0

Basic EPS after Stock Based Comp. Exp. 2.700 2.340 1.800 1.460 0.960

Diluted EPS after Stock Based Comp. Exp. 2.530 2.200 1.705 1.385 0.925

Interest Expense, Supplemental 834.0 629.0 561.0 603.0 794.0

Depreciation, Supplemental 1,884.0 1,733.0 1,703.0 1,693.0 2,271.0

Total Special Items – – 755.0 1,027.0 1,723.0

Normalized Income Before Taxes 10,439.0 9,350.0 8,285.0 7,410.0 6,339.0

Effect of Special Items on Income Taxes – – 213.0 252.0 632.3

Inc Tax Ex Impact of Sp Items 3,182.0 2,869.0 2,557.0 2,283.0 2,326.3

Normalized Income After Taxes 7,257.0 6,481.0 5,728.0 5,127.0 4,012.7

Normalized Inc. Avail to Com. 7,121.0 6,350.0 5,603.0 5,003.0 3,891.7

Basic Normalized EPS 2.831 2.461 2.161 1.928 1.496

Diluted Normalized EPS 2.662 2.321 2.041 1.820 1.422

P&G and Unilever 58 P&G and Unilever

58

P&G and Unilever 59

ANNUAL CASH FLOW STATEMENT (Indirect Method)

In Millions of U.S. Dollars 12 Months Ending

12 Months Ending

12 Months Ending

12 Months Ending

12 Months Ending

(except for per share items) 6/30/2005 6/30/2004 6/30/2003 6/30/2002 6/30/2001 Restated Restated 6/30/2005 6/30/2005

Net Income/Starting Line 7,257.0 6,481.0 5,186.0 4,352.0 2,922.0

Depreciation/Depletion 1,884.0 1,733.0 1,703.0 1,693.0 2,271.0

Deferred Taxes 650.0 415.0 63.0 389.0 (102.0)

Non-Cash Items – – – – –

Changes in Working Capital (1,069.0) 733.0 1,748.0 1,308.0 713.0

Cash from Operating Activities 8,722.0 9,362.0 8,700.0 7,742.0 5,804.0

Capital Expenditures (2,181.0) (2,024.0) (1,482.0) (1,679.0) (2,486.0)

Other Investing Cash Flow Items, Total (155.0) (8,120.0) 119.0 (5,156.0) 643.0

Cash from Investing Activities (2,336.0) (10,144.0) (1,363.0) (6,835.0) (1,843.0)

Financing Cash Flow Items – – – – –

Total Cash Dividends Paid (2,731.0) (2,539.0) (2,246.0) (2,095.0) (1,943.0)

Issuance (Retirement) of Stock, Net (4,548.0) (3,515.0) (967.0) (331.0) (1,109.0)

Issuance (Retirement) of Debt, Net 3,111.0 5,686.0 (1,882.0) 2,623.0 38.0

Cash from Financing Activities (4,168.0) (368.0) (5,095.0) 197.0 (3,014.0)

Foreign Exchange Effects (61.0) (46.0) 387.0 17.0 (56.0)

Net Change in Cash 2,157.0 (1,196.0) 2,629.0 1,121.0 891.0

Cash Interest Paid 783.0 630.0 538.0 629.0 735.0

Cash Taxes Paid 2,644.0 1,634.0 1,703.0 941.0 1,701.0

P&G Financial Data 2005 2004 2003 2002 2001

Net Income 7,257.0 6,481.0 5,186.0 4,352.0 2,922.0Sales 56,741.0 51,407.0 43,377.0 40,238.0 39,244.0

Assets 61,527.0 57,048.0 43,706.0 40,776.0 34,387.0Equity 17,477.0 17,278.0 18,186.0 13,706.0 12,010.0

P&G Dupont Analysis

Net Profit Margin

Asset Turnover

Rtn. On Invest.

Financial Leverage

Rtn. On Equity

2001 0.07 1.14 0.08 2.86 0.242002 0.11 0.99 0.11 2.98 0.322003 0.12 0.99 0.12 2.40 0.292004 0.13 0.90 0.11 3.30 0.382005 0.13 0.92 0.12 3.52 0.42

P&G and Unilever 60

P&G Dupont Analysis

0.00

0.20

0.40

0.60

0.80

1.00

1.20

2001 2002 2003 2004 2005

Net Profit MarginAsset TurnoverRtn. On Invest.Rtn. On Equity

Financial data obtained from Reuters on February 4, 2006 from http://www.investor.reuters.com/IS/aspx.

P&G's overall financial performance is good, but not stellar. Return on equity has generally risen slightly over the last several years, although profit margin and return on investment have both leveled off in the 12%-13% range. Asset turnover efficiency is declining, which is due to increases in inventory, accounts receivable, cash and goodwill. The firm's financial leverage increased, which is due to increasing levels of debt that is being carried on the balance sheet, most of which is short-term debt. Carrying a high short-term debt load may be considered problematic, and is reflected in P&G's liquidity as measured by the current ratio and quick ratio at .81 and .61 respectively, somewhat below the sector (non-cyclical consumer goods) averages. In terms of the long-term debt load, it is currently equal to about 42% of the stockholder's equity, which is also considered a little on the high side, compared to a more optimal level of 25%-35%. P&G's SG&A costs are in the 25%-30% range, which is somewhat high, compared to a more optimal level of 12%-15%. Cash flow from operating activities has also slowed, and in the most recent year was reduced to a level comparable to two years prior.

P&G and Unilever 61

Appendix S: Unilever Financial Analysis

Unilever Financial Statements ANNUAL BALANCE SHEET

In Millions of U.S. Dollars As of As of As of As of As of(except for per share items) 12/31/2004 12/31/2003 12/31/2002 12/31/2001 12/31/2000 Restated Restated 12/31/2003 12/31/2002

Cash & Equivalents 1,904.5 2,224.9 2,013.7 2,234.5 3,135.7

Short Term Investments 1,219.2 1,789.3 1,471.3 526.8 792.0

Cash and Short Term Investments 3,123.7 4,014.2 3,484.9 2,761.3 3,927.8

Accounts Receivable - Trade, Net 3,791.0 4,212.2 4,934.6 6,413.1 6,553.5

Receivables - Other 1,491.7 1,419.7 1,696.9 1,938.1 1,779.7

Total Receivables, Net 5,282.6 5,631.8 6,631.5 8,351.1 8,333.1

Total Inventory 4,509.8 5,010.2 5,400.2 6,411.9 6,505.5

Prepaid Expenses 393.6 661.2 687.6 657.6 597.6

Other Current Assets, Total 1,167.6 764.4 566.4 3,032.5 4,849.4

Total Current Assets 14,477.4 16,081.8 16,770.7 21,214.4 24,213.4

Property/Plant/Equipment, Total - Gross 16,063.8 16,565.5 18,358.3 21,801.3 23,003.7

Accumulated Depreciation, Total (8,538.3) (8,579.1) (9,434.8) (10,712.8) (11,196.4)

Property/Plant/Equipment, Total - Net 7,525.5 7,986.3 8,923.6 11,088.4 11,807.3

Goodwill, Net 13,810.2 16,149.0 18,394.3 22,458.9 30,308.4

Intangibles, Net 4,596.2 5,107.4 5,935.4 7,499.1 1,453.3

Long Term Investments 242.4 238.8 814.8 1,060.8 1,388.5

Other Long Term Assets, Total – – – – –

Total Assets 40,651.6 45,563.4 50,838.8 63,321.7 69,170.8

Accounts Payable 4,475.0 4,448.6 5,209.4 5,858.6 6,463.5

Accrued Expenses 3,046.9 3,057.7 3,466.9 3,835.4 3,250.9

Notes Payable/Short Term Debt – – – – –

Current Port. of LT Debt/Capital Leases 6,236.6 8,921.2 10,724.8 13,535.3 20,010.8

Other Current liabilities, Total 3,726.1 4,062.2 4,545.8 4,626.2 4,313.0

Total Current Liabilities 17,484.7 20,489.6 23,947.0 27,855.5 34,038.2

Long Term Debt 8,271.9 10,159.6 13,120.1 17,065.9 15,679.8

Capital Lease Obligations – – – – –

Total Long Term Debt 8,271.9 10,159.6 13,120.1 17,065.9 15,679.8

Total Debt 14,508.6 19,080.8 23,845.0 30,601.2 35,690.6

Deferred Income Tax 613.2 896.4 450.0 1,092.0 2,382.1

Minority Interest 434.4 528.0 742.8 796.8 741.6

P&G and Unilever 62

Other Liabilities, Total 7,206.3 6,385.5 6,936.3 8,119.5 6,525.9

Total Liabilities 34,010.6 38,459.1 45,196.2 54,929.8 59,367.6

Redeemable Preferred Stock, Total – – – – –

Preferred Stock - Non Redeemable, Net – – – – –

Common Stock, Total 504.0 504.0 504.0 504.0 504.0

Additional Paid-In Capital 1,676.5 1,676.5 1,676.5 1,676.5 1,676.5

Retained Earnings (Accumulated Deficit) 6,291.9 6,062.6 4,945.4 3,686.5 5,379.8

Treasury Stock - Common – – – – –

Other Equity, Total (1,831.3) (1,138.8) (1,483.3) 2,524.9 2,242.9

Total Equity 6,641.1 7,104.3 5,642.6 8,391.9 9,803.2

Total Liabilities & Shareholders' Equity 40,651.6 45,563.4 50,838.8 63,321.7 69,170.8

Shares Outs - Common Stock Primary Issue 571.58 571.58 571.58 571.58 1,122.00

Total Common Shares Outstanding 571.58 571.58 571.58 571.58 1,122.00

Employees 227,000 240,000 258,000 265,000 295,000

Currency Exchange Rate

(most recent) 0.833 Euro / U.S. Dollar

ADR Information 1 Share(s) Per ADR

ANNUAL INCOME STATEMENT In Millions of U.S. Dollars 12 Months

Ending12 Months

Ending12 Months

Ending12 Months

Ending12 Months

Ending(except for per share items) 12/31/2004 12/31/2003 12/31/2002 12/31/2001 12/31/2000 Restated Restated 12/31/2003 12/31/2003

Revenue 48,204.7 51,233.6 57,926.3 61,819.3 57,100.7

Other Revenue, Total – – – – –

Total Revenue 48,204.7 51,233.6 57,926.3 61,819.3 57,100.7

Cost of Revenue, Total 24,014.2 25,431.4 28,860.0 32,515.3 30,266.4

Gross Profit 24,190.6 25,802.2 29,066.4 29,304.0 26,834.3

Selling/General/Admin. Expenses, Total 20,097.2 19,222.4 23,057.7 23,368.5 22,871.7

Research & Development – – – – –

Depreciation/Amortization – – – – –

Interest Expense(Income) - Net Operating – – – – –

Unusual Expense (Income) – – – – –

Total Operating Expense 44,111.4 44,653.8 51,917.7 55,883.8 53,138.1

Operating Income 4,093.4 6,579.9 6,008.6 5,935.4 3,962.6

P&G and Unilever 63

Interest Expense, Net Non-Operating (921.6) (1,407.7) (1,735.3) (2,223.7) (1,177.2)

Interest/Invest Income - Non-Operating 308.4 472.8 460.8 363.6 526.8

Interest Income(Exp), Net Non-Operating (613.2) (934.8) (1,274.5) (1,860.1) (650.4)

Gain (Loss) on Sale of Assets – – – – –

Other, Net (73.2) (199.2) 129.6 50.4 (44.4)

Net Income Before Taxes 3,406.9 5,445.8 4,863.8 4,125.8 3,267.7

Provision for Income Taxes 938.4 1,832.5 1,926.1 1,822.9 1,683.7

Net Income After Taxes 2,468.5 3,613.3 2,937.7 2,302.9 1,584.1

Minority Interest (928.8) (1,242.0) (922.8) (1,386.1) (774.0)

Equity In Affiliates – – – – –

U.S. GAAP Adjustment 972.0 1,254.1 1,862.5 (273.6) 188.4

Net Income Before Extra. Items 2,511.7 3,625.3 3,877.4 643.2 998.4

Accounting Change 0.0 0.0 626.4 (7.2) –

Discontinued Operations – – – – –

Extraordinary Item – – – – –

Net Income 2,511.7 3,625.3 4,503.8 636.0 998.4

Preferred Dividends (33.6) (32.4) (50.4) (61.2) (52.8)

Income Available to Com Excl ExtraOrd 2,478.1 3,592.9 3,827.0 582.0 945.6

Income Available to Com Incl ExtraOrd 2,478.1 3,592.9 4,453.4 574.8 945.6

Basic Weighted Average Shares 963.41 968.91 976.70 982.80 989.22

Basic EPS Excluding Extraordinary Items 2.572 3.708 3.918 0.592 0.956

Basic EPS Including Extraordinary Items 2.572 3.708 4.560 0.585 0.956

Dilution Adjustment 0.0 0.0 0.0 0.0 –

Diluted Weighted Average Shares 1,012.55 998.14 1,006.60 1,010.00 1,014.28

Diluted EPS Excluding ExtraOrd Items 2.447 3.600 3.802 0.576 0.932

Diluted EPS Including ExtraOrd Items 2.447 3.600 4.424 0.569 0.932

DPS - Common Stock Primary Issue 2.268 2.088 2.040 1.872 1.716

Gross Dividends - Common Stock 2,178.1 2,018.5 1,990.9 1,836.1 1,749.7

Interest Expense, Supplemental 921.6 1,407.7 1,735.3 2,296.9 1,209.6

Interest Capitalized, Supplemental – 0.0 0.0 (73.2) (32.4)

Depreciation, Supplemental 1,195.2 1,078.8 1,604.5 1,749.7 1,822.9

Total Special Items – – – – –

Normalized Income Before Taxes 3,406.9 5,445.8 4,863.8 4,125.8 3,267.7

Effect of Special Items on Income Taxes – – – – –

P&G and Unilever 64

Inc Tax Ex Impact of Sp Items 938.4 1,832.5 1,926.1 1,822.9 1,683.7

Normalized Income After Taxes 2,468.5 3,613.3 2,937.7 2,302.9 1,584.1

Normalized Inc. Avail to Com. 2,478.1 3,592.9 3,827.0 582.0 945.6

Basic Normalized EPS 2.572 3.708 3.918 0.592 0.956

Diluted Normalized EPS 2.447 3.600 3.802 0.576 0.932




ANNUAL CASH FLOW STATEMENT (Indirect Method)

In Millions of U.S. Dollars 12 Months Ending

12 Months Ending

12 Months Ending

12 Months Ending

12 Months Ending

(except for per share items) 12/31/2004 12/31/2003 12/31/2002 12/31/2001 12/31/2000 Restated Restated 12/31/2003 12/31/2003

Net Income/Starting Line 4,093.4 6,579.9 6,008.6 5,935.4 3,962.6

Depreciation/Depletion 3,430.9 2,445.7 3,098.5 3,414.1 2,344.9

Deferred Taxes – – – – –

Non-Cash Items 667.2 (410.4) 136.8 (860.4) 427.2

Changes in Working Capital (1,549.3) (2,124.1) (1,864.9) (2,040.1) (684.0)

Cash from Operating Activities 6,642.3 6,491.1 7,379.1 6,449.1 6,050.6

Capital Expenditures (1,176.0) (1,249.2) (1,575.7) (1,843.3) (1,633.3)

Other Investing Cash Flow Items, Total 302.4 766.8 1,634.5 4,386.2 (32,488.9)

Cash from Investing Activities (873.6) (482.4) 58.8 2,542.9 (34,122.2)

Financing Cash Flow Items (972.0) (1,432.9) (2,336.5) (879.6) 2,048.5

Total Cash Dividends Paid (2,097.7) (2,090.5) (1,933.3) (1,761.7) (1,687.3)

Issuance (Retirement) of Stock, Net (8.4) (9.6) 10.8 (3.6) (21.6)

Issuance (Retirement) of Debt, Net (3,496.9) (3,490.9) (3,704.5) (6,203.0) 27,505.1

Cash from Financing Activities (6,575.1) (7,023.9) (7,963.5) (8,848.0) 27,844.7

Foreign Exchange Effects – – – – –

Net Change in Cash (806.4) (1,015.2) (525.6) 144.0 (226.8)

Cash Interest Paid – 1,336.9 1,760.5 2,210.5 1,159.2

Cash Taxes Paid 1,653.7 1,707.7 2,180.5 2,646.1 2,080.9




P&G and Unilever 65

Unilever Financial Data 2004 2003 2002 2001 2000

Net Income 2,468.5 3,616.3 2,937.7 2,302.9 1,584.1Sales 48,204.7 51,233.6 57,926.3 61,819.3 57,100.7

Assets 40,651.6 45,563.4 50,838.8 63,321.7 69,170.1Equity 6,641.1 7,104.3 5,642.6 8,391.9 9,803.2

Unilever Dupont Analysis

Net Profit Margin

Asset Turnover

Rtn. On Invest.

Financial Leverage

Rtn. On Equity

2000 0.03 0.83 0.02 7.06 0.162001 0.04 0.98 0.04 7.55 0.272002 0.05 1.14 0.06 9.01 0.522003 0.07 1.12 0.08 6.41 0.512004 0.05 1.19 0.06 6.12 0.37

Unilever Dupont Analysis

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

2000 2001 2002 2003 2004

Net Profit MarginAsset TurnoverRtn. On Invest.Rtn. On Equity

Financial data obtained from Reuters on February 4, 2006 from http://www.investor.reuters.com/IS/aspx. Unilever's financial performance leaves much room for improvement. Net profit and return on investment margins have remained in the single digits for the last several years. Over the last three years, return on equity has also dropped off. To Unilever's credit, debt loads have been significantly reduced along with inventories and accounts receivable, which has improved the company's financial leverage and improved asset turnover. For the most recent year, their current ratio is .82, and their quick ratio is .57. Although their debt loads have been significantly reduced, their liquidity is still below industry averages. Unilever's SG&A expenses have run unusually high at around 37%, and in the most recent year, swelled to more than 40%. Perhaps most significant is the fact that Unilever's sales have been on a decreasing trend for the last five years. Because Unilever has its ownership spread across several different countries, its financial results can be greatly impacted by fluctuations in foreign exchange rates.

P&G and Unilever 66

Appendix T: 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

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

*Information derived from financial statements, company reports, industry news and periodicals and competitor websites. This summary represents the key issues that Global Strategy Advisors have identified for each category.

P&G and Unilever 67

Appendix U: 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

*Information derived from financial statements, company reports, industry news and periodicals and competitor websites. This summary represents the key issues that Global Strategy Advisors have identified for each category.

P&G and Unilever 68

APPENDIX V: History of Global Expansion P & G

As early as 1915, P & G began movement outside the United States, developing a manufacturing facility for soap

and Crisco, in Canada, and by 1930, P & G created its first subsidiary overseas, purchasing Thomas Hedley & Sons

Co., Ltd., in England.170 In 1935, P & G acquired their first Far East operations, in 1948, moved into Mexico with a

subsidiary in Latin America, and in 1954, moved into continental Europe leasing of a plant in France.171

Understanding the importance of foreign marketplace knowledge, people management, and subsidiary management,

P & G created an Overseas Division to manage the Company's growing international business.172,173

Continuing to identify key markets, in the 1960's, P&G GmbH moved into Germany and established a

manufacturing facility, began Middle East business in Saudi Arabia, and opened their European Technical Center in

Brussels, serving Common Market subsidiaries.174 In the 1970's, P & G acquired a company for manufacturing and

selling P&G products in Japan, and by 1984, highlighting their global development capabilities, P & G introduced

Liquid Tide, with components developed in Japan and Europe, and packaging in the United States. This

accomplishment is an example of their true Global Mindset and orientation to maximizing global strengths. To

further propel their global expansion for increased opportunity, P & G made several more acquisitions in the 1980's,

and reorganized to category management while integrating, purchasing, engineering, manufacturing, and

distribution, to create an effective, well coordinated product supply system.175

From the late 1980's until currently, P&G has formed a manufacturing JV in China and Viet Nam, moved into

Eastern Europe through acquisitions and new business development,176 and secured additional acquisitions such as

Max Factor, Betrix,177 Clairol, and Gillette.178 To better serve the global marketplace, P & G modified their

geographic structure for better strategic integration and coordination globally, creating four regions, North America,

Asia, Latin America, and Europe/ Middle East/Africa,179 created alliances for co-marketing, especially their

pharmaceutical line, and developed the Market Development Organization, which leads country business teams in

building brands in local markets.180 They continue to benefit from ongoing learning, such as their launch of Olay in

Spain, following a roll out in store counters in Asia with lessons shared, and their completed acquisition of the

remaining 20% of its China venture from its partner, giving P & G full ownership.181

* This history is in an expanded presentation format to provide an insightful overview of their growth. The Unilever

history is presented in a table, as the Board of Directors knows this information.

P&G and Unilever 69

APPENDIX W: A History of Unilever’s Global Expansion182

YEAR GLOBAL EXPANSION By 1906 Lever Brothers had established factories in three European countries, plus

Canada, Australia and the U.S. and enterprises in the Pacific. Both Lever Brothers and Jurgens and Van den Bergh had established palm planting operations – Lever Brothers in the Solomon Islands; Jurgens and Van den Bergh in German Africa.

1910 Lever Brothers buys first company in West Africa. 1914 Jurgens and Van den Bergh acquire additional small businesses in the

Netherlands; they operate seven margarine factories in Germany. 1920s Jurgens and Van den Bergh own margarine factories in Scotland, Ireland

and England. 1926 New mass market for consumer goods in Argentina 1927 Jurgens and Van den Bergh team up with two European businesses, Centra

and Schicht. Jurgens and Van den Bergh merge to create Margarine Unie - the Margarine Union. The union gains new members, creating a large group of European businesses involved in the production of almost all goods created from oils and fats.

1928 Margarine Unie acquires the French-Dutch Calvé-Delft group with factories in the Netherlands, France, Belgium and Czechoslovakia.

1929 New mass market for consumer goods in Brazil 1930 Unilever is officially established

1940s During war years, Unilever is broken up, with businesses in German and Japanese-occupied territory cut off from London and Rotterdam. Unilever continues to expand in the food market, increasing shareholder interest in UK businesses and gaining UK rights to deep-freezing methods (through acquisition of Birds Eye and other companies).

1945 Unilever regains control of its international network, post-war 1948 New mass market for consumer goods in Caribbean 1950s 1954 Sunsilk shampoo available in 18 countries worldwide 1955 Dove soap launched in the U.S. 1960s Manufacturing and packaging initiatives launched in Europe 1961 Good Humor ice cream acquired in U.S. 1962 New mass market for consumer goods in Chile 1963 New mass market for consumer goods in Central America.

Cornetto, the first packaged and branded ice cream cone, begins its launch in Europe.

1965 New mass market for consumer goods in Mexico. Cif (everyday cleaner) launched in France.

1970s United Africa Company yields large profits in Nigeria 1971 Unilever acquires Lipton Teas; Unilever’s tea business becomes one of the

largest in the world. 1973 Unilever acquires Frigo ice cream in Spain.

United Africa Company (Unilever subsidiary) becomes UAC International - having expanded since its inception in the 1920s to trade in 43 countries.

1977 By now, across the nine members of the EEC, Unilever employs nearly 177,000 people in 200 offices and factories.

1978 Unilever acquires National Starch in the U.S. 1980s 1987 Dove soap relaunched in Europe, starting in Italy.

P&G and Unilever 70

1989 Magnum ice cream launched in Germany. 1990s 1992 Unilever enters the Czech Republic and Hungary, and establishes UniRus

in Russia. 1993 Breyers ice cream (my favorite) acquired in the U.S.; Organics shampoo

first launched in Thailand. 1994 Unilever disposes of United Africa Company. 1996 Hindustan Lever and Brooke Bond Lipton India merge to create India’s

largest private sector company. Annapurna iodized salt launched in India.

1997 Kibon ice cream acquired in Brazil. 1999 Acquired HPC business Sociedad Industrial Dominicana, in the

Dominican Republic, and a controlling interest in the Varela HPC business in Colombia.

2000s 2000 Ben & Jerry’s ice cream and Slim Fast foods acquired in U.S.

Amora-Maille culinary business acquired in France. Acquired controlling interest in leading Ecuadorian detergents, personal products and food company, Corporacion Jaboneria. Acquired Honduras-based soaps, foods and beverages company, Grupo Cressida.

2001 By this time, Unilever has cut the number of its brands from 1600 at the end of the 20th Century, to 900.

2002 Unilever Health Institute opens regional centres in Bangkok and Accra, Ghana.

Our history. Retrieved February 14, 2006, from Unilever web site: http://www.unilever.com/ourcompany/aboutunilever/history/default.asp. Organising to win in Latin America. Retrieved February 14, 2006, from Unilever web site: http://www.unilever.com/ourcompany/aboutunilever/history/default.asp.

P&G and Unilever 71

Appendix X: Dynamic Resource-based Model of Competitive Advantage183

P&G and Unilever 72

Appendix Y: Unilever’s Early Use of the Internet, 2000

“Mindful that women buy most of the food and consumer products in a household, the company has taken equity stakes in iVillage.com, and American Web site aimed at women, and Wowgo.com, a British site that plans to target teenage girls. It is advertising its Lynx male body spray on the on-line sites of the so-called lad magazines like FHM, which are widely read by British teens.”184

P&G and Unilever 73

Appendix Z: Global Data Synchronization Network Overview of Benefits for Manufacturer and Retailer185

“Global Data Synchronization (GDS) is fast becoming a strategic imperative for many manufacturers and retailers,” says Nigel Bagley, Head of Customer eBusiness of Unilever and Co-chairman of the Global Commerce Initiative’s GDS Implementation Program. “Early adopters understand that GDS is necessary to provide a foundation for future collaborative commerce and are realizing substantial benefits from implementing GDS.”186

Among the actual business benefits of GDS cited in this article was Unilever Colombia, which significantly reduced their data inconsistencies and improved new item speed to market by aligning product information with their trading partners.187

P&G and Unilever 74

Appendix AA: Safeway, Unilever Complete Global Data Synchronization Project

Safeway, Inc. announced on July 1, 2004 the results of a successful global data synchronization initiative with Unilever. “The companies said the significance of this project has international reach, as it represents the first time that product information has been synchronized by way of interoperability between the leading supply side and demand side of data pools. …” “Through the successful completion of this project, Safeway and Unilever have demonstrated that by adopting industry standards, critical product information exchange between manufacturers and retailers can be achieved in a scalable and rapid manner. …” “Tom Barnhart, director E-Business Unilever North America, said his company is pleased to have collaborated with Safeway in achieving the industry milestone. ‘Unilever is committed to the GCI Global Data Synchronization vision, and we view this project as an important step towards the realization of that vision.’”188

P&G and Unilever 75

Appendix BB: Unilever Initiatives in Information Technology189

INITIATIVE DETAILS

Latin America – “Orchestra” Advances made in 2004 in this information, process and system harmonization and simplification program, which was deployed to over 110 sites and 9,400 users in Brazil, Greater Andina, Chile, River Plate and Mexico, to cover 60% of the Latin American business. Information Management component has won external recognition for excellence.

Asia A demand and supply network planning tool has been implemented in eleven countries; the Unilever standard data warehouse is available in nine countries with twelve countries using the regional e-Commerce hub.

Siebel – automation technology Sales force automation technology – continues to be deployed across the business. Good progress in Asia and Latin America using low-cost hand held devices, sharing learning and best practices across regions. An Asian trade funds management system has been implemented in two units (remainder to follow in that region in 2005/2006).

RFID Pilot programs in North America with Wal-Mart (Unilever is one of their lead suppliers), linked to broader data synchronization efforts to improve quality and speed of information sharing between Unilever and its customers.

Unilever Portal Common entry and navigation software technology, deployed to over 40,000 users in Europe and 6,000 users in North America. Enabled a reduction of over 50 traditional intranet sites in Europe. Unilever has agreed to a global licensing of this technology; will continue to deploy to establish one environment for information and access within Unilever.

P&G and Unilever 76

Appendix CC: P&G Portfolio: Product Groups and Businesses There are numerous P&G manufacturing and distribution facilities around the world. Therefore, this list is grouped by product line; in addition the list contains some European/UK facilities. Segment/ Company Product line/purpose Product P&G Beauty Cosmetics, deodorant,

feminine care, fine fragrances, hair care, hair colorants, personal cleansing, professional hair care, skin care.

Pantene, Always, Whisper, Olay, Head & Shoulders, Tampax, Herbal Essences, Nice n Easy, Natural Instincts, Wella, Koleston, Wellaflex, Shockwaves, CoverGirl, SK-11, Rejoice, Hugo Boss, Max Factor, Old Spice, Safeguard, Secret, Lines Feminine care, Zest, Lacoste, Vidal Sassoon, Ivory, Aussie, Evax, Camay, Infusium 23, Naturella, Ausonia, Noxzema, Infasil, Laura Biagiotti, Sure.

P&G Family Health Baby care, family care, oral care, personal health care, pet health & nutrition, pharmaceuticals

Pampers, Charmin, Crest, Bounty, Iams, Eukanuba, Actonel, Vicks, Prilosec OTC, Luvs, Asacol, Kandoo, Dodot, Puffs, Tempo, Metamucil, Fixodent, PUR, Scope, Pepto-Bismol, ThermaCare, Didronel, Kukident, BlendaMed.

P&G Household Care

Coffee, Commercial Products group, Fabric care, Home care, Snacks.

Tide, Ariel, Downy, Lenor, Pringles, Folgers, Dawn, Fairy, Joy, gain, Ace, Swiffer, Mr Clean, Febreeze, Dash, Bold, Cascade, Cheer, Bounce, Millstone, Bonux, Linidor, Daz, Era, Flash, Dreft, Vizir, Salvo, Viakal, Myth, Alomatik

P&G Chemicals manufacture and marketing of oleochemicals

fatty alcohols, fatty acids, methyl esters, glycerine, tertiary amines, SEFOSEtm and OLEAN®.

P&G Health Sciences

identifying, developing, and using leading health care technologies in the development of effective products -- 200 scientists and collaboration with external partners

scientific research in the areas of health, hygiene, and nutrition

P&G Products Europe

By Country

Procter & Gamble Ltd., also known as the Newcastle Technical Center (UK)

makes and markets fabric and household care products, such as the Swiffer Duster and Mr. Proper. The company's Go, Give & Grow program partners with the World Health Organization and selects a handful of graduates from top Western European

P&G and Unilever 77

universities to work on projects before they graduate

Procter & Gamble Technical Centres Limited. Also known as Rusham Park Technical Centre (RPTC),

the division conducts research related to its parent's health and beauty care products. A subsidiary of consumer products giant Procter & Gamble (P&G).

development of its hair care products, skin care items and cosmetics, oral care products, fragrances, deodorants, and respiratory medicines

Procter & Gamble Western Europe

regional arm of parent firm makes and markets personal care products, pharmaceuticals and over-the-counter medicines (Prilosec).

P&G Nordic brings many of the parent company's top brands to consumers in Denmark, Finland, Norway, and Sweden.

Graham Webb International, Inc

Graham Webb founded the international hair care company, which is now woven into Wella AG.

Hair care education. Its first Graham Webb Academy opened in London in 1981. The company now has academies in the US. Webb makes hair care, body care, and cosmetics worldwide and sells them through licensed beauty salons, cosmetologists, and distributors. Wella AG bought Graham Webb in 2001. Procter & Gamble acquired Wella in 2004.

The Dover Wipes Company, a subsidiary of P&G

Pampers and LUVS branded baby wipes, including their tubs and refills.

Paper machines to manufacture sanitary wet paper products, converting and packing operations, raw material storage, a warehouse, and shipping department

The Folgers Coffee Company

Coffee and related.

Global Gillette The world's #1 maker of shaving supplies

(Sensor, Trac II, and the premium-priced Mach3, M3Power, and Fusion), the firm is also a leading battery (Duracell) manufacturer & makes Braun electric shavers

The Iams Company Eukanuba and Iams premium dog and cat foods (dry and canned)

Iams also funds research efforts related to animal dermatology, geriatrics, allergies, and nutrition

Millstone Coffee roasted coffees, as well as flavored, decaffeinated, and organic coffees

Olay Company, Inc. skin care products Daily Facials, Total Effects, Regenerist, Ohm by Olay, OlayComplete, and OlayQuench.

Oral-B Laboratories manufacturer of oral hygiene products (Oral-B was acquired in 1984 by Gillette and shifted to P&G in 2005)

power and manual toothbrushes, floss, irrigation products, toothpaste, and mouth rinse

http://cobrands.hoovers.com/global/cobrands/proquest/factsheet.xhtml?COID=91241



P&G and Unilever 78

P&G-Clairol, Inc. part of the company's P&G Beauty division and makes hair coloring products, hair spray, shampoo, conditioner, and hair styling items

130 brands include Herbal Essences, Nice 'n Easy, Hydrience, Ultress, Natural Instincts, Loving Care, and Balsam Color. Clairol helped lay the foundation for P&G's head-first dive into hair care after P&G acquired Clairol from the Bristol-Myers Squibb Company in 2001.

Wella AG Wella UK world's leading haircare firms, it sells professional and retail haircare products, cosmetics, and fragrances

P&G owns more than 95% of Wella shares.

Soap operas As the World turns, Guiding Light

Market Development Organization

North America, Western Europe, Northeast Asia, Latin America, Central and Eastern Europe/Middle East/Africa, Greater China and ASEAN/Australasia/India

Marketing, brand building.

Table Sources: Hoovers.com and pg.com


P&G and Unilever 79

Appendix DD: Unilever Portfolio: Product Groups & Businesses

Company Name LocationSort By...

Employees Company Type

Al Gurg Unilever Co Dubai, United Arab Emirates 240 Private Subsidiary

Conopco Inc Owensboro, KY, United States 250 Private Parent

Elais Unilever S.A. Athens, Greece 449 Public Subsidiary

Hindustan Lever Limited [Unilever]

Mumbai, India Public Subsidiary

Lancaster Cosmetics International

New York, NY, United States 800 Private Subsidiary

PT Unilever Indonesia Tbk

Jakarta, Indonesia 3,010 Public Subsidiary

Suomen Unilever Oy Helsinki, Finland 300 Private Subsidiary

UBF Food Solutions Franklin Park, IL, United States 400 Private Subsidiary

Unilever Hammond, IN, United States 350 Private Branch

Unilever Clinton, CT, United States 500 Private Subsidiary

Unilever (Malaysia) Holdings Sdn Bhd

Kuala Lumpur, Malaysia 1,000 Private Independent

Unilever (Schweiz) AG

Zug, Switzerland 1,453 Public Subsidiary

Unilever Andina (Colombia) SA

Santafé de Bogotá DC, Colombia 723 Private Independent

Unilever Andina SA Guacara, Venezuela 366 Private Independent

Unilever Arabia Group of Companies

Jeddah, Saudi Arabia Private Subsidiary

Unilever Australia Limited

Epping, Australia 1,700 Private Subsidiary

Unilever Austria GmbH

Wien, Austria 430 Private Independent

Unilever Belgique SA

Bruxelles, Belgium 1,195 Private Subsidiary

http://globalbb.onesource.com/sharedscripts/companylookup/companylookup.asp?CoSearchString=unilever&SortCol=Employees&RMSortCol=CompanyName&SearchType=co28

http://globalbb.onesource.com/Browser/cia_log.asp?Process=CP&KeyID=42387184




























P&G and Unilever 80

Unilever Bestfoods Asheboro, NC, United States 130 Private Branch

Unilever Bestfoods Baltimore, MD, United States 300 Private Branch

Unilever Bestfoods Independence, MO, United States 400 Private Branch

Unilever Bestfoods New Century, KS, United States 210 Private Branch

Unilever Bestfoods Englewood Cliffs, NJ, United States

42,000 Private Subsidiary

Unilever Bestfoods Merced, CA, United States 150 Private Branch

Unilever Bestfoods Atlanta, GA, United States 150 Private Subsidiary

Unilever Bestfoods Ridgefield, NJ, United States 25 Private Branch

Unilever Bestfoods (Ireland) Ltd

Dublin, Ireland 800 Private Subsidiary

Unilever Bestfoods Foodservice

Chicago, IL, United States 300 Private Branch


Little Rock, AR, United States 125 Private Branch


Bayonne, NJ, United States 175 Private Branch


Orange, CA, United States 4 Private Branch

Unilever Bestfoods Italia SpA

Inveruno, Italy 700 Private Independent

Unilever Bestfoods Nederland BV

Rotterdam, Netherlands 2,000 Private Subsidiary

Unilever Bestfoods Nordic AB

Helsingborg, Sweden 200 Private Subsidiary

Unilever Bestfoods North America

Merced, CA, United States 150 Private Branch

Unilever Bestfoods North America

Harrisburg, PA, United States 130 Private Subsidiary

Unilever Bestfoods Portugal SA

Lisboa, Portugal 175 Private Subsidiary

Unilever Bestfoods Schweiz GmbH

Thayngen, Switzerland 1,050 Private Subsidiary

Unilever Bestfoods Solutions

Milwaukee, WI, United States 170 Private Parent

Unilever Bestfoods Specialty Products

Indianapolis, IN, United States 40 Private Branch

Unilever Brasil Ltda São Paulo, Wiltshire, Brazil Private Independent































P&G and Unilever 81

Unilever Canada Toronto, ON, Canada 3,400 Private Subsidiary

Unilever Canada Toronto, ON, Canada 350 Private Parent

Unilever Canada Calgary, AB, Canada 35 Private Parent

Unilever Canada Ltd Toronto, ON, Canada 450 Private Parent

Unilever Caribbean Champs Fleurs, Trinidad and Tobago

600 Public Subsidiary

Unilever Chile HPC Ltda

Santiago, Chile 2,000 Private Subsidiary

Unilever Co Ltd Shanghai, China Private Subsidiary

Unilever Cosmetics International

Budd Lake, NJ, United States 100 Private Branch

Unilever Cosmetics International France

Neuilly sur Seine, France 70 Private Subsidiary

Unilever Cosmetics Intl

Oakville, ON, Canada 42 Private Subsidiary

Unilever Côte d'Ivoire

Abidjan, Cote d'Ivoire Private Independent

UNILEVER CR spol sro

Praha, Czech Republic 1,499 Private Independent

Unilever Danmark A/S

Glostrup, Denmark 134 Private Subsidiary

Unilever Deutschland GmbH

Hamburg, Germany 9,000 Private Subsidiary

Unilever España SA Madrid, Spain 2,020 Private Subsidiary

Unilever Foods España SA

Barcelona, Spain 505 Private Independent

Unilever France Rueil Malmaison, France 1,120 Private Subsidiary

Unilever France Foods

Rueil Malmaison, France 1,117 Private Subsidiary

Unilever France Home and Personal Care

St Ouen, France 1,050 Public Independent

Unilever France Ice Cream and Frozen Food

Rueil Malmaison, France 850 Private Subsidiary

Unilever Ghana Limited

Tema, Ghana Public Subsidiary





































P&G and Unilever 82

UNILEVER GROUP

London, London, United Kingdom 240,000 Public Parent

Unilever Hellas SA Piraeus, Greece 500 Public Subsidiary

Unilever Home & Personal Care

Chicago, IL, United States 350 Private Subsidiary


Greenwich, CT, United States 250 Private Subsidiary


Baltimore, MD, United States NA Private Branch


Trumbull, CT, United States 135 Private Subsidiary

Unilever Home & Personal Care Inc.

Clinton, CT, United States 500 Private Branch

Unilever Home & Personal Care USA

Troy, MI, United States 15 Private Subsidiary

Unilever Home and Personal Care UK Ltd

Kingston upon Thames, Surrey, United Kingdom


Unilever HPC Clinton, CT, United States 475 Private Parent

Unilever HPC Chicago, IL, United States 50 Private Branch

Unilever HPC Englewood Cliffs, NJ, United States

300 Private Branch

Unilever HPC USA Jefferson City, MO, United States 600 Private Branch

Unilever Hpc Usa Greenwich, CT, United States 350 Private Subsidiary

Unilever HPC USA City of Industry, CA, United States 250 Private Subsidiary

Unilever Hpcusa Palmetto, GA, United States 200 Private Parent

Unilever Ice Cream Loveland, OH, United States 1 Private Branch

Unilever International Paris

Rueil Malmaison, France 85 Private Subsidiary

Unilever Israel Ltd Ben Gurion International Airport, Israel


Unilever Italia SpA Milano, Italy 3,500 Private Subsidiary

Unilever Magyarország Kft

Budapest, Hungary 1,350 Private Subsidiary

Unilever Maroc Casablanca, Morocco Private Independent

Unilever N.V. Rotterdam, Netherlands 223,000 Public Parent



































P&G and Unilever 83

Unilever Nigeria Plc Lagos, Nigeria 2,000 Public Subsidiary

Unilever Pakistan Limited

Karachi, Pakistan 1,920 Public Parent

Unilever Philippines Inc

Manila, Philippines 1,100 Private Subsidiary

Unilever plc London, United Kingdom 223,000 Public Parent

Unilever Research & Development Co.

Edgewater, NJ, United States 350 Private Subsidiary

Unilever Singapore Pte Ltd

Singapore, Singapore 260 Private Subsidiary

Unilever South Africa (Pty) Ltd

Durban, South Africa 4,000 Private Subsidiary

Unilever Special Markets Department (Military Div.)

Greenwich, CT, United States NA Private Subsidiary

Unilever Sverige AB Helsingborg, Sweden 1,981 Private Subsidiary

Unilever Tea Kenya Nairobi, Kenya 16,000 Public Parent

Unilever United States Inc

Englewood Cliffs, NJ, United States

4 Private Subsidiary

Unilever United States Inc.

New York, NY, United States 17,800 Private Subsidiary


Cartersville, GA, United States 225 Private Subsidiary


Los Angeles, CA, United States NA Private Subsidiary


Raeford, NC, United States 500 Private Subsidiary


Washington, DC, United States 3 Private Subsidiary

Unilever Usa Englewood Cliffs, NJ, United States

700 Private Parent

Information obtained February 12, 2006, from: http://globalbb.onesource.com.































P&G and Unilever 84

APPENDIX EE: P&G e-Business Network

B2B data is exchanged directly through two Value Added Networks (VANs), Global eXchange

Services, Inc. (GXS) and Sterling Commerce. GXS is “a leading worldwide provider of B2B

integration, synchronization and collaboration solutions. The company operates a highly-reliable,

secure global network services platform enabling more than 30,000 businesses, including over

half of the Fortune 500, to conduct business together in real time.”190 Sterling Commerce is a

subsidiary of SBC Communications, Inc. and “is the world's leading provider of multi-enterprise

collaboration solutions for the Global 5000. Sterling Commerce software and services help

companies operate more profitably by giving them visibility and control over the processes they

share with business and supply chain partners.”191 For Data synchronization, P&G uses the

Global Data Synchronization Network (GDSN). GDSN “connects retailers and suppliers, via

their selected Data Pools, to the GS1 Global Registry.”192 P&G is also a member of 1SYNC,

formerly Transora, a B2B marketplace of data for efficient use of data synchronization.193

P&G and Unilever 85

NOTES 1 Global personal products: Industry profile. (May 2005). Retrieved February 7, 2006, from Business Source Premier. 2 Ibid. 3 Wall Street Transcript, Analyst interview: Household & personal products. (June 20, 2005). The Wall Street Transcript Corporation. New York, NY. 4 Grant, R. M. (2005). Contemporary strategy analysis (5th ed.). Malden, MA: Blackwell. 5 Perfumes, cosmetics, and other toilet preparations. Encyclopedia of American industries (online edition). Thomson Gale, 2006. Reproduced in Business and Company Resource Center. Farmington Hills, Mich: Gale Group. Retrieved Feb 6, 2006 from www.referenceforbusiness.com. 6 Global personal products: Industry profile. P 18. 7 Perfumes, cosmetics, and other toilet preparations. 8 Industry Growth Rate – Sales. Retrieved February 6, 2006, from: http://www.investor.reuters.com. 9 Personal and Household Products: Company Rankings. Retrieved from February 7, 2006, from: http://www.investor. reuters.com. 10 P&G news: Information on exchange of Gillette shares. (February 7, 2006). Retrieved February 7, 2006, from: http://www.pg.com/investors/exchange_of_gillette_shares.jhtml. 11 Global personal products: Industry profile. (May 2005). 12 Grant, R. M. (2005). Contemporary strategy analysis. 13 Global personal products: Industry profile. 14 Fitch: U.S. consumer products industry outlook – limited upside in 2006 (Industry overview). (December 8, 2005). Business Wire. 15 Ibid. 16 Kamenicky, V. (1992). Cleaning preparations and cosmetics – Industry Overview. US Industrial Outlook. US Dept of Commerce. Retrieved Feb 6, 2006, from http://www.findarticles.com. 17 Perfumes, cosmetics, and other toilet preparations. 18 Fitch: U.S. consumer products industry outlook – limited upside in 2006 (Industry overview). 19 Global personal products: Industry profile. P. 7. 20 Global personal products: Industry profile. 21 Perfumes, cosmetics, and other toilet preparations. 22 Global personal products: Industry profile. 23 Procter and Gamble: Our history. (2006). Retrieved February 6, 2006 from: http://www.pg.com/company/who_we_are/ourhistory.jhtml. 24 The Procter & Gamble Company. (2005, August). Retrieved February 6, 2006 from: http://www.datamonitor.com/~d79aa700b01941d1821f3071842b6035~/companies/company/?pid=C895EAE6-25E0-4D36-B30D-69500B939DC1. 25 Procter and Gamble Annual Report. (2005). Retrieved February 6, 2006 from: http://www.pg.com/investors/ annualreports.jhtml. 26 Ibid. 27 Form 10K Procter & Gamble Co. (2006, January). Retrieved February 2, 2006 from http://biz.yahoo.com/e/060130/pg10-q.html. 28 Ibid. 29 The Procter & Gamble company. (2006, January). Reuters Fundamentals. 30 Profile. (2006). Retrieved February 1, 2006, from: http://finance.yahoo.com/q/pr?s=PG 31 Ibid. 32 Procter and Gamble Annual Report. (2005). 33 Ibid. 34 Ibid. 35 Ibid. 36 Govindarajan, V., & Gupta, A.K. (2001). The quest for global dominance: Transforming global presence into global competitive advantage. San Francisco: Jossey-Bass. 37 P&G North America electronics data interchange. (2006, February). Retrieved February 10, 2006, from: http://www.pgedi.com. 38 Procter & Gamble Company Profile. (2004, May). Retrieved February 1, 2006, from: http://www.datamonitor.com. 39 Profile. (2006). Retrieved February 1, 2006, from: http://finance.yahoo.com/q/pr?s=PG. 40 Overview. (2006). Retrieved February 2, 2006, from: http://www.hoovers.com/procter-&-gamble/--ID__11211--/free-co-factsheet.xhtml. 41 Dranikoff, L., Koller, T., & Schneider, A. (2002, May). Divestiture: Strategy’s missing link. Harvard Business Review, 80(5). 42 Procter & Gamble awarded enterprise value award by CIO magazine for work with MatrixOne on innovative product lifecycle management application. Retrieved February 10, 2006, from: http://www.matrixone.com/matrixone/press_release_20040223_ pg.html.

P&G and Unilever 86

43 Procter and Gamble Annual Report. (2005). 44 Jones, G. (2002, December 9). Unilever-a case study. HBS Working Knowledge. Retrieved February 7, 2006, from http://hbswk.hbs.edu/tools/print_item.jhtml?id=3212&t=finance. 45 Ibid. 46 Van den Oever, R. (2005, December 20). Unilever simplifies ownership regime, keeps two parents. The Wall Street Journal. (Eastern ed.). P. B8. Retrieved February 5, 2006, from Business Source Premier Electronic Database. 47 Ibid. 48 Yahoo. (2006). Yahoo finance webpage. Retrieved February 5, 2006, from http://finance.yahoo.com. 49 Unilever. (2005, June). Introduction to Unilever. Retrieved February 7, 2006, from: http://www.unilever.com/ourcompany/aboutunilever/introducingunilever/default.asp. 50 Company Profile. Unilever. 51 Unilever. (2005, June). Introduction to Unilever. 52 Drier, M., Larsen, P., Burney, E., Jones, N., Epiro, S., Born, P., et al. (2005). Beauty's top 70. Women's Wear Daily; WWD Beautybiz, 190(53). Retrieved February 5, 2006, from Business Source Premier Electronic Database. 53 Neff, J. (2005, October 31). Unilever 3.0: CEO not afraid to copy from P&G. Advertising Age, 76(44). Retrieved February 5, 2006, from: Business Source Premier Electronic Database. 54 Cescau, P. (2006, February). Unilever results presentation for full year 2005. Retrieved February 6, 2006 from: http://www.unilever.com/Images/Q4%202005%20Speech_ul%2Ecom_tcm13-32067.pdf. 55 Company Profile. Unilever. (2004, May). 56 Company Profile. Unilever. (2004, May). 57 Ibid. 58 Ibid. 59 Ibid. 60 Ibid. 61 Unilever company profile. (2006). Retrieved February 19, 2006 at: http://biz.yahoo.com/ic/41/41850.html. 62 Grant, R. M. Contemporary strategy analysis. 63 Fact Sheet. (2005, October). Retrieved February 10, 2006, from: http://www.pg.com/investor. 64 Ibid. 65 Earning your trust. Annual Report. (2004). Retrieved February 7, 2006 from: http://www.pg.com/annualreports/2004/pdf/pg2004annualreport.pdf. 66 P & G Company Profile. (2004, October). 67 Ibid. 68 Ibid. 69 Balance and Leadership. 2005 Annual Report. (2005). Retrieved February 7, 2006, from: http:// www.pg.com. 70 Ibid. 71 Kotler, P. (2003). A framework for marketing management, (2nd ed.). Upper Saddle River, NJ: Prentice Hall. (pp. 294 & 295). 72 Balance and Leadership. 2005 Annual Report. 73 Grant, R. M. Contemporary strategy analysis. 74 Moore, M. (2003, September). 300 Brands, One Strategy. CIO Magazine. Retrieved February 15, 2006, from: http://www.cio.com/archive/090103/case.html. 75 Dranikoff, L.,Koller, T., & Schneider, A. Divestiture: strategy's missing link. 76 Lucas H. C., Jr. (2002). Strategies for electronic commerce and the internet. Cambridge, MA: MIT Press. 77 Insana, R. (2006, February 5). Focus on strategies, core business helps P&G progress. Retrieved February 10, 2006, from: http://www.usatoday.com/money/companies/management/2006-02-05-pandg_x.htm. 78 Fact Sheet (2005, October). Retrieved February 10, 2006 from: http://www.pg.com/investor. 79 Cook, M., & Tryndal, R. (2001, Nov.-Dec.). Lessons from the leaders. Supply Chain Management Review,5(6). Retrieved from Business Source Premier Database. 80 Ibid. 81 Ibid. 82 Ibid. 83 Ibid. 84 Lucas, H. C., Jr. Strategies for electronic commerce and the internet. 85 Govindarajan, V., & Gupta, A. K. The quest for global dominance. 86 Procter & Gamble awarded enterprise value award by CIO Magazine. 87 Insana, R. (2006, February 5). Focus on strategies, core business helps P&G progress. Retrieved February 10, 2006 from http://www.usatoday.com/money/companies/management/2006-02-05-pandg_x.htm. 88 Ibid. 89 Unilever. (2005, June). Introduction to Unilever.

P&G and Unilever 87

90 Fact Sheet (2005, October). 91 Foley, J. (2005, Nov 14). Selling Soap, Razors- And Collaboration. Information Week. Issue 1064, p49. Retrieved from ABI/Inform. Feb 14, 2006. 92 Ibid. 93 Jacobs, L. (2000, Feb 28). E-Business: Honeywell, P&G and Other Large Firms Offer their Intellectual Property Online. Wall Street Journal, NY, NY. Pg 1. Retrieved Feb 14, 2006 from: ABI/Inform, UMUC. 94 Nelson, E. (2001, Dec 31). E-business: The Web @ Work / Procter & Gamble. Wall Street Journal, NY, NY. Pg B.4. Retrieved Feb 14, 2006 from: ABI/Inform, UMUC. 95 Lucas, H. C., Jr. Strategies for electronic commerce and the internet P 10. 96P&G Website. www.PG.com. 97 Ibid. 98 Ibid. 99 Ibid. 100 Sanford, L. 1/9/2006. Businesses must learn to let go. Business Week Online. Retrieved on Feb 15, 2006, from Business Source Premier. 101 Grant, R. M. Contemporary strategy analysis. 102 Unilever. (2005, June). Introduction to Unilever. 103 Ibid. 104 Ibid. 105 Ibid. 106 Ibid. 107 Grant, R. M. Contemporary strategy analysis. 108 Govindarajan, V., & Gupta, A. K. The quest for global dominance. 109 Discover Unilever. Retrieved February 14, 2006, from Unilever web site: http://www.unilever.co.uk/Images/Discover%20Unilever_tcm28-17220.pdf. 110 Our purpose. Retrieved February 14, 2006, from Unilever web site: http://www.unilever.com/ourvalues/purposeandprinciples/ourpurpose. 111 Organising to win in Latin America. Retrieved February 7, 2006, from: http://www.unilever.com. 112 The DE opportunity – Winning in Asia-Africa. Retrieved February 7, 2006, from: http://www.unilever.com. 113 Unilever. (2005, June). Introduction to Unilever. 114 ITI TranscenData enables seamless global development at Unilever. (April 6, 2004). Retrieved February 14, 2006, from: http://www.transcendata.com/pr20040406.htm. 115 Multinationals merely pay lip-service to acting local. (February 24, 2005). Marketing Week. 116 Brand mot: Unilever. (March 4, 2005). Brand Strategy. London. 117 Govindarajan, V., & Gupta, A. K. The quest for global dominance. P. 104. 118 Ibid. 119 RFID technology in flux. (January 27, 2005). IT Week. Retrieved February 11, 2006, from Welcome to Access Events International website: http://www.access-events.com/in_the_news06.asp. 120 About Unilever. (2003). Unilever Annual Report & Accounts and Form 20-F. Retrieved February 11, 2006, from: http://www.unilever.com/Images/2003%20About%20Unilever_tcm13-5417.pdf. 121 Lucas, H. C., Jr.. Strategies for electronic commerce and the internet. P. 10. 122 Grant, R. M. Contemporary strategy analysis. 123 Buerkle, T. (February 23, 2000). Consumer goods giant to cut 25,000 workers and push e-commerce: Unilever to jettison brands and trim jobs. International Herald Tribune. Retrieved February 11, 2006, from: http://www.iht.com/articles/2000/02/23/unilever.2.t.php. 124 Ibid. 125Emigh, J. (August 5, 2004). GDSN launched for global e-business. eWeek.com – Enterprise News & Reviews. Retrieved February 11, 2006, from: http://www.eweek.com/article2/0,1759,1633101,00.asp. 126 A2Z of B2B. (May 15, 2004). Retrieved February 11, 2006, from: http://www.a2zofb2b.com/cgi-bin/MasterFrameReunion.cgi?http%3A//www.a2zofb2b.com/links/pages/eMarketplace/Industry_Sponsored_eMarket. 127 1SYNC. Retrieved February 11, 2006. from: http://www.transora.com. 128 Emigh, J. (August 5, 2004). GDSN launched. 129 Safeway, Unilever exchange data. (June 30, 2004). San Francisco Business Times. Retrieved February 11, 2006, from http://www.bizjournals.com/sanfrancisco/stories/2004/06/28/daily28.html. 130 RFID technology in flux. (January 27, 2005). IT Week. Retrieved February 11, 2006, from Welcome to Access Events International website: http://www.access-events.com/in_the_news06.asp. 131 About Unilever. (2003). Unilever Annual Report & Accounts and Form 20-F. 132 Ibid. 133 Our suppliers. (2006). Retrieved February 11, 2006, from Unilever website: http://www.unilever.com/ourcompany/aboutunilever/introducingunilever/oursuppliers. 134 Grant, R. M. Contemporary strategy analysis.

P&G and Unilever 88

162 Ibid. 163 Jain, V.K. (2002). Note on industry structure. Retrieved January 9, 2006, from http://info.umuc.edu/mba/public/AMBA607/IndustryStructure.html. 164 Fitch: U.S. consumer products industry outlook – limited upside in 2006 (Industry overview). 165 Global personal products: Industry profile. 166Jain, V.K. Note on industry structure. 167 Industry: Household and personal products. (April 18, 2005). Retrieved February 7, 2006, from: http://money.cnn.com/magazines/fortune/fortune500/industries/Household_and_Personal_Products/1.html. 168 Toiletries and cosmetics. 169 Ibid. 170Sanford, L. (January 9, 2006) Business Week Online. Retrieved February 15, 2006, from Business Source Premier. 171 Ibid. 172 Ibid. 173 Govindarajan, V., & Gupta, A. K. The quest for global dominance. 174 Procter and Gamble: Our history. 175 Ibid. 176 Ibid. 177 Ibid. 178 Ibid. 179 Ibid. 180 Form 10-Q for PROCTER & GAMBLE CO. (2006, January). 181 Reuters, P & G. (2006 Jan). 182 Procter and Gamble: Our history. (2006). 183 Lucas, H. C., Jr. Strategies for electronic commerce and the internet. P. 10. 184 Buerkle, T. Consumer goods giant to cut 25,000 workers and push e-commerce. 185 Global data synchronization network: Overview of benefits for manufacturer and retailer. Retrieved February 11, 2006, from uccnet web site: http://www.uccnet.org/Docs/pdf/benefits%20of%20GDSN.pdf. 186 Capgemini News: Global data synchronization. (March 8, 2005). Retrieved February 11, 2006, from Capgemini website: http://www.capgemini.com/resources/news/global_data_synchronisation.

135 Unilever. (2005, June). Introduction to Unilever. 136 Ibid. 137 Ibid. 138 Ibid. 139 Jones, G. (2002). Unilever-a case study. 140 Dranikoff, L., Koller, T., & Schneider, A. Divestiture: strategy's missing link. 141 Wasserman, T. (2005, December 19). Getting comfy in their skin. Brandweek, 46(46). Retrieved February 5, 2006, from Business Source Premier Electronic Database. 142 Unilever. (2005, June). Introduction to Unilever. 143 Dranikoff, L., Koller, T., & Schneider, A. Divestiture: strategy's missing link. 144 Grant, R. M. Contemporary strategy analysis. 145 Global personal products: Industry profile. (May 2005). 146 Wall Street Transcript, Analyst interview. 147 Ibid. 148General information. Retrieved February 12, 2006, from: http://pgsupplier.com/GI_General_Information.htm. 149 Fitch: U.S. consumer products industry outlook – limited upside in 2006 (Industry overview). 150 Global personal products: Industry profile. 151 Ibid. P. 3. 152 Ibid. 153 Perfumes, cosmetics, and other toilet preparations. 154 Toiletries and cosmetics. 155 Ibid. 156 Ibid. 157 Ibid. 158 Who’s who guide to personal care. (November 2005). Global Cosmetic Industry, 173(11). 159 Toiletries and cosmetics. 160 Global personal products: Industry profile. P. 3. 161 Ibid.

P&G and Unilever 89

187 Ibid. 188 Safeway, Unilever Complete Global Data Synchronization Project. (July 1, 2004). Supply & Demand Chain Executive. Retrieved February 11, 2006, from: http://www.sdcexec.com/article_arch.asp?article_id=5769. 189About Unilever. (2004). Unilever Annual Report and Accounts. 190 Global eXchange Services Inc. http://www.gxs.com/industry_cp.htm. 191 Sterling Commerce. http://www.sterlingcommerce.com/About/CompanyInfo. 192 What is Data Synchronization? http://www.pg.com/frameset_fs.jhtml?frameURL=http://www.transora.com. 193 www.pg.com.

p&g

Documents

unilever unilever house

unilever financial analysis

competitive industry

unilever portfolio

industry trends

industry leader

industry conclusions

strategy pg