Syed Kashif Shah

Ph.D

Case 1: Unilever’s New Global Strategy: Competing through Sustainability

Accelerated change program evaluation

As such, after three days the takeover approach of Kraft Heinz (US$139.1 billion) which is a
food conglomerate backed by Warren Buffet and three Brazilian billionaires  to Unilever in order
to become public, the takeover bid has been rejected by Unilever due to the fact that it seems no
merit neither strategic nor financial for the shareholders of Unilever.
The top management of the company has discussed various reasons due to which the takeover
would not benefit the company. It has been argued by the top management that the proposal
would most likely undervalued the business as a whole as well as it would deliver little strategic
and financial benefit for the long term opportunity for the shareholders and a company.
There are two reasons due to which the Kraft Heinz takeover approach has been brushed off by
Unilever. The group management of consumer group has argued that offering “substantially
undervalued” knorr soup maker and magnum ice cream at the price to earnings (P/E Ratio) of
19.1 times.
Kraft Heinz has been focusing on cost reduction so that it would be able to generate earning
growth on immediate basis, but without substantially investing in the organic growth, its model
depends on the merger and acquisitions M&A for the purpose of fueling the continued returns.
Last week, speaking at the Consumer Analyst Group of New York investor conference, Graeme
Pitkethly, a CEO at Unilever has explained that there are two different approaches which can be
deployed to increase the shareholder’s value or he presented accelerated change program
according to which the model of attractive return on invested capital, compounding return on
investment, as well as robust balance sheet gives flexibility for merger and acquisition (M&A).
This approach is inherently sustainable in long run and it can also generate high returns.
On the other hand, the next approach is to rely on leverage for generating the strong growth in
earnings in short run, but without basis of strong organic growth, this approach depends on the
portfolio expansion and repeated portfolio change. Also, the Unilever has put its major emphasis
on merger and acquisition on expanding the personal care business through acquisition strategy
which includes purchasing Dollar Shave Club. In a result, the increasing proportion of sales
generated by Unilever comes from its personal care brands. The 28% revenue is generated by
group in 2008 and grown to 38 percent in 2016. Another aggressive approach to cost is zero
based budgeting program that has driven the tremendous and valuable insights into Unilever
business.
In my opinion, it is to state that the senior executive team had made right decision at time and
found a sustainable balance between stakeholder interest & shareholder interest. It is due to the
fact that the accelerated change programs have bring innovation closer to customers and
supported the ability of the company to roll out the products at speed while the global teams of
the company are remained concerted on strategic launches. In addition to this, the company has
business model that generated unlevered and high returns on its investment via building brand
strength and compelling organic growth through sustained technical, investment, and benefit led
innovation through R&D and an improvement approach to cost, the company surely do more to
communicate the value creation from its existing and better strategic plans.

Alternatives:
For Unilever, its CEO is the great source of motivation with ability to turn issues into solutions.
In context to the case, three alternatives have been suggested which are analyzed below on the
basis of their pros and cons of the shortfalls faced by Unilever.

Increased sustainable living brands:

Production and addition of sustainable living brands in the portfolio with ability to contribute
more than one goal of Unilever Sustainable Living Plan and with a purpose of sustainable living.
Pros:

 Brands with sustainable products have proven to be a potential key in the growth of
organization.
 It significantly increases overall relation amongst portfolio of brands and key goals of
Unilever.
 Focusing on production and addition of sustainable brands will provide Unilever with a
competitive advantage among its rivals in the market.
 With increase concern over environment sustainability, products of Unilever will be greatly
appreciated by its customers.
 Retention of employees with increase in the attraction of customers towards Unilever’s
products giving rise to sales.

Cons:

 Changes in the production process to meet the standards and goals of Sustainable Living Plan
will require significant increase in investment.
 Confirmation of goals match up will be hard for Unilever to configure for certain brands.

Build External Partnership:

Pivoting in the direction of agenda of transformation with focus on building external relations in
order to support and amplify the work of organization.
Pros:

 Building partnerships will allow Unilever with the benefit of shared cost and responsibilities
in managing operations.
 With shared responsibilities, the outcome of the product will be efficient and will have a
positive effect on the community.
 Partnership allows each partner to use their specialized resources in as many effective manner
as they can.

Cons:

 It is important while building partnership that their culture match with one another as well as
their views considering the Unilever Sustainable Living Plan.
 Difference in views or ineffective way to drive operations might result in potential disputes
among them.
 Both partners will be equally responsible in joint liability.

Get remaining two pillars on track:

Use of seven pillars on-track out of nine needs to get the remaining two pillars on track as they
are affecting the performance of the organization and sales.
Pros:

 Focusing all the pillars of sustainability will completely meet the goals of Unilever’s
Sustainable Living Plan.
 As there has been increase in the emission of greenhouse gases, while focusing on all pillars
impact of Greenhouse gases and use of water is to be reduced.
 Improvement in each pillar of Unilever Sustainable Living Plan will effectively improve
overall efficiencies.

Cons:

 It seems difficult to fix the habits of consumers as it is directly related to the mental ability of
the consumer to shift its focus to something unusual to them.
 It is a time consuming approach to be adopted as satisfying and convincing anyone on what
you are saying is right is somehow challenging.
 It will significantly not be an immediate source to generate potential profit rates.

Analysis of each alternative option that was needed to be considered has been done on the basis
of their pros and cons. Therefore, in increasing sustainable living brands in portfolio only some
changes will be required in changing the production process. Whereas, building partnership has
many issues related to culture and views of the organization and the management in driving
processes. Similarly, getting focus on retaining of remaining two pillars is a time consuming
process and convincing people to follow their set standards is a challenge in itself. Therefore,
option is best suited to be implemented.

Case 2 : Apple and its Suppliers: CSR

1. Identify the multiple levels of analysis at play for Apple as it addresses the Corporate Social
Responsibility challenges in its supply chain.
Nowadays, Corporate Social Responsibility is the main topic everywhere. If any firm (including
Apple, Inc.) wants to create the right image in society, they should contribute some of their profit
and earnings to CSR (Lee & et al., 2016).
Many companies are donating some percentage of their revenue for the welfare of society and
the environment. Moreover, Apple’s brand image was degraded when they violated the worker’s
rights at one of Apple’s suppliers, Foxconn.
But after they started contributing to CSR and applying some rules and regulations to preserve
labor rights. And this happened at one more distribution location that was China (Lee & et al.,
2016).
Instead of having a great brand image that invests in CSR, it still has so many problems due to
violations of laws in its supply chain. The main four reasons for CSR’s breach are lack of
stakeholder engagement, lack of triple-bottom-line thinking, lack of transparency, and lack of
CSR leader (Godelnik, 2012).
After analyzing it in detail, the company got to know that this problem is not at one level. The
first level of challenges arises because Apple operates worldwide because they have different
cultures, values, and rights. The second level of issues is due to the distinct goals of every
company. The third level of challenges grows due to the relationship between supplier and buyer.
It’s then the responsibility and opinion of how much they want to give importance to Corporate
Social Responsibility. Therefore, this depends on the stakeholders which are customers,
investors, employees, and suppliers’ employees (Thompson, 2017).
Apple can address the challenges of CSR by satisfying its stakeholders:
Customers: The main stakeholders of apple are its customers. For CSR, Apple has designed its
strategy to address the issue by giving preference to its customers and their desires. Every
customer or consumer always buys the right quality products and is available at reasonable prices
in any company. In contrast, Apple is a prestigious brand and offers its products at high prices.
Also, almost all individuals want to buy Apple products. They do not care about the prices
because apple is satisfying their needs by providing products of high quality and also
environment friendly (Thompson, 2017).
Employees: The Second most crucial stakeholder who helps Apple attain its corporate social
responsibility goals is its employees. These are those individuals who work there and the
company for achieving its goals and objectives. If they are not satisfied with the management,
they would do something wrong and do not do their jobs properly, and also they might
sometimes violate human rights. Therefore, to satisfy them, the main reward is compensation and
benefits. Apple tries to compensate its employees after some time to help them fulfill their CSR
goals (Thompson, 2017).
Investors: Investors of any organization are their primary stakeholders, which is the same case in
Apple. Therefore, in Apple, this stakeholder’s only want and objective is to get an excellent
financial return on their investments. If they would satisfy them, then they would be able to
contribute more to their CSR efforts. Moreover, Apple is an excellent profitable company that
has a superior profit margin. Therefore, this effort in CSR helps them to satisfy their investors
(Thompson, 2017).
Supplier’s employees: Along with their employees, the employees working with their suppliers
are also their stakeholders. But they are indirect stakeholders. Their want is ethical employment,
compensation, and job security. Therefore, to successfully present Apple company as a company
with a good reputation in CSR, they have to take care of their suppliers’ employees. Moreover,
Apple follows its code of conduct according to which they can leave their suppliers if they do
some evil things. Therefore, by addressing CSR goals, Apple can satisfy its stakeholders also
(Thompson, 2017).
Therefore, at last, if they want to remove the allegations of violation of CSR policies, then they
have to satisfy their stakeholders first. Because if they follow the ethical code of conduct, they
will automatically not face CSR challenges.
2. Is Apple responsible for the alleged human rights violations that occurred?
Apple’s supply chain is global in nature. Around 90% of Apple’s exclusive products, i.e., the
iPhone, are manufactured in countries other than the USA. Semiconductors are manufactured in
Germany and Taiwan, display panels in Korea, and chipsets in Europe. All these parts are
ultimately assembled in China (Render, 2020).
Foxconn and Pegatron are Apple’s two key suppliers operating out of China, where, as per
various media reports, many human rights violations occurred. These human rights violations
included long working hours, low wage rates, poor labor practices, and working conditions, use
of the juvenile workforce, environmental pollution, and violation of women’s rights, etc. (Lee,
Mol, & Mellahi, 2016).
In my opinion, Apple is responsible for the alleged human rights violations as well due to the
following reasons:
These suppliers are manufacturing on a contractual basis for Apple, so Apple can also be
considered a principal employer (Moorhead, 2019). Hence, it is Apple’s duty to ensure that fair
labor practices are followed by their suppliers also.
Apple is a key buyer for these suppliers, i.e., 40% of Foxconn’s revenue comes from Apple
(Oliver, 2013). Hence, Apple holds substantial power over its suppliers and can get better labor
practices implemented by their suppliers.
Apple is known for forcing its suppliers to supply parts at a shallow margin, whereas its profit
margin is very high, e.g., it pays a 0.8% margin to some of its suppliers, whereas its margin is
more than 35%. To cut costs and increase their margins, the suppliers resort to these unfair trade
practices. To counter this, apple should ensure that while making their internal estimates for
various purchases, they should ensure that enough margin is left for the suppliers so that they do
not have to resort to unfair labor practices (Lu, 2020).
As part of their Corporate Social Responsibility, they should ensure that the supplier should
declare that they will follow fair labor practices as part of their contract.
Apple believes in making processes simple; however, this principle has its limitations in the case
of Supply Chain Management (Lu, 2020). They will have to maintain close coordination with all
their suppliers to ensure that their suppliers’ labor practices are fair.
Apple is the world’s leading company in terms of valuation, cannot neglect its corporate social
responsibility, and it has to keep an eye on what labor practices are followed by its suppliers as
Apple itself is indirectly responsible for that also.