Competing Values Framework

Every society characterises the existence of a series of organisations. The organisations include entities that produce goods and services, social institutions such as colleges and charities as well as hospitals and religious entities. Each of these organisations carry out their activities to achieve pre-determined objectives. However, they have vast differences in their managerial approaches and functionality. Notably, organisations cannot achieve their set goals and objectives effortless and thus the need to uphold cohesive and systematic performance of activities, which is facilitated by the function of management. As such, understanding the concept of management and managerial theory is vital in this report. Based on the definition by James Stoner as cited in Eze (2015), management refers to “the process of planning, organising, leading and controlling the efforts of organisation members and of using all other organisational resources to achieve stated organisational goals” (p. 9). Conversely, Boddy (2013) describes management as activities that are associated with management of work and people within an organisation.

               Depending on the nature of a business that an organisation engages in, its output will be a physical product or services. Given that all business organisations are economic entities, the justifications for their existence are founded on the need to produce products or services that meet the needs of all stakeholders. Achieving such as goal depends on the nature of management and organisational structure thus need to need to understand the concept of Competing Values Framework (CVF).

             There are many different approaches to management. In the quest to achieve their goals and objectives, different organisations employ various management models to foster their effectiveness. The Competing Values Framework (CVF) developed by Cameron and Quinn adequately outlines the models. The CVF is a framework allows organisational leadership to identify and compare models of management that can be employed to analyse organisations and examine possible strategies for the future (Yu and Wu 2009, p. 37). Besides, the framework outlines major indicators of effective organisations based on four primary models of organisation and management theory.

             The CVF is as shown in appendix 4. The four quadrants represent four management models that shape the styles of organisational management. The CVF characterises two value dimensions (Lindquist and Marcy 2016, p. 167). The first value dimension relates to organisational focus, which entails an internal (micro) emphasis on the development of people and organisational well-being and external (macro) emphasis on the growth as well as the welfare of an organisation itself (Yu and Wu 2009, p. 37). The second value dimension relates to an organisational structure that puts more emphasis on stability and flexibility of an entity (Yu and Wu 2009, p. 37).

             The two dimensions categorise four management models with each have a distinct set of effectiveness criteria. The models include an open system, human relations, rational goal and internal process (Yu and Wu 2009, p. 37).  Human relation model puts a great deal on internal focus and flexibility, morale, development of human resources, flexibility and stress cohesion as a measure of organisational effectiveness (Lindquist and Marcy 2016, p. 167). On the other hand, organisations that foster open system model consider external focus and flexibility, growth, external support, stress readiness and resource acquisition as means of measuring effectiveness. Besides, while rational goal model emphasises on external focus and control, goal setting, efficiency and productivity, internal process model upholds internal focus and control as well as effective communication, information management, stability and control.

2.    The Company

2.1 Profile: Activities, Size, Finances, Analyses

               Unilever is among the largest business entities in the world. The entity has two parent companies operating virtually as a single corporation. The parent companies include Unilever N.V. based in Netherland and Unilever PLC based in the UK.  Unilever is the second largest consumer products in the world after Philip Morris Companies Inc. According to the statists of 2010, the company’s annual turnover was approximated to be around £40 billion and over 179,000 employees globally (Unilever 2010, n.p). In 2017, the company turnover growth was 1.9%, sales growth- 3.1%, operating margin of 16.5% and free cash flow of €5.4bn (Unilever 2017). Unilever was founded in 1930 as a result of a merger between a United Kingdom soap company Lever Brothers and a Dutch margarine company Margarine Unie. The primary aim of the merger was to ensure adequate collaboration and sharing of resources given that they both relied on same inputs for their products (palm oil). Through the merger, the newly formed company was able to reduce significantly its costs of operations (Unilever 2010, n.p).

              The core purpose of the company is to meet day-to-day needs of the people in every part of the world. The company’s activities are rooted deeply in the local cultures as well as markets where its subsidiaries operate. Its manufacturing activities include edible fats, food products, and oil milling, detergents and toilet preparations, auxiliary businesses and margarine preparation among others. The company’s brand portfolio is over 400 including many consumer goods such as beverages, foods, cleaning products as well as personal care products. The company is listed in the Dutch equivalent the AXE and UK FTSE 100. The company’s SWOT, Five Forces and PESTEL analyses are as outlined in the appendices.

Porters 5 Force Analysis

            Unilever is a strong and globalised company than many multinational organisations. Therefore, Porter’s five forces model is the most reliable technique to analyse its competitive nature of the company within the industry of operations. Porter’s model has five force effective for organisational analysis. The forces include buyer power, competitive rivalry, a threat of substitution, threats of new entry and supplier power.

            Buyer power

            Unilever has many buyers who are scattered in many countries around the world. However, the power of the buyers are low and as such, they are unable to bring the prices down. The customers have great power than the buyers since their aim is to be satisfied with both quality and prices (Dobbs 2014, p. 32). Therefore, Unilever should look into the threat and maintain its prices based on the demand of its clients to foster their satisfaction.

            Competitive rivalry

            Unilever faces a high competitive rivalry from companies that operate in the same industry. The competitors include small shopkeepers and big giants such as Nestle, P & G and Kraft. The companies also have quality products and as such, take a good share of the market. Low switching cost makes it possible for customers to switch to the products offered by other companies.

            Threats of substitutes

            There is a moderate threat of substitutes. In most cases, consumers often like to try something new, an aspect that has reduced the devotion of customers and product lifecycle (Dobbs 2014, p. 32). In this regard, Unilever is under a continuous danger of a series of alternate products offered by its competitors that spend huge amounts of money on Research and Development.

            Threats of new entry

            There is a moderate threat to the new entry (Dobbs 2014, p. 32). The company supplies its products and services across the world and as a result, the threat of new entry into the market does not have an adverse impact. Given that Unilever has diverse geographical markets, the risk of new entrants depends on the nature of various markets. In markets with higher costs of operations, it is difficult to enter the market. However, it is easy to enter markets with low capital need and lawful rations.

            Supplier’s power

            The company has a low supplier’s power. Unilever has a blanket agreement with the entities that supply it with products. The strategy makes suppliers weaker in their power to bargain for rates. At times, Unilever employs comprehensive agreement with the suppliers based on sure rates to prevent them from switching to its competitors. The company moderately take care of its suppliers to generate trustworthiness among them.

2.2 Management Approach

             Unilever utilises management development approach as a strategic tool to aid in helping the company meets its goals, both the short and long term. The company has undergone a series of rapid change and the use of management development has played a vital role in communicating change through the entity’s systems as well as equipping its employees in embracing it. The organisation’s strategy for talent identification, joint ownership, explicit incorporation of the wishes of employees and customers, performance related development and pay, transparency and emphasising on company interests are among the features that have made the approach successful (Reitsma 2001, p. 131).

             The company employs quality management as a strategic decision area. In this regard, operations managers work toward satisfying the expectations of their consumers through the implementation of quality standards in operational processes (Thompson 017, n.p). The company applies corporate and local standards on certain products to maintain quality (Thompson 017, n.p).

               Additionally, Unilever’s organisational culture of performance puts more importance on the significance of the input of its employees (Gregory 2017, n.p). Besides, the culture points to the implication of techniques used to measure the standard and adequacy of output (Gregory 2017, n.p). The culture characterises efficiency, performance and quality, observable in the history of the company since its inception. For instance, the company’s growth from a small firm to a leading multinational corporation is based on the ability of its culture to instil high quality and performance on its employees to maximise output.

               From the sections outlined above, it is evident that Unilever’s management approach focuses on efficiency, performance and quality. Besides, the approach upholds explicit incorporation of the wishes of employees and customers, performance related development and pay, transparency and emphasises on company interests. Therefore, the analysis shows that the current dominant model in use in Unilever now is the Rational Goal Model. As aforementioned, the concepts of Rational Goal Model correspond to Unilever’s management approach.

3.     The Business Challenge

 3.1     Description of the Challenge

              During the 1990s, Unilever was organised based on the concept of decentralisation. The company’s subsidiaries thus focused on different markets. The structure made it possible for managers to match market strategy and product offerings to local preferences. Unilever recruited local manages to lead local markets to drive localisation. However, given the current size and scope of Unilever, it is logical to operate within a defined framework.

             Currently, Unilever operates on a structure that aids in addressing corporate needs based on managing products types across the globe. The current structure, a product type divisional organisational framework, divides the company into components based on product focus. For example, there is a division for home care products and personal care products. The primary characteristics of Unilever’s organisational structure include product type division, geographic divisions and corporate executive teams. The corporate executive team is a secondary feature of the structure. Based on this, Unilever has a four-tier hierarchical structure that foster funnelling of information in the business and make it possible for senior teams to engage in adequate decision-making based on channelled or available data. Each division has dedicated assets and functions. The divisions are also self-sufficient.

             The corporation believes that the structure gives it an effective and suitable balance between organisational flexibility and corporate governance. Within the hierarchy of the structure, each level serves a distinct function and as such, making it easy for other levels to concentrate on their core functions. The executive directors of Unilever, Graeme Pitkethly- Chief Financial Officer and Paul Polman-CEO, as well as Dr Marijn Dekkers-Chairman, are the figureheads of the firm (Unilever 2017). On the other hand, the non-executive directors are the independent elements in the governance structure of the company proving check and balance.

             However, according to Worley and Cummings (2005) ”sheer sizes” of firms expose them to a series of risks such as stagnation and paralysis gave the fact that they are too large to effectively and timely respond to external challenges hence a structural challenge that Unilever faces (p. 136-38). Another challenge that Unilever faces in its organisational structure is the minimal support that the company puts for regional strategic implementation. Despite geographic divisions are one of the components of its structural features, the organisation focus more on product divisions and thus limited support for regional strategic reforms. Besides, such a focus also makes it difficult for the company to foster market-specific reforms.

                Furthermore, the structural challenge that characterised less focus on regional strategic reforms led to a slow start in 2017 after economic challenges and currency headwinds in India, Europe and Brazil. The company management associated such a slow start with price deflation in Europe leading to drop in sales. The company also believe the drop in performance was due to tough market conditions, a challenge that would be overcome with effective organisational structure.

   3.2     Impact of the Challenge on the Company

            As outlined, the challenge of Unilever in its organisational structure has made it difficult for it to solve adequately emerging challenges in regional markets such as Brazil and India and other countries around the world (Business Reporter 2017, n.p).  The current dynamics in business world characterise a series of challenges that require multinational organisations to employ a clear structure in leadership and management in all subsidiaries to achieve set generic goals and objectives. However, it is evident that there is no clear cut regarding the type of structure that Unilever uses in its subsidiaries.

             Unilever’s organisational structure characterise product type division, geographic divisions and corporate executive teams and while more focus is put on product division, the corporate executive team is a secondary concern of the structure. Given the corporate executives plays a critical role in the performance of firms, Unilever’s system leads to loss of focus on the primary goal of the management in some of its subsidiaries.  The priorities of the company in 2017 was volume growth in their global markets, improvement in its core operating margin as well as strong cash flows (Business Reporter 2017, n.p). Nevertheless, the ineffectiveness of its structural consolidation makes that company face challenges in realising such objectives and overcoming tough market conditions.

              Another challenge of Unilever’s structure includes the duplication of functions at different divisions such as manufacturing or sales. Such a challenge, in turn, precludes adequate achievement of corporate-level economies of scale, which may increase operating costs. Besides, such a structure lead to inefficiencies and lack of effective standardisation in other divisions across the world.

4.     Recommendations

              In order to take advantage of the opportunities offered by developments in technology, advances in corporate governance and the need to employ an effective organisational structure that work for all the company’s subsidiaries around the world, it is recommended that Unilever should examine the benefits of both the Human Relations model vis-à-vis its Rational Goal Model. The use of human relation framework will make the organisation focus on internal forces and flexibility, morale, development of human resources, flexibility and stress cohesion to improve its effectiveness in management. Besides, the company should improve its policies of diversity and implement improvements in information technology. The improvements will help in implementing human relations management model.

5.    Conclusions     

            As explained in the Introduction management theory provides organisations with a means of achieving their goals and objectives. The CVF as a framework allows organisational leadership to identify and compare models of management that can be employed to analyse organisations and examine possible strategies for the future. Unilever uses is the Rational Goal Model. However, the company has faced a number of challenges resulting from the application of the model and the nature of its structure. The challenges include duplication of functions at different divisions and ineffectiveness structural consolidation leading to difficulties in achieving its objectives among others. Therefore, the company should consider the application of human relations management model alongside the recommended strategies.

References

Boddy, D. (2013). Management: An Introduction. Pearson Education Limited.

Business Reporter. (2017). Unilever expects slow start to 2017 as challenges continue. Retrieved from https://business-reporter.co.uk/2017/01/26/unilever-expects-slow-start-2017-challenges-continue/

Dobbs, M. (2014). Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp. 32-45.

Eze, A. A. (2015). Management practice in an organisation. Accessed from https://www.aiu.edu/applications/.../upload/ANASTASIA%20DOC.pdf

Gregory, L. (2017). Unilever’s Organisational Culture of Performance. Retrieved from http://panmore.com/unilever-organisational-culture-of-performance

Lindquist, E. and Marcy, R. (2016). The competing values framework: Implications for strategic leadership, change and learning in public organisations. International Journal of Public Leadership, 12(2), pp.167-186.

Reitsma, S.G. (2001). Management development in Unilever. Journal of Management Development, 20(2), pp.131-144.

Thompson, A. (2017). Unilever’s Operations Management, 10 Decisions & Productivity. Retrieved from http://panmore.com/unilever-operations-management-10-decisions-productivity

Unilever (2010). Annual Report. Retrieved from http://www.unilever.co.uk/Images/ir_Unilever_AR09_tcm13-208066_tcm28-237553.pdf retrieved 13th Dec 2010

Unilever. (2017). Annual Report and Accounts 2017 Highlights. Retrieved from https://www.unilever.com/investor-relations/annual-report-and-accounts/

Unilever. (2017). Our Leadership. Retrieved from https://www.unilever.com/about/who-we-are/our-leadership/

Worley, C.G. and Cummings, T.G. (2005). Organisation development and change.

Yu, T. and Wu, N. (2009). A review of study on the competing values framework. International journal of business and management, 4(7), p.37.

Appendices

Appendix 1: PEST Analysis of Unilever

Appendix 2: SWOT Analysis of Unilever

Appendix 3: Unilever’s Five Forces Analysis

Appendix 4: CVF

(Source: Accessed from researchgate.net)