Hindustan Unilever (then Hindustan Lever)

Similarly, by the early part of this century, Hindustan Unilever (then Hindustan Lever) didn’t know what was happening to its brands and their market shares. For years, the company’s topline grew by only a few percentage points and margins continued to take a beating. Its stock, considered a blue chip retirement scrip in the past, was discarded by most investors. Nothing seemed to be going right for it.

The problem lay with Unilever’s strategy in 1999 to only focus on power brands. It cut its number of brands from 110 to 30. The idea was to allow the management to spend more time and effort on the already-successful brands and boost their bottomline. But with fewer brands to play with, there were obvious pressures on volumes. In addition, the desired boost in margins didn’t happen as intense competition and higher raw material costs ate into them. In 2004, the company not only did away with the power brand policy, but revived those brands that were once discarded. This process is still on and the new focus is on sustainable volumes and growth-driven profits.

However, the best example of an Indian company that has managed change and, in fact, been able to predict the future, is that of Moser Baer. In less than 10 years, the company has already rejigged its strategy thrice. By 1998, it was a global player in floppy diskettes. But then, floppies became redundant to optical storage devices. Moser Baer was ready for the change and became one of the largest makers of CD-Rs with an annual production capacity of 30 million units in 1999.

Yet again, anticipating the changing market, Moser Baer diversified into the manufacturing of DVD-Rs. But in 2000, another predicament struck. The price of a CD plummeted from an average $7 per unit to just $1, while manufacturing costs remained at around $1.5 per unit. If things didn’t change, Moser Baer would have had to file for bankruptcy. The only way to bring down the cost-prices gap was to crank up volumes. It did, and today, the company is considered the champion of low-cost production and is the lowest-cost producer of optical storage devices in the world. Affirms Manoj, a consultant with Realization, “Change management helps an organisation to think and dream big. Once these dreams are followed up with action, admiration for the company is bound to increase.” As a study by Australia’s Pearson Education group points out: “The business world is not a stagnant one, and the process of globalisation and advancements in technology are two dimensions, which continuously force businesses to change.”

Elaborates Ashutosh Mishra, Founder Partner, Proact Management Consulting, “Change management helps initiate a change in the fundamental aspects of the organisation and thus prepares them to embrace challenges. Shareholders admire the company because the company is prepared to meet the challenges of future.”

Whether or not change management brings about a paradigm shift in an organisation depends on how well and smoothly the transition is implemented. And also on who initiated it – the market, competition, or internal understanding of future changes.

For Complete IIPM Article, Click on IIPM Article

Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

B-schooled in India, Placed Abroad (Print Version)
IIPM in Financial times (Print Version)