Global Business History - Essay tutorial 2
Name: Cas Klatte
Student number: S2535963
Date: 27/11/2014
Unilever merger: Expansion & Efficiency
Introduction
In the article “Purposive Strategy or Serendipity? Development and Diversification in Three Consumer Product Companies, 1918-39: J. & J. Colman, Reckitt & Sons, and Lever Bros”, Roy Church and Christine Clark discuss, amongst other cases, the merger between Lever Brothers and the Dutch Margarine Union into Unilever. Unilever is still considered as a key player in the household industry. Church and Clark provide a seemingly complete overview on this strong merger, but they undervalue two main aspects: what exactly made the merger ‘Unilever’ possible and in what way did the merger influence the value chain and organizational structure of the company?
Reasons for the merger
The main arguments for the merger can be attributed to Lever’s production technology and improved value chain. When considering production technology, Lever tried to alter the balance of existing products by using a mixture of corporate acquisitions, the development of products in the company’s laboratories or through modification and improvements in the presentation of existing products. This process was called ‘diversification under distress’, and required limited changes in resources. The merger with the Margarine Union was necessary, to make Lever’s margarine more comparable to butter. Furthermore, Lever had to defend its market share and profits in a slow moving market. Because of that fact, main strategies were those of collusion: acquisition of other firms’ products and technologies or investment in new product development.

Change in value chain and organisational structure
One of the major value chain improvements of the merger was that palm oil could be imported more efficiently, because it was the main raw material for both soap and margarines, this increased the overall efficiency of the merger’s value chain. Until 1919 the Lever Company was managed as a sole proprietorship by its founder, W.H. Lever. After merging with the Dutch Margarine Unie in 1929 into Unilever, the company’s structure developed increasingly horizontal, both low- and highly experienced managers were acquired to run the company. This resulted in the emergence of the first and largest M-form corporate structure in Britain. It has one board of directors, but different shareholders for both the British and the Dutch part of the company. Unilever had acquired a substantial amount of diversified products, but now faced the challenge of conducting them properly through focused marketing.

Conclusion
Thus, in order to explain what made the merger possible and how it did affect the structure of the initial company, we have to examine production technology and the value chain. The merger mainly originated from the major diversification and acquisition tendency Lever had in the early 1900’s, by merging with Margarine Unie into Unilever they gained both in efficiency and portfolio size. Thereby the organizational structure changed from autocratic hierarchy to a successful professional management structure.

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[ 1 ]. Jones, G., Unilever – A Case Study, Harvard Business School Working Knowledge, 09 December 2002