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Law and Finance
Case Study: Russian Strategy at Unilever
Unilever is a global FMCG group which operates in nearly all world markets. New and smaller markets are developed initially by trading through importers, until the volume of business justifies direct entry. Unilever has traded in Russia for many years but was concerned to evaluate the long term potential of the market in order to justify inward investment. The Russian project was overshadowed by Unilever's enormous investment in China, so that there was an ambivalent attitude to Russia among managers, since it was seen as riskier than China as well as a smaller total market. In order to be prudent Unilever took a phased approach to the Russian market, making an opportunistic investment in a perfume factory initially in order to create a toehold in Russia from which to plan further steps.
The use of scenarios was seen as a means of exploring the complexity and uncertainty of the Russian market and of building a consensus around investment. SAMI was commissioned in 1994 to undertake a limited scenarios study to validate the potential purchase of the perfume factory in St. Petersburg. This was principally a matter of interviewing key Unilever executives and selected external experts. Despite short term uncertainty, the scenarios indicated a path to future success.
The second scenarios study in 1996/7 was on a larger scale and involved extensive interviewing in Russia as well as involving external experts. There was some concern about the futures produced earlier by Daniel Yergin and others, but the scenarios allowed paths out of short term difficulties towards a more stable future to be discerned.
As a result, Unilever bought businesses in margarine and detergents and established themselves as a Russian-focussed, Russian-speaking business. One of the key insights was to see beyond the short term fascination of Russians with Western brands and anticipate the return of Russian values (and demand for Russian brands).
The use of scenarios enabled Unilever to see beyond the short term problems of Russia to take a strategic view of a major new market. Unilever came to market leadership in India by working there for the long term; the use of scenarios evoked the Indian spirit in Unilever and protected the project from the distractions of China. Unilever is now a Russian presence in the Russian market.
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