East Asian Growth Model Macroeconomic stability and export growth -low government budget deficits -stable interest rates -export promotion Government - private sector cooperation -shared growth principle (low Gini) -deliberation councils - lobbying

East Asian Growth Model Accumulation of Human and Physical Capital -educational development -increased savings opportunities -infrastructure development -increased agricultural productivity -low duties on capital goods imports

East Asian Growth Model Government Allocation and Promotion Policies - targeting selected industries/companies - focus on international competitiveness

Developing Country Growth Impact on Unilever’s Strategy Up to 1997: Anglo-Dutch consumer goods and specialty chemicals producer focused mainly on EU and North America 1997: - EU revenues flat - Growth expected in targeted developing countries - Developing country growth in consumer goods

Developing Country Growth Impact on Unilever’s Strategy Decisions -Shift emphasis to: China, India, SE Asia, southern Latin America, Central/Eastern Europe -Sell specialty chemicals business and focus on global consumer goods products -Reduce the number of product lines

Developing Countries Labor Cost Scenarios Labor cost x hours* =labor cost hour unit unit *U.S. Labor Department records productivity = output per hour

Cultural vs. Market-oriented Business Environments Cultural vs. Market-oriented Business Environments CulturalistMarket-oriented Buyer-sellerNorms ofBargaining and relationsreciprocity exchange and allegiance (horizontal) (vertical)

Cultural vs. Market-oriented Business Environments Cultural vs. Market-oriented Business Environments CulturalistMarket-oriented Competitor Trust networks Jockeying relations(horizontal) for market dominance (vertical)

Developing Countries Labor Cost Scenarios Labor cost Hours Labor cost per hour per unit per unit (U.S. = 100) Scenario AHigh Low 100 (USA) Scenario BLow High 115 (Philippines) Scenario CLow Moderate 80 (Mexico)

Market Size & Growth Potential  Market size – Total population  Market growth rate – Average annual growth rate for the industry  Market intensity – Private consumption expenditure per capita  Consumption capacity – Size of middle class  Market receptivity – average annual growth rate of imports from home country

Large Low Income Market Scenario (China) Characteristics Marketing Strategy Strong: Set up local market size production for growth rateexport Weak: market intensity consumption capacity (?) receptivity

Small Middle Income Market Scenario (Chile) Characteristics Marketing Strategy Strong: Export to country market growth consumption capacity receptivity Weak: market size

Large Middle Income Market Scenario (Brazil) Characteristics Marketing Strategy Strong: Set up local market size, production for Consumption capacitylocal middle class consumers Weak: market growth intensity, receptivity

Developing Country Subsidiary Management Type of ManagerPrimary Function Business managersCarry out global market & cost rationalization plans Country managersReact to local economic & (coordinates)legal conditions Functional managersWorldwide and local learning and innovation