ABSTRACT

UNILEVER Malaysia is chosen company for this assignment paper. Study conducted is based on
the company’s unaudited interim report for the first half of 2018 ending 30th of June. Since the
data has been made public, it makes easier to analyse using concept of mathematics.
Contribution Margin and Break Analysis concept has been applied to study the financial report
of UNILEVER. The main objective of the study is the evaluation of the application of the
mathematics in business with the help of a case study, to get practical knowledge of applications
of mathematic, to broaden outlook regarding the mathematical terms that I have learnt earlier
and to have the practical knowledge of theoretical knowledge of applications of mathematics.

1. INTRODUCTION

Unilever began with British soap-maker company named Lever Brothers. Their
revolutionary action in business was by introducing the Sunlight Soap in 1890s. That idea was
from William Hesketh Lever, founder of Lever Brothers. This idea helped the Lever Brothers
become the first company that help popularise cleanliness in Victorian England. Moreover, the
product rapidly emulated globally after that it was a success in UK and made Lever Brothers
obtained more business worldwide. One of the reasons of this success was the strategy from
William that not only prioritize on selling the products but also focus on manufacturing them. On
the other side, in 1872 Jurgens and Van den Bergh created a company that produces margarine.
Since there were many competitors in the margarine industry in Dutch, in 1920s, Jurgen and Van
de Berth decided to strengthen their company by joining another margarine manufacturer in
Bohemia. In 1927, there were three companies including Jurgen and Van de Berth company
which formed Margarine Unie located in Holland.

In 1930, the Lever Bros merged with the Margarine Unie and even though, an
international merge was an unusual move at that time, both of the two companies have the same
vision that by doing this merge with strong global networks would create new opportunities.
Finally, the name of “Unilever” was created by the merge of the companies. Not too long after
Unilever was formed, they got a big problem which was that their raw material companies were
reduced from 30% to 40% in the first year. As that problem started to attack, Unilever had to
react quickly by building up an efficient system of control. In September of 1930, Unilever

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established the ‘Special Committee’ that was designed to stabilize British and Dutch operate and
concern as an internal cabinet for the organization.

Since William Lever’s death in 1925, it was Frances D’Arcy Cooper who replaced him to
become the chairmen of Lever Brothers. Cooper made several benefits for Unilever, one of his
revolutionary action was that he led the various companies that included Unilever into one
Anglo-Dutch companies. According to The Netherlands official UK site, “Anglo-Dutch
Companies is the British and the Dutch historically joined forces to form some of the strongest
companies in the world, and until now their position is still strong”. In 1937, when the
correlation between the profit-earning capabilities of the British and Dutch companies found
itself overturned, it was Cooper that came to solve the problem by convincing the board of the
necessity for restructuring.

In the 1930s, Unilever continued to grow their business when they promoted their
products in America Latin. To keep it growing, Unilever adapted a new strategy in 1940s by
widening their business areas and create new areas such as particular food and chemical
manufactures. Furthermore, Unilever recognized that there were something more important than
widening their areas, it was the relationship between marketing and research that they must focus
on. Therefore, Unilever expanded their operation by making association by two important
actuations in US, those are Thomas J. Lipton company, manufacture of tea, and the Pepsodent
brand of toothpaste in 1944. In 1957 Unilever continued their actions by associating with U.K.
frozen food maker birds eye, and in 1961 with U.S. Ice cream novelty maker Good Humor.

In the 1980s Unilever made a revolutionary restructuring by selling most of its subsidiary
business to concentrate the company’s core business. Eventually, foods, toiletries, detergents and
special chemicals were the Unilever’s core business. This restructuring also helped Unilever to
make collaboration with Chesebrought-Pond’s in U.S. in 1986. That collaboration made a big
impact to Unilever, their profit margin increased. Furthermore, Unilever bought Chesebrought-
Pond in 1987.

In Malaysia, Malaysians will remember growing up using household products with brand
names like Hazeline Snow (personal care), Planta (margarine), Lipton (tea) and Walls (ice-
cream). These are just some of the many brands that have been introduced by Unilever

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(Malaysia) Holdings Sdn Bhd since the company began operations here (as Lever Brothers) back
in the late 1940s.

The company built its first factory in 1949 in Jalan Bangsar, which was little more than a
tiny, one-lane road flanked by trees and hills. The first branded product it launched here was
Sunlight soap, which was used for washing clothes by hand. In the last 50 years, Unilever has
successfully spawned an impressive array of popular brands for products ranging from foodstuff
to personal care.

Nowadays, Unilever become the world’s most consumed product brand in home care,
personal care and food. In 2002, Unilever had a worldwide revenue around $48,760 million.
Unilever has two main parenting companies; they are Unilever NV in Rotterdam and Netherland
and Unilever PLC in London, United Kingdom.

2. OBJECTIVE of UNILEVER

Vision:

To grow business, while decoupling environmental footprint from companies growth and
increasing Unilever’s positive social impact.

Mission:

Unilever’s Corporate Purpose states that to succeed it requires the highest standards of corporate
behavior towards everyone Unilever work with, the communities that been touch, and the
environment on which Unilever have an impact.

Value:

Integrity: Conducting operations with integrity and with respect for the many people,
organisations and environments the business touches has always been at the heart of Unilever’s
corporate responsibility.

Positive Impact: Unilever aim to make a positive impact in many ways: through Unilever brands,
commercial operations and relationships, through voluntary contributions, and through the
various other ways in which the company engage with society.

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Continuous Commitment: Unilver committed to continuously improving the way to manage our
environmental impacts and are working towards longer-term goal of developing a sustainable
business.

Setting Aspirations: Corporate Purpose sets out aspirations in running the business. It’s
underpinned by Unilever’s Code of Business Principles which describes the operational
standards that everyone at Unilever follows, wherever they are in the world. The Code also
supports Unilever’s approach to governance and corporate responsibility.

Unilever is committed to making sustainable living commonplace and the logo is a visual
expression of that commitment. Each icon has a rich meaning at its core, and represents some
aspect of Unilever’s effort to make sustainable living commonplace

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3. Identify and Explain

a) Product

Unilever makes and sells products under more than 400 brand names worldwide. Two billion
people use them on any given day. Here is a selection of our top brands, available in many
countries, along with the stories behind them.

Unilever's products include foods, beverages, cleaning agents and personal care products. The
company owns more than 400 brands, which are organised into four main categories - Foods,
Refreshments, Home Care, and Beauty & Personal Care. Unilever's current largest-selling brands
include: Axe/Lynx, Ben & Jerry's, Dove, Heartbrand, Hellmann's/Best Foods, Knorr, Lipton,
Lux/Radox, Omo/Surf, Rexona/Sure, Sunsilk, TRESemmé, Magnum, Vaseline and VO5.
Unilever's Standard Industrial Classification codes are 10890: Manufacture of other food
products n.e.c., 10410: Manufacture of oils and fats, and 10420: Manufacture of margarine and
similar edible fats.

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b) Fixed Cost & c) variable Costs

Fixed costs don't vary based on a company's production or sales levels. Rent and property taxes
are classic examples of fixed costs; these expenses may increase, but they don't increase because
of increased sales or production levels. Variable costs, on the other hand, increase and decrease
based on sales and production levels. Variable costs are explicitly labeled on a variable costing
income statement. Under sales revenue, there should be a line item labeled "Cost of Goods Sold"
and "Variable Selling, General and Administrative Expenses.

The formula used to calculate costs is:

FC + VC(Q) = TC

Where FC=fixed costs, VC=variable costs, Q is quantity, and TC is total cost.

From the financial statement, there is only cost of sales, other operating income, selling and
distribution expenses, administrative and other operating expenses that are assumed as a variable
cost.

Cost of Sales = (Opening stock + Purchases) - Closing Stock

€ 4474 000 000 = € 3487 000 000 + Purchase - € 224 000 000

€ 4474 000 000 = € 3263 000 000 + Purchase

Purchase = € 1211 000 000

d) Price of Product

Retail Price = Cost + Net Profit + Operating expenses

R = C + NP + OE

R = € 224 million + € 3237 million + € 1722 million

R = € 5183 million

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e) Profit/Loss

As stated in the unaudited interim financial report for the second quarter ended 30th June 2018,
Unilever PLC makes a profit in that year. Net profit for the Unilever PLC can be clarified after
they deduct all of the cost. That means their net profit is € 3237 000 000.

f) Breakeven Point

Break-even point can be defined as a point where total costs (expenses) and total sales (revenue)
are equal. Break-even point can be described as a point where there is no net profit or loss. The
firm just “breaks even.” Any company which wants to make abnormal profit, desires to have a
break-even point.

Profit = Revenue – Cost

Revenue = Cost

Profit = 0

Means, revenue can only cover cost of sales and their administrative and other expenses to reach
their break-even point. In this case,

Profit = 0

Revenue = Cost

Revenue = cost of sales + administrative and other operating expenses

= € 4474 000 000 + € 1722 000 000

= € 6196 000 000

Unilever PLC needs to reach € 6196 million as their net sales for second quarter 2018 to be at the
break-even point.

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g) Limitations

Besides Unilever’s success, there are also some social and environmental issues that affects
Unilever. There are several damages created by Unilever during their processes in
manufacturing, supplying, and laboring.

Palm oil issue:

Unilever is the company with the world’s largest buyer of palm oil. They turn the palm oil
material to their products like detergents, cosmetics, bio-fuel and soaps. Their actions by cutting
down the palm oil of the most area in Kalimantan was slowly destroying habitat of Orang-utan,
an endangered species which lived almost everywhere in the rainforest of Kalimantan. This
action resulted in the extinction of the Orang-utan species in Kalimantan. An expected of two
million acres of the rainforests in Kalimantan have been cut down annually. This action is also
damaging Indonesia’s rainforest, eventually leading to a severe climate change. Unilever created
their products to help people in doing their daily life, but in fact they are also destroying other
endangered lives. In 2008, Unilever was criticised by Greenpeace UK because of these actions.

Mercury waste:

In 1983, Chesebrough Ponds Ltd, one of U.S. company bought an area near Kodaikanal. They
relocated their thermometer-making factory that had been in Watertown, suburb of New York to
this area. In 1987, Unilever bought Ponds and the thermometer-making factory in Kodaikanal
and became the biggest facility in the world. Then, Hindustan Lever Limited (HLL), the
subsidiary of Unilever which operates and located in India, took charge of the factory.

Early 2001, there were 7,4 tonnes of mercury-contaminated wastes around Kodaikanal in Tamil
Nadu found. Kodaikanal has beautiful lakes, perennially cool weather and rich forests which is
why it became the most popular tourist destination in South India. After investigating the source
of those mercury it was found to be from Hindustan Lever Limited factory. Mercury is a toxic
metal that can harm human’s liver and brain. Once mercury comes into the environment, it will
be changed during natural method into a structure that works its way quickly through the food
chain where it can contemplate to hazardously high levels. Mercury is the basic material to create
thermometers.

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4. CONCLUSION

Mathematics is an important part of managing business. Business and mathematics go

hand in hand this is because business deals with money and money encompasses everything in
itself. There is a need for everyone to manage money as some point or the other to take decisions
which requires everyone to know mathematics. Business mathematics is used by commercial
enterprises to record and manage business operations. Commercial organizations use
mathematics in accounting, inventory management, marketing, sales forecasting, and financial
analysis. It helps you know the financial formulas, fractions; measurements involved in interest
calculation, hire rates, salary calculation, tax calculation etc. which help complete business tasks
efficiently. Business mathematics also includes statistics and provides solution to business
problems.

By preparing this report about mathematics applications in a case study of Unilever PLC,
we can broaden our outlook about the applications of mathematics.

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REFERENCES

Brechner, Robert. (2006). Contemporary Mathematics for Business and Consumers, Thomson
South-Western

Dowling, Edward (2009). Schaum's Outline of Mathematical Methods for Business and
Economics, McGraw-Hill

Retrived from https://www.unilever.com/investor-relations/results-and-presentations/quarterly-

results/

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