The consumer goods company Unilever reported an overall operating margin of 14.9%

in 2011. As shown in Exhibit 7, the operating margin is higher in the slower growing Western European and Americas regions than in the faster growing Asia, Africa, and Central and Eastern Europe region.

i. Determine the estimated sales, operating profit, and operating profit margin by using the following two approaches: (A) Assume consolidated sales growth of 6.5%
and overall stable operating margin of 14.85% for the next five years; and (B) assume each individual region’s sales growth and operating margin continue at the same rate reported in 2011. Which approach will result in a higher estimated operating profit after five years?

ii. Compare and explain the results under the two alternative approaches described in Question 1 (A and B) with reference to the yearly growth rate in estimated total sales, the yearly growth rate in total operating profit, and the yearly profit margin.

iii. Assume Unilever is able to grow revenues the next five years in each region in line with 2011 (Western Europe 0.7%; Americas 6.3%; Asia, Africa, Central and Eastern Europe 10.5%). But operating profit margins in Western Europe will fall 50 bps annually for the next five years (as a result of high competition and limited growth), and operating profit margins in Asia, Africa, and the Central and Eastern Europe region will increase 50 bps annually for the next five years (helped by increasing demand for the company’s products and better utilization of its factories). Using approach (B), calculate the overall operating profit margin.

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EXHIBIT 7 Unilever Revenue from Various Regions ( millions, unless noted) 2010 2011 Change USG Asia, Africa, Central and Eastern Europe 17,685 18,947 7.14% 10.50% Americas 14,562 15,251 4.73 6.30 Western Europe 12,015 12,269 2.11 0.70 Total revenues 44,262 46,467 4.98 6.50