Understanding the Business Environment - Analysis of Unilever and HSBC

This report discusses the legal and market structure of Unilever, stakeholder analysis, and macro environmental factors affecting Unilever and HSBC. It also explains the importance of analysing the business environment and Porter's five force model for competitive analysis.

UNDERSTANDING THE
BUSINESS
ENVIRONMENT

TABLE OF CONTENTS
UNDERSTANDING THE BUSINESS ENVIRONMENT............................................................1
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Brief about organization legal structure along with their purpose and objective, discus about
market structure affects behaviours of business in achieving competitive advantages...............3
A brief about shareholder, stakeholder and stakeholder analysis and process of stakeholder
analysis .......................................................................................................................................5
Discussing three reasons why it is important for Unilever to analyse the business environment
it face. Using the PESTLE identify and explaining 5 important macro environment factors
affecting Unilever. And importance of five forces model with five most critical influence
arises competitive market environment both internationally and nationally...............................7
Key performance indicators to measure organization short term and long term performance
and some recommendation........................................................................................................10
CONCLUSION.............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
Business environment indicate external factors and institution that are not control by
business and affects business operation. It includes competition, social, political, technological,
legal factors, customers, suppliers etc. Unilever is the third largest company in consumer goods
and has many manufacturing sites in United Kingdom and company headquartered is in London,
UK. This company offers consumer goods such as food, refreshment, home care products,
personal and beauty care products. Their culture is performance they mainly focus on improving
quality of products and financial performance. Unilever company have good market share which
give them competitive advantages. This report highlights the legal structure of a company such
as public company, charity, public sector, voluntary etc. with their market structure and how this
affects organization in achieving competitive advantages and also includes the terms like
shareholder, stakeholder and stakeholder analysis (Hamilton and Webster, 2018). Also illustrate
about the external factors which affect HSBC business operation such factors are political,
economic, social, technological, environmental and legal factors and importance of macro
factors which influence organization and explain porter five force model is helpful in
competitive advantages. Moreover, it includes key performance indicators which helps
organization in evaluating their short term and long term performance with some
recommendation.
MAIN BODY
Brief about organization legal structure along with their purpose and objective, discus about
market structure affects behaviours of business in achieving competitive advantages.
Organization structure is a system which figure out how activities are applied in order to
accomplish the objective or goal of an organization. These activities involve rules, responsibility
and roles. There are many legal structure such as public company, partnership, public company,
charity, sole trader, voluntary etc. Unilever has legal structure as it operates under single parent
company that is Unilever Plc. This organization is the good consumer goods provider and
Unilever is the biggest company in UK, headquarters in London, UK. Unilever provides
products such as food, water & air purifier, breakfast cereal, tea and coffee, well-being vitamins,
ice cream, soap, personal care and beauty products and many more. Company products are
available in all over 190 countries and there served area is worldwide (Halbert and Ingulli,
2020). There legal structure is public limited company, in UK public company are legally

abbreviated to plc or PLC, and they follow UK company law. Public limited company can be
listed or unlisted on stock exchange but public company have like PLC or plc at the end of the
company name such as Unilever PLC (Bento, 2021). They denote that a company is public by
such suffixes. Public company can take finance from public by Initial public offering (IPO) it
allows company to offer share to investors in London stock exchange before they become
tradable in secondary market. Public company need minimum 2 directors and company should
follow all the rules, regulation and guidelines of UK company law.
Unilever plc is register under Wales and England, which has listed shares on London
stock exchange, New York stock exchange, American depository receipts. Public company can
easily raise capital which helps company to generate good revenue and then profits are share
between shareholders (or a person who invest in this company) as a dividend, and have
advantages such as finance opportunities, spreading risk, easy transfer share, expansion and
growth opportunities. Moreover, it has some disadvantages like difficult to manage, political
interference, expensive to operate and maintain etc. Unilever plc purpose is make sustainable
living common place. There main objective is to helps people in improving their well-being and
health and satisfy their customers. There are mainly four market structure that is monopoly,
perfect competition, oligopoly and monopolistic competition. Unilever plc operate in oligopoly
market structure, in this market usually dominated by small or less number of suppliers. Unilever
plc has a competitive advantage over competitor like proctor and gamble as by its flexible price
and strong distribution channels. Oligopoly affect competition by profit margin that is higher
price would be in competitive market (Velikorossov, 2020). In this market structure marginal
curve never intersect with demand curve therefore it produces less product from the demand so it
is lack allocative efficiency. In this market company have ability and incentive to do innovation
over time. Oligopoly includes price selling ability, maximum revenue, non-price competition,
product differentiation, interdependent of firms and many limitations to new entry. Unilever
have more economic benefits in such market that is come in particular price than they try to
compete with competitors. In this particular market structure there are many barriers for new
entry so company have competitive advantages.

A brief about shareholder, stakeholder and stakeholder analysis and process of stakeholder
analysis
Shareholder is an investor, they can be legal entity and an individual with good amount
of money to purchase share of a company and become owner of a particular potion. Shareholder
get voting rights and perks like bonuses, gifts and discount related to the company products and
services (Fernandez, 2019). They are not eligible for day to day business operation but if an
individual is an employee of such company then there is another case means they are also
managed their roles. Stakeholder define as a group or an individual that has invested time or
interest in any activity or decision of a company. Stakeholder includes suppliers, customer,
employees, shareholder and government. In simple words they are directly involve or indirectly
affects business products, services, project. Stakeholder analysis is a process of finding
individual before project starts, then group them according to individual levels of participation,
influence and interest in the project and then determining how best to communicate and involve
each stakeholder in a group throughout (Azar and Vives, 2021). For conducting stakeholder
analysis there are following steps:
Identify company stake holders: By brainstorming with a team make a list of stakeholder in a
project, the individual who can affect or influence company work, the list may includes:
 Exclusive staff
 sales
 products
 IT/ operations
 marketing
 shareholders
 government
 suppliers
 customers
 development/ manufacture
Prioritize stakeholders: Now company have list of stakeholders which affect company work,
so organization start categorizing their team in level of particulars, influence and interest in
project. By using power-interest grid company can prioritize.

In this company allocated their stakeholders according their action, need requirement.
High power, high interest (Manage closely): Company must satisfies these people, because
they are the most important for organization. For example, suppliers and government if
organization not manage these stakeholders then it creates problem in managing other activities
like if suppliers are not provided proper raw material then it creates issue which affects or
influence business (Ekuase-Anwansedo, 2018).
High power, low interest (keep satisfied): company encourage work which satisfied
stakeholder for example, customer if company keep satisfied their customer then it gives positive
impact on company.
Low power, high interest (keep informed): provide sufficient informatics, for example
shareholder company give full information to them and talk to them that there is no issue arise in
project.
Low power, low interest (Monitor): monitor these individuals, but don't sink them with more
communication.

Understand key stakeholders: now company want to now what stakeholders are feel about
project, it includes question like what's motivate them, their opinion about a project, their
positive point of view etc.
By the success of organization stakeholders are influence as Unilever have great revenue and
expand their business so shareholders are influence and want to invest in company. There are
factors which helps in identifying stakeholders such as the power of influence other, key area of
performance etc.
Discussing three reasons why it is important for HSBC to analyse the business environment it
faces. Using the PESTLE identify and explaining 5 important macro environment factors
affecting Unilever. And importance of five forces model with five most critical influence arises
competitive market environment both internationally and nationally.
Analysing the business environment is important for every organization but here will discuss
HSBC as its financial and banking services are spread all over the world. HSBC is the largest
bank in Europe. Analysing is used for being aware before having an issue, it is a futuristic action
(Tien, 2019). So it has to analyse it according to what it is facing as:
 Analysing helps to make managers aware of linkage between consumer's requirement
and HSBC management and keeps them alert and informed about the circumstances.
Analysing also help HSBC about the threat and opportunities of the before it faces. It
sends the signal which warns the company in developing and providing appropriate
response.
 Nowadays environment is transforming very fast, So understanding how environment of
industry is transforming is important. It helps the HSBC planners to analyse and narrow
the range of options available that can be used at alternative and eliminate the options
which are irrelevant for the organization. It allows and helps in using the correct
alternative which could be use.
 Analyse of environment is essential for the organization as to use the right strategies
which is useful to the HSBC and for making the modifications in current strategies when
it is necessary for organization.
Explaining 5 important macro environmental factors affecting HSBC are:

Political Factor: It is affecting the performance of HSBC. This section helps in identify the
impact of Government on the organization. Political stability of United Kingdom, Issue related
to political factor and growing free trade relations. Bank has sheltered by the riles and regulation
and policies created by different governments as they work in different country. The HSBC bank
also create their own strategies (defence) beside government limitation and restriction.
Economic Factors: Performance of HSBC is depended on the situation of the economy.
Economic external factors that is affecting HSBC are: Increasing interest in the country, High
growth of the country, in the way of opportunity can take the stability in the economy of the
country. Thus, this section analyses the opportunities for the HSBC and highlight the growth.
Social or Socio cultures Factors: In this section most of the time socially driven behavioural
aspect is considered here. Social factors are the key demographic characteristics, social norms
and values, custom of the environment in which company functions. Socio culture external
factor of HSBC company that is consumer behaviour, social equality, societal and cultural
norms, gender etc.
Technological factors: As it is banking company it should always look towards the technology
infrastructure, technological innovation, and research and development. HSBC company prefer
countries with developed infrastructure create easier for company to achieve its innovation, cost
reduction and value create goals. Technological innovation development can affect the industry
and market. So by these factors HDFC will understand the product life cycle, innovation feature
which is liked by consumer, new product or service development rate etc.
Environmental Factors: It is totally uncertain factor. The factor of natural environment issue to
the HDFC. Rising in interest in business environmentalism, Efforts of business in sustainability,
increasing in Complexity of environment related programs (Coline, 2021). HDFC may adopt
practices, encourage responsible practises, and try to enhance its brand sustainability and image.
Porter's five force model is use for analysing organization competitive environment, it
includes force such as Threat of new entry, bargaining power of buyers, bargaining power of
supplier, rivalry among the existing players and threat from substitute products. This help in
estimating competition in the particular industry, help in identifying opportunities to grow and
expand their business and easily understand corporate risk.

Threats of New Entrants: Profitable markets can attract new entry, which have impact on
profitability. New entry put pressure on HSBC through reducing cost, low price strategy, and
provide value to customers so company manage these issue and make effective barriers or
limitation to protection its competitive edge (Khajeh, 2020). HSBC plc can tackle this by
innovating new services or products because company have both markets (national and
international) so they can innovate their products according to the culture of countries, so they
can grab new customers and retain old customers who are usually connected to HSBC. They
have high economic of scale which carry competitive pricing.
Bargaining power of suppliers: supplier power is how company suppliers increase their prices,
that is driven by relative size, uniqueness of products and services, numbers of suppliers in the
market in this industry etc. If suppliers are dominants market then it can decrease the profit's
margin of HSBC plc in the market. For tackle this problem company creates efficient supply
chain with many suppliers so it helps company to maintain their profits margin but HSBC plc
have global market, so they focus on making strong supply chain.
Bargaining power of buyers: If buyers drive prices downer than it make problem for company,
this can be driven by buyers are dominants market, many buyers in the market. HSBC plc can
Illustration 2: Porter's five force model, 2022

tackle this force by rapidly innovating new products, and give offers such as zero balance
opening account to attract new customers, and also helps in reducing desertion of existing
customers of company to its competitor. By creating large support of customers, it helps in
reducing this bargaining power and provide opportunities to smooth their sales process. This
company sell their products and services in both market, so they have appropriate to grab new
customers. The strategy that is used by company permit them to change becoming a leader in
banking services.
Threats of substitute products or services: If there are existing substitute product in the market
then customer change their products or use alternative according to the interest rate change. For
handling this threats HSBC plc should also focus on different customers sections. The problem
face by HSBC is competitors offer new services and products.
Rivalry among the existing competitors: It derives capacity and numbers of competitor in the
existing market. Such competitors offer same products and services which reduce attractiveness
of the market. As HSBC plc operates their business in very competitive industry (banking
industry), so they build strong scale, so they compete better and create sustainable
differentiation. Also, HSBC plc develop strategic to confirm that they are the permanently being
first choice of customers and banking industry.
Key performance indicators to measure organization short term and long term performance and
some recommendation
Key performance indicators helps organization to know their success, between industries
and countries or in simple words KPI helps in measuring performance. For measuring
satisfaction level company can use customer satisfaction KPI, which helps organization in
measuring that their products or services are satisfied the customers need or not. If customers are
satisfied then its good for HSBC but if company fails in meet the requirement or needs of
customers then it gives negative impact on organization. So by using such customer retention
KPI HSBC measure their performance and then take corrective action if needed. For measuring
performance of they can use consumer penetration KPI by this they measure that how much a
services and product is being used by the customers compare to total market for that services and
products. Because if company not measure their performance then company have high staff
turnover, low productivity which affects organization very badly. So HSBC plc can design some

training programmes which helps their employees to do work in effective way, improve their
productivity and optimize proper resources so it reduces employee turnover rate. By good time
management KPI help in measure employees time management in a particular task. Training
programmes help them in developing skills which help then in future also and skills related to
their task. By giving them rewards they feel motivated and work in proper manner reward like
commission, promotion, leaves, bonds, rights issue etc. this improves their performance which
indirectly improve company performance (Hristov and Chirico, 2019). HSBC plc provide
innovative products so customers are more satisfy and retain them and also provide quality
services.
For measuring organization finance growth Unilever use Key performance indicators
such as profit margin, current ratio, working capital, account payable turnover, quick ratio etc.
HSBC plc use revenue KPI which result in knowing the revenues of the company are increase or
not from the past years. By this KPI they know there position in the market and their competitors
position and also know the success rate of the organization. If their performance is not match
with the standard one then managers should take action to correct it. By these KPI company can
easily measure their performance. Budget key performance indicators to make sure that budget is
in acceptance range, so it helps in making strategies. Many KPI like profitability, solvency,
valuation, efficiency, liquidity helps in measuring organization success in terms of finance.
HSBC use such KPI to measure their performance in long term. If performance is not
appropriate or up-to the mark that company forecast earlier than company have to manage their
finances and focus on reducing expenses. HSBC plc is in balanced position there KPI indicates
that their financial position is strong, and they increase their revenues. So key performance
indicators helps organization in measuring the failures and successes of their business. Financial
ratio helps in analysis organization performance and improve if needed.
CONCLUSION
This report involves the concept of company legal structure and highlights the public
company as a legal structure and a brief about market structures with the discussion of oligopoly
market structure. Also includes some key teams such as stakeholders, shareholder, stakeholder
analysis and how an organization apply stakeholder process to understand company stakeholder
groups. Moreover also discuss how environment factors affects business operation, by the use of
PESTEL framework an organization analysis macro factors such as political, legal, economical,

environmental, social and technological factors affects business, these factors helps organization
to know external environment, so they make strategies accordingly. This report illustrate about
the concept and how company can use porter's five force model as competitive advantages,
forces such as threat of new entry, bargaining power of suppliers, bargaining power of buyers,
threat of substitute products and rivalry among existing competitors. Also, incudes some key
performance indicators which helps in analysis the short term and long term performance or an
organization such as finance KPI, employee performance indicators and customer satisfaction
indicators etc., companies current growth is balanced or not if not then there are some
recommendation which company should follow to balance there performance in both terms that
is financial and non-financial terms.

REFERENCES
Books and Journals
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