Impacts of Internal and External Factors on Business Performance

This article discusses the impacts of internal and external factors on the performance of a business, using Unilever as a case study. It explores the effects of political, economic, social, technological, legal, and environmental factors on the company's performance and growth. It also highlights the ways in which businesses can affect these factors.

Political: Regulatory restrictions pronounced by the food and drug administration in US of America is the main
subject to Unilever. In the case of inability to comply, Unilever may face to face several legal issues like risk fines. It
is also found that Trump government is going to come up with new strict regulations that can also create challenges
for this company. On the other hand, growing free trade relations is opportunity for this retailer and it can take
advantages of increasing sales and retaining customers.
Economic: Economic is one of the main factors on which performance of Unilever depend. One of the main factors
or examples of this is increasing wage rate that may be opportunity and threat. It can increase profit more from
higher sales as consumers gain higher disposable income. However, the same factor can be threat as it can
increase cost. Economic crisis is affecting its growth as consumers are less likely to invest in expensive products
and services. They are demanding for cheaper and qualitative products so, many companies are trying hard for
competing Unilever specially in France. So, it can be said that there are critical impacts of this force on the growth
and performance of Unilever.
Social: There are some strengths and skills of Unilever that is making it able in taking advantages of social factors.
It has presence in many nations and its ability of providing ad. in various language makes customers feel valued. It
promotes diversity. Other factor in this element that can also give advantages to this retailer is health
consciousness among people. It is also striving hard for reducing negative impacts and producing qualitative
products made by natural ingredients. It is able in producing premiums products so, it can be said that this factor
gives it several opportunities and have positive impacts on its performance and growth.
Technological: This factor also has both positive and negative impacts on the performance of Unilever. In this
context it is found that Unilever has implemented integrated supply chain with ultralogistik that is making it able in
being in the competition. But on the other hand, it is found that several other retailers and companies like Nestle,
Tesco are also making use of advanced technology to the great extent. It is increasing competition. It is also putting
pressure on this retailer to invest in technologies that can increase its overall cost. Rising investment in research
and development by other companies is also a threat for Unilever. So, it can be said that by setting facility with
automated operations can also help it in saving time and improve productivity.
Legal: Unilever has more than 400 brands product portfolio so, it is required taking care of all relevant regulations
and laws. Nowadays, increasing rate of fraudulent companies can take undue advantages of patent so, it is
important for Unilever to protect its patent. Otherwise, it can affect its image in the mind of customers. Sometimes
regulatory approvals can delay to the process of decision-making and it affects business growth. If it follows all rules
and regulations, then it can increase trust in the mind of people and can increase customers retention rate as well.
Changes in tax laws and regulations can also sometimes create problems as company has to make changes in its
all internal strategies accordingly (Unilever PESTLE Analysis, 2019). Employees may face problems in performing
functions as they also have to change their style of performing as per the changes happen in this factor.
Environmental: Increasing awareness among people regarding environmental protection pressurized this retailer
initially. But it is found that Unilever strived hard and became successful in protecting itself as an environmental
friendly by reducing wastes. Now it is working towards UN sustainability goals that can help it out in improving
image in the market. It is making use of recycle and reusable materials for packaging that can increase its CSR and
can improve relation with its stakeholders. So, it can be said that this factor is having positive impacts on its
performance because of its strengths and abilities.
On the basis of above discussed external factors it can be recommended to Unilever that it requires improving its
sustainability programs for taking more advantages regarding business sustainability. By automating production
process and investing in advertising and promotion it can grab attention of customers and can increase their
experience.
Impacts of internal and external factors on business performance
Internal factors
Strengths: Strong brand and improved
image in the market is the main strength of
this retailer. It provides variety of products
and services to customers that helps in
increasing sales. It has strong global market
presence that helps it out in taking
competitive advantages.
Weaknesses: Most of the products and
services that it offers to customers are
imitable.It is mainly dependent on small
retailers for getting qualitative products. It
operates in an Uber competitive market
where other well-known players Nestle and
P&G increases challenges (Danniel
Kissinger. Unilever's SWOT Analysis, 2017).
Opportunities: It can take advantages or
opportunities of business diversification and
expansion. Opportunity to market segment of
health conscious people and increase profit
margin. To increase sales by good tracking
record of environment responsibility of ethical
chic consumers.
Threats: High intensity of competition in the
market among existing rivals is the main
threat for this retailer. Products imitation can
reduce sales and profit margin that is other
main threat. Ongoing economic crisis has
also affected profit margin o retailers.
So, on the basis of above discussed internal
factors it can be said that it is affecting
performance of Unilever in critical manner.
Some of its weaknesses and threats reduces
profit margin and sales. On the other hand,
strengths like improved image, varieties of
products can help it out in improving image
and making an effective position in the
market (Nwagwu, 2020).
Different ways in which business can affect
internal and external factors
Ineffective management or leadership: It is one
of the main thing or way in which business can
affect its strengths and some of external
factors. Due to ineffective management and
leadership, employees leave organization, and
they talk about the company with their friends
and family members. It affects image of the
company and also affect internal environment
of the company. Due to this, company find
problems in attracting customers and satisfy
social needs.
Union strikes: It is another way that can also
affect and influence all internal and external
factors. Many of the time employees go on
strikes due to lower wages and other reasons.
Due to this, government have to make
changes in their regulations that may affect
company's performance in critical manner. It
affects legal, political factors and can also
increase overall cost of the company.
Strategies related to sustainability: Strategies
of the company affect all external factors and
internal as well. Improved strategy of the
company can help it out in taking advantages
of external opportunities. On the other hand,
poor and ineffective strategy can affect its
performance in a negative manner and some
of external factors. Poor strategies can affect
legal factors and due to this it may have to
face legal issues.
Rather than human risks and strategies, there
are several other factors and ways in which
business can also affect both factors. All these
factors include: technological, ability of
company of research and development,
financial stability, natural risks and others
(Bevilacqua and Ciarapica, 2018). Poor and
ineffective working environment can also affect
some factors. Due to this, company have to
face some political risks.Akhmetshin, E. and et.al., 2017. Analysis of innovation activity of enterprises in modern business environment.
Journal of Advanced Research in Law and Economics. 8(8 (30)), pp.2311-2323.
Bevilacqua, M. and Ciarapica, F.E., 2018. Human factor risk management in the process industry: A case study.
Reliability Engineering & System Safety. 169. pp.149-159.