Analyzing the Effect of Macro Environment on Business Strategy

This report discusses the impact of the macro environment on business strategy, using frameworks like PESTEL and Porter's Five Forces. It also analyzes the internal environment of Unilever and its capabilities. The report provides insights into strategic decision-making and the importance of considering external and internal factors.

BUSINESS STRATEGY

Table of Contents
BUSINESS STRATEGY ................................................................................................................1
INTRODUCTION...........................................................................................................................1
TASK 1 ...........................................................................................................................................1
P1 Using different frameworks determine the effect of macro environment in relation with
organisation and its strategies.....................................................................................................1
TASK 2 ...........................................................................................................................................3
P2 Determine the capabilities as well as efficiency of organisation and internal environment..3
M1 Briefly analyse the macro environment to determine and inform decisions in relation
with strategic management..........................................................................................................5
M2 briefly determine the internal environment to analyse strength and weakness of firm
efficiency and capability.............................................................................................................5
TASK 3............................................................................................................................................5
P3 Porter's five forces model.......................................................................................................5
M3 Strategies to improve competitive edge................................................................................8
TASK 4............................................................................................................................................8
P4 Application and Interpretation of various strategic concepts................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Business strategy refers to set of alternative course of actions and decisions which helps
owners and marketers to achieve the organisational business objectives and goals (A Definition
of Business Strategy. 2018). In other terms, it is process of formulating and implementing game
plan that management uses to protect and sustain competitive position in market as well as
industry. It is combination of various decisions and activities that undertake by firm in order to
accomplish goals effectively and efficiently. It works as a blue print or map which direct efforts
of workforce towards common path goal (Vlachos, 2016).
Unilever is a British multinational company operates its business in consumer goods
industry. Corporation selling and marketing in diversified product line including foods,
beverages, cleaning agents and personal body care products. Firm has its co-headquarters in
London and in Netherlands. It delivers and serves its items around 2.5 billion consumer across
190 countries. Company have over 400+ brands worldwide which helps organisation to achieve
its mission and vision goals.
Further, this report describes different approaches for analysing internal and external
environment in which organisation operating its business functions. This assignment contains
detail information of models namely PESTEL, Porter's five Force, SWOT with the purpose of
examine intrinsic and extrinsic capabilities of company in different situations. In addition to this,
report exhibits numerous strategical models and theories which help in formulating new strategic
management plan that helps organisation to sustain and protect competitive position and
increases productivity and profitability.
TASK 1
P1 Using different frameworks determine the effect of macro environment in relation with
organisation and its strategies
It is a framework used by organisation/entities to track activities of market. This tool is
mostly used to analyse the external factors which are affecting the business (Pan, Chen and
Zhan, 2019). It act as support system for the firm to tackle from uncertainty situations. In relation
with PESTEL,Unilever has conducted analysis which is mentioned below-
Political- Political factors are those which comprise of laws, rules and regulations etc.
These factors are important for every organisation as they determine the productivity and
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stability of business in the market. Involvement of government in the economy can affect the
overall growth of organisation for example- tax policy, inflation and deflation rate etc. In context
to Unilever, there are strict rules and regulations which have been implemented by some of the
countries in trade policies like US is changing its trade and taxation policies which have direct
impact on Unilever products as it covers the mass area of US market.
Economic- Then comes economic factor, these factor are most crucial part of the
framework. These comprises of deflation rate,exchange rate, trade policies etc. Company should
have a proper market researcher to tackle these economic factors. Organisation like Unilever
which basically deals with FMCG sector should focus on economy factors of other countries in
which they are operating their business.
Social- Another important factor is social factor. These covers income, age, standard of
living, etc. Unilever should focus on their consumer buying behaviour and their standard of
living which directly have a impact on overall development of business. Hence, it should be
more socially active in order to create a brand awareness in the eyes of people (Dinçer and
Pınarbaşı, 2020).
Technology- Further comes the technology which reflects the effectiveness of
organisation operations. Technology factors includes updated automation, security, digital
platforms etc. Technology is important because it enhances the business operating efficiency
and resources and affects organisation production capacity and cost efficiency.. As Unilever is
fast growing consumable goods company it should develop its R&D which will be helpful in
producing and supplying of more products.
Environment- Another important factor is environmental factor, theses includes safety
of surroundings, eco friendly raw materials and products etc. A FMCG company can attain more
customers by contributing to this factor as it creates a goodwill and awareness in the eyes of
consumers like for example- Unilever is reusing waste plastics for the packaging process as
elimination of plastic will leads to a healthy environment.
Legal- Last but not the least; legal factor which include, employment law, antitrust law,
money laundering etc. Being dealing with wide range of products Unilever should also be active
in legal factors which can effect its goodwill as well as productivity. Many alternatives are
available in the market thus, there are chances of organisation product and design duplication,
irrelevant rumours by competitors etc. So, concluding these key words Unilever should be
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legally active and well aware about change of sudden activities and government rules as well as
regulations.
TASK 2
P2 Determine the capabilities as well as efficiency of organisation and internal environment
Internal environmental factors are those which can affect the organisation but they have
complete control over these factors. Some of these factors are personnel behaviour, management
activities, technological impact etc. Unilever focuses on all of these factors and conducts a
weekly as well as monthly group discussions as well as meetings within the organisation in order
to determine the efficiency of business (Gürel and Tat, 2017).
SWOT is a tool used by the organisation in order to determine strength and weakness of
entity.
STRENGTH
 Unilever is heavily funded by some of
the financial institutions due to its
goodwill in the market.
 As, Unilever is more economically
involved, consumers have trust on the
brand and their products.
 Moreover, they believes in customer
satisfaction, and maintain CSR due to
which a positive word of mouth
revolves around the market.
WEAKNESS
 Presence of diverse employees in
Unilever leads to conflicts in
management and organisation because
of different opinions, religions etc.
 In context to Unilever, Use of outdated
technology in R&D reduces the speed
of production process.
OPPORTUNITY
 Use of digital platforms as a advertising
tool can creates a product awareness
across the globe which will attract more
new employees.

THREATS
 Labour turnover may get increased if
employees in Unilever didn't get well
treated.
 Lack of skilled and experienced
employee affects the growth and
profitability of business.
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VRIO ANALYSIS- It is a framework used by organisation in decision making process.
It mainly focuses on companies internal efficiency and capabilities. In other words, it helps in
internal situation of entity. VRIO is mostly concerned with organisational resources this is
because according to this framework firm main assets are their resources and implementation of
effective strategies can reduce the sources of any competitive advantage. In context to Unilever,
to attain the competitive advantage in market VRIO analysis is used by the firm. Its components
are discussed below-
Valuable- Organisation only invest when its resources or assets have some value to their
business. If resource doesn't have any value in the business than organisation will shifts and will
focus on alternatives. Benefit from these assets as well as resources should be at higher ladder
because moderate is not accepted by the entity due to increasing competition in the market. In
context to Unilever, as it deals with wide range of products and its resources are valuable and
beneficial to the firm. Hence, due to an efficient human resources and its global presence it gives
a tough competition to its rivals. Differentiation strategy can be valuable for some of the times
but not always. Furthermore, cost strategy is valuable when company introduces some new
products. (W. and Daryanto, A., 2018).
Rare- Further comes the rare in which resources in the organisation should be taken into
considered while at adoption/ neglecting stage. If resources are rare as well as valuable then
organisation should try to be more chosen and can attain the competitive advantage in the
market. Moreover, Unilever has now started to produce natural products with motive of
sustainable growth in the business. Hence, raw materials and assets used by firm are rare as well
as beneficial up to some extent.
Intimate- In this, organisation gain the competitive advantage at temporary level.
Because of adopting similar resources in the market by other entities competition rises Hence,
duplication or substitution of product may lead to competitive advantage. Manpower cannot be
intimated as b expertise and skills cannot be copied by other firm.
In this scenario, Unilever has adopted differentiation strategy in order to be unique in the market
from their rivals.
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`Organised/systematic- This component states that resources which are used by
organisation are in processed form or not. Because firm is only able to attain the market when its
processing and operations are well organised. Unilever, one of the most globally recognised
brand, its logistic as well as supply chain management system works under complete processed
form. Organisation structure is designed in such a way that resources are used at optimum level.
Thus, their resources attain the value in the market because of firm supportive and climate
culture in the organisation.
M1 Briefly analyse the macro environment to determine and inform decisions in relation with
strategic management
So, macro environment factors are important for every organisation to monitor the market
activities and uncertainty situation. In context of Unilever, it should focus more on trade policies,
as its products are available across the globe. It should emphasise and focus on economic factors
such as inflation and deflation rates while dealing with other countries. Moreover, company can
use more energy consumable resources in order to provide eco friendly products. To be more
advanced and fast it should focus on technology enhancement. Also, to be socially involved
customers preferences should their first priority (Z. and Harizanova-Bartos, H., 2017).
M2 briefly determine the internal environment to analyse strength and weakness of firm
efficiency and capability
Every firm has its own tactics and strategies to determine its strength as well as
weakness. Internal environment are those which controllable by the organisation. In context to
Unilever, there are several internal factors which affect the efficiency as well as capability of
firm such as technology, personnel behaviour, perceptions of employees etc. Thus, Unilever
provide brainstorming session every week and month in in order ton reduce the conflicts between
management. Conflicts may affect the productivity of business in negative manner.
TASK 3
P3 Porter's five forces model
Porter's Five Forces model -
This model is proposed by Michael. E. Porter since 1979. It is a framework that helps in
understanding the competitive landscape of a certain industry(Akter and et. al., 2016). This
model is helpful for new businesses and new industry sector. The benefit of this model vary from
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company to company that means every company is different in its attractiveness and
profitability. It can particularly used to analysing the internal environment of an industry in
which it operates. In context of Unilever, it is important to apply this five forces model because it
has a strong competition not only from big companies like P&G, NESTLE etc. but also from
local retailers. The potential new market entrants, number and power of firm's competitors,
buyers, suppliers and substitutes products all this factors affects the efficiency and profitability of
the respected company. This theory describes in five different forces that relate to the
organisation opportunities and threats that is faced the firm. These five elements explain below: Bargaining Power of Buyer's - It mainly focus on more customer demand with less
price as much as possible. It is affected by how many buyers a firm holds and in what
amount it finds new consumers or market for its output. In some areas buyers contain
strong bargaining power such as when there is few buyers available, there are many
alternatives present in the market, buyers are price sensitive, rivalry firm cost are
comparatively low etc. In context of Unilever, industry is dependant on the customer
satisfaction to its products(Higgins, Omer and Phillips, 2015). It is a company that have
number of buyers all over the world and as a firm provide quality products to its
customers so they did not need to lower the price of there product offerings. But the user
of the product have the great power in hand to make a trustable and likeable company and
make the worst institution ever. So because of the customer power, Unilever should be
very careful about the threat and control the price as per the consumer demand and
satisfaction. Threat of substitutes- According to this model, there is a fear about close substitute of
products which is present in the existing market, it increases customers switching to
alternative product in response to their price,quality etc. For this company manufactures
those goods that has no close substitutes and because of this it have more power to
increase the prices. In context of Unilever, substitutes goods will reduce profits and
growth in the market. Because of this company has to be very careful and closer to its
customers need and wants(Johnson, 2016). To overcome this threat company focus on
quality products so buyer would choose its products as compared to substitute products.
And it also concentrate on introducing new and innovative products that the customer
wants and ensure that buyer will not shift easily so substitute goods.
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 Bargaining power of suppliers- High bargaining power permits suppliers to sell their raw
materials at high price with low cost to the buyers. It affects the purchasing firm revenues
because it will pay more money for raw materials(Martinez-Simarro, Devece and Llopis-
Albert, 2015). They have high bargaining power when there is few suppliers are present
in the market for the particular product. Unilever have large number of suppliers in which
it operates as compared to customers because of this suppliers have less control over
price and this will create the threat in bargaining power of supplier. If the suppliers
provide unique and standardised goods and services and there is no substitute is available
for that. This makes the great opportunity in bargaining power of supply. Unilever can
tackle the bargaining power of supplier by purchasing raw material at low cost and if the
cost are not suitable than it will switch the suppliers because there are number of
suppliers present in the competitive market. Threats of new entrants- This model can explain the economics of scale that is difficult
to succeed in the firm in which Unilever established. It also make difficult for new entry
firms because it contains more production cost and this make the threats of new entrant is
strong. If the company focus on the new design products rather than standardised goods
and strongly influence promotional activities and customer satisfaction all this forces
reduce the fear ]of new entrants. However, the company have more capital which is
difficult for new firm to set their business on such a high cost. And this cost will be high
because of changing environment that need more research & development. Here the legal
policies are also require to set the new business which is difficult for new industry and it
all benefited the Unilever(Peng, 2017).
 Rivalry among Existing company- This factor determines how competitive and
productive a company is. In today's competitive environment industry have to compete
truculently for a market share that results in minimum profits. Competition among firms
are high when there are many competitors, exit barriers are high, substitute of products
are easily available and low customer loyalty(Thompson, Strickland and Gamble, 2015).
Unilever has a huge number of competitors like P&G, Nestle etc. and these are very
powerful in reality. These competitive company using a very attractive prices and
advertising techniques because of this many customers influence to buy that products.
Therefore, highly competitive market can reduce the profit margin of the organisation.
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Firms contains high fixed cost and because of this it cannot reduce their prices. This also
means that when the demand is low company automatically low the price of the products
this will lead to face loss in profit earnings. To overcome this threats company can focus
on new customers rather than winning one from rival firms. And they also conduct the
market research to understand the demand and supply of the goods and prevent from
overproduction. Company majorly focus on manufacturing unique offerings so that it
reduces the competition in the competitive market.
Unilever operates in a highly competitive and dynamic environment. Strategic planner of the
organisation analyse and identify the profitability by using porter's five forces model. Here the
company focuses on legal factors, technological changes , changes in the customer behaviour
and their competitors who present in the market. After that they update it to a R&D department
about the problem, demand and supply of the products. According to this judgement Unilever
can make strategic plan and earns more profitability.
M3 Strategies to improve competitive edge
From the above theory it has been concluded that Unilever can overcome this problem
which is relating to the threats of new entrants by using innovative techniques in their products to
differentiate it from the others and spend more money on marketing to build strong brand image.
Differentiate and low price of the products will increase bargaining power of customers. The
organisation have multiple suppliers in different locations in this way it will ensure proficiency
with in its supply chain. All this forces affect the business strategy planning, survival and growth
of the industry(Woerner and Wixom, 2015).
TASK 4
P4 Application and Interpretation of various strategic concepts.
There are various strategic model used by organization for purpose of business expansion
growth, increasing market share and organizational productivity as well as profitability. Unilever
is a well known organization works in producing consumable food items to preserve its
competitiveness and brand loyalty company can make use of Ansoff matrix for planning its
growth. Ansoff model represent the product and market expansion matrix in order to help firm to
enlarge its operations in different areas as well as determine the risk involved in each strategy
(Mohelska and Sokolova, 2016).
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 Market Penetration: this particular strategy emphasize on raising sales of current
products within existing market. This method is opt by organization with view of
expanding its growth through increasing its promotional efforts, by offering attractive
deals at low cost. Unilever can apply this tactics by putting aggressive sales efforts via
offering affordable products at discount or buy one get one offer so that it increases their
sales volume and enhance its profits (Cassidy, 2016).
 Product Development: this strategy focuses on launching exclusive products to existing
target market. This method helps in addressing different needs and demands of current
buyers so that company can produce new or modify its existing items in order to retain its
current customer base and preserve its market share. Unilever can evolve in its present
product features like expanding its durability of item and can launch new version of
personal care products time to time to prompt its customer base to try out something
better and unique. Organization can take full advantage of strong brand loyalty and recall
remind their consumers about them which helps in gaining large market share.
 Market Development: this approach is adopt by firm when company motive is to serve
its existing product in newly different target market. Expansion of business units by
tapping new geographies, customer segments and other regions. This strategy is riskier as
it is difficulty to understand various complexities and issues of untapped market. This
method is suitable when firm has appropriate resources and funds to enter new market.
Unilever can expand its business by introducing 100% organic cosmetic products to serve
health conscious customer base.
 Diversification: this strategy opt by company when it want to enter new market with
brand new products that can be either related or unrelated to existing product line.
Related diversification means developing new product which somewhere connected with
organization current product whereas unrelated diversification refers to emerging brand
new item that has no link with present production. In case of Unilever, company can
make use related diversification strategy in view of introducing infant care products to
capture maternity customers segment (Uggla, 2015).
From discussion of all above strategy, UNILEVER can select Market Development
strategy to tap new target market to satisfy the needs and demands of skin and health conscious
consumers. This strategy is beneficial for company as it can make optimum utilization of
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resources which enhance profitability level as well as brings new opportunities for organisation.
This method helps firm to enlarge it customer base and retain existing consumers. Company can
explore new things and technology. To implement this strategy management needs to formulate
strategic management plan (Hockerts, 2015).
STRATEGIC MANAGEMENT PLAN
Unilever is one of leading British consumer goods corporation which deals is high quality
food refreshments, beauty and personal care as well as cleaning products. It is an oldest
multinational company produce and marketing its goods across 190 countries. It has over 400
multi brands which serves in different categories to reduce environmental footprint and upgrade
its positive social impact.
Vision: To create sustainable living commonplace with belief of having opportunity and
responsibility to work for betterment of world.
Mission: To brings vitality to life by fulfilling day to day requirements for nutrition, hygiene and
personal care.
Objectives: To increase and attract huge customer base. Enlarge its sales and profits.
STP Process
Segmentation: Unilever can segment its target customer base by categorizing its products on
basis of demographic segmentation such as gender and age.
Targeting: After segmenting, the target market for Unilever will be 18+ age group people
including both male and female customers.
Positioning: Unilever can achieve higher profits and market share as growing needs of health
conscious customers and there are few quality brand organisation which produce same.
Monitoring and Controlling
Unilever conduct survey and take regular feedback from its customers so that it enables them to
identify any deviations regarding pure organic product. After that company take corrective
measures to rectify the issue. Firm keeps monitoring its products about how much it can
satisfying needs of customers (Wesseling and et. al., 2015).
CONCLUSION
From above study, it can be concluded that business strategy is an integral part of
strategic management. It helps an organisation to accomplish its short term and long term
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objectives and goals effectively and efficiently. Business strategy concern with coping up with
future changes and keep the firm ready for facing upcoming challenges related to these change.
Further, there are number of models and approaches which help out marketer analyst to study
and examine macro as well as micro surroundings with view of formulating policies and plans
accordingly. Business strategy is also essential for planning out for growth and expansion of
business enterprise so that firm can easily sustain its survival through launching new or
modifying its existing products. Lastly, it is important for organisation to construct powerful
master plan so that it can be easy for firm to cover and serve large customer base and keep
maintain its brand image and goodwill.
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