Business Strategy for Unilever: Macro Environment Factors, Strategic Capabilities, and Analysis

This report analyzes the business strategy of Unilever, a multinational company that sells consumer goods. It examines the influence of macro environment factors, evaluates the company's internal environment and capabilities, and applies VRIO and SWOT models to analyze its strategic direction. The report also discusses the company's vision, mission, and objectives, as well as its stakeholder and PESTLE analysis.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
LO1 Examine the influence and impact which macro environment factors has on an
organization and its business strategies ......................................................................................1
LO2 Evaluate an organisation’s internal environment and capabilities .....................................5
LO3 Evaluate and apply the outcomes of an analysis using Porter’s Five Forces model to a
given market sector.....................................................................................................................9
LO4 Apply models, theories and concepts to assist with the understanding and interpretation
of strategic directions available to an organisation...................................................................10
CONCLUSION..............................................................................................................................11
References:.....................................................................................................................................12

INTRODUCTION
Business strategy is defined as a combination of set plans, goals and actions that explains
about the working of business in a competitive market with different number of products. This
strategy considers various factors which include competitors, market, company structure and the
business environment. Business strategy defines the action plan to accomplish the vision and
objectives of a company and guides the process of decision making to improve the financial
stability of an organization in the competitive market(Centobelli, Cerchione and Ertz, 2020).
Unilever is considered as a famous multinational company which sells consumer goods including
beverages, food, personal caring products and cleaning agents, headquartered in London,
England. The report outlines the mission, objectives and vision of Unilever company and the
effect of external factors by pestle and stakeholder matrix. The report also discussed about
strategic capabilities by using VRIO and swot analysis model, competitive market through
Porters model, designing product strategy by Ansoff matrix and explained theories to design
strategic planning.
MAIN BODY
LO1 Examine the influence and impact which macro environment factors has on an organization
and its business strategies
Vision
The vision of Unilever company is to 'make sustainable living space for people' as they believe
that this is the best way to grow business in the long run. They mainly focuses on producing
products that adds value in the life of customers by designing good quality personal goods and
home care items.
Mission
The mission of Unilever company is to 'add energy to the life of customers' by fulfilling
everyday needs for nutrition, personal care and hygiene with branded products that helps in
making people look good, feel good and get to know more about life.
Objectives
Main objective of Unilever company is to 'improve the health and well-being of people' by
offering good quality products. More than one billion people are using personal and beauty care
products on a daily basis which creates a real difference in the life of people.
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Meaning and Definition of Strategy
Strategy is defined as an action plan that managers considers to achieve one or more than one
goal of organisation(Dokukina and Petrovskaya, 2020). A strategy is a framework of plan that
integrates all activities of organization and allocate and utilize scarce resources in the
organisational environment in order to meet the existing objectives. Strategy in a business is
divided into three types which include Corporate strategy, Business strategy and Functional
strategy that helps in taking decision regarding achieving the gaols of the organisation.
Role of Strategy in achieving objectives and goals of organization
Strategy plays an important role in operating the business functions of a company for
accomplishing the desired goals. Unilever company uses strategy to develop plans for achieving
the desired objectives for satisfying the customers needs and preferences. The role of strategy is
defined below:
 Provides Framework for future planning – Strategies provides company a framework
for designing plans which helps in achieving long term growth in future. In context of
Unilever, the manager focus on developing plans that helps in achieving future growth
by producing good quality products or services.
 Differentiate company from others – Strategy helps a company in creating a image
that differentiate it from other companies and helps in achieving competitive advantage
(Weinstein, 2020). In context of Unilever, the manager focuses on producing products
and services in unique and innovative manner that creates a difference in the minds of
customers to choose their product over competitor product.
 Increase Effectiveness in organization – Strategies help in increasing organizational
effectiveness by optimum utilization of resources to fulfil company's objectives. In
context of Unilever, the manager focus on identifying the resources that are useful for
the company and using them in an efficient manner to contribute in organizational
objectives.
Strategic planning techniques
 Benchmarking – Benchmarking is defined as a comparison of the company metrics with
the competitor or industry. In context of Unilever, the manager focus on determining the
costs spend on technology and innovation in relation with other competitors.
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 Budget planning – Budget planning is defined as a process of setting budget and then
applying it to control the activities of company (Fleckenstein, Fellows and Ferrante,
2018). In context of Unilever, the manager focuses on creating a budget plan that helps in
allocating finance appropriately with each department.
Stakeholder analysis: stakeholder matrix
Interest level
High Low
Power level High Consumers, Government Employees
Low Suppliers Communities
As mentioned in the above table it is concluded that Unilever company applied a systematic
strategy to achieve its social responsibility. This strategy helps company in analysing qualitative
information to identify the interest of stakeholder in managing the operations.
 Consumers – Consumers are at the top priority in the company as they determine the
overall profits (Rosyad, Syarief and Syuaib, 2022). They are at high priority because they
are the ultimate source for which the company produces good quality products at
reasonable prices. Satisfied customers will increase the revenue of the company and will
promote the products to other people which will enhance the brand image in the market.
 Government – Government is on high priority in Unilever company because they work
directly with them to develop laws and regulations that might impact the business. The
company does not support candidates, political parties or any groups which promote
interest of party.
 Employees – Employees comes at low high priority as they play an important role in
increasing the sale of Unilever company goods and services. Employees are more
interested in career development and competitive compensation for better performance.
 Suppliers – Suppliers are at high low priority because they have interest in gainful
business with the Unilever company. This group of stakeholder is important in impacting
the capacity of business based on the availability of raw materials for manufacturing
consumer goods.
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 Communities – They are at the lowest priority in Unilever company as they influence the
behaviour of customers towards the product. Communities interests involve community
development and environmental protection.
Stakeholders contribute in the success of the company as they are important in analysing
competition in the organization and helps in proper utilization of resources.
Environmental analysis: Pestle analysis
Unilever is a leading retailer of consumer goods which operates in three different segments such
as beauty and personal care, home care and food products. Company uses pestle method to
analyse the changing taste and needs of consumers in the market and improving operations of
business for achieving competitive advantage. Pestle analysis is explained below:
 Political – Political factors affect the operations of the company such as tax policy, trade
restrictions, political stability, labour law and tariffs (Kaplan and Kinderman, 2019).
Unilever is a renowned consumer goods company which produces different variety of
products in the market of UK. Most of the profits of the company are generated from the
sale of consumer goods and for this the company has to abide by the laws and regulations
set by Food and Drug Administration. Main political factor that affects the company is
the position of present government of USA.
 Economical – The business performance of Unilever company is dependent on the
situation of economies across the world. The present state of the economy defines that
consumers are less interested in buying high rate products as low prices goods are more
in demand. Consumers affect the sale of company's products as they demand products
which are offered at reasonable prices.
 Social – There are various social factors such as population, income group, education
level, buying habits and lifestyle which affects the operations of the company
(Rosenberg, 2018). As Unilever company operates in different brands, they focus more
on building a strong reputation in the market. The company emphasises on improving the
lifestyle of customers by producing good quality of personal and beauty products which
makes them feel and look good.
 Technological – In today's competitive market technology is changing rapidly and
companies need to cater with the technological changes in order to achieve success in the
market. Unilever focuses on producing new and innovative products by selling them on
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online platforms to acquire more market share. The company mainly emphasizes on
developing its selling and digital marketing methods for increasing the sales of products.
 Legal – Legal factors include product labelling and safety, advertising standards,
consumer rights and equal opportunities which effects business operations. Unilever
company is involved in several laws and regulations as it deals in consumer goods. The
company needs to safeguard its patents because many fraudulent companies make use of
company patents for selling products which creates confusion in the minds of customers.
 Environmental – Environmental factors like natural disasters, pollution levels and
change in climate affects the supply chain or increase the price of raw materials of the
company(Kirchmer, Franz and Gusain, 2018). Unilever focuses on providing products
which are safe and eco-friendly for customers in every segment in which the company
distributes its product. The company is fully devoted towards achieving the goal of
promoting reusable plastic packaging to reduce the amount of plastic.
LO2 Evaluate an organisation’s internal environment and capabilities
Strategic capabilities meaning
Strategic capabilities is defined as a ability of business to support all its capabilities, resources
and skills in order to achieve competitive advantage to survive and to increase value with time
(Kostel and Samoilikova, 2019).
Key components of strategic capabilities:
 Unilever has a strong position in the market for producing good quality of personal care,
food and home care products that differentiates it from other companies.
 They focus on continuous improvement for producing innovative products by investing
large amount of investment in marketing and research & development team.
 The company has the ability to use various channels for reaching more consumers around
all over the world by selling products from both offline and online platforms.
 Unilever creates an increasing amount of digital content for connecting with customers
and make it easy for them to choose products of the company brand.
 The company produces products by analysing the needs and wants of customers so that
they feel satisfied with the quality of products.
 Relationships with customers, governments and other organizations within different
countries helps the company in achieving success on their own.
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Analysing strategic capabilities of the company through VRIO and swot analysis:
VRIO analysis of Unilever helps the company in evaluating the resources of the company
and also helps in gaining competitive advantage. This method enables company in improving
performance by optimum utilization of resources and by understanding the competitive
weaknesses. VRIO framework consist of four factors which are explained below:
 Valuable – Resources are considered as valuable in case it allows the company to
achieve competitive advantage (Ku, 2020). Optimum utilization of resources is
significant for company in order to gain customer value and satisfaction. Local food
products of Unilever are highly valuable because they provide differentiated products to
the customers. Financial resources holds high value in the company as they help in
reducing external threats and investing into opportunities that rise externally. Employees
are also a valuable resource in the company as they are highly skilled and trained which
helps in increasing the productivity of the organisation.
 Rarity – Resources which are acquired by only one or small number of companies are
considered as rare. Local products of Unilever are not rare as they are easily available and
marketed by other competitors which increase the market share for the company.
Financial resources of the company are considered as rare because strong financial
resources are found to be possessed by very few organizations in the industry. Employees
of the company are considered as rare because these employees are properly trained and
are highly skilled which is not in the case of other companies.
 Imitable – Valuable and rare resources help companies in testing the capability of
employees to fight competition in business of their own(Rascão, 2018). Local food
products of Unilever company are not that much expensive to imitate because these
resources can also be adopted by competitors in case they invest a small amount in R&D
department. Financial resources of the company are quite costly to imitate because these
resources are achieved by prolonged profits over the years. Employees of the company
are not that expensive to imitate because other companies can also train their employees
in the same way to improve the productivity.
 Organization - Resources themselves do not provide any advantage to the company
until they are organized in a proper manner to exploit opportunities and to create value
(Lattuch, 2019). Patents of Unilever company are not organized properly which means
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that the company is not using proper use of their patents to achieve competitive
advantage. Financial resources of the company are organised in a proper manner as these
resources are strategically used to invest in accurate places, reducing threats and
identifying opportunities. The distribution network of company is also well organized
because they use this network for reaching out their customers by assuring that all variety
of products are available in different outlets.
To identify opportunities and reduce threats, swot analysis of the company is done:
Strengths  Unilever has global foot print in around
190 countries of the world with top
brand recall in the customers.
 It has a broad portfolio of strong brands
and a diversified range of products
which creates a unique position in the
market.
 Distribution channel of the company is
very strong as they reach every corner
geographically with their wide variety
of products.
 Pricing policy of Unilever is flexible as
they have a large portfolio of products
which allows company in changing
their prices as per the choice of
customers.
Weaknesses  Although Unilever company invest a
large amount of money on technology
but then also they lack behind from
other competitors company.
 With the new changing world, it is
important for company to cope with
modern branding channels for
communicating instead of following
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traditional branding.
 High competition means constant wars
of prices which leads to reduce the
margin rate of the company (Marom,
Lussier and Sonfield, 2019).
 Major weakness of the company is the
availability of the substitute products in
the future markets which are replaced
by rural consumers in Asia and Africa.
Opportunities  The emergence of growing economies
is improving the standards of living of
people which is a good opportunity for
the company to sell right products in
the right place.
 Now a days most people are moving
towards healthy eating which is a
opportunity for Unilever to produce
products which provide health benefits
to customers.
 As large population is indulged in using
social media, the company should use
social media to promote goods and
services which is more effective and
will cost less.
Threats  Unilever is highly dependent on
retailers which is a big threat for them
because big companies are bringing
products in their own brand label.
 High competition from companies such
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as P&G, Nestle affects the growth of
the business in the market.
 Imitation of products is also a threat to
the company as they invest huge
amounts for bringing new products and
falls in danger as other company
decides to imitate that.
 Current growth in the sale of Ayurvedic
products is a big threat for which
company launches a product called
Ayush lever but it is still a long task to
achieve.
LO3 Evaluate and apply the outcomes of an analysis using Porter’s Five Forces model to a given
market sector
Porters five forces model is a method that helps in analysing the level of competition in
the market and also helps in knowing the position of products in the market to get an idea about
the areas which the company needs to focus on. For analysing the competitive markets of
Unilever company porters five forces model is used:
 Threat of new entrants – New entrants in the market brings new innovation, capacity,
more market share, and substantial resources (Mazzei and Noble, 2019). Unilever is not
much affected by the threat of new entrants as they supply different variety of products
and services all over the world. These things generally depends on the place and vary on
the basis of different types of people. The company needs to offer products at reasonable
prices for achieving economies of scale in the company. By bringing new changes and
innovation in products and services for new customers will provide existing customers a
reason to purchase products of Unilever PLC.
 Threat of new substitute products – Existence of similar substitute product in the
market will shift focus of customers to buy products of alternatives with respect to
pricing factor. New substitute product affects the profitability of the Unilever as
competitors company produce same range of products at much suitable prices according
to the customers. The company needs to focus on providing better services to their
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customers for gaining customer value and trust towards the brand instead of just product
oriented. Although competitors are providing alternative products at reasonable prices but
Unilever products are still in gaining market share as they have a good brand image in the
customers mind.
 Buyer power – The power of buyer influences the growth of the company and affects the
sale of products in the market. Unilever company consists of large number of buyers for
their products and services in the market as they are scattered across the world and the
quality of the company have not the ability to pull down the prices of products. But
customer like the product of the company and also trust the brand in the market because
they feel satisfied and are comfortable with the set prices. This is a strong factor for
company growth but they must set prices according to the demand of the customers so
that they feel satisfied and happy.
 Competitive rivalry – Large number of competitors and equivalent distribution of
products in the market affects the company growth and profitability(Polishchuk,
Kornyliuk and Ivashchenko, 2020). As Unilever is a leading retailer of consumer goods
which is known in almost all countries because of this competition is high in the market.
There are many big companies in the market which produces same variety of products as
Unilever and creates a confusion in the minds of customers by introducing similar quality
and attractive product in the market. Low cost of alternative products shifts the customer
to choose product of other brands.
 Supplier power – Supplier power links with the control of prices and limit the sale on
the number of products in the market. Unilever works equally on the satisfaction and
loyalty of customers as well as suppliers which reduces the chance of shifting from their
company. The company has a blanket agreement with their suppliers to entertain them for
producing products on time with good quality. The loyalty of company towards their
suppliers makes a chain of good relations and agreements for long time.
LO4 Apply models, theories and concepts to assist with the understanding and interpretation of
strategic directions available to an organisation
Ans off matrix model helps Unilever in making strategic plans for growth and survival in
competitive market an for increasing the sale of products.
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 Market Penetration – This refers to the growth strategy where company sells is existing
products in the current market (Preghenella and Battistella, 2021). This strategy helps
Unilever in understanding the market which focuses on selling its products to large share
of market to reduce economies of scale and to earn new customer base which helps in
achieving success in the FMCG industry.
 Product development – Product development strategy defines the sale of new products
in the existing markets which brings new innovation and creativity in the product.
Unilever focus on improving product line and produce products that are new in style and
texture which helps in attracting more customer base of the product in the present market.
 Market development – Market development strategy refers to the growth strategy where
company sell their existing products in new markets (Rahman, Akter and Radicic, 2020) .
Unilever is a company which never thought of staying in local market for the sale of
products and services but they always implement strategies that help in gaining more
market share. The company has a diversified customer segment in relation with products
and geographical markets which helps in increasing brand value.
 Diversification – Diversification strategy is defined as a growth strategy that sell their
new innovative products in new markets. Unilever has implemented this strategy to focus
on improving the characteristics and features of products to stand out with competitors
companies. In this strategy, the company mainly focuses on designing specialized
products that helps in attracting more customers and market share.
Porters generic strategies
 Cost leadership strategy - Profits are increased by cutting costs and charging industry-
average pricing. Increasing market share by lowering prices while still making an
acceptable profit on each transaction because the costs have been cut
 Differentiation strategy - Making products or services stand out and be more appealing
than those of competitors is what differentiation is all about. The particular nature of the
industry and the products and services itself will determine how company is going to
survive but it will most likely require features, functionality, durability, support, and a
brand image that the consumers appreciate.
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 Differentiation focus strategy - Companies that utilise Focus strategies focus on certain
niche markets and build low-cost or well-specified products for those markets by
studying the dynamics of those markets and the unique needs of their consumers.
Browman’s strategies clock
 1st Position: Low Cost and Low Value Added - The goal of this technique is to sell a
large number of items. The value of the items or services is low, and the price point is as
low as feasible. It is the least competitive area on the Strategy Clock as a result of this
combination.
 2nd Position: Low Cost - Low Price is a method for becoming the cheapest alternative for
purchasers in the marketplace, as the name suggests.
 Hybrid (position 3) - The Hybrid stance straddles the line between cheap cost and
distinction. It's all about making sure the pricing is competitive, ideally with a low
perceived price from customers, while marketing the product's added value.
 Differentiation is the fourth position - Differentiation strategy refers to a company's
efforts to set itself apart from competitors by adding high perceived value to its products
or services.
 Position 5: Differentiation with a Purpose - Providing high value at a high price is what
focused differentiation is all about.
 Position #6: High-Risk Margin - Any approach that includes the word "risky" should
imply that you have thoroughly considered all of the options before committing to it.
 Monopoly Pricing (position 7) - Because a single business controls the product and
pricing in monopoly marketplaces, other factors such as price points, value, and
competitors have less of an impact.
 Position 8: Market Share Loss This is the worst position to be in since it indicates that the
company is quitting the market or declining.
CONCLUSION
It is concluded from the report that business strategy helps in identifying strengths and
weaknesses of a company and designs ways to respond to the opportunities and threats in the
market in which they operate. For evaluating the external opportunities the company chooses
pestle analysis which helps in achieving competitive advantage and adopted stakeholder analysis
for evaluating the interest of different stakeholder in the company. It has also been evaluated that
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for analysis of internal factors the company adopted VRIO model and swot analysis which helps
in analysing capabilities and resources of company. The report define about porters five forces
model that helps in understanding the competitive levels of company to earn profitability and to
understand the market the company adopted ans off matrix model which helps in analysing
growth strategies for earning more market share.
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