Business Environment and Strategic Management

This report analyzes the business environment and strategic management of Unilever, a transnational consumer goods company. It discusses the external analysis using PESTLE and Porter's Five Forces Framework, as well as the internal analysis of core competencies and value chain. Recommendations are provided to overcome challenges and maintain competitive advantage.

Business Environment and Strategic Management

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Introduction
Business environment is the sum total of all factors that affects a business in terms of growth
(Hamilton, and Webster, 2018). It is essential for an organization to analyses the internal or
external factors in order to evaluate the risk. The various tools that help the organization to
evaluate the business environment such as PESTLE Analysis, Value Chain Analysis, Porter’s
Five Forces Framework and many others (David, and David, 2017). In this report, the discussion
is made on the concept of business environment analysis. Unilever has been selected in order to
analyses the external or internal environment.
In the beginning of this report, external environment will be analyzed with the help of PESTLE,
Porter’s Five Forces Framework. After that, internal analysis will be analyzed to evaluate the
competitive advantage of the organization. At the end of the report, strategies will be
recommended in order to overcome the issues.
Overview of the organization and industry
Unilever is a transnational consumer goods company in British-Dutch, and its headquarters in
London, United Kingdom and Rotterdam. It offers the personal care products, beauty products,
food and beverages and cleaning agents. It is marked as the oldest multinational companies and it
provide the products in 190 countries. Organization has its 400 brands with the turnover of 53.7
billion euros in the year 2017. Organization operates in consumer goods industry to serve the
services to consumers. There are 155000 of employees in the organization that helps to attain the
success at the higher level. The company earned the revenue of €50.982 billion and net income is
€9.808 billion in 2018 (Unilever, 2018).

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Consumer goods industry is the largest industry in the world. Nowadays, fast moving consumer
goods companies have seen their revenue growth and operating profit growth. The industry is
rising from 0.5% in 2016 to 5.7% in the year 2017 (Consultancy, 2018).
(Source: Consultancy, 2018)
External Analysis
PESTLE Analysis
Trends
Political- Brexit has creates uncertainties and open doors for UK. Unilever face some challenges
during the Brexit period although, there are numerous opportunities open for the company such
as competition is decreases in the market (Politics, 2018).
Economic- It is observed that UK is positioned at the largest national economy in the world and
also ranked at the fifth number in terms of Gross Domestic Product (GDP) and ninth largest
country in terms of purchasing power of consumers. From the last years, it is noticed that the
GRP per head of the country has been fluctuated such as in 2005, it is 7200 but in 2010, it is

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below 7000 and in 2019, it is 7800. It states that the economy of the country is growing rapidly
due to which the willing power of consumers is also increasing.
(Source: Financial Times, 2018)
Social- It is observed that 65% of UK customers that claim to be loyal shoppers which is above
the global average. The trend for consumer services is high as the loyal shoppers never sacrifice
with the necessity of products or services. Their demand towards the products or services has
been increases.
Legal- The Employment Act 1996 is followed by the country to protect the rights of employees.
There are some other legal laws that the organization has to implement to provide the services to
consumers such as sales of goods act 1979, and electronic commerce regulations 2002.
Environmental- The step taken by the government, local councils, communities of UK taken an
initiative to create the environmental awareness in the nation and also encourages the people for
protection of environment.
Key Drivers

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Economic- Job Growth is the key driver as it helps to increase the willingness of consumers to
purchase or to spend the money. The employment rate of UK is 85.2% from the age 35-49 which
is highest. It depicts that the 85.2% of people have income source to earn money (National
Statistics, 2019). It helps to enhance the economy rate and willing power of consumers which is
beneficial for Unilever.
Social- It has been seen that UK is most educated country in the world as the most of population
of UK is educated due to which the living style of people is high. The literacy rate of UK is 99%
from 1990 to 2019 (Macrotrends, 2019). The high literacy rate enhances the livening standard of
consumers. High living standard of people increases the demand of consumers to purchase the
products or services.
Technological- UK is the fourth most technologically advanced country in the world. The UK
ranked fourth with the score of 8.75. Advance technology in the country helps to promote the
product or service in the market (The Telegraph, 2019).

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Technological- UK invests £28bn in technology investment in the year 2011(Spaven, 2017).
Advance technology improves the services of digital sectors. The UK’s digital tech sector is
growing continuously faster than the rest of the economy. The turnover of digital tech companies
is growing by 4.5% between the years 2016-17. Digital sector is a main key driver for the
economy to grow in the market. It not only contributes in economy but also helps to
communicate or promote the services in the market (Stobbart, 2015). It is beneficial for
consumer service industry as they can inform their consumers about their services.

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Legal- Consumer protection is the key drivers as it helps to protect the consumers and also aware
the consumers to be aware for their rights. It also wares the organization to not to do any fraud
with the consumers.
Environment- These groups of authorities spread the awareness among the public through
newspapers, charities and many other tools. Media plays the role of key drivers as it helps to
spread the awareness among the people towards the step taken by the government.
Porters Five Forces Framework
The threat of new entrants
 Moderate degree of threat.
 It is observed that the high capital is required to establish the business in consumer
industry of UK but the consumers industry of UK also earns the high revenue which is an
attractive part for the new entrants. The main motive of the companies is to earn the high
revenue which can easily attain in this industry as the demand of consumers is high
(Aithal, 2016).
The threat of competitors
 High degree of threat of competitors
 There are number of competitors is the market such as P&G, Johnson & Johnson, and
many others competitors who provide the similar services to consumers.
 The demand of consumers towards the consumers goods or services is high due to which
the companies has the opportunity to earns the high revenue or attain its all goals and

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objectives. The companies who operate in this industry have high brand image due to
which industry is growing continuously. Growing industry is an attractive factor for the
companies to perform their operations (Owler, 2018).
Bargaining power of buyers
 High negotiating power of consumers
 There are many companies under the consumer industry of UK who provides the similar
services to consumers in the different price rate in order to beat the competitors.
 The consumers requires to purchase the daily routine products due to which the demand
of consumers is high. High demand of consumers is an attractive part of the industry as
the customers has to purchase the goods of daily routine as per their living standards
(Ansoff, et. al, 2018).
Bargaining power of suppliers
 Low Negotiating Power of Suppliers.
 Various numbers of suppliers in the industry who deliver the services to companies. The
organization can easily switch with the other suppliers as there are number of suppliers in
the market. Switching cost is low due to number of suppliers providing the similar
services to the companies (Meyer, Neck, and Meeks, 2017).
Threat of substitute
 Moderate level of threat of substitute

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 The products provided by Unilever have lower level of substitute such as beauty product
can substitute by natural ingredients but household instruments cannot substitute with
other products.
 It is beneficial for the existing companies as the new entrance cannot enter the market
with the new substitute products.
Internal Analysis
Core Competencies
 Brand Strategy of Unilever helps it to beat the competitors (Lasserre, 2017).
 It invests the€34 billion to deliver the quality of product/services in order to enhance its
capability to provide the services to large number of consumers with the excellent quality
(Unilever, 2018b).
 Unilever set the prices of products or services and becomes the leader in the market. Price
strategy is also a core competence of the company.
 Manufacturing base, Zero- based budgeting and overhead, and leveraging scale are the
strategies that are used by Unilever to maintain the inflow or outflow cash flow
(Unilever, 2018c).
 Unilever invests in digital marketing to increase the brand value in the market (Marketing
Dawn, 2015).
 Employees of Unilever have developing talent, attracting talent, and values-led and
empowered.
 Distribution strategy of Unilever is also helps to cover around 400 different places in the
world (Unilever, 2018c).

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Value Chain
Primary Activities
Inbound Logistics
It has been seen that the Unilever works with the industry of agriculture to collect the raw
material for operations. Unilever has the strong relation with its suppliers that helps it to operate
smoothly in the market. The 100% of procurement spend from suppliers to meet the compulsory
requirements of the responsible sourcing policy (Unilever, 2018b). The manufacturing site of the
organization gathered the raw material as per their requirement. The company operates the
business in various fields that is why; it has to deal with the suppliers of different sectors
(Wheelen, Hunger, Hoffman, and Bamford, 2017).
Operations
It has been found that the organization uses the raw material to design of goods and services.
Unilever works with the 10000 suppliers and also spent €34 billion on goods and services to
supply quality of products to consumers (Unilever, 2018b).
Outbound Logistics
Unilever has 400 coordinated distribution centers in global market to deliver the services at 26
million retail stores (Unilever, 2018b). The services are distributed in 190 countries with the help
of strong supply chain network. The company shipped their product to its distributors (Unilever,
2018b).
Marketing and sales

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Digital technology changes the way of promoting the services of Unilever in the market.
Machines learning and voice technologies are being used by Unilever to provide immersive and
personalized experiences to their customer’s platforms such as Recipedia and Cleanipedia
websites (Unilever, 2018b).
Services
The organization gathered the complaints from consumers and distributors to serve the quality of
services (Noe, Hollenbeck, Gerhart, and Wright, 2017).
Secondary Activities
Procurement
Unilever serves the services in different locations due to which it shipped the product. The
company stores its product in warehouses (Unilever, 2018c).
Human resource management
Human Resource is one of the main assets of the organization that helps to attain the goals. There
are 155000 numbers of employees who supports the organization to perform well in the market
(Unilever, 2018b).
Technological development
Unilever introduces the new tools to enhance efficiency, speed, and quality of our innovation
processes. Technology is moving the channel landscape and their relationship with the traditional
consumers (Unilever, 2018b).
Infrastructure

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The work is divided among the departments as per the work such as financing, and production
department. Financing department is responsible to handle cash and production department is
responsible to handle all producing or packaging activities (Unilever, 2018c).
VRIN Analysis
Resources of Unilever are defined in this table:
Resources Valuable Rare Inimitable Non-
substitute
Competitive
Advantage
Distribution
services
Yes Yes Yes No Strong
Advantage
Digital
marketing
Yes Yes Yes No Temporary
Advantage
Quality of
Product
Yes Yes No No Strong
Advantage
Brand image Yes Yes No No Strong
Advantage
Cash
controlling
strategies
Yes No Yes Yes Temporary
Advantage
Pricing
Strategies
Yes No Yes Yes Temporary
Advantage
High talented
employees
Yes Yes No No Strong
Advantage

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Recommendations
As discussed above, it is observed that the organization faces the threat of competitors in the
market. It is suggested that the organization has to produce the unique product by investing into
the new ideas in order to deliver the unique services to consumers (Hill, 2017). It helps to attract
the consumers towards it or to attain the competitive advantage.
The above analyses represent that Unilever has high threat of substitute products such as beauty
products. It is also recommended that the company has to provide the organic product so that the
threat of substitute is reduces (Erasmus, Strydom, and Rudansky-Kloppers, 2016).
It is observed that the consumers of UK prefers the loyal shopping instead of common due to
which it is suggested that Unilever has to provides the high quality of services to consumers. It
has to divide the products in different categories so that it is able to provide to services to all
class of consumers such as less amount for middle class, high amount for upper class.
Distinctiveness
According to above discussion, it has been found that the consumer’s service industry of UK is
attractive. The company has high opportunity to operate the business in the consumer industry
just because of its core competences. Brand strategy and techniques of controlling cash are the
capabilities of the company that helps to operate the business in long term and also helps to gain
the competitive advantages. But behavior of consumers towards the natural products affects the
business and demand of customers (Unilever, 2018c).
There are many competitors of Unilever in the market that provides the common services to
consumers in order to beat the company. It has been found that P&G has high brand image in the
market even more than Unilever. In terms of revenue, P&G earned high revenue as compare to

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Unilever such as $67.684billion and Unilever earned €50.982 billion in 2018 (Unilever, 2018a).
It depicts that Unilever operates the business and recognized at the highest rank but still it is
lower than its P&G Company in revenue and brand image. The company has the capability to
enhance the brand image and operates for long time in the market but as compare to P&G, it has
to work on its skills and capabilities to grab the market share or beat the competitors.
Conclusion
At the end, it has been concluded that Unilever is growing with the continuous rate but it has to
more focus on its services. It has been examined that there are some external forces that affects
the growth of the company. The company faces the difficulties related to political factor while
expanding the business. As per the internal analysis, it has been seen that the company has the
capability to grasp the higher market share in the market. Organization has higher level of threat
of competitors due to which they face the challenges. It has been recommended that the
organization has to implement the porter’s generic strategies to increase the competitive
advantage.

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Appendix

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