Unilever Analysis: General and Industry Environmental Analysis

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UNILEVER ANALYSIS
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Company profile
Unilever is a British-Dutch company with its headquarters in London and Rotterdam. The
company was founded in 1929 through a merger of Margarine Unie and Lever Brothers in what
The Economist described as “one of the biggest industrial amalgamations in European history
(Unilever, n.d). The company deals with the manufacture and sell of consumer products. It
currently trades in more than 400 brands in around 190 countries. The company also employs
more than 160 thousand employees in different capacities.
General Environmental Analysis
Political and Legal environment
The general environmental of a company directly and indirectly affect its operations and
performance. The general environment consist of political, legal, economic, social and
environmental factors that affect the organization (Prajogo, 2016). PESTEL analysis offers an
extensive coverage of these factors. Unilever is a multinational company and hence is affected
by political, economic, social, technological, environmental, and legal factors in different
countries. The presence of a favorable political and legal climate is of interest to Unilever. With
Europe and America being its main markets, Unilever is affected by regulations of the European
commission and the U.S Food and Drug Administration. The company is also subject to local
and regional laws together (within Europe) and other regulations set by countries in which
Unilever operates including India, China, and South Africa. Political stability is generally good
for business. Political instability in countries such as Pakistan coupled with poor economic
conditions and tax regulations negatively affects business.
The Economic Environment

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Economic factors include levels of inflation, interest rates, exchange rates, and cost of
production. Increased inflation might lead to a decline in the purchasing power of customers and
hence leading to a reduction in profitability (Nelson, 2015). Lower interest rates favors
investments by enabling the firm to increase its debt capital so as to expand its operations.
Exchange rates also significantly affect the Unilever business since it operates in different
countries. A strong Euro is good for Unilever since the company can purchase raw materials at
favorable prices. The cost of production is a function of cost of labor and raw materials. Unilever
faces tough competition from Procter & Gamble, Nestle among other companies. This puts
pressure on the firm to reduce production cost and enhance quality of its offerings. Consistent
with the law of demand, consumers tend to purchase more of a product at lower prices and less at
higher prices. Unilever should therefore put in place strategies that assure competitiveness of its
products against substitutes. Unilever has diversified its customer base allowing it to cash from
other customer segments in case demand in other declines. The Free Trade agreements in Europe
exposes Unilever to competitors in addition to opening other markets for the firm’s products.
Technology and Innovation
Unilever uses technology and innovation to create competitive advantage and enhance its
global power. Since its inception, Unilever has incorporated new technologies in its business
strategy to boost productivity and enhance quality of its products. Unilever invests heavily in
research and development initiatives aimed at enhancing innovation and competitiveness. It
invests more than 1 Billion Euros annually in Research and Development. The company has
established six R&D centers in different regions consisting of around 6,000 scientists, engineers,
technicians, and chefs (Unilever, n.d). The team is tasked with the role of investing new products
and improving already existing products with the aim of satisfying customers. The research