Global Business Environment: Unilever Plc Case Study

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Global Business Environment
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Table of Contents
Introduction......................................................................................................................................3
Task 1...............................................................................................................................................4
Task 2...............................................................................................................................................9
Conclusion.....................................................................................................................................13
Bibliography..................................................................................................................................14
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Introduction
In the present scenario, globalisation has resulted in the emergence of an economic system
network at an international context. It has successfully bridged the gap between different nations
in terms of socialisation, business and commerce; thereby, making it a global village. In this unit,
the case scenario of Unilever Plc will be taken under contemplation. It is known to be one of the
leading organisations that are selling its products in near about 190 nations. This unit will further
shed light on different drivers and concepts of globalisation along with its strategic complexities.
The global environment of business together with its challenges and opportunities will also be
evaluated. In addition to this, the various ways in which globalisation affects organisational
culture, structure and function will be discussed in details. It will further apply different suitable
models and theories in order to identify the influence of globalisation upon a business and its
operations.
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Task 1
1. An introduction to the concept of globalization
As per the discussions of Eriksen (2014), globalisation is the process of transference and
interaction flanked by different pre-existing units. In other words, the conception of globalisation
can be defined as the procedure of transformation, which takes place at every level of systems.
This term has gained immense recognition the present times and is used in order to depict
economic, social as well as political interrelation and interaction across cultural and political
boundaries. Furthermore, Dholakia and Atik (2016) stated that, globalisation can be referred as
the process of spreading the technology, services, products, jobs and information from one
country to another. In context to economics, globalisation depicts the interdependence of
countries that is further fostered with the help of free trade. It has further facilitated in improving
the living standards in the developing nations by offering job opportunities, better access to
services and products, modernisation and so forth. As opined by Eriksen (2014), the concept of
globalization is opportunistic as well as idealistic; for that reason, has encouraged growth of the
international free market; thereby, benefiting the small as well as large scale organizations.
2. A critical analysis of the key drivers of globalization and their impact on global business
environment in terms of benefits and challenges
Globalisation being one of the most trending areas of concern, it is driven by a number of
factors. Some of the most significant drivers of globalisation are foreign investments,
international economic integration, international business and trade, and most importantly
digital revolution. Other factors that drive globalisation are increased market competition,
changing working environment, increased cost, and so forth. In accordance to the findings of
Wto.org. (2019), foreign direct investment or FDI has become one of the initial drivers of
globalisation. The advent of the global market has greatly interconnected the different nations
from the far corners of the world, in this way, promoting better awareness of opportunities for
business. Owing to the invention of better technologies, profit opportunities and potential risks
are easily accessible. This has further resulted in increased number of foreign direct investments;
by this means, improving the economic system of various nations. Due to this, the majority of
the business organisations make efforts to remain competitive with its rivals operating in
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different parts of the world, in so doing, expanding their horizon of competition past their home
nations and local areas.
As per the discussions of Clark et al. (2018), another noteworthy driver of globalisation is
international economic integration. Economic integration can be referred to as the arrangement
of various regions, which often comprises of the elimination or reduction of different trade
barriers. It further deals with the arrangement or coordination of fiscal and monetary policies
between different nations. It further aims at reducing expense for both the producers and the
consumers; thereby, increasing trade between different nations. The key advantage of this
driver of globalisation is that it provides employment, political cooperation along with other
trade benefits. Most importantly, international economic integration results in reduced trade
costs by offering an extensive assortment of services and products. On contrary, it also imposes
certain drawbacks upon the nations, such as, natural sovereignty erosion and trade diversion.
In the words of Surugiu and Surugiu (2015), with the improvement of technology and
communication, businesses have significantly begun to expand its business across borders.
International trade and business has further resulted in being one of the major drivers of
globalisation. The advanced technology and internet has made it effortless for every type of
businesses to gain advantages from international trade. It holds a significant share in the gross
domestic product in various countries. A number of business organisations from different nations
are in search of new opportunities apart from their home country. Owing to international trade, a
number of significant industries of the economies can be kindled, such as, ICT and transportation
sectors. It further offers huge prospects for profits and growth along with reducing the
dependency upon the known markets. It further facilitates business expansion. The increased
rate of international trade and business over the past few years has effectively driven the entire
process of globalisation; thereby, providing the businesses as well as the consumers with an
assorted range of services and products to choose from.
Digital technology is one of the most fundamental forces that drive business globalisation. It has
revolutionised the global financial system; in this manner, being a crucial competitive strategy
for every business organisation. Digital technology has facilitated the overcoming the most
important and foremost barriers of globalisation, such as, need of common standards of ethics,
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cost of transportation, delay in exchange of information; thereby, transforming the market. It has
further prompted innovation and growth in the global market.
3. An explanation and a critical analysis on the complexity of strategic challenges faced by
global business organisations supported by specific examples. Your answer should include
risk and diversification strategies and the supply chain flow.
As per the discussions of Faulconbridge and Muzio (2016), globalisation has resulted in
endowing the business organisations with huge opportunities for growth and profits. However,
with a number of perquisites, globalisation has also introduced a number of complexities and
challenges that the global business needs to deal with in order to sustain in the extreme market
conditions. Some of the key complexities experienced by the global business organisations are
political risk, complexity in supply chain, labour exploitation risks, and most importantly,
foreign regulations and laws. Along with maintaining the company structure, it is necessary for
every business organisation to comprehend the local regulations and laws that governs its target
market. From trading laws to tax implications’, navigating the legal requirements is highly
crucial for every successful global business. For instance, Unilever Plc needs to understand the
trade laws and policies of the countries wherein it operates to ensure smooth functioning of its
operations.
Different nations have different laws and policies and it is necessary for every business
organisation to plan their operations accordingly to ensure better growth and success. For
instance, the European nations demand a minimum maternity leave of 14 weeks for the
employees; whereas, there are no such rules in the USA. Therefore, Unilever Plc needs to
accordingly design its business policies for different countries; thereby, adhering to its laws.
Another apparent risk for global business is political instability and uncertainty. Different
countries and its emerging markets, which provide considerable opportunities for growth and
expansion, may perhaps pose significant challenges upon the businesses as well (Faulconbridge
and Muzio, 2016). Therefore, prior to expanding its business to unknown or newly emerging
market, organisations such as Unilever Plc must carry out effective risk assessment of the
political and economic landscape of concerned countries.
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When sourcing services and products across borders, managing the supply chain or suppliers
can also prove to be extremely challenging and risky. Unfortunately, the complexity and length
of supply chain enhances the instance of functioning with different suppliers who practice illegal
and unethical activities. This increases the possibility of worker exploitation and forced labour,
which may further have an effect upon the brand image and reputation of the international
companies.
4. A critical evaluation of global business environment, including opportunities and
challenges in the perspective of Unilever Plc
With the intension of evaluating the business environment of Unilever Plc, the following PEST
analysis has been carried out. This will help in comprehending the impact of different factors
upon the business organisation on a global scale.
Factors Analysis
Political The key political factors of a country that may have an effect upon the
business operations of Unilever Plc are different governmental
policies, foreign trade policies, trade restrictions, and so forth. For
instance, in context to UK, the country offers feasible foreign trade
policies; thereby, providing the company with huge opportunities of
cross border business activities (Lydgate et al., 2016). Additionally,
US impose certain import tariffs upon the business operating within
its national premises; in that way, increasing the cost of operations of
the company.
Economic The economic factors that may affect the operations and activities of
the business are inflation rate, disposable income of consumers, and
so forth. As for the fact, due to the phenomenon of Brexit, the income
rate of the country may considerably be affected, which may further
affect the intensity of disposable income of the population of the
country (Jensen and Snaith, 2016). This may impose major
implications upon the operations and functions of Unilever Plc, as the
buying power of the consumers will reduce. On contrary, the
disposable income of US is witnessed to be an average of 5302.53
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USD Billion, which is reasonably high in comparison to other
countries; thereby, being a advantage for the business
(Tradingeconomics.com., 2019).
Social The social factors of a country also impose major implications on the
business activities of a company. Unilever Plc must therefore be
apprehensive of different social factors such as, safety concerns,
health consciousnesses, type of population, lifestyle and so forth;
thereby, ensuring better business operations. For instance, the people
of UK are highly apprehensive of their health and safety, therefore, it
is necessary for the business organisation to ensure offering its
consumers with healthy products. This will facilitate in attracting
more number of customers. On the other hand, the population of
Asian countries impose a number of cultural barriers that the
company must abide by for functioning effectively (Hamilton and
Webster, 2018).
Technological Technology, being one of the biggest drivers of globalisation may
have an effect on the functions of the business. The United Kingdom
being highly advanced in terms of technology provides the business
organisation with numerous opportunities of growth and innovation;
whereas, the developing countries that lack in technological
advancements may restrict the operations of the company.
Table 1: PEST analysis of Unilever Plc in global context
(Source: Created by the Learner)
Hence, from the above analysis it can be stated that, Unilever Plc has huge opportunities of
expansion and growth in the international markets owing to globalisation. On the other hand, it
may also face certain complexities or challenges for which it needs to come up with effective
diversification strategies and methods; in this way, being able to overcome the potential hurdles
and ensuring effective and smooth functioning of business operations.
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Task 2
1. An evaluation of how globalization influences corporate governance and leadership,
structure, culture functions and ethics.
Organisations in the present times are surviving in a highly complex environment, which is
directly influenced by globalisation. In order to excel in such extreme conditions, it is necessary
for Unilever Plc to cope with the every changing global market conditions. Setting up of suitable
and effective organisational culture has therefore become necessary for the company. The
organisational culture of the business must efficiently suit the market wherein it operates as well
as cater to the needs of the business (Corporategovernanceoup.wordpress.com., 2019).
Furthermore, the international exchange of services and products has significantly contributed
towards the GDP. As a result, the interaction between different nations have increased; thereby,
imposing huge responsibilities upon the global leaders to effectively choose their employees and
how they regulate the business activities. Globalisation has further affected leadership of
business owners by inducing the global leaders to develop global mindset and enhance their
leadership styles (Perez, 2017). Unilever Plc therefore needs to improve upon its leadership skills
for managing a diverse workforce with different culture and background.
However, with globalisation, the business organisations may also encounter various ethical
challenges. Ethics is considered an important factor in every business. It is necessary for
Unilever Plc to ensure ethical practices being carried out in its organisation; thereby, being able
to gain better market recognition as well as retain workforce (Gurnani, 2015). Globalisation has
resulted in integration of economies and culture through trade, transportation and
communication; thus, making it necessary for the business organisation to ensure ethical
practices and maintaining better cross-border relations.
2. Using McKinsey’s 7S model and Hofstede’s Dimensions of Culture, critically evaluate
how global market influences organisational structure and culture of Unilever Plc.
In order to analyse the impact of the global market upon the organisational structure of Unilever
Plc, the McKinsey’s 7S model has been applied.
Factors Analysis
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Style In context to Unilever Plc, corporate sustainability and CSR
activities is not much distinguishable from their business
strategies. The company employs effective policies and
approaches to highlight its constructive social impact of its
products (unilever.com., 2019).
Shared Values The company carries out its operations with integrity, openness
and honesty. It further respects human rights as well as interests
of their employees. They further respect the lawful interests for
their key stakeholders.
Systems The company makes use of a known cloud application provider,
“Workday” for its human resource and financial activities along
with other analytical application; thereby, standardising its
business processes in global context as well as streamlining its
operations and minimising complexities.
Structure The company adheres to a “four tier hierarchical structure”.
This helps the business in funnelling information within the
company; thus, allowing the senior management to make
necessary business decisions (unilever.com., 2019).
Staff The company owns a diverse workforce with employees coming
from different backgrounds and culture
Skills The company provides effective training and development
programs to its workforce; thus, improving their skills and
potency.
Strategy The company strategises to provide its customers with products
through a sustainable process; thereby, ensuring sustainable
living standards.
Table 2: McKinsey’s 7S Model
(Source: Created by the Learner)
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The Hofstede’s Dimensions of Culture has further emphasised upon the fact that, there is a
significant dissimilarity between the people of different nations initially and the organisations
later. The theory further sheds light upon the impact of cultural difference and values upon the
business operations and functions of a workplace. The six dimensions of this theory are Power
Distance, Uncertainty Avoidance, Collectivism and Individuality, Masculinity vs. Femininity,
long-term vs. Short-term Orientation and Indulgence vs. Restrain (Beugelsdijk et al., 2017). In
context to Unilever Plc, it is necessary for the business to understand the culture that is majorly
followed by the countries it is operating in. In the view of the fact that, the business organisation
adheres to the collectivism dimension when operating in the global market, it tends to behave as
per the social norms of the different nations; thereby, maintaining social harmony. The company
further ensures to share resources and make business decisions considering collective interest.
3. Critical evaluation of global market entry strategies, barriers and recommendation to
overcome them
In the present scenario, some of the most common and successful market entry strategies that
Unilever Plc may consider are joint venture, franchise, direct exporting and so forth. With the
help of direct exporting, the company will avail the benefits of selling its products across a wider
market through different distributors and agents. However, it may also impose certain challenges
upon the operations of the company. For instance, it increases the cost of the business, as it sells
its products through third party agents. In order to overcome this, the company need to curtail its
expenses in other operations such as production and marketing; thereby, managing its costs.
Additionally, joint venture is another significant market entry strategy that the company can
adopt to enter new markets (Goyat and Nain, 2016). This will help the company to join its forces
with other potential companies having similar goals; thus, ensuring better profits and growth.
However, a major challenge that the company may experience owing to this market entry
strategy is that it may restrict the flexibility of work. Furthermore, as both the companies
involved in the joint venture need to focus upon the new venture; thus, hampering their own
business. In order to overcome this situation, Unileaver Plc, if entering a new market through
joint venture must allocate more human resource for the new venture; thereby, being able to
focus on both the ventures.
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4. Critique strategies that Unilever Plc can adopt in a global business environment, making
valid and justified recommendations of how it can adapt it to its organisational structure
and decision-making processes
Unilever Plc has adopted a number of significant strategies to survive the global business
environment. The company is quite apt at responding to the constant change in the environment.
The company adheres to sustainable approaches; thereby, ensuring strong market positioning and
brand image. However, the company can still make a number of changes in its operations and
functions in order to ensure better decision making and functioning. The company can adopt a
divisional organisational structure. As the company adheres to umbrella branding strategy, this
organisational structure will help the company managing its different product lines effectively
and earning equal profits from every product line. With globalisation, cross-border activities
have grown to a large extent. The company can therefore, outsource its production operations to
the regions with lower labour cost. This will further facilitate the company in reducing its
expenses; in so doing, the company will be able to expand its business largely with the help of
direct exporting. As a result, the company will be able to reach out to a larger market; thereby,
improving its customer base.
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