Strategic Analysis Of Unilever: PESTEL, Porter's Five Forces, VRINE Essay.

Environmental Factor

Events, trends and possible developments for the foreseeable future

Potential significance for the focal organization

Political /geopolitical and regulatory

·         Health and safety laws

·         Employment laws

·         Consumer Protection Laws

·         Trade Agreements

The political landscape describes how governments affect the external environment of a company. To begin with, the majority of countries are politically stable, allowing Unilver to expand in the sector in which it runs. Secondly, a free trade agreement has been developed, allowing Unilever to reach a wider audience (Tien 2019). Thirdly, the EU has had political problems that have almost always resulted in political instability.

Economic (national and international)

·         Employment Rates

·         Foreign Exchange Rates

·         Inflation Rate

·         Corporate and Sales Tax

·         Interest Rates

·         Wages

The state of the world’s economies has a significant impact on Unilever’s economic performance, just as it does on any other company’s performance. Wage increases in rapidly emerging nations, economic stability in emerging nations, and huge growth in emerging nations are just a few of the macroeconomic factors influencing Unilever’s consumer performance. Wage increases provide the company with an excellent opportunity because increased disposable income may lead to increased sales (Murphy, P.E. and Murphy 2018).

Social/cultural phenomena

·         Health-conscious consumers

·         Environmentally friendly products

Unilever is influenced by three sociocultural factors, which provide opportunities for the consumer goods company. These include an increase in general public health consciousness. Unilever has a sizable market because health-conscious consumers buy more products that promote sanitation/health (Chiedu 2017). Because it allows for environmentally friendly products, Unilever is an environmentally conscious company. Finally, the company’s sales have increased as female employee salaries around the world have raised.

Technological developments

·         Automation

·         Research and Development

Unilever relies on readily available technologies to support its consumer goods business. Three technological factors influence Unilever’s operations and eventual profitability. To begin with, business automation is on the rise all over the world. Business automation is both an opportunity to improve. Second, spending on research and development has increased (Mukiira, Musau, and Munya, 2017). Third, transportation costs have decreased, resulting in lower operational costs.

Environmental (ecological) issues

·         Environmentalism

Three ecological factors influence Unilever: the business is raising its hard work to remain in the market, environmental programmes are becoming more complicated, and business environmentalism interest is growing (Ullah 2021). Unilever can attract customers who care about the environment by embracing business environmentalism and implementing environmental programmes. The three factors mentioned above will benefit Unilever because they will eventually attract more customers.

Legal issues

·         Environmental issues

·         Consumer protection legislation

·         Patent laws

Three legal issues must be resolved by Unilever. The first point to mention is that environmental regulations are becoming more complex. Second, internationally recognized patent laws have been strengthened. Finally, consumer protection legislation has been preserved. The factors listed are opportunities for Unilever because all of the companies have been judged to be socially responsible (Ullah 2021).

Sectors

Porter’s Five Forces

Industry

High / Low

Reason

Bargaining Power of Buyers (High)

1.      Smaller individuals buyers

2.      Superior quality of information

3.      Switching Cost

1.      Low

2.      High

3.       High

Customers could swiftly switch from Unilever’s products to other companies as the switching costs are low. This external factor adds to the high bargaining position of the buyer. Furthermore, customers now have a way into superior quality details regarding consumer goods, making it even easier for them to choose whether to switch from Unilever to another provider. On the other hand, the high information quality and low switching costs overshadow this third external factor in the industry environment (Birahim 2020).

Bargaining Power of  Suppliers (Medium)

1.      Overall Supply

2.      Number of Suppliers

3.      Size of individuals suppliers

1.      Medium

2.      Medium

3.      Medium

Unilever has large suppliers such as oil companies and foreign paper, but the average supplier is few. The external factor has a moderately strong impact on the environment of the FMCG sector (Birahim 2020). Moreover, due to the moderate number of suppliers, they can wield considerable but restricted pressure over Unilever. In the same way, the moderate level of total supply aids suppliers’ significant but limited influence. Other companies in the industry are also being impacted in the same way.

Threat of Substitutes (low)

1.      Substitute performance-to-price ratio

2.      Substitute Availability

3.      Switching cost

1.      Low

2.      Low

3.      Strong

Due to the low switching costs, customers can easily utilize replacements for products of Unilever. However, due to a scarcity of substitutes, the total result of the substitution is weakened (Henry 2021). When compared to readily available consumer goods, most substitutes provide deprived performance at a minimal or insignificant price difference. The situation makes the products of Unilever more alluring than substitutes, reducing the risk of substitution more.

Threat of New Entrants (High)

1.   Switching cost

2.   Brand Equity

3.   Economics of scale

4.   Entry barriers

1.       Low

2.       High

3.       High

4.       Low

Because switching costs are low, new entrants can put significant pressure on Unilever. Developing better brands, such as Unilever, on the other hand, is an expensive endeavour (Grant 2021). This external factor mitigates the threat faced by new company competitors. Unilever also profits from large economies of scale that allows for high organizational efficiencies and competitive pricing that are typically lacking in new entrants. Therefore, the company remains strong even in the face of new entrants.

Rivalry among Competitors (High)

1.      Exit Barriers

2.      Market Size

3.      Number of Competitors

1.   High

2.   High

3.   High

The consumer goods industry is brimming with businesses. This external factor has a substantial impact on Unilever (Lakada, Lapian. and Tumiwa 2017). Furthermore, these companies are aggressive in general, raising the stakes of the game. Unilever is also facing stiff competition as a result of its low switching costs.

No

Resource / capabilities

Valuable

Rare

Inimitable and Non- substitutable

Exploitable

 Competitive Advantage

1

Financial Resources

X

Sustained competitive advantage

It is because it aids in investing in possible potentials. It also assists in minimizing threats.

Only a few businesses in the sector have substantial financial resources (Siddique and Sultana 2018).

Imitating Unilever’s financial resources is costly. Long-term profits enabled the company to acquire these resources.

It is deployed deliberately to invest in suitable areas, capitalize on opportunities, and fight threats.

2

Employees

A sizable portion of the employees is immensely skilled, resulting in increased organizational productivity. Employees are also devoted, and the company has a high retention rate (Shaikat, 2020)

The employees are highly skilled and trained, and that’s not the case with other companies’ employees. Better pay and a more pleasant working environment keep these employees from leaving for other companies.

Unilever employees are also cheap to imitate. These companies can also hire Unilever employees by providing advancement opportunities, benefits, work environments, better pay packages, and among other things. As a result, Unilever employees are transformed into a capability which creates a competitive edge in the short run. Competitors might purchase these in the future.

Temporary Competitive Advantage

3

Patents

X

X

Unused Competitive Advantage.

These enable the company to sell its products without interference from rivals. Unilever’s revenue rises as a result. Unilever earns licensing revenue when these patents are licensed to other producers.

The patents are complicated to gain and are not detained by rivals. It allows Unilever to utilize them without fear of rivalry.

Unilever’s patents are really complicated to imitate. It is because of the fact that it is against the law to imitate a patented creation. Similar resources must be created, and obtaining a patent for them is a time-consuming and expensive process.

It implies that Unilever is not completely utilizing its patents (Lieu et al., 2019).

4

Distribution Network

X

Sustained competitive Advantage

It allows it to reach a growing number of customers. Unilever will benefit from increased revenue as a result. Since the products are easily accessible, promotional activities are more likely to result in sales.

Competitors will also find replicating Unilever’s distribution network prohibitively expensive (P?odowska 2021). Unilever has made small steps forward in this area over the years.

This network is used by Unilever to connect with customers by ensuring that products are available at all of its locations.