The analysis of the environment in which the business operates is very important. It is very crucial for the business to ensure survival, differentiation and competitive advantage. There are three levels in which the environment of the business can be broken which are as follows:
The Macro environment
The model that is most commonly used to analyze the macro environment of the business is called PESTLE analysis. Using this analysis the political, economic, social, technological, legal and environmental factors affecting the business are analyzed.
The political factors consist of the law and order condition and the political stability in the country where the business operates. The economic influences include factors such as the monetary and fiscal policy of the country. Similarly, it also include the per capita income of the people and the overall economic condition of the country where the business operates. The social factors also vary from one country to other and might impact the business it include the social customs and habits of the people which might impact their buying decision.
The use of the technology might also impact the operations of the business. Legal factors include the general laws of the country which might also impact the business. The environmental influences can also impact the operations of the business.
The micro environment
The micro environment of the company can be easily understood with the help of the Porter’s five forces analysis. This model can be used in order to properly understand the competitive position of the company with respect to its market and industry.
This model consist of bargaining power of buyers, bargaining power of suppliers, threat of new entrants, threat of substitute products and rivalry among the existing competitors.
The internal environment
The best tool which can be used to in order to understand the internal environment of the company is SWOT analysis. This tool defines the strengths, weaknesses, threats and opportunities of the business. The strengths and weaknesses are internal to the business whereas the opportunities and threats are considered to be external to the business. All the above discussed techniques which can be used to analysis of the business are very useful and suitable. The PESLE analysis presents the complete picture of the macro environment of the business. Similarly, the Porter’s five forces model is extensively used for the analysis of the micro environment of the business. Furthermore, the SWOT analysis is the best tool with the help of which the internal environment of the business can be ascertained in an efficient way.
An analysis of micro and macro environment of business using techniques discussed above. The analysis of the micro and macro environment of Unilever can be done in an effective way with the help of PESTLE analysis and the Porter’s five forces analysis.
Political and Legal Analysis
Unilever has to face the regional, local and global laws, rules and regulations. Some diverse areas such as product claims, product safety, copyright, trademarks, patens, the environment, corporate governance, employment and taxes are covered by these rules and regulations. Unilever may face legal action in the country where it operates if does not comply the laws and regulations of that country. Furthermore, the reputation of Unilever will also be affected if it breaches any laws. The change in taxes or the government will also affect the business of Unilever.
If the economy of a country, a region or the globe at large is affected it will also affect Unilever. Most of the brands of Unilever are reliant upon the demand of the customers and decline in the income of the customers will also affect the sales of Unilever. Due to the global financial crisis that took place in 2008, the operations of Unilever were also affected. In addition, the business of Unilever is also reliant upon the monetary and fiscal policy of the country where it operates.
Societal and Environmental Analysis
Over the years, Unilever has established a strong corporate reputation by focusing on the environmental and corporate issues which included promoting sustainable development and effectively utilizing the renewable resources of energy. It also very much concerned about the safety and health of its employees due to which the accident rates reduced significantly. Unilever is engaged with a large number of social welfare projects like safe drinking water and world food program. Furthermore, it also uses such materials and packaging stuff which is environmentally friendly. Moreover, the image of Unilever is established as a socially responsible and environmental friendly company.
The importance of technology for any business cannot be underscored. Similarly, Unilever has also spent a lot of money on improving the quality of products and its brand image. It is particularly interested in the development of its e-business. Furthermore, high level of automation is very critical for Unilever as it will differentiate it from the rest of its competitors.
Bargaining Power of Buyers
The bargaining power of the buyers is low for Unilever as it has trillions of buyers around the world. They cannot influence Unilever to change the prices of its products; however, the customers might have choice on the additional offer.
Bargaining Power of the Suppliers
Unilever has suppliers in almost all the countries where it operates. Due to this, the power of the suppliers is reduced significantly. Furthermore, Unilever has an agreement with its suppliers in which they are required to provide the products at a certain period for a fixed rate. This policy helps Unilever greatly in keeping a check on the customers. Thus, the bargaining power of the suppliers for Unilever is low.
Threat of new entrants
The threat of new entrants is low for Unilever as it is a well established company. The new entrants will require lot of capital and resources in order to enter into this segment. Thus, the threat of new entrants is very low for Unilever. Rivalry among the existing competitors:
The rivalry among the existing competitors is very high for Unilever. Unilever has to face a number of competitors which are very strong in reality. The companies like P&G and Nestle pose serious threat to Unilever in most of the developed and underdeveloped countries.
Threat of Substitute Products
Unilever is under constant threat of alternative products which are offered by the local producers as well as its rivals. The competitors of Unilever are spending large sum of money on new product development and R&D. Thus, the threat of the substitute products is high for Unilever.
How the international business environment impact the organization. Unilever is highly impacted by the international business environment. If any issue arises in any region or country the overall performance will be impacted. The political, economic, social, technological, environmental and legal factors will highly impact the performance of the business. Furthermore, if any issue takes place at the global level it will also impact the performance of Unilever. For instance, due to financial crisis of 2008, the overall performance of Unilever was impacted. Similarly, the adverse law and order situation and political instability in some of the countries will also affect the performance of Unilever. Due to the Arab Spring, the law and order situation in many of the countries was worst which also impacted the sales of Unilever. Furthermore, Unilever will also faces tough competition in many of the industrially advanced countries.
The social values in different countries are different as what might be considered as acceptable in USA might not be liked in India. Due to this, instead of following the same set of strategies in all the countries Unilever follows different strategies in different countries according to the local conditions. The success of the business largely depends on the international business environment in which it operates. The international business environment for Unilever can be studied in an effective way by analyzing its operations in all the countries where it operates. Similarly, the macro and micro environment of Unilever can also reflect the true position of its international business environment. The trillions of customers in almost 190 countries and the excellent brands that Unilever offers reveal that the international business environment is favorable for Unilever. An assessment of the benefits, opportunities and challenges globalization have on the business There are many benefits, opportunities and challenges of globalization for the business.
One of the important benefits of globalization for the business is that it can effectively and efficiently communicate with its partners. Similarly, efficient communication can also be done with the suppliers and customers due to globalization. Furthermore, due to globalization the business manages their supplies, inventories and distribution network in an effective way. In addition, the local businesses can sell their products in the international markets with relative ease due to globalization. Due to globalization, Unilever can sell its brands with same ease in London and Tokyo. The business can also reduce the cost of labor and other manufacturing processes by outsourcing some of their functions. There are even many businesses which have outsourced all of their functions and only maintain a head office. Unilever has also benefitted from this strategy and it has suppliers in the countries where it operates due to which it costs are reduced significantly.
Globalization also offers many opportunities
The extent of globalization on an organization
Structure of different organizations operating in international markets