The impact of external and internal factors on Unilever
The impact of external and internal factors on Unilever
These influences are very linked with shaping the future of an organisation. The external influences of a company are considered as factors that the company are not in control. This may include things like inflation and environmental factors like political situations in the place of business. The internal factors are on the other hand under the control of the company; these may include things like marketing customer service and the production levels among others. These internal factors most of times are expected to have a rating of above seventy percent. (External influences, 2011)
These factors have been handled by the slept model which has enabled the business to formulate long term plans. They include social, legal, economic, political and technological factors.
- Social factors; these factors have been linked with variation in behaviour of the consumers. As the consumers change their consumption behaviour so is the business processes. The time and speed at which the consumers change their behaviour is entirely out of Unilever control. The company has to generate products with respect to the customer needs for example the people today like to have sizeable snack to bite while relaxing or walking. There is also dislike of food stuffs that are high cholesterol content and other fattening foods. With the current age of online shopping, consumer communications through social networks and you tube, the ethnic and racial lines are rendered useless. These sites can destroy a business instantly or take it the peak.(Factors affecting international business, 2011)
- Legal factors these are the rules and standards set by the government of the day. The rules change from time to time regarding the operation procedures, minimum standards of products, and the wages of the employees among other things. Despite the difficult in constant changes Unilever has abided by all the regulations and ensured quality and affordable products are still being produced. The company also has all the necessary documentations showing its operations and flow of cash. The auditors with the help of accounting systems maintain very accurate and reliable accounting information for the government inspectors. The legislation to protect both the consumers and the employees of the company is well observed. The employees are insured, provided with proper working gear, free from any kind of harassment and the company is equal opportunity employer. The company also observes the trade union rights legislation and also the fair competition legislation. The consumers are protected by the company by ensuring high standards of products which have been tested and proofed by regulatory body, either from the government or the European Union. The company is compliant with the pension fund to the retirees and has been accredited as one of the most compliant companies in the United Kingdom. (External influences, 2011)
- Economic factors; these include the competition presented by the market. Rivals companies producing same products tend to use all means possible to ensure their products are the first to be bought. As the completion stiffens the company has also laid down its own comprehensive advertising. This has been done through the internet, local media, bill boards and the local media outlets. The company also enjoys loyalty from it long time customers who over time have gained confidence in their products. The inflation also sometimes hits hard and this makes the company expenditure quite high. Over years the stiff competitions have led to closure of several outlets belonging to the Unilever. The inflation also affects the shares trading especially when paying out the dividends to its share holders. This problem is widely felt when the global Unilever finalises it financial documents and mostly affected region is standardised by the other units. (Factors affecting international business, 2011) With the change in climate acquiring of raw materials has become a very expensive affair. The company have signed an agreement of acquiring all its raw materials sustainably and reducing as much as possible the carbon print of every of their product. Such measures make the production cost quite high. The effect is having products more expensive than the companies using any means to acquire materials creating uneven competing grounds. However as the public becomes more aware of the need to live sustainably, they are prefer buying product that have been produced environmentally friendly. Since the economy in United Kingdom is doing well the business thrives from the fact that many consumers can afford their product easily. (Factors affecting international business, 2011)
- Political factors; this refers to hoe the government operates and changes hands from time to time. Unilever United Kingdom has enjoyed considerable stability compared to other regional outlets. The politics in the kingdom are mature and never disrupts the economic activities. The governance is also very accountable and instances of corruption are not there, this is the opposite of other regions where political class determines the success of a company. The taxation also varies with government in power whether labour or conservative. Taxation highly influences the product cost and the net profit of a company. (External and internal business environment, 2010)
- Technological factors, Technology has changed the manual procedures and mechanised most all of them. This has enabled fast and standardised products. The company through automation of the factories have tried to reduce the human labour which is very costly. This in turn reduces the production cost making the products more affordable. The company also gets an opportunity to create a variety of products through shaping and mixing different contents. Technology has also enabled daily running of the business easy buy use of different accounting software. The software has enabled the sales, purchases, invoices and other business documentation easy and transparent. (External and internal business environment, 2010) The consumers have also been provided with the chance to shop while at home. Through online shopping the customer can check through the products, make an order and then delivery be made to the house. Technology has also enabled potential investors check the performance of the company online. When the investors compare Unilever with other companies then they can still purchase share from their bank accounts online. Research carried out by the company has also been boosted by technological growth; the researchers are capable of comparing their results with one another and exchange ideas with the shortest time possible. (External influences, 2011)
- Value system, This is the tendency to extend business past the normal borders. The system urges the inclusion of the buyers and the suppliers to generate a product or a service. The idea behind it is to minimise completion by the means of reducing costs along the lines of production and selling. This common that the raw materials should come from a company that is having minimal production cost and once the materials are bought on large scale then the prices become even better. Unilever joins or integrates with small outlets like supermarkets and mid-sized business who sell their product. The retailers are able to make some commissions from the sale made. Unilever has also its main outlets where exclusively Unilever products are sold. Such points also offer direct customer care services and receive feedbacks about their products from the customers. Such system ensures that product cost and delivery is controlled all through it processing process. (Guide to Business Planning: The Value System, 2011)
- Objectives and vision; The common objective of each company is making profit and maintaining a fair share of the market. Unilever objectives are also clearly stated and they state the need to drive the volume growth ahead of the existing market, sustainable and constant underlying margin improvement and there definitely should be a strong cash flow. The vision of the company is to create a better future in each day by helping the consumers feel and look great and also the goods they produce should offer more to them and others. (External and internal business environment, 2010) They further claim to inspire people to perform small actions everyday which at the end will have a huge difference. They also visualize the day when they will be capable of producing double amount of what they do today at half the cost of environmental destruction caused presently. These are the driving force of the company and they give a guideline of what the company sets as target. After every financial year the company gauges itself how near it has moved for the past year to attaining the objectives. The vision always provides for the guidelines through which every day activities are performed. The objectives set for each company set should always be within achievable levels. (Internal factors Business Resource Software, Inc., 2011)
- Management structure; The structure of a business determines how daily running of the company is done. In case of Unilever which is a multinational company has a large structure. It is composed of an overall president who oversees all the functions of the entire company. There are also the finance officer, research and development officer, human resource officer, marketing officer and the chief supply chain officer. Further into regional levels are regional presidents representing the zones. From the regional there are the country branches like the Unilever United Kingdom. Through this structure instructions are handed down from the senior management to middle level management then to operational management and finally to the employees who perform the task. With such clearly stipulated order each department knows it functions and duplication of work and corruption is eliminated. (Internal factors Business Resource Software, Inc., 2011)
- Human resources; this is the wing in business that is involved in getting new employees for the company. The team or the panel that conducts the interview must be well informed of the requirements needed for the vacant position. The interview must also be conducted professionally and without being biased. The process of identification and attraction of new employees should be careful handled to ensure personnel control is enforced. (Factors affecting international business, 2011) The Unilever Company achieves this by competitively advertising for these positions. The qualified and interested parties apply and after selection they attend an interview. The screening is well done to see if the desired qualities are present in an individual. The company being multinational very high positions are advertised from all over the globe while positions of lesser influence are advertised by the regional or country offices for the locals to apply. (Unilever global site, 2011)
- Image of the company and brand share equity; The image of a company is formed after being in the market for a while. This is an advantage for companies that have more experience over the emerging businesses. The company gains trust from the consumers since after considerable time of consumption it satisfies the customers need. The brand name then comes after the company has established its roots. Some instances have been noted that a brand can make a bigger name than its mother company because of its high quality compared to other products from the same company. This is the case for Unilever in United Kingdom and the rest of the globe as a whole. Some common brands that are recognised not only in United Kingdom but all over are; rexona, knorr, Lipton, Hellmann’s, lux, dove among others. (Unilever global site, 2011) The image of a company or brand has several advantages in the market. The first one it becomes easy to introduce a new product into the market. By simply relating the new product with the company consumers get eager to try the new innovation from their reliable company. In cases where the companies requires funding from either an institution like the bank or by having initial public offers. (Nadia Shoukat, 2010.) The company has certainties that the shares will be bought in large numbers to raise the capital. For the case of the bank they always look at the previous performance of the company and their products, from that case it very easy to improve products and services to the customers. At times it deems proper to form a corporate alliance with other companies having similar interests. When a company has strong name and products it enables them to strike a good bargaining deal. Unilever has the ability to merge with midsized business to help in retail services and increase product penetration. Such associations helps product sale without necessarily investing heavily on the outlet points and personnel. (Factors affecting international business, 2011)
- Physical assets and facilities; Unilever has sufficient tangible and intangible assets. The intangible assets are heavily invested in the customer loyalty, company image and the brand name. The company has also adequate facilities to enable the employees perform tasks comfortably and with optimisation of all resources. These assets have been shown in the financial records of 2009 amounting to millions of pounds. (Unilever global site, 2011)
- Research & development and technological capabilities; For a company like Unilever which designs a product from scratch the availability of research facility is essential. To cater for such needs the company has five world class laboratories located in different parts of the globe. There are also minor laboratories for every outlet to carry out simple test before products are released into the market. These have enabled them to be very innovative and change with the market demand. (Unilever global site, 2011)
- Financial factors; Financial levels of Unilever are quite high having assts worthy millions of pounds all over the world. (Unilever global site, 2011) With such capabilities the company can loan one of its subsidiary experiencing financial crisis. Such activities reduce the overall cost of external borrowing which comes with very high interest rates. The workers are also well paid and all their financial rights catered for, such acts rejuvenate the employee’s and give them a sense of belonging. Every employee works hard to ensure that the company performs well so that he or she continues to enjoy the good working conditions. Some of the employees have also made financial contribution by acquiring company’s shares trading in London stock exchanges among others. (External and internal business environment, 2010)
Influence of globalisation and decision making
Globalisation can be termed as the liberalisation of the international trade this is marked by increased foreign direct investment and rapid movement of money across borders. All these activities can occur without movement of the people themselves. The aspect touches mostly on multinational investments that have the financial capability to invest almost everywhere and influence the trading regulations. This has highly affected the local market especially in developing countries where technology is still developing. (Kim Kercher n.d) The company has joined many other companies that have been caught in the cross fire of globalisation and market expansion. There has been formation of the corporate social responsibility wings which try and fill in the deficit of international law. The international law has not developed regulation to control global trade and hence the corporate social responsibility tries to make companies regulate their operating levels. Common features of the corporate social responsibility are the advocacy on the rights of the employs, the regard to environment, catering for the local economy among others. (Chandrasekaran Balakrishnan, 2004) The company previous have been criticised on several issues;
- Child labour; the company had been involved in this practice back in 1993 in Hindustan Unilever the company denied those facts. The effect of child labour is a key factor to be observed by the corporate social responsibility. It is a major challenge in most of the developing countries where legislation has not been made to protect the children. In other parts of the world the legislation is just writing on a piece of paper since it is not implemented. This vice have not been experienced in developed countries like in the case of Unilever United Kingdom. (Chandrasekaran Balakrishnan, 2004)
- Advertisements and race; previously the products were advertised on basis of sexuality. Women and children were the target of this advertisement. Since then, the advertisements have asked to be children free and gender sensitive. There has been advertisement advocating for the use of brightening creams. This has been viewed to be politically incorrect since it would mean having a darker skin was bad. Such advertisements were banned on the basis of promoting racism. Other branches have produced ice cream and named it “Mohr” which is a German name for an African or black person. (Wikipedia)
- Animal testing; the company had also been using animals to test products. The animals suffered under the poisonous doses of chemicals injected or smeared on them. There were also genetically engineered animals that had no fur for the use in these laboratories. This was unethical and most countries have put up legislation to protect animals from such uses. However in some countries the laws are still reluctant in tightening the grip on offenders.( Wikipedia)
- Environment; the environment is affected by almost all made chemical processes. Having this in mind big companies emit poisonous gases into the air. These gases have attributed to global warming and ozone depletion. Such companies that do not reduce the carbon print of their product are very unfriendly to the environment. The Unilever have been associated by green peace united kingdom, with encouraging destruction of forests through buying palm oil from suppliers damaging the Indonesia’s rainforest. The company should ensure that all their products are sustainably obtained. (Globalization and its impact, n.d)
From such bad press the company has put several efforts to stop the unnecessary bad media picture. Through the corporate social responsibility division the company have been involved in several campaigns to promote good business environment. Some changes have even been part of the company’s vision. Some of the measures put up as a result of globalisation include;
- I.Environment; the company products are to be produced from materials that have been sustainably obtained.
- II.Employment; the company employs the locals where each respective outlet is based. This is to avoid job imports. Only qualified individuals and attained working age shall be employed.
III. Advertisement, the company’s new product have decent adverts recently lux advertisement advocates for natural beauty.
IV. Animal testing; the company has committed itself to eliminating animal test on its program and promotes elimination by local authorities where it is legal.
- V.Funding; Unilever money has also been associated with anti-globalisation campaign. The company tries to promote sustainable globalisation.
VI. Compliance; the Unilever is fully compliant to all the existing laws in countries where it operates.
- VII.Enhancing livelihoods; this is evident by the involvement of the Unilever in raw materials production. The company advises the farmers on best options to optimise production. The products are also produced in sizes and prices that are affordable.
- VIII.Local community support, the organisation as a whole spent over eighty nine million pounds in funding of over 14000 community based organisations in areas of operation. Two third of the money was directed into long term investments. (Unilever global site, 2011)
Effectiveness of company response
The company have tried to ensure that globalisation is not only felt on the negative side. Through the many initiatives it has made lives of the locals better than if the direct foreign investment were hindered. The company has created over 180000 employment opportunities for the locals. These employees have also been given all the rights as per the labour rights require. The investments made to the society have enabled completion of many projects like supply of clean water and general sanitation. Normally this should be the task of the government but in most developing countries such tasks are filled by such companies through goodwill to the people. The company future is bright by taking into consideration that environment needs to be protected. The initiative of having all the raw materials be sourced sustainably and in future reduce the carbon print of each product by half The company’s products are consumed all over the world by the rich and poor. This has been made possible through having them in different sizes for the affordability. The company caters for the whole society disregarding the financial capabilities. The company has also shown respect to the different governments it operates under. This is evident as the company has received several awards as one of the most compliant multinational companies.
The company should make improvement and investments in the environment protection. It would be a great idea to commit itself to fund one of the best performing organisations protecting the environment.
The company should also come out clear regarding the controversies. For example it should demystify the allegations that it only advocates against animal testing for publicity. Such matters should be dealt with comprehensively so that consumers do not have doubts when using their products.
Supply chain in developing countries should be reviewed from time to time. The developing world is changing at a very fast rate and the company should have information on such changes to effectively tap the new markets
Chandrasekaran Balakrishnan.2004 “Impact of Globalisation on Developing Countries and India” http://economics.about.com/od/globalizationtrade/l/aaglobalization.htm
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Kim Kercher. “Corporate Social Responsibility: Impact of globalisation and international business” Bond University: http://epublications.bond.edu.au/cgej/4
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