Business Environment And The Economy Assignment Sample

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Introduction

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The business economic environment involves all the micro as well as macro factors that have the capability to influence consumer behaviour as well as the business decisions that are directly linked with the performance of the business organization (Hans, 2018). There are many micro and macro factors that are not in the control of the business organization.

Discussion

2.1.1. Background of the chosen business organization and its industry

Unilever PLC is a multinational consumer goods company that was founded on 2nd September 1929. The company was formed with the merging of Lever Brothers and Margarine Unie (Habep, 2021). The business offerings are food items, personal care items, beauty care products, water and air purifiers and the country is operating in around 190 countries globally.

2.1.2. The market structure of the chosen industry

Unilever PLC conducts its business operations in the consumer goods industry and it can be recognised that the market structure is Oligopoly (Umesi and Ntewo, 2020). Oligopoly Market Structure refers to a market structure that is heavily dominated by a small number of organizations and the business offerings are mostly similar and every business in an oligopoly industry can operate their business operations successfully (Alothman and Alqahtani, 2020).

2.1.3. The nature of chosen PLC and this type of market structure

Unilever PLC is a single large parent company for all the companies that come under the umbrella of Unilever PLC. In the year 2021, Unilever engaged in grouping the legal structure under a single large parent company (Unilever, 2020).

There are 4 types of Oligopoly Market Structures;

Perfect Oligopoly involves different business organizations offering homogeneous commodities (Tanaka, Matsukawa and Managi, 2020). For Example; the cement industry, steel industry etc.

Imperfect Oligopoly involves businesses producing differentiated commodities (Dickson and Tonin, 2021). E.g., cigarettes, passenger vehicles etc.

Collusive Oligopoly involves a business organization collaborating with other businesses for determining the price as well as the output (Pazhanisamy, 2019).

Non-Collusive Oligopoly involves business organizations competing with other businesses for determining price and output (Furse, 2020).

2.2. Analysis of external business environment

2.2.1. Social

Unilever PLC conducts its business operations in around 190 countries globally. There are different societal factors in each country where it operates (Sivakumar, 2021). The company is very well aware of the power of advertisement in meeting the societal factors of the specific country where it is carrying the business operations. For instance: In India, Lifebuoy a soap that was launched by Unilever is available in many Indian languages such as Hindi, Telugu, Bengali, Tamil, Malayalam etc (Agarwal, 2022). It can be recognised that the company is putting heavy emphasis on personal care and well-being products and it indicates that the company have a b desire to aid individuals in looking as well as feeling good. One of the instances is the Dove soap which is completely focused on assisting women to feel their best.

2.2.2. Technological

As per the official website of Unilever PLC, it can be identified that the company has actively spent and invested a huge number of financial resources to empower the company in the technological department. In the year 2020, €800m was invested in Research Development by the company (Unilever, 2020a). The company is actively utilizing cutting-edge digital technology for making superior commodities as well as well-designed. Furthermore, the use of Artificial Intelligence is being heavily utilized to innovate new commodities (Kerr and Billaud, 2020). Unilever PLC has an online store that deals in selling its business offerings to the customer conveniently. In addition to that, digital marketing is one of the highlighted spectrums of Unilever's marketing strategies which is boosting the brand and increasing the overall market value of the company.

2.2.3. Environmental

For every successful business, one of the prime goals is to attain business sustainability in the long run of the business. From reliable news outlets, it can be discovered that Unilever PLC always put huge importance on environmental sustainability and the company is engaged in many activities to promote environmental sustainability as well as increase awareness among different individuals. For instance: Company is aiming for taking the company to net zero emissions by the year 2039 (Zhongming et al., 2020). And for that, the company is utilizing its influence to accelerate the progress to attain net zero-emission furthermore the company is also calling on all the governments, businesses as well as partners to join the mission to zero-emission.

2.2.4. Political

Unilever PLC is among the companies that have a gigantic product portfolio that is being offered in many different countries around the world. The revenue is completely generated from the Fast-Moving Consumer Goods industry. Therefore, there is a requirement of conducting the business operations with all the rules and regulations of the different countries where the business is operating. Unilever PLC has to follow the legal laws and regulations of the United Kingdom to conduct business operations in the United Kingdom and just like the UK (Cheng, 2021). The other country such as the USA where Unilever PLC has to follow the Food and Drug Administration's different rules and regulations (Paradise, 2019). For instance: When the Trump Government came into the act, foreign businesses were facing difficulties to conduct business effectively since the Trump Government introduces strict rules and regulations.

2.2.5. Legal

Legal Factors are very similar to political factors. Being a large company like Unilever PLC, the company has to follow each rule and regulation depending on the product line-up. Furthermore, there are copyright laws, employees' rights, health and safety laws of the country, and taxes which are different in different countries. Unilever has 20,000 patents registered to protect the ideas from any kind of theft or conflicts (Patjoshi and Nandini, 2019). This is one of the instances where how the legal guidelines are being followed by Unilever PLC. There are many companies that can simply make the same looking product without the permission of the company and this is very common in the oligopoly market since there are not so many companies operating their businesses. Furthermore, Unilever is also following the rules and regulations regarding Consumer Acts of different countries. Consumer Rights Act 2015 is mandatory to be followed by Unilever PLC in the United Kingdom.

2.2.6. Ethical

Being ethical in terms of carrying the business operations is a must for any business organization that wants to accomplish business sustainability. Unilever PLC is a company that can be recognised as being unethical in its business operations. Unilever has one of the worst ratings for the policy regarding animal testing. The company is aiming to end the use of testing of animals in food items, cosmetics items and cleaning products which shows that Unilever got hit by this rating in the brand reputation as well as the image. The Palm oil of the company is not completely RSPO certified as per the report from the year 2019 (Voora et al., 2019). Only a small percentage of the palm oil is RSPO certified.

2.3 Economic Factor Analysis

2.3.1. Determinants of demand for the chosen firm's goods/services

Pricing Of the Products

Unilever PLC is a product that offers a wide range of products to different customers around the world. The company prices its commodities based on the competitors and the premium pricing strategy for the commodities like Dove can be recognised (Rifkhan, 2021). Occasionally, Unilever also gives bundle offers at a discounted price to its customers.

Income of the customers

Other determinants of the demand for the commodities of Unilever are the income of the customer. Consumer behaviour is also influenced by income. As of 2019, there's been an increment in terms of Gross Disposable Household Income in the United Kingdom and London has the highest Gross Disposable Household Income which is on average each individual is having £30,256 to spend as well as save (Fenton, 2021). This means that the customers will be more willing to spend on commodities of Unilever and the demand will also rise due to that.

Number of Customers

As per the reliable source, it can be recognised that the consumer goods industry is the largest and most growing industry globally. Larger the number of the consumer then the demand for the commodities of Unilever will also be very high. For instance, India is expected to increase at a CGPR of 14.9 per cent reaching $220 billion by 2025 (Sinha and Laghate, 2022).

2.3.2. Determinants of supply of the firm

Prices of the products

One of the most determinants of supply for Unilever is the pricing of the commodities. As per the general rule, the prices of the goods are directly related to the supply of the goods. Unilever uses competitive pricing, and premium pricing and offers discounts for the customers. The price tends to increase with the decrease in supply and vice versa (Chappelow, 2019).

Factors of Production

Another determinant of the supply of Unilever is the factors of production which involves the necessary inputs that are essential for the creation of commodities. Furthermore, factors of production involve land, labour, entrepreneurship as well as capital (Mehmood, Alzoubi and Ahmed, 2019). Unilever has to suffer from the high cost of production if the factors of production increase.

Technology

The technology is accountable for influencing the supply of the goods in the market since technological advancements can enable the producer to goods at a very reasonable price which will assist Unilever PLC to generate more revenues and increase supply (Reza, 2020).

2.3.3. Competitiveness of the UK market and impact on the firm

Unilever PLC is a company that is among the largest FMCG company globally. In the United Kingdom, Unilever PLC is the most valuable brand in the United Kingdom with having a brand value of approximately 27.91 billion euros (Statista Research Department, 2022). Being an oligopoly company, the company is not being affected by any kind of competitors in the United Kingdom. There are brands in the Fast Moving Consumer goods such as Warburtons which is a baking company it comes under the FMCG but it is not a direct competitor of Unilever (Nils-Gerrit Wunsch, 2022). Therefore, Unilever is not being heavily affected by any business organization when seen from the perspective of the United Kingdom only.

2.3.4. Examples of “Random Shocks' and impact on government's fiscal policy and on the chosen firm

Random Shocks mean any changes to the variables of the macroeconomy that has a significant impact on the outcomes of the macroeconomy variables. For instance; Unemployment, Inflation etc (Drautzburg, 2019). Currently, Unilever has to increase the prices of its business offerings by 4 per cent due to the higher rate of inflation going on in the United Kingdom (Wood, 2021). Furthermore, Unilever also forecasted that cost inflation will be £3bn in the coming year (Sweney, 2022). Furthermore, it can be recognized that the public finances of the United Kingdom are at risk due to the high inflation which can result in fiscal deficits. The government is increasing the taxes to fund healthcare services (Giles, 2022). A rise of £16 billion for the worker as well as the employees are going to hit the disposable income of the citizen of the United Kingdom which can result in affecting the profitability of Unilever (Milliken, 2021).

2.4. Problems and Challenges faced by the firm

Currently, the problem and challenge that are being faced by Unilever is the gap in the academic industry for their skincare products. Unilever is facing difficulty to match the cosmetics as well as the personal care industry to the "science academics" and incorporate them into the industry. In addition to that, Unilever PLC is also facing the problem of a rising inflation rate in the United Kingdom as well as other countries because of the pandemic and the ongoing war between Ukraine and Russia. The Company raised prices by 2.9 per cent in 2021 involving a 4.9 per cent jump in the 4th quarter. In the year 2021, the company even sold their tea business for £4.5 billion to sustain the business effectively (Milliken, 2021). As per the situation of the company, it can be identified that Inflation is the major challenge for Unilever that needs to be overcome.

Conclusion

This assignment has come to end and it can be concluded that understanding the business environment and economy is very critical and important since it assists businesses around the world to understand the different macro and microeconomic variables.