PESTEL ANALYSIS - UNILEVER GLOBAL

PESTEL analysis - UNILEVER

A scan of the external macro environment in which the firm operates can be expressed in terms of following factors:

§  Political

§  Economical

§  Social

§  Technological

PESTEL analysis is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations. The headings of PESTEL are a framework for reviewing a situation, and can in addition to SWOT and Porter’s Five Forces models, be applied by companies to review a strategic directions, including marketing proposition. The use of PESTEL analysis can be seen effective for business and strategic planning, marketing planning, business and product development and research reports. PESTEL also ensures that company’s performance is aligned positively with the powerful forces of change that are affecting business environment (Porter, 1985). PESTEL is useful when a company decides to enter its business operations into new markets and new countries. The use of PESTEL, in this case, helps to break free of unconscious assumptions, and help to effectively adapt to the realities of the new environment.

Limitations of PEST analysis 

Political factors include government regulations and legal issues and define both formal and informal rules under which the firm must operate. Economic factors affect the purchasing power of potential customers and the firm’s cost of capital. Social factors include the demographic and cultural aspects of the external macro environment. These factors affect customer’s needs and size of potential markets. Technological factors can lower barriers to entry reduce minimum efficient production levels and influencing outsourcing decisions.

It may be difficult to forecast future trends with an acceptable level of accuracy. In this regard, the firm may turn to scenario planning techniques to deal with high levels of uncertainty in important macro-environmental variables.

                                                    http://www.quickmba.com/strategy/pest/

UNILEVER PESTEL

Political and legal analysis

Unilever is subject to local, regional and global rules, laws and regulations. These rules and regulations cover diverse areas such as product safety, product claims, trademarks, copyright, patents, employee health and safety, the environment, corporate governance, listing and disclosure, employment and taxes. Important regulatory bodies in respect of business include the European Commission and the US Food and Drug Administration. Failure to comply with laws and regulations could leave Unilever open to civil and criminal legal challenge and may result in fines or imprisonment of personnel. Further, reputation could be significantly damaged by adverse publicity relating to such a breach of laws or regulations.

During 2009-2010 almost 49% of Unilever revenue came from D&E markets including Brazil, India, Indonesia, Turkey, South Africa, China, Mexico and Russia. These markets typically proved more volatile than developed markets. Any government response to reduce the impact such as fiscal stimulus, changes to taxation and measures to minimise unemployment have also affected Unilever’s economic performance.

In some regions Govt. has imposed heavy duties on imports and raw materials and it has a negative impact on production capacity. However, Unilever is quite good in managing relations with Governnments.

                                                                  source: http://www.hbs.edu/research/pdf/06-061.pdf

                                                                   Unilever Financial Statement

Economic analysis

Unilever market environment is becoming highly competitive especially in the Western Europe. Macro economic environment is highly uncertain whcih has affected micro economic environment as well by creating a fear among ordinary consumers. Consumers  would not want to buy expensive product or brands due to current economic tide. Competition in EU has grown so strong that Unilever is facing difficulties in places like France, Netherlands.

Economic Decline in business during an economic downturn has resulted in customer and supplier default. Unilever’s business is dependent on continuing consumer demand for its brands. Reduced consumer wealth driven by adverse economic conditions has resulted in consumers becoming unwilling or unable to purchase Unilever products, which has adversely affected cash flow, turnover, profits and profit margins. Adverse economic conditions have resulted in the impairment of some of intangible assets which are in the form of brand names. Adverse economic conditions have affected in two ways i.e. one or more countries within a region or extended globally. However, recession has increased the demand for some of the home care products. Unilever is operating in different market, which have reacted to recession in different ways. In D&E markets volume led growth has been improved upto 7% in the first quarter of 2010.

                                         Source: www.unilever.com

                                                      Executives Director’s Report

Societal and Ecological Analysis

Unilever has developed a strong corporate reputation over many years for its focus on social and environmental issues, including promoting sustainable development and utilisation of renewable resources. It is very conscious about safety and health of its employees and accident rate decreased by 9% during 2009.

Unilever’s vision is to help people feel good, look good and get more out of life with brands and services that are good for them and good for others.

It has successfully maintained high social and environmental standards by designing and producing products that are safe for consumers. Unilever is working on so many social welfare projects like World food programme and safe drinking water. Unilever is using environment friendly materials and packing stuff.The Unilever brand logo now displayed on all products and advertising, increases its external exposure. Unilever has built its image as an environment friendly and socially responsible company.

                              Unilever Financial Statements – Operational Highlights

                                   http://www.unilever.com/sustainability/?WT.GNAV=Sustainability

                                 http://www.unilever.com/sustainability/?WT.GNAV=Sustainability

Technological Analysis

Unilever has been spending on IT to improve its business especially in the area of e-business so as to improve brands image and quality of its products.

Unilever know that failure to provide sufficient funding to develop new products, lack of technical capability in the R&D function and quickly roll out the products may adversely impact its cash flow, turnover, profit and profit margins and affect reputation.

High level of automation is one of the critical success factors of Unilever that differentiates then from their competitors and serves as a source of competitive advantage. Today, Unilever is trying to minimize cost through IT efficiencies at global level. In addition, Unilever Technology Venture works in collaboration with Unilever R&D group to help Unilever meet consumers’ needs. Area of concern is genomics, advanced bioscience, advanced materials science and nano technology.