This paper seeks to outline the finer details of business environment and how it affects the operations of a business entity. Business environment basically means the surrounding factors and influences that affect trade. It can be categorized into two; internal and external. The internal environment covers the employees, the management and the stakeholders as well as a business’ premises and machines. The external environment comprises of a business suppliers, competitors, customers and most importantly the government, and bilateral trade agreements and quotas.
In this paper, we shall be focused on finding out the implication of international trade and the European dimension for businesses in the United Kingdom. We will be specifically zero in on the value of international trade, economic integration and global markets in the United Kingdom. Similarly, attention is given to the impact of two micro economic policies and the influence of the global economy on United Kingdom-based organizations and stakeholders.
For any organization, profit making or not, to operate efficiently and in line with its aims, it must have a well thought out and executable design as well as structure. Organizational structure and design borrow from each other. An organizational structure is a format within which an institution or a business entity devises and executes its daily operations or processes. It can be described as a process of coordinating and controlling the human resources, communication and technology as well as other inputs. For an organization to institute a structure, it has to enlist the use of a versatile design. A good design must support an organization to attain the goals it is aiming for. Normally, the staff discusses the needs of the organization and then come up with a rubric to meet the needs. Good designs accompanied with a deliberate workforce effort are essential to realizing an effective organizational structure (Burton et al, 2006).
In the second part of this paper, we are going to outline and discuss some issues in management of an organization. We are going to specifically analyze Unilever’s business environment. Unilever is a renowned corporation which has its headquarters in the United Kingdom. It has several investments and business interests spanning the entire world. Unilever deals with Fast Moving Consumer Goods (FMCG). FMCGs are the day to day commodities which are essential for ordinary living. These are soaps, body lotions, beauty products, tea leaves, tissue papers, cooking fats and many others.
In FMCGs industry, Unilever is an established and the most revered player. Since it deals with the production, distribution and eventual sale of the most essential commodities in life as well as operating in many countries, it is the most appropriate organization to use for a business environment case study. The history of this company shows us that it is a merger of two different companies based in United Kingdom and the Netherlands. With this foundation, it has two head offices; one in the UK and the other in Netherlands. This has resulted in the adoption of a simpler organizational structure.
Task 1: Explore the Significance of International Trade and the European Dimension for United Kingdom’s Businesses
Importance of foreign international trade, economic integration and global markets into UK business organizations
International trade is the exchange of goods and services through the borders. This type of business has formed the firm foundation in the modern business world because the manufacturers and distributors attempt to gain from a wider market rather than looking at their own borders. Each and every firm intending to throw its nets wide must focus on the globalization of its marketing and distribution operations. The foreseeable constraints of venturing into international trade are deeply rooted in the standardizations and trade barriers formed through economic integrations and blocs formations.
Many economies have learnt that they cannot effectively compete with the do-it-alone approach. Therefore there is a rise in regional economies coming together and forming bigger economies. This grouping and regrouping of states have a huge impact on the social, political and most important economic dimensions of organizations. There many benefits that come along side this integrations as well as demerits. Any organization in need of these benefits and willing to take the accompanying risks will surely take these challenges and reap from the goodies of global market. Just like any other multinational firm, Unilever’s presence in the global market has helped in the continuous development of new market segment.
In order to benefit from the economies of scale, the corporation shakes off the saturation in the European domestic market by gathering for the needs of international buyers. International trade is also important bearing in mind the corporation’s portfolio resources and products. To tap from these undoubted benefits of international trade, Unilever utilizes the various available options of internationalization. The concept of mergers and acquisitions has given the corporation a huge milestone in venturing into international trade. Among the many firms that have entered in an international partnership with the corporation are: Pepsico which works together to market and distribute Lipton, a ready-to-drink tea, Inmarko which is the leading ice cream corporation based in Russia and the imminent acquisition of Sara Lee division of body and laundry production. In a nutshell, the company has been able to secure a total of twenty acquisitions.
Economic integration is basically the amalgamation of monetary and financial regulations and laws between two or more hitherto independent parties who have similar interests. It is a coming together in order to push for better trade terms and to boost efficiency among the members and with the non-members. It involves drawing up terms of engagement and setting up conditions with which businesses must meet. It also aims at regulating competition. An example of economic integration is the European Union (EU). Though E U is thought to be a political outfit, it has an economic objective that led to its formation. It draws most of its members from Europe who have ratified its statutes.
Unilever can be said to be a global corporation based on the attributes described before. This is justified by its presence in many nations and the use coordinated brands in global market. It however has one centralized office in the United Kingdom which manages the entire strategy. The European Union policies which affect tariffs and free trade agreements are going to have a final trickledown effect on the revenues and operations of Unilever. The elimination of trade restrictions and barriers within the European market means that the revenues are going to rise because of easy penetration to domestic regions. The removal of all tariffs on trade is one of the major benefits enjoyed by the corporation.
The impact of two micro economic policies and the influence of the global economy on United Kingdom-based organizations and stakeholders
Microeconomic policies are so far successful in creating structural changes in United Kingdom’s organizations. These policies are the kinds of long term modifications in the patterns of producing output. The immediate reforms achieved are the reduction in inflationary expectations and maximization of production and job opportunities. The main aim of microeconomic policies is developing the operations of organizations, industries and markets with an objective of improving aggregate supply levels. The United Kingdom’s government has been at the forefront in seeing that efficiency, flexibility and less costly production is the order of the day because these factors indirectly affect the supply side of the economy. There is need for firms to maximize efficiency and minimize production cost through adoption of current technologies for production of goods and services. Organizations such as Unilever which are technically efficient will tend to minimize the quantity of resources required for a given production activity.
The government of United Kingdom has tried to see that there is healthy competition in the country. Microeconomic policies help firms to oversee the conduct of sectors which are competitive in that all the players are given a chance to compete with the each other in the market. There are some micro economic reforms which uses approaches such as corporation structures and privatization.
The United Kingdom’s government has tried to improve micro economic reforms so that the long term constraints to economic growth can be eliminated. Constraints to economic growth could be brought about by inefficient allocation of resources, undeveloped infrastructure, unstable price structure and underemployment of available labor. As a result, producers increase their prices and consumers buy cheap foreign goods thereby dampening growth. In order to achieve microeconomic objectives, policy makers must remove the obstacles in order to have efficient allocation of resources which is ideally supposed to be automatically done by the markets. In this case, pricing policies in the United Kingdom have been advantageous in stabilizing the market forces but have hindered the market from charting its own course.
Due to the increased competition brought about by privatization and deregulation, firms will manage to reduce cost and increase productivity with an aim of maximizing profits. Through the government, there are competition policies and licensing regulations that have been put in place. In order to cut production costs, Unilever has been replacing human labor with automated systems. Some critics view this as a precursor to unemployment in the country.
Microeconomic policies are very useful because they tend to bring about the element of competition among players in any given sector. Competition makes some firms to struggle while others reduce their prices and move towards the profit margin. Others who are unable to stay afloat exit the market. When a firm has more profit which is obtained from its revenue, it will invest and expand its business. As a result the firm will need more employees thereby creating more jobs opportunities and indirectly expanding the economy (Yip, 2007).
Economic implications for the United Kingdom of entry to the Economic Monetary Union (EMU)
The Economic Monetary Union is the adoption of one currency by the European Union member countries. This move has been achieved through the development of one European Central Bank and formulation of a common monetary policy. Such adoption of single currency has elicited a series of mixed reactions due to the economic implications. Some school of thought may argue that the adoption of EMU is irrelevant because it focuses strictly on the financial services sectors (Smith & Grant, 2003).
The critics of Economic Monetary Union claim that putting together economies of different sizes is going to be detrimental. This will mean that the entire Europe economy will be the least common denominator. In simpler terms, the economic muscle of the member states is going to be achieved through striking a balance between the participating economies. The poorly performing economies are going to pull down the perceived successful ones. Despite this pessimistic view of EMU, there will ultimately be a lot of attractiveness of euro financial assets due to eliminated exchange risk and improved liquidity. In addition the stability in macroeconomic environment is very instrumental in reduction of financing and investments risks. It is no doubt that the introduction of euro as the common currency in the European Union has improved prices transparency. There are no fears by someone using euro resulting from using different currency (Smith and Grant, 2003).
The firms in the Union’s territory are able to comfortably compare prices without worry of actual value being distorted by conventional highly and volatile exchange rates. From an external point of view, the consolidated EMU area is in a position to be self sufficient and independent of the Asian or American influences. Thus partnership has a political effect. The mutual relationships between nations are going to be fostered since the bad blood is eliminated by continually partnering in the formulation and improvement framework of the common market policies. The European Union firms, in which our organization of discussion is part, are going to increase their profitability through elimination of currency exchange transaction costs. Other trade focused proponents of this worth venture claim that no cent will be lost on the fluctuating exchange rates. Trading as a bloc makes Europe compete effectively with other regional giants in the Far East and America.
In conclusion, all these discussed issues notwithstanding, Unilever is regarded as a strong organization with a big history behind it. It is an absolute truth that it has a future that is beyond limit. This can be evidenced by the way it is well organized and designed. It also deals with all its stakeholders on mutually beneficial basis. In addition, since it operates in many countries around the world, it has always upheld the rule of law while engaging with the various governments and in its operations.
Task 2: Identify the Mission and Responsibilities; Investigate the Economic Environment and Behavior of Organizations
Unilever’s Vision, mission, goals, objectives
It is no doubt that almost everyone has ever utilized Unilever’s products. An estimate of two billion people uses their products daily. It has been possible to achieve this unprecedented customer base because of a well articulated vision and mission statement. The statements are backed by specific objectives and precise ways of attaining the goals. The company also gives environmental conservation a priority and at the same time focuses on business expansion. Through such a noble vision, Unilever is one of the most successful multinational companies in the recent past. Unilever believes that success is solely dependent on maintaining the highest levels of standards in corporate conduct towards customers, employees and the society in general. There has been a focus over the past few years on sourcing raw materials in sustainable manner. The communities in which Unilever operates have greatly benefited from its support through a detailed corporate social responsibility.
The main mission of Unilever is to cater for the needs of all people around the world. The corporation envisages its customers’ desires by reacting to the market forces in a creative and competitive manner. This corporation is well established because its approaches are deeply rooted in the local cultures of the areas in which it operates. This has aided it to capture and maintain an even wider market throughout the world unlike its competitors. Its long term success emanates from its commitment to customer satisfaction and unique standards of performance as well as quality in its products. Both the staff and management collectively work as a unit and have the willingness to grasp new ideas and integrate them as quickly as possible.
An evaluation of the extents to which Unilever achieves its objectives of its stakeholders
The success of this corporation has been attributed to towering relationships which it has developed and maintained with a number of people and other organizations acting as its most direct stakeholders. Its stakeholders are the consumers, input providers and shareholders. Other stakeholders are the government, regulating bodies, the society, scholars, and individuals who are concerned with what the corporation produces and the impacts of it products on the consumers (Jones, 2005).
This corporation manages to achieve its objectives by engaging its stakeholders in unique and different ways. The stakeholders are engaged in different levels and ways depending on their interest. The corporation sees that the interests of the consumers are also met. It continuously sends its team to the field so that they can analyze and understand various tastes, needs and trends of existing and targeted consumers.
The corporation also holds several meetings with local governments and civil society organizations. The engagement with the governments is fundamentally based on issues like change of regulations, licensing, trade terms, tariffs and tax matters. It also engages other associated companies in several areas such as nutrition, and conducts various research projects with an aim of improving its products and market share. The key step of engaging the stakeholders is that most of it is made from the local levels, to regional levels and finally at the global arena. There is always an improved partnership with intergovernmental and non-governmental organizations throughout the world. This partnership brings in the much needed expertise and adds knowledge in several vital areas as well as bringing on board the practical initiatives from the ground.
This corporation operates in using multiple approaches to guarantee its stakeholders contentment. For example on environment concerns, it is in no doubt that it has created a friendly atmosphere which will sustain its business for a long time to the future. It works hand in hand with other partners in making the environment safe and also provides information on the importance of maintaining a healthy environment. In Kenya, for instance, Unilever engages it social responsibility capacity to plant over a billion trees in the next five years.
The corporation maintains and defends the right of its customers. Unilever has strong co-operation with the governments and various organizations which it engages with directly or indirectly for example trade unions. The main reason why this organization involves its stakeholders is because it is more concerned with maintaining its legitimate interests in business. To make sure that its objectives are observing corporate ethics, the corporation supports the introduction of competition laws. It also makes sure that the staff conducts their duties according to the rules and regulations of fair competition (Jones, 2005).
This corporation values its staff such that it creates an environment where mutual trust is a main principle. This is why it offers safe and rich working conditions for the staff. It guarantees to its staff all the basic freedoms.
The social responsibilities of Unilever and the strategy they employ to meet all its social obligations
This firm believes that for it to succeed there has to be a consistent maintenance of corporate behavior among its employees to the consumers, society, and immediate competitors. There is a good observance of business codes, principles and regulations which characterize its operational standards because they are embraced by everyone in Unilever. The corporation dutifully performs it roles and meet its obligation with a lot of honesty, uprightness, integrity, and sincerity. It respects human rights in relation to its staff employment and remuneration terms by making sure that their interests are always put forward. Not only does it respect the rights of the staff but also the individuals and other firms it interacts with (Jones, 2005).
Unilever ensures that its staff adheres to the laws of every country which it operates in. The corporation has dedicated itself to improvement in an environment where there is common trust and value and where everyone is held liable for the performance and status of the firm. This corporation recruits, employ and support qualified candidates on individual basis of academic merits, experience and abilities required for each and every position it advertises. The management is dedicated to seeing that the socio-economic wellbeing of the staff is looked into and in doing so, it does not allow forced labor or compulsory labor to children. The staff is given freedom to freely associate with each other and with those from outside the corporation. The staff benefits from effective communication system and receives regular support from the upper management of the organization in terms of consultation.
On the other hand, consumers benefit from this corporation by being provided with high quality branded products and services whose prices are always stable. They are offered products which are of high utility and safe for its probable use. Before releasing any new product to the market, Unilever makes sure that the consumers are well informed about it through prior advertisements and appropriate branding (Jones, 2005).
Similarly, its suppliers have greatly benefited from this corporation because they have established mutual working relationship with it and even its other business partners. Unilever also involves the society in its corporate activities and ensures that it has fulfilled its social responsibilities to the whole community.
This corporation values the environment it operates in because it is committed to making continuous improvements within the organization with a view of constantly assessing environmental impacts with an intention of establishing long term. The corporation has developed fair competition laws among its staff. In their lines of duty, they have a natural inclination to conduct themselves in accordance with the principles of free and fair competition.
There is high maintenance of business integrity in that both the staff and the management do not give nor receive any bribe. There is a rule that corruption should be reported immediately to the management. There is maintenance of a high rate of transparency because its accounting records are well audited and reported periodically. The code of conduct is also examined and anybody who breaches it is supposed to follow the procedures listed by the joint secretaries.
This corporation has a management board which ensures that the principles set out are complied with. They also make sure that the principles set out are implemented to the letter. This board meets regularly to discuss emerging issues and oversee the whole corporation besides making major decisions.
The corporation makes sure that its consumers meet their everyday needs in matters of nutrition, sanitation and personal care. The corporation produces brands which make people feel good and gain more in life. Its key objective is sustainability which really acts as the backbone of the main business. Through the products that it sells to the consumers, it has an aim of inspiring people. It regards the customer satisfaction as a fundamental part of development and it is for this reason that the corporation is in touch with the society. In order to succeed, the corporation always ensures that corporate standards are maintained to the highest level possible.
There are various fields in which Unilever deals in, some of the major ones are: nutrition, hygiene and personal care. The subsequent responsibilities undertaken by this corporation is clearly explained by the nature of business that it engages in. It is involved in promotion of its customers’ health diet and living standards in collaboration with healthcare bodies such as United Nations Children Education Fund (UNICEF) and World Health Organization (WHO). In order to provide healthy nutrition to the society, this corporation has developed new policies which promote proper diet and educate consumers of the importance of using healthy products. The corporation is involved in global campaigns which are related to hygiene. Through these campaigns it has managed to prevent, on a wider scale, some hygiene related diseases.
This corporation ensures that the environment is managed accordingly through consideration of some factors such as farming, aquatic life and water. It has also introduced proper marketing programs which sustain fisheries and water conservation activities in the whole world.
How economic systems attempts to allocate and make effective use of resources for Unilever
The main aim of Unilever is to utilize resources available to it for maximizing profit in the various countries it operates. Its multidimensional products and status as a market leader in all other aspects and responsibilities emanates from a deeper background. This corporation has spread its wings to a wider world economy and is recognized as a responsible to the entire society. Having occupied this big space, this corporation has become the main target of attack from those companies which disagrees with the way it runs its business. Being one of the leading FMCG corporations with several interests represented both geographically and functionally. This firm utilizes various economic systems in seeing that economic resources are allocated properly. It uses central planning where the management identifies and designs the production of the kinds of goods and services required by the prospective consumers. After identifying these commodities, it produces and distributes them to the earmarked regions.
The process of identifying the much needed goods and services globally needs proper deliberation and understanding of complexity of such an exercise. Several people are often involved in this exercise where factories and suppliers are given guidelines of what they ought to produce or not. This corporation has planners who approximate and plan the allocation of the required resources in producing the forecasted output. This corporation has employed many people who efficiently utilize these non-human resources to produce optimum output and are in turn given wages or salaries. The numbers of staff is also controlled for the corporation to plan how to cater for the amount of salaries and wages they will be paid. The reason behind planning for this allocation of resources is for employees to work towards realizing the optimum output. The management also plans for the prices at which these commodities will be sold at.
By using free market economy, the corporation always focuses on demand and supply forces in determining both the prices and quantities for the commodities. The general public will create demand and supply which will later determine prices and quantities of output produced. The final market prices are very critical to both the producers and consumers in determining how much will be produced and supplied and bought respectively. By doing so, Unilever’s management has several motives such as the reward of an enterprise, adequate information to producers and consumers, price that shows costs and benefits and the simplicity in which resources can be maximally allocated and utilized (Yip, 2007).
The corporation takes risk of producing goods and services with an expectation of some returns after the sales are made. There is also the fundamental need to maximize revenues and minimize costs. For this to be realized, Unilever depends on the superior market information which enables it to access supplies at a low cost and to strategically place the prices of its commodities. It also has very effective mechanisms of systematizing production in the most competent way and looking for resources at an affordable cost. Consumers constantly require information which will guide them of what is in the market.
This corporation needs to give the prices of the various commodities which it is offering in the market. Prices in any firm, is a focus point in that it gives a signal to both suppliers and consumers. Consumers have to know the amount of money they are supposed to part with for any given product. The amount of money allocated by consumers for a consumption of a product reflects its true value and the maximum possible utility they can draw from it.
It is also notable that Unilever keeps on inventing and innovating new and viable ideas for all the products it can manufacture. By doing so, it is able to expand the demand and for new products as well as fostering higher and better returns. The corporation also focuses in procuring and moving the resources which are necessary to produce the new products. When a variety of complementary and substitutable products are availed in the marketplace, it gives the consumers multiple consumption choices and the competing firms will have to adjust their respective prices and quantities in order to maximize revenues and establish themselves in the market.
The impact of social welfare and industrial policy initiatives on Unilever and the wider community
The main purpose of developing industrial policies within organizations is to establish a course of action which will provide support that is helpful in achieving development goals which depends on manufacturing and industrial sectors. These policies justify that market failures hinder free markets and therefore many countries do not manage to achieve development targets. For this reason, government can overcome the problem of market failures through intervention and ensuring that there is free and fair competition. Industrial policies are very important because they tend to favor large corporations such as Unilever. These policies are widely accepted and supported because they provide a more effective way of dealing with market failures. In the process of dealing with market failures, the governments can come with better ways of accessing quality information, empowering legal and institutional frameworks, providing adequate infrastructural support, and avails to the business entities a favorable environment needed for industrial and economic development.
In an effort of preventing or avoiding market failures, planners focus on industrial policies which attract and level competition. There are some unavoidable externalities which bring about increase in costs and therefore some interventions are more important and urgent than others because they aim at reducing these costs and realization of the benefits resulting from economies of scale. There are various externalities that hamper free and fair competitions which can either be within or outside business entities and countries. Examples of these externalities are perennial problems in the labor market which at times tends to be rigid and inadequate finances for stimulation of growth. The cost associated with accessing information is also a major externality which hinders open and fair competition. There are also those industrial policies which focus on ways of overcoming information externalities and by doing so, they create an enabling environment which permits organizations to comply with international standards , engage in experimentation, come up with new product lines and access new markets while expanding the existing markets. Since Unilever makes proper use of industrial policies, it seems to enjoy good environment in which the producers will find resources required for the business.
Economic growth is enhanced by an efficient market economy which allows access to markets and economic capital. The aim of industrial policy is to aid industrial sector and its growth. Being a non-governmental organization, Unilever sets crucial conditions for a complete strengthening of plurality and democracy in the societies which has its operations in. Therefore, the improvement of non-governmental organizations has an impact on individuals and the overall development of society. Social welfares are very important in the society because they lead to development of projects which are individually beneficial and can adjust to the need of the society. Projects which are beneficial to the society should be in the hands of private sector because they are very close to the society and understand their needs.
How the market structures which Unilever uses deviate from the model of perfect competition
Market structure is the manner in which a corporation experience competition during the delivery of goods and services. The structures are very dynamic and both extremes do exist depending on the market in which one is operating and the type of goods being dealt with. The theoretically existing market structures are: perfect competition, monopolistic competition, oligopoly and monopoly. Out of these existing market structures, it is not possible to single out one to be prevailing in the Unilever products market. This so because there is no clear cut differentiating between them. However, perfect competition is a far much distinct structure from the other three structures. Unilever has a wide range of its consumer products in distribution worldwide. The corporation’s complexities in organizational structure coupled with an expansive portfolio of products have made the Unilever to operate in all market structures except perfect competition.
Perfect competition prevails when there are many sellers and buyers present in a market. This means that no single player will bring much influence in the entire market. The presence, withdrawal or change of strategy by a distributor in this market structure has an insignificant effect in price and demand. The market forces are left to take their full swing operation. In this market, the consumers view all products to be identical thus selection of a product to be purchased is indiscriminate. However, this is not case in most household consumer products. Consumers are very sensitive in the selection of such products, especially those that affect their health and general appearance. The earlier mentioned expansive portfolio of Unilever house hold products affects the final consumer’s health and appearance. These effects either instant or long term are evident in its advertising slogan; adding vitality to life. By considering the corporation’s profile, Unilever is not the type in which its presence in the market cannot be felt by fellow competitors as well as consumers. Therefore, saying that a perfect competition is the kind of market structure in which Unilever is operating will be a complete fallacy (Yip, 2007).
Monopolistic competition prevails when there are few restrictions to the entry of the market. The presence of a corporation in the market will therefore be determined by it creativity and ability to overcome the few existing restriction. Such restrictions may not necessarily be economic but rather anything which may retard the growth and performance of a player in that particular market. The many companies operating in this kind of market structure have little to influence since they have small market share. Unilever’s market share cannot be generalized as small globally but rather largely variable. It is dependent on geographical diversification characterized by expansion and venturing into emerging markets. The aspect of small market share may not be entirely dismissed but can be stated as a fairly potential scenario to occur. This is evident in the penetration in to the new markets already colonized by competitors as well as situations where others are proving too strong to eat into the corporation’s market share. The products in this case are very distinct thus one can easily differentiate between products of different companies.
The Unilever products can easily be identified and are available in a large sea of household products from which a consumer chooses from. The marketing strategists in Unilever must therefore apply non-price competition strategies. Advertising is the most common non-price strategy available for Unilever, where fellow market players’ provide close substitutes of its products. Another tool in use by the corporation is the rolling out of an ambitious research and development program which has seen it deliver the most optimal innovative designs of products. All these characteristics describe a monopolistic competition which becomes one of the prevailing market structure (Yip, 2007).
Oligopolistic market structure exists when a few firms dominate market and thus enjoys a majority of market revenue. This is evident in its market share which according to Fortune 500 list of large companies in Europe, it revenue was at $ 45,679 million which placed them at fifty-fourth slot in the year 2000. This commanding market share coupled with European Union stringent standardization rules makes it hard for new products to hit the market.
Monopoly on the other hand means that there is only one supplier. Therefore there is no competition expected. The sole supplier dictates the prices, supply quantities and the quality control. This hypothetical structure hardly prevails unless there are influences from regulators like governments and other authorities empowered by pacts and international agreements. There are high barriers making it totally impossible for other firms to enter the market. It is hard to experience this kind of a market structure currently. It can only be seen in specialized products distributed by the government due to their nature to influence the national security. We can therefore confidently dismiss this structure to be non-existing in Unilever’s products.
To sum it up, all market structures except monopoly are in practice at Unilever. However the perfect monopolistic structure carries less weight because the cumulative market share of this corporation is big enough to shake off potential high caliber competitor. Any organization interested in the manufacture and distribution of household goods can only do best by either franchising or merging with Unilever. The consolidation of European resources through European Union’s elimination of trade barriers and restrictions has come up with far reaching opportunities as well as setbacks for main stream organizations. For Unilever, it is a great milestone as it is for other multinational organizations to see different regions get in to agreements of forming trading blocs. The usually complex management structure can be simplified through creation of regional offices. The basis of such regional offices is going to be the preset blocs.
The relationship between market forces and Unilever’s response
Market forces are the demands and supplies which is a reflection of all price-conscious sellers and buyers of the products available in the market. The desires of sellers and buyers are in the two extreme ends. Sellers will want the highest possible prices while buyers want to own the goods for free if possible. Since taking goods freely is not possible they are therefore asking for minimum prices possible. The price is expected to go up with an increase in demand while an excess supply will make the price to fall. Such varied desires constitute never ending market forces. It is worth to note that the market forces are only possible when there are no external interferences.
The already mentioned rich portfolio of Unilever products can be put into the following categories: washing powder and detergents, beverages and butter and margarine. These products must attract many buyers as well as producers being the fast moving consumer goods are on demand daily. In fact, the demand is poised to rise given the ever rising populations of the world accompanied by rapid urbanization.
It is the dream of every organization in business to make profit and reduce cash outflows as much as possible. Unilever being no exception has put in a lot of efforts to stay up beat so as to maintain and grow its market share both in Europe and global market. We are now exploring its response to such dynamic challenges accompanying variations in market forces, the actual effects in revenue and long term reputation of the corporation.
The corporation has a deliberate effort to guard its market share. The main strength of Unilever is the expansive geographical diversification of its products. These will translate to the final returns because; the poor results of one region are likely to be cushioned by those of the other. To illustrate this, the corporation was in operation in eighty eight different countries in the year 2002. Management teams in every region have decision making autonomy so that the products available for distribution in their respective regions are tailor made to just meet the consumer needs. This brilliant approach ensures the avoidance of obsolescence as well as delivery of the most relevant goods in the market.
Paying attention to human capital offers enormous opportunity to the long term strategy of the corporation. This global organization believes that a highly motivated human capital is going to impact positively on the general outlook. It is this reason therefore that has made the company to invest on human resources development through recruitment and training of employees from varied disciplines and qualifications. To ensure that every talent in the society is utilized one can enter the company’s amazing human resource through graduate trainee program or specialized skill direct entry (Yip, 2007).
Another notable strategy which may look more of welfare based than economic is the formulation and implementation of a well detailed safety, health and environmental policy. This has a lasting perspective and a wide focus beyond what can be seen immediately. However, there are short term benefits of this. An employee who is always safety conscious is going to deliver better results than the other who has no attention to safety. It is also worth noting that some economic blocs like the European Union cannot accept a company’s products if they have no practical move to conserve and protect the environment. The most recent example is the black tea sourcing sustainability commitment which came by through the certification by Rain Forest Alliance. Among the immediate benefits of this tea sourcing sustainably, Unilever has been able to launch its Rain Forest Alliance compliant tea in the European market (Smith & Grant, 2003).
The years of poor performances globally prompted the organization to embark on an ambitious path to growth strategy in the year 2000. The strategy has specific action points to be discussed next. First of all, the ambiguity surrounding the amorphous number of brands was eliminated through the reduction of brands to the four hundred most important core products. The unsuccessful brands were successfully removed from the market which led to the increase in sales of the top brands from 75% to 93%.
The corporation has been able to also tap from emerging markets by penetrating those which are already colonized by the competitors such as; Procter & Gamble, Nestle and Kraft Foods. Among the major advantages of Unilever is its ability to carry out research and identify the consumer trends of needs. With this information at hand, the response is efforts to cater for them. Just to illustrate this proactive approach, the major concerns in the world of late are nutrition and weight. Majority of the people are currently shifting their focus to ways of living healthier lifestyles. So as to move in tandem with this trend Unilever acquired Slimfast, an organization offering weight management services and nutritional consultancy. The intense competition faced worldwide has necessitated the Corporation’s top management to make acquisitions. The top acquisitions are Ben & Jerry, Slimfast and Best Foods among other twenty worldwide. This ability to make huge acquisitions and conglomerate firms have put itself in a position it is enable to enjoy competitive advantage. The corporation saved EUR750 in cost and operating margins rise by 15.7 per cent in the first three quarters (Smith and Grant, 2003).
The behavior and competitive strategies employed by Unilever and the role of Competition and regulatory bodies
Unilever is carefully working together with the Competition Commission so as to achieve a balance between its profits and legitimacy. Striking a balance has been a headache for both parties bearing in mind their varied intention of promoting competition.
Competition Commission will always strive to provide a fair play ground for the players in a given industry. It ensures also that no one takes unfair advantage by punishing the final consumer. To achieve this, the commission closely monitors the interaction of competitors and partners in the market. The changes in businesses set up including concentrations through mergers and takeovers are very useful so as to eliminate the competition among the players in the market. The recent proposed acquisition of United States based Sara Lee’s body and laundry division by the Unilever is being reviewed in line with European Union Merger Regulation.
The commission seeks to establish the ultimate effects on shelf prices of these products after the elimination of competing suppliers of a good number of household cleaning products. Through such a strategy, the corporation is able to wade off expenses that could have resulted from competition and huge advertisement. However, if this is viewed as move to club together and drive others out of business it will be totally unacceptable and the commission is going to advice the relevant bodies accordingly. Sanctions and license suspension may the worst penalties that the company can get if found guilty. But leaving alone this pessimistic approach of the role of competition Commission, there are a lot to be achieved.
The corporation’s expansion strategy has seen it adopt an earlier mentioned path-to-growth master plan aimed at growing it market share. Its unrivalled enormous infrastructure has played a paramount role in venturing into emerging markets. The other strategy has been the focus on the internal structures of management and building of global leadership. A well oiled management machine has been achieved through internalization of the concept of growth by every member of the management team. A fast decision making and improved accountability can only be achieved through the continuous improvement of organizational structure (Jones, 2005).
Burton, R. M, DeSanctis, G. and Obel, B. (2006) Organizational Design: A step by step Approach. New York: Cambridge University Press.
Jones, G. (2005). Renewing Unilever: Transformation and Tradition. London: Oxford University Press.
Smith, D. & Grant, S. (2003). UK Current Economic Policy. 3rd Ed. New York: Heinemann.
Yip, G. S. (2007). Managing Global Customers: An Integrated Approach. London: Oxford University Press.