Unilever’s PESTEL/PESTLE Analysis & Recommendations

Unilever PESTEL PESTLE analysis, political economic sociocultural technological ecological legal external factors consumer goods case study
Unilever’s bath salts sold as Radox. A PESTEL/PESTLE analysis of Unilever shows growth opportunities based on external factors in the consumer goods remote/macro-environment. (Photo: Public Domain)

Unilever’s ability to address external factors in its remote or macro-environment contributes to business prominence in the global consumer goods market. This PESTEL/PESTLE analysis identifies such external factors. The PESTEL/PESTLE Analysis model is a tool for managers to understand the influence of the external environment on businesses. In the case of Unilever, these external factors vary significantly, considering the international scope of the business. Nonetheless, the company must focus on maximizing business performance. Unilever can achieve higher business performance through strategies that overcome the most significant threats and exploit the biggest opportunities shown in this PESTEL/PESTLE analysis.

This PESTEL/PESTLE analysis of Unilever outlines growth opportunities in the international consumer goods market. While the company also faces threats in its remote or macro-environment, growth is achievable by focusing on product innovation, among other approaches.

Political Factors Affecting Unilever’s Business

The political landscape affects Unilever’s performance. This section of the PESTEL/PESTLE analysis identifies the impact of governments on firms’ remote or macro-environment. The following political external factors are significant in Unilever’s consumer goods business:

  1. Political stability of most countries (opportunity)
  2. Political issues in the European Union (threat)
  3. Growing free trade relations (opportunity)

The political stability of most countries presents opportunity for Unilever to grow in these markets. For example, the political stability of the United States helps minimize challenges in the company’s strategic implementations in the country. On the other hand, the political issues in the European Union are a potential threat against Unilever’s operations in the region’s consumer goods market. Nonetheless, the company has opportunity for global growth based on the expanding free trade relations, especially those involving developing countries. Based on the political external factors in this section of the PESTEL/PESTLE analysis, there are opportunities generally available in the market, although Unilever must address the challenges linked to the political condition of the European Union.

Economic Factors Important to Unilever

Unilever’s business performance depends on the situation of economies around the world. This section of the PESTEL/PESTLE analysis outlines the influence of economic conditions on firms and their remote or macro-environment. The following economic external factors are determinants of Unilever’s performance in the consumer goods industry:

  1. Increasing wages in developing countries (opportunity & threat)
  2. High growth of developing countries (opportunity)
  3. Economic stability of developed countries (opportunity)

The increasing wages in developing countries present the opportunity for Unilever to profit more from higher potential sales, as consumers gain higher disposable incomes. However, the same external factor is a threat in terms of increasing costs, considering that the company has many manufacturing facilities located in developing regions. Nonetheless, Unilever can expect business growth, as these countries grow in terms of consumer goods market size and value. For example, China presents major growth opportunity for the company. Moreover, the economic stability of developed countries cushions the business from risks in other markets, while facilitating gradual but steady growth. Thus, this section of the PESTEL/PESTLE analysis of Unilever highlights opportunities for global growth.

Social/Sociocultural Factors Influencing Unilever’s Business Environment

Sociocultural trends and issues affect Unilever’s business performance and the remote or macro-environment. The socially driven behavioral aspect of markets is considered in this section of the PESTEL/PESTLE analysis. The sociocultural external factors significant in Unilever’s consumer goods business are as follows:

  1. Rising health consciousness (opportunity)
  2. Rising environmentalist behaviors (opportunity)
  3. Gradual dismantling of the gender divide (opportunity)

Unilever can grow through products that directly address consumers’ increasing interest in healthful products. In addition, rising environmentalist behaviors present an opportunity for the company to attract more consumers by improving its environmental impact. For example, Unilever can minimize its energy consumption by adopting new and more energy-efficient technologies. Also, the company can grow through higher sales based on improving incomes among female consumers worldwide. The external factors in this section of Unilever’s PESTEL/PESTLE analysis show the importance of product innovation in growing the consumer goods business.

Technological Factors in Unilever’s Business

Unilever depends on available technologies to support its consumer goods business. This section of the PESTEL/PESTLE analysis identifies the impact of technological trends on firms and their remote or macro-environment. In Unilever’s case, the following technological external factors are significant:

  1. Rising business automation (opportunity & threat)
  2. Rising R&D investments (threat)
  3. Decreasing cost of transportation based on technological efficiencies (opportunity & threat)

Rising business automation is an opportunity for Unilever to increase operational efficiency. For example, new business processing equipment can enhance inventory monitoring to support supply chain and distribution efficiencies (Read: Unilever’s Operations Management). However, the same technological external factor is a threat because it increases the competitiveness of other firms, including small ones in local markets. On the other hand, rising research and development (R&D) investments threaten Unilever because it also increases the competitive advantage of other firms in the consumer goods industry. Nonetheless, the decreasing cost of transportation leads to lower operating costs, which contribute to business growth. Still, the decreasing cost of transportation is a threat because it contributes to the competitiveness of other firms. This section of the PESTEL/PESTLE analysis of Unilever highlights growth opportunities and competitive threats based on technological trends in the remote or macro-environment.

Ecological/Environmental Factors Affecting Unilever

Ecological trends and conditions influence Unilever’s remote or macro-environment. The effects of the natural environment and related issues are considered in this section of the PESTEL/PESTLE analysis. The following ecological external factors significantly affect Unilever’s consumer goods business:

  1. Rising interest in business environmentalism (opportunity)
  2. Increasing business efforts on sustainability (opportunity)
  3. Increasing complexity of environmental programs (opportunity)

The rising interest in business environmentalism is an opportunity for Unilever to improve its environmental programs to attract consumers concerned about the environment. In relation, the company can enhance its sustainability programs to strengthen its competitiveness against other firms in the consumer goods industry. Unilever’s corporate social responsibility strategy must effectively implement these programs throughout the organization. For example, the strategy must consider product innovation and internal business processes to further reduce business environmental impact. These efforts should also support Unilever’s ability to satisfy increasingly complex environmental programs. Such external factor is an opportunity for the company to improve its competitive advantage through corporate responsibility. Based on the condition of the remote or macro-environment shown in this section of Unilever’s PESTEL/PESTLE analysis, there are opportunities to improve business performance by making the organization more environmentally sustainable.

Legal Factors Facing Unilever

Unilever must satisfy regulations to minimize barriers to its consumer goods business. This section of the PESTEL/PESTLE analysis determines the impact of legal systems on firms’ remote or macro-environment. Unilever must satisfy the issues based on the following legal external factors:

  1. Increasing complexity of environmental regulations (opportunity)
  2. Strengthening international patent laws (opportunity)
  3. Strengthening consumer rights laws (opportunity)

Unilever has an opportunity to enhance its corporate image by matching the organization’s corporate social responsibility strategy with environmental regulations. In addition, strengthening international patent laws can facilitate the company’s growth. For example, new patent laws in developing countries help reduce patent-related issues Unilever experiences in its remote or macro-environment. Furthermore, stronger consumer rights laws create an opportunity for the company to improve its customer-service quality, along with product quality standards. These efforts can increase the attractiveness of Unilever’s brands in the consumer goods market. The external factors in this section of the PESTEL/PESTLE analysis of Unilever indicate the benefits of improving legal systems worldwide.

Unilever’s PESTEL/PESTLE Analysis – Recommendations

This PESTEL/PESTLE analysis reflects a number of opportunities and threats that Unilever must prioritize in its strategies for growth and global expansion in the consumer goods market. A recommendation is that the company’s strategies must include the external factor of rising health consciousness among consumers. Unilever can take this factor as an opportunity to improve its food products. It is also recommended that the company must improve its sustainability programs to address opportunities regarding business sustainability. Another recommendation is to take rising business automation as a significant threat that empowers Unilever’s competitors, especially smaller ones in local markets. For example, local companies can increase their competitive advantage by automating their production processes. Given such issues based on this PESTEL/PESTLE analysis of Unilever, global growth with innovation and business sustainability require strategic focus.

References
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