Impact of Government Policies on Unilever's Business Environment
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Introduction - The Impact of Government Policies and Globalization on Business Environments
Business environment of an organization is impacted by different changes in public sectors and governmental policies. The recent COVID-19 pandemic has brought several changes in the government’s operational policies and actions. After the outbreak of the pandemic, the government implemented some infection control measures that resulted in a reduction in business activities. It has resulted in a decline in the retail, hospitality, and tourism industries. Public sectors generally consist of organizations that are operated by the government to give services to society and citizens (Biber et al, 2017). On the other hand, private sectors are part of the economy are owned and operated by individuals or companies to earn profit and are not directly controlled by the state. However, any changes in both sectors have an impact on each other’s structure and activity. Unilever is a British multinational retail organization that operates in around 190 countries. The organization sells a diverse range of products including food items, water and air purifiers, cosmetics, and personal care. The organization has its headquarters located in London. As it is a multinational organization, the structure, business operations, and profitability of the organization are impacted by different governmental policies and actions. This report will highlight the impacts of changes in governmental policies and actions on the business environment of Unilever.
Legal structure and their impacts on business
There are different legal structures that the organization follows in its business operations. The four most common legal structures are Sole Proprietorship, general partnership, Limited Liability Company, and corporation. The explanation and advantages and disadvantages of these legal structures are discussed below.
sole proprietorship
Here the whole business is owned and operated by an individual. Thus, there is no legal distinction between the owner and the business. Advantages
Easy to establish, the cost of capital formation is low.
The owner has full autonomy over the business.
Disadvantages
Personal exposure to risk is maximum.
Investors are less likely to invest in such businesses.
General partnership
Here the association of the business is between two or more people. Each of the partners is jointly liable for any partnership obligation. General partnership business does not pay federal income tax. Partnership agreements are established depending on capital contributions, distribution of profits or losses, and management responsibilities (Just,2018).
Advantages
Easy to create and operate
Profits and losses are passed through to the owner’s tax returns.
Disadvantages
Partners are individually liable for debts.
This can lead to management issues between the partners.
Limited Liability Company
It is a hybrid of a corporation, general partnership, and sole proprietorship. Owners of an LLC is known as members. Members may be individuals, corporations, or other LLCs.
Advantages
Owners have limited liabilities.
This legal structure allows numerous numbers of members.
Disadvantages
Such legal structures are sometimes subject to additional taxes.
Each member’s profit is taxable.
Corporation
It is the most complex legal structure. It is a legal structure that is separated and independent from its owners. It can enter into a contract that is separated from its shareholders.
Advantages
Shareholders have different liabilities.
Generally, a favourable formation that attracts investors.
Disadvantages
This process makes the business more complex and costly.
Liable to a high level of taxation.
Unilever is an LLC with an Anglo-Dutch structure However, the completion of Dutch and UK into a single London-based entity occurred in 2020. Thus, the organization is largely impacted by the policies of the UK government.
Differences between public and private ownership
The difference between public and private ownership is that public money intentionally changes and changes the pay dependent on the costs while private money controls the costs dependent on future pay.
Public ownership:
The primary benefit of looking for public ownership is that it offers a bigger pool of subsidizing for the organization than private ownership alone.
The extent of subsidizing accessible from public financing is its central benefit.
The first sale of stock is the point at which a privately owned business converts to a public organization by selling portions of its stock publicly (Parida & Madheswaran, 2021).
An organization can sell further portions of stock in secondary contributions.
An organization can likewise sell obligations, such as bonds, openly trade.
Private ownership:
Private ownership can upgrade an association's capital construction, save money on costs, and work on administrative impetus arrangement (Davis et al, 2018).
One benefit of private ownership is that private financial backers might inject the organization with more capital than was accessible to it from public financing.
Private ownership likewise saves money on the regulatory expenses of being a public corporation.
Private ownership can further develop impetuses for the executives, and increment financial backer contribution.
Unilever is a private-sector organization. Thus, the owners have to focus on productivity and profit-making.
UK Competition Policy and the Legislative Framework
The competition policy of the UK was designed to save businesses and customers from anticompetitive actions and behavior. This law secures effective competition for delivering open and dynamic markets as well as increased productivity and good customer experience. The UK government has to establish different autonomous authorities to evaluate and implement action actions against anti-competitive practices. Anti-competitive practices lead to the elimination of competition and misuse of market power. The UK’s exit from the EU has a significant impact on competition policy. Unilever has benefitted from the competition policy and the legislative framework.
Business review practices and its impact on Customers
Competition and market authority of the UK promotes competition for the benefit of customers. This organization is responsible for reviewing the business practices and performance of different organizations. The CMA works to make sure that consumers can get a good deal when they buy goods and services and the organizations operates within the law(Angulo-Guerreroe al,2017). This body reviews mergers between organizations so that healthy competition does not reduce. Moreover, they investigate entire markets if they think there are competition or consumer problems. The organization has investigated Unilever’s business analysis recently and they are satisfied with it. Unilever promises to ensure the delivery of the best products and services to its customers. The organization is rebuilding its operation policy after 2021.
Government policies during the recession
The accompanying political external elements are critical in Unilever's customer merchandise business: The political stability of most nations. Policy cantered issues after exit from the European Union and developing free trade relations. However, the government has to change its actions and policies during the recession and other crises. The government has to give some relaxation in its taxation policies for the improvement of the country’s economy (House et al, 2020). The UK government has also implemented some measures for recovery of the business after the COVID-19 pandemic. The government had created policies to rebuild the business. The government has introduced effective packages to support small, medium, and large businesses. It has implemented a business rates holiday worth 11bn euros. The government is also providing loans to businesses that have been critically affected by the COVID-19 pandemic. All of these policies are helpful for the business recovery of Unilever. However, the UK government should focus on creating more effective policies and their implementation in the future.
Impact of Globalisation on business, competition, and Economy
Globalization has given rise to many multinational business organizations. Unilever manages a wide assortment of outer elements, considering the degree of its activities in the worldwide purchaser products market. It has changed the nature of production by outsourcing and mechanism. The implementation of advanced technology has a positive effect on profit-making. Thus, globalization gave rise to an economic boom (Coulibaly et al,2018). However, globalization has several negative impacts also. One of the major negative impacts of globalization is an environmental crisis. The spreading of the coronavirus is another negative impact of globalization as the virus has spread from China to the whole world so rapidly. It is not possible without globalization. This incident hurts the global economy. Non-essential businesses have been most impacted by the pandemic and control policies related to this pandemic.
As a multinational organization, Unilever has been also impacted by the changing governmental policies. The business of food items is stable now, but the other departments of the business have been affected negatively. The business performance became better during the beginning of 2021. However, its time takes time for the full recovery of the business.
Conclusion
From the above discussion, it can be concluded that changes in the public sector and governmental policies largely impact the practices and profitability of a private organization. Unilever organization has also been affected by the changes in governmental policies and practices due to the economic crisis and Covid-19 pandemic. The annual revenue and profitability of the organization had declined in 2020 like many other private organizations. The condition is improving in the current year as the intensity of the pandemic has declined. However, the pandemic is still not over and the governments are concerned about the control measures. Thus, Unilever should make smart deskins to develop its business strategies so that they can cope with governmental policies and practices. The UK government should also create and implement its policies wisely for the economic development of the country.
References
Biber, E., Light, S.E., Ruhl, J.B. and Salzman, J., 2017. Regulating business innovation as policy disruption: From the Model T to Airbnb. Vand. L. Rev., 70, p.1561.
Angulo-Guerrero, M.J., Pérez-Moreno, S. and Abad-Guerrero, I.M., 2017. How economic freedom affects opportunity and necessity entrepreneurship in the OECD countries. Journal of Business Research, 73, pp.30-37.
Just, N., 2018. Governing online platforms: Competition policy in times of platformization. Telecommunications Policy, 42(5), pp.386-394.
Davis, D., Kaplinsky, R. and Morris, M., 2018. Rents, power, and governance in global value chains. Journal of World-Systems Research, 24(1), pp.43-71.
Parida, M. and Madheswaran, S., 2021. Effect of firm ownership on productivity: empirical evidence from the Indian mining industry. Mineral Economics, 34, pp.87-103.
House, C.L., Proebsting, C. and Tesar, L.L., 2020. Austerity in the aftermath of the Great Recession. Journal of Monetary Economics, 115, pp.37-63.
Coulibaly, S.K., Erbao, C. and Mekongcho, T.M., 2018. Economic globalization, entrepreneurship, and development. Technological Forecasting and Social Change, 127, pp.271-280.
