Nestle's Business Environment Analysis

This assignment analyzes Nestle's business environment through a PEST (Political, Economic, Social, Technological) framework. It discusses the significance of international trade for Nestle and other UK businesses, highlighting the impact of global factors like emerging markets and protectionism. The analysis also emphasizes the importance of EU policies on Nestle's operations, including taxation laws, health & safety regulations, and cost reduction strategies.

BUSINESS ENVIRONMENT

Table of Contents
Introduction................................................................................................................................4
Task – 1......................................................................................................................................4
Nestlé’s Organisation Type........................................................................................................4
1.1 : Identification and discussion about Organisation.............................................................5
1.2: Extension to which Nestle require to meet the objective of the stakeholders:...................6
1.3: Strategies and objectives to achieve the goals and targets:.................................................7
Task - 2.......................................................................................................................................9
2.1: Discussion about the effectiveness of Economic systems of Nestle...................................9
2.2 : Impact of Fiscal and Monetary policies on Nestle.............................................................9
2.3: Competition Policy and other regulatory mechanisms’ impact on Nestle........................10
Task - 3.....................................................................................................................................11
3.1: Market structures to identify the pricing and output decision..........................................11
3.2: Illustration on the process by which Supply shapes organizational and market forces
demand responses.....................................................................................................................12
3.3: How different cultural and business environments effects on different organisational
behaviour of Nestle..................................................................................................................14
Task – 4....................................................................................................................................15
4.1: Significance of International trade to run the business environment................................15
4.2: Importance of Global factors on different business organizations of UK........................15
4.3: Importance of policies of European Union on UK business Organisation.......................16
Conclusion................................................................................................................................16
Reference List..........................................................................................................................17

Introduction
Environment of business derives all the internal and external factors that try to impact
the environment of business. Different environment of Macro and Micro business
environment and Political factors are example of External factors which might not be
controllable, whereas, Organisational culture, Organisational behaviours are internal factors
that may be supported by the organisation.
It is required to develop an understanding of the two factors effectively by
organisation to create a professional business environment and earn benefits from it.
Structures of organisation are built in such a way that allows meeting the business objectives
of any organisation. Business environment of any organisation find out various strategies of
business that will help to achieve the all the purposes of the organisation that can be fulfilled
per the regulatory and legal aspects.
The purpose of this assignment is to develop an understanding of different organisations,
influence the stakeholder of an organisation and to understand the link between local,
national and global environment in business. This assignment will guide learners to know
about business’s organisational purpose, nature and environment, organisations behaviour
and make them to understand the importance of different global factors that tries to provide
support to the different activities of business.
Task – 1
Nestlé’s Organisation Type
Menychtas (2014) stated that, Nestle is one of the biggest multinational supermarket
that is considered as food and beverage company of Switzer land. It is one of the biggest
company in global market per revenues and other stats. The products that Nestle produce are
baby food, confectionaries, dairy products, ice-cream, frozen foods and snacks. According to
Giessmann (2014), the annual net sale of Nestle is about $1.1 billion by selling their 29
brands. Nestle has 447 factories that are spread almost every countries in the world. Almost
340,000 people used to work as employees in Nestle around the world. L’Oreal, the largest
company in cosmetics are their main shareholders (Smith, 2014).
Vision Statement: “To be a leading, competitive, Nutrition, Health and Wellness
Company delivering improved shareholder value by being a preferred corporate citizen,

preferred employer, preferred supplier selling preferred products” (nestle.co.uk, 2016)
Mission Statement: “Good Food, Good Life” (nestle.co.uk, 2016)
1.1: Identification and discussion about Organisation
The public sector
Per Solomon (2014), Public sector organisations focus on the part of economic
system, state, national or local government that helps to control the market’s economic
section. Almost 3.5 million of total private sectors are running in UK. Public sectors are
owned and operate by government and are run to provide service to the citizens. Public
organisations are those firm which are directly run through the government and local
authorities. And public sector is also may provide services to local public.
There are different governments across the world that used a unique process to
produce fund to the public sectors. As for example, Marks & Spencer is an enterprise that is
associated with Nestle. According to Sinay (2014), they used to sell almost all the products of
Nestle in their retail outlet. The main objective of private company is to earn profit, which
helps to create social and economic benefits for community apart from creating profit through
these public sectors.
Charity
Charity organisation or non-profit organisation need to set clear aim, as they are try to
possess concern to earn the value of money. These organisations try to present their best
service to gain the aims they have set. These types of organisations are mainly focused to
stop the wastage of their limited resources in the process. Nestle has a clear vision on charity.
They help lots of NGO by giving them the products of Nestle for the needy people, such as
they provide financial aid to Missionaries of Charity (Hogarth, 2015).
Cooperative
Cooperative are considered as the autonomous association of people, who are free to
use the voluntarily way to meet the common objectives in terms of business purposes for an
organisation. Cooperative organisations are not similar from other organisation. The
cooperative organisation gain profits by selling numbers of the shares and then extend the
voting rights to other members. Nestle is associated with national cooperative organisation

that operates its business for co-operatives (Bartos, 2014). Private sector is oe of those sector
who provide services in their concerning organisation. And private companies is one the
companies who own share for generating high profit and revenue.
1.2: Extension to which Nestle require to meet the objective of the stakeholders:
The stakeholders of Nestle are divided into several categories. They are Suppliers-
suppliers are third party vendor and they supply raw materials to the company. Marinating a
buyer supplier relationship and bargaining power with the supplier help the suppliers to meet
the objective.
According to Welter (2014), customers are main stakeholders of any company. Thus,
the objectives of the stakeholders are meeting through providing excellent service to them
with a strategic pricing of the products. It is necessary for a company to produce proper
information about the product to their customer before telling them to buy it (Corcoran, 2015)
The government of different respective countries where the business is being operated
is also a stakeholder of Nestle. Trade unions, Non-government organisation, shareholders,
employees, manufacturer are all members of Nestlé’s stakeholders group. The objectives of
these shareholders are met through providing tax and maintaining the laws and regulation of
business.
The organisation Nestle should figure out the problems of its stakeholders, they need
to co-operate in between the internal and external stakeholders. The business ensures that the
shareholders need to enjoy the maximum competition from the competitors. The organisation
also tries to support the NGO by donating funds thus their objectives are also meet (Iwai,
2014).
Nestle use different processes to create a relationship with stakeholders. One of such
process is communicating with customer through different ethical Trading websites.
Nestle also provide importance to primary stakeholders to set their internal policies.
They have quality benefits to attract employees in their orhanisation. Nestle also generate
suggestion from their investors before making the financial investments. One more thing
cited company have healthy relationship with their suppliers who made aid to high
productivity.

Reducing packaging cost
Use sason factory time for production
Minimal Advertisement
Use of local raw materials
On the other hand company also focuses on interests of secondary stake holders, and
they have implemented several sustainability activities to improve the well being of society,
which is associated with customers.
Figure 1: Stakeholders Objective of Nestle
(Source: Hogarth, 2015)
1.3: Strategies and objectives to achieve the goals and targets:
Nestle focuses on the Water resource ACT 2007 and Environmental Protection Act
1987, these two working bodies jointly works to control the environment and pollution that
are created by the manufacturing firm of Nestle products. Per Olson (2015), Nestle mainly
focusing on the people, those who love dairy products.
People who love to take dairy goods in their daily life they are the main objectives for
Nestle. Nestle has developed a good customer proportions and it has developed as a brand.
Nestle’ value based on offering with complete manner and it goals to target proper customer.
The company offers good quality of food products in an affordable price to their
customer. Nestle is focusing on the Performance Management which might help the
managers to integrate the approach and set targets measures and redefine the goals and
Nestlé’s
Strategic
Decision

produce a clear indication to provide enough support to their employees so that they can able
to work effectively. Nestle has also strong focus on different labour laws for their suppliers
and employees in different part of the world. Nestle has various policies to maintain financial
support of the organisation (Vogel, 2014). There are various responsibilities to aid to achieve
high profit and revenue. Nestle provide proper information to their concerning stakeholder to
aware new business activities and strategies. They also conduct meeting and conference
where they spread all information related to their activities and strategies. Here company
finance department responsible to provide all budgeted information. For achieving high
profit and revenues company done CSR activities to generate their image.

Task - 2
2.1: Discussion about the effectiveness of Economic systems of Nestle
Nestle has stable, consistent and accelerated growth in entire turnover in term of their
recent performance. They have the record sales, net profit and pay record dividend to their
shareholders in current year. Almost 84.2 billion in sale and 6.681 million in profit are
recorded in this year. They are remarkable to make steady profit every year (Hlawiczka,
2016).
Nestle manages an investor relation programme to get the assurance that all its
investors and potential investors always in touch with the company. Financial indicators, one-
to-one meetings are some communication tools used by Nestle to stay in connect. Nestle has
their production facilities mainly in European countries. In some countries it has taken long
years for them to receive full return on their investment (Smallbone, 2014).
Nestle starts their operation mainly in developing countries with dairy products. As a
result, it helps the local farmers to develop their economic condition and develop a modern
dairy industry. Nestle Agricultural services is one of the key service in worldwide who has
the responsibility to develop and protect the source of raw materials. Its main activity to
provide agricultural extension service to farmers (Soyer, 2015).
There are two types of economy system where this concept is based on mixed
economy. In this economy system private and governmental bodies both are regulate the
market . In this economy government have less control on the activities. On the other side
private companies have to used all resources which are mentioned. So in that situation the
economic system of the country effect on allocation of resources significantly.
2.2: Impact of Fiscal and Monetary policies on Nestle
Per Nestle, monetary policies are considered as the impact constituent of the
stabilization strategy in different countries as it is faster and possesses more flexibility than
fiscal policies. Monetary policy is secluded according to fulfil the political demands.

Monetary policies affect money supply of the nation.
Nestle tries to use three main monetary tools that can help to control and try to
produce impact so that it can able to produce abilities to create money to run the system of
commercial banking. They are the reserve ratio, open market and discount rate (Rubtsova,
2014). This tool helps to supply money and affect macro-economic factors. These tools are
important as it maintain a balance between low inflation, economic growth and reasonable
rates of unemployment. Nestle choose their foreign trade partners carefully based on the
questions ‘what to produce’ and ‘whom to produce’ on individual basis (Kovalev, 2015).
While working on for the foreign customers, it is found that, the demand of the
customers is mainly on two different aspects. They are price elasticity and cross elasticity.
Government taxation, spending policies, education and infrastructure business are involved in
fiscal policies that help to drive business demands. Nestle follows the federal funds because if
it is found that the amount money supply is more comparing to the production of goods then
the government will increase the interest rates and decrease the supply of money to the
company.
If government thinks that the rise of economic growth is more in the ratio than the
supply of money, they reduce the rate of interest and the product will be cheaper than before.
Nestle always try to increase their economic supply to reduce the market price of their
products. This will help the customer to buy their goods with more comfort (Kovalev, 2015).
2.3: Competition Policy and other regulatory mechanisms’ impact on Nestle
Per Leong (2010), Competition policy is used to measure the success of a company
and to fulfil the increasing demand of customers. Nestle has analysed the competition as a
part of regular measures. It is observed that, it deducted its monopoly that has lowered the
competition with other companies who are in the same field. Nestle is affected by regulatory
mechanisms effects as an organisation to produce more products due to high taxation. Due to
low revenue, the number of employees started to decrease in the company (Yew Wong,
2014).there are various competiton policies which may provide healthy competition in their
workplace. The main objective of competition policies is to ensure the efficient and fair
operation of markets in order to maximize total economic welfare. The company gives
importance on the competition policies to run the business through an ethical way.

The competition policy affect as both positive and negative in the company. It
supported Nestle so that it can take the initiative to improve the environment of the market
and it will try to increase the effectiveness of organisation. It delivers according to technical
innovation, customer choice, price fixing and easy entrance for new competitors. Some
regulations made by the government, restrict the price and ensure good services and better
technology for customers that ultimately lead to success in the market (Kovalev, 2015).

Task - 3
3.1: Market structures to identify the pricing and output decision
Perfect Competition
Perfect condition is those conditions that act as a situation obstruction where
consumer and a seller is well known about different aspects of relating to the above policy
and the product cost is so expensive that is out of the control of both individual buyer and
seller. Perfect condition consists of many homogenous products.
There is no single firm, which encourage the product cost that influences the mean
price of the elasticity of demand. If it is found that, if the level of competition is large in the
environment of different types of companies, try to dominant the entry of market, and creates
obstruction from entering those companies that are intended for joining the market (Slater,
2015).
Monopoly
The monopoly market can be considered as the one of the biggest obstruction that
leads as a barrier to obstruct the growth of the market. The firm which are having the same
marginal revenue to increase their market growth and take the competitive advantages from
the market. According to process of the monopolistic markets, the producers of the market
get the chance to make the process of price determination and as a result the price of the
products are increased which possess discrimination of price for the customers (Evans, 2011).
Oligopoly
There are numbers of techniques and types that are used by the marketer to make tyhe
determination of the price of different products. Mutual inter-dependencies express the
condition in the time where the selling price has been set that also is the set price for
establishment of the product. There are few firms those who compete in the market with a
commodity in the Oligopoly market.
There are important characteristics of Oligopoly market. It is a big issue for the new
organisation to enter in the market advantage and they face huge problems to recognise the
decision making process to determine the price and fail to determine objectives that are

Duopoly
OligopolyMonopoly
Perfect
Competition
required to gain advantage (Kovalev, 2015).
Duopoly
If any of the industry is composed of any different two big firms, each selling same
products and having almost half of the total market there is huge possibility of clash in
between the two firms. Competition and different market types need to make economic
analysis, pricing along with several output decisions that has been taken in output decisions
in the monopoly market. Intimations of monopoly market and perfect completion lie to take
the managerial decision.
Among these in which market does Nestle operates is recently following the
penetration pricing to market products. According to Cannon (2014), this processes where
Nestle can a relatively low price for a product originally to reach the mass market. Nestle has
decided that they need to select a better pricing strategy which will help them the direction of
movements of the price over the life cycle of the product of Nestle. Nestle has to be
conscious of high price. If they raise the price, they have to produce better quality product.
However, the competitors of Nestle will also get influence by the price strategy (Cannon,
2014).
Figure 2: Market structures to identify the pricing and output decision
(Source : managementtheoriesnestle.wordpress.com, 2016)

3.2: Illustration on the process by which Supply shapes organizational and market
forces demand responses
Different microeconomics theories are applied by Nestle with its firm and their
economic environment. Nestlé’s supply and demand can be affected by different factors,
which will also affect their profits. Demand can be described as the desire and capability to
buy the product. Supply is the amount of products and service. Nestle responds to its market
demand by analysing customer’s attitude and requirements through market research. They
apply two forms of research, one is qualitative and other is quantitative
(managementtheoriesnestle.wordpress.com, 2016).
Supply and demand chain is very effective for the organisation and there most of the
companies are depend on this process to set their business goals and objective. They want to
generate market customer demand and need so that they according develop their product
chain .
Demand’s Price Elasticity is a unit-free measurement of sensitiveness and
responsiveness of a quantity of a good or service requires changing in its price when all other
influence or buying plans remain the same. The formula of Price Elasticity of Demand:
Price of Breakfast cereal
D
10%
20%
suppl

Price Elasticity of Demand of Breakfast cereal = 10% / 20% = 0.5
Power of customer of Nestle is high, Power of supply is moderate in Nestle, Degree of rivalry
is moderate, Substitute threat is high these can be analysed by evaluating the Nestle business
report.
3.3: How different cultural and business environments effects on different
organisational behaviour of Nestle
As a multinational company, Nestle has to build a level of adaptation, which is
suitable to different markets driven by customer choices and different culture.
Political Nestle change the regulation food standards and marketing
action of the surroundings. They also change the global
regulation-standardised practice while working under different
political forces in different countries (Hult, 2015).
Economic Nestle has change the budget for their customer. Nestle is
focusing on their awareness and knowledge of changing
inflation, income level and economic growth level Nestle also
focusing to sustain the rate of rising price of raw materials.
Social Nestle is changing their products according to the change of
customer’s attitudes and lifestyle. They are making product
according to customer behaviour (Soyer, 2015).
Technical Nestle is showing innovation in technical department. They can interact
with their customer in social media platform. They introduce E-commerce
for different upgraded technology while producing food products in
production centres (Olson, 2015).
Legal Nestle is changing the regulation. They need to adopt themselves to world
regulation and changes in different international market. They follow the
food Regulatory act (Kovalev, 2015). Legal factors are create a render
impact on the marketplace behavior where they all have different culture
Output of Breakfast
Cereal

and legal factors is same for all of them.
Environmental Nestle has increased their attention to social responsibility.
They also show their concern on their packaging to protect the
environment.
Table 1: Pest analysis of Nestle
(Source: Sinay, 2014)

Task – 4
4.1: Significance of International trade to run the business environment
Per Neely (2013), it can have observed that the international trade tries to cover the
process of trading between the rest of the world and with UK. It is found that every country
has distinctive source of services, goods and the trading process between two different
countries.
These countries use to achieve the benefits in terms of economic aspects. The UK
organisation tries to achieve the benefits from the different business environment of other
countries. However, the cost production of that organisation will exceed. It is found that the
employees from UK try to visit other countries so that they can able to achieve more earning
from that business environment. The employee of Nestle went to different countries to
achieve more earnings from the environment. It is found that UK has the quality to possess
the development of economy to higher margin.
4.2: Importance of Global factors on different business organizations of UK
Different types of Global factors try to produce the opportunities for making
international trade that bring growth in the UK economy (Stalk, 2011). Nestle operates in
those countries where it is found that the labour rate is cheap, the price of raw material is low
and easy to find.
Market
Opportunity
Due to GDP rate is high and inflammation rate is low in UK, Nestle gets the
opportunity in technological advancement to conduct their business
successfully (Soyer, 2015).
Emerging
Market
Different countries from the developing part of the world and the countries of
BRICS have show huge improvement in the development process of their
economic structure. It can be considered that the country from these groups
will lead the economic market in future. It is important for the organisations
that are belong from the UK to use the platform of these countries to develop
their business structure.
Protectionism It is important for all business organisation to make their trade to different

countries taking the help of different policies that can help them to make trade
smoothly. It is important to follow all the business policies that are developed
by the government of the respective countries so that every company can get
equal opportunity to get fair competitive advantages from the market and they
might not face any sorts of barrier that lead them to face serious loss from the
market (Sinay, 2014).
Table 2: Global factors on UK business organizations
(Source: Keiningham, 2016)
4.3: Importance of policies of European Union on UK business Organisation
Per Boons (2013), it can have observed that the policies of EU tries to provide support
the business industry or organisation to such a manner so that they can able to achieve the
advantages in terms of promotion. It is important for the small companies to develop their
promotional activities in the market so that they can able to exist in the market.
The policies of EU try to influence the organisation like Nestle to spend money for
the taxation laws and try to mitigate the barriers which they can face while licensing their
products. It is important for the Nestle to follow all the terms and condition of health and
safety act and try to produce those products for their customers that are healthy for their
health and it does possess any sort of problems in the health of the customers. The EU
policies will help the organisation to reduce the cost of the regulation and help them to
sustain in the competitive markets.
Conclusion
It is necessary like Nestle, every business organisation have to understand the
business environment. They have to identify the strength, weakness, threats and other
opportunities. Every organisation has to follow some definite strategic plans and analyse
those plans regularly for their development.