Nestle's Challenges and Success

This assignment examines the factors contributing to Nestle's success as a leading food company. It delves into the company's history, its impact on the business environment, and the challenges it faces due to evolving customer needs and competition. The analysis also explores how Nestle adapts to these challenges through innovation and strategic decision-making.

Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
LO 1 Understanding the organizational purposes of business.........................................................1
1.1 On the basis of structure, purpose of different types of organizations that Nestle caters for
business relationship...............................................................................................................1
1.2 Objectives of different stockholders, employees and customers, institutions and agencies
influencing operation of organisation in various ways...........................................................2
1.3 Responsibilities of an organisation and strategies employed to meet them.....................3
LO 2 Understanding the nature of the national environment in which business operates...............4
2.1 Economic systems attempt to allocate resources..............................................................4
2.2 The impact of fiscal and monetary policy on Nestle business activities..........................4
2.3 The impact of competition policy and other regulatory mechanisms on Nestle activities.5
LO 3 understanding the behaviour of organizations in their market environments. ........6
3.1 Market structures determine the pricing and output decisions of Nestle.........................6
3.2 Market forces shape Nestle organizational responses......................................................7
3.3 The business and cultural environments shape the behaviour of Nestle..........................7
LO 4 Assessing the significance of the global factors that shape national business activities........8
4.1 Significance of international trade to Nestle as a UK business organization...................8
4.2 Impact of global factors on Nestle as a UK business organization..................................9
4.3 Impact of policies of the European Union on Nestle as part of the UK business
organization............................................................................................................................9
CONCLUSION..............................................................................................................................10
References......................................................................................................................................11

INTRODUCTION
With its headquarters in Vevey, Vaud, Switzerland, Nestle S.A is a food and drink
company, and it is said to be the largest food company in the world regarding revenue and other
metrics. The company’s roots can be traced back in 1867 when Henri Nestle had a breakthrough
in infant food development (Nestle, 2017a). The child food company later merged with another
company Anglo-Swiss in 1905 to form what is the now Nestle Group. Over the years, the
company has been growing slowly by slowly all over the globe, and today its products can be
found in more than 190 countries with more than 400 factories. Being a food and drink industry,
the company has more than 2000 brands worldwide (Nestle, 2017b).
LO 1 Understanding the organizational purposes of business.
1.1 On the basis of structure, purpose of different types of organizations that Nestle caters for
business relationship.
Just like other companies whether large or small, Nestle also has organizational
structures. The main purpose of these structures is helping the company conduct its business
smoothly. It is through these structures that the relations between individuals within the
organization are demonstrated. Different companies have different types of organization charts
or structures depending on the nature business the company deals with. Nestle is organized
according to a matrix structure. In this, the low branches have a high level of independence
where the day to day activities and decisions are left to them. However, some major strategy
decisions are made at the headquarter level (Broeckx and Hooijberg, 2008).
To enable the company to perform its business, the management is divided into three
types; the top level management, middle-level management, and the low-level management. The
top management sets aside more of its time on planning and coordinating functions as well as
laying down the company’s objectives and policies (Ketharan, 2011). However, these are not
their only duties, but they also have other functions and chores. Branch managers and
departmental managers constitute the middle-level management, and the operative of their
departments is their responsibility. More of their time is devoted to directional and
organizational functions. Just like the top level management, the middle-level management also
has other duties and responsibilities. The lower level management constitutes of supervisors,
superintendent, and other officers. Their job is mainly assigning jobs to other workers as well as
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instructing them during their day to day activities. The worker's complaints are also solved by
this level of management among other responsibilities (Nestle, 2012).
There are various types of organisational structures such as:
 Hierarchical
 Matrix
 Flat
out of which Nestle prefer matrix approach. As it has decentralized, so they provide high
level of independence to their subordinates. But all the major decision are still taken by the
authority of organization. Along with this they follow non-linear interacting approaches due to
which sometime process become more complex. Along with this various types of relationship
management approaches are considered by Nestle such as:
Operational: Under this they explain objective to their customers by including various means of
interacting process. In this customers needs are identified and on the basis of that various
approaches are considered in order to satisfy them.
Analytical: Under this method process is divided into two parts such as performing operational
activity and analysis of previous resources. All the essential information are collaborated into a
single issue and on the basis of that operation are selected.
1.2 Objectives of different stockholders, employees and customers, institutions and agencies
influencing operation of organisation in various ways.
A company that is successful is the one that meets all or most of its stakeholders
objectives. Stakeholders are all the groups that influence the company’s operations. These can be
shareholders, customers, employees among others. Different stakeholders have different
objectives. Their power towards the company’s decision in achieving the objectives is also
different. Any business has internal and external stakeholders. The internal stakeholders affect
the company directly while the external stakeholders affect the company indirectly. There is also
another category of stakeholders known as connected stakeholders and the also affect the
business directly and sometimes indirectly.
Over the years, nestle has been very because it has been able to meet most objectives of
its stakeholders. To understand the extent to which nestle has complied with the objectives of its
stakeholders, it useful to understand who the stakeholders are. The internal stakeholders are the
company’s managers and the employees. It's connected stakeholders are the customers,
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shareholders, financiers and suppliers. The external stakeholders are the government and the
community. To the internal stakeholders, nestle has been able to provide a conducive
environment which includes paying them well and giving them the relevant knowledge to enable
them to perform their duties (Halbert and Ingulli, 2012). The connected stakeholders have also
been taken care properly. For instance, the company has been trying to meet the customers
demand while maintaining the minimum cost as much as possible (Nestle, 2017b). The company
has also been paying reasonable dividends to its shareholders. To the external shareholders, the
company has been faithful to the host governments through payment of taxes. To the community,
the company has been in good terms to the communities surrounding it. This can be in terms of
providing employment to the locals who surround the company’s industries (Fernado, 2011).
As vast range of stakeholder are involve into company therefore various types of
objectives will be provided for engaging and regulating changes such as money, growth,
customer satisfactions are considered as major objectives. Along with this if government
stakeholder are involved in that case objective will be shifted to budget and taxes along with this
various other legal issues are also considered for the employees of firm.
1.3 Responsibilities of an organisation and strategies employed to meet them.
A company cannot be successful without carrying out its management responsibilities
well too. This includes taking good care of its customers, employees, suppliers and the local
community. To the employees, nestle has put in place retirement pension plans as a management
responsibility. It also provides good quality services and products to its customers. The company
is also honest to its customers who are a good management responsibility. For instance, Nestle
chocolate company portrays a good picture of a good and honest business. To deal with ethics
issue, nestle follows all ethics consisting of culture and also while importing or exporting
products to and from other countries ethics have to be complied with. Nestle is has various
responsibilities associated with it such as providing informations related to nutrients that they are
providing through their products, innovative and encouraging practices should be adopted by the
employees, along with this they should also provide risk and reward on the basis of their
performance so that they can motivate to improve their performance. Lots of investment takes
place on research and development process so that production factors cover all areas as such
economical, demographical and local.
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LO 2 Understanding the nature of the national environment in which business
operates.
2.1 Economic systems attempt to allocate resources.
For the economic growth of a company like nestle and the host countries, there are
various resources which combined contribute towards the growth. Some of these resources are
workers, raw materials, suppliers, customers, and finance among others. These resources are
allocated or connected by the economic systems. The economic systems are also of different
kinds. There are private and public systems, transitional economies systems, and financial
systems. All these attempts to allocate the resources. However, the allocation has to be as
effective as possible. For instance, the workforce is allocated according to the qualifications
whereby skilled workers are given jobs which match their qualification. The same happens to the
less skilled labour where they are given tasks which match their experience (Beeetsma, 2004).
Checking at the economic systems that allocate these resources, nestle seems to rely mostly on
the market economic system. In this system, the company produces its own goods while trying to
get the maximum profit possible. The resources allocations are therefore driven by market forces
such as demand and supply. Unlike planned economic system, the government does not play a
significant role in the market economic system (Reddick and Roy, 2013). Usually, government
does not make decision, organisation takes by considering all the policies that are implemented
by government agencies. Such as Nestle hires labour for work and provides wages by
considering government policies and acts. Along with this various trade exchanges are also
provided by company in the form of tax. In case if they want some investment or loan then
through which they can get various investors.
2.2 The impact of fiscal and monetary policy on Nestle business activities.
The main purposes of the fiscal and monetary policy are the same. These purposes are to
promote stable economic growth, to stabilize the prices of commodities, to balance payments and
to reduce the level of unemployment. Fiscal policy is aimed to control the economic cycles, and
it is driven by the federal government. If a country is in a recession, the government can control
the recession by purchasing some commodities or reducing the taxes. If it chooses to reduce the
taxes, this can be to the advantage of the companies like Nestle. On the other hand, if the
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economy is not in recession, the government can choose to increase the taxes, and this may affect
the company negatively.
Monetary policy is a mechanism that is used to control the supply of money by the
central banks of a particular state. This is done by changing the interest rates on the money
borrowed. It can also be done by changing the reserve requirements for open market operations.
When the interest rate is changed, it impacts the supply market. For instance, when the economy
is in recession, the rates go down. The low-interest rates cause people to spend more money
which in turn increases the demand for products supplied by companies like nestle. To some
extent, this can affect the company positively because the community will consume the goods
more. Consequently, the opposite can also happen where the interests are raised. This reduces the
demand for commodities thus affecting the companies negatively. Different governments have
different fiscal and monetary policies, and they all affect businesses positively and negatively
(Beetsma, 2004). Nestle is largely dependent on these. Due to which they are able to get loan at
small interest rate and also easily get borrow from different government agencies. Along with
this they have to pay reduced amount of tax and increased government ids also providing
expenditure in case if organization is growing.
2.3 The impact of competition policy and other regulatory mechanisms on Nestle activities.
The competition between companies is controlled by the competition policy. They
control the existence of monopolies in the market. They also make sure that the coming together
or vertical integration of companies does not damage the market structure. The policy is also
responsible for the promotion of fair competition in the local markets. Without this policy, the
prices of commodities can be very high and especially the prices of gas and electricity. The
policies also include strategies that push the manufactures to produce goods that met the
customers’ needs. For a company like Nestle, competition helps the company produce more
quality products while coming up with ways of maximizing profits. The policies also prevent
nestle from practising monopoly to the companies producing the similar goods. High taxation in
some countries in a bid to control competition also affects the company negatively because the
profits are less when the taxation is high. In the long run, the competition policies and regulatory
mechanisms affect nestle and other companies both positively and negatively (Beetsma, 2004).
Nestle emphasised of competition policies in order to improve quality and efficiency of
their product. For this they usually prefer four principle such as anti monopoly, market
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relaxation, resource control and market control. With all these policies they are restricted for
competition ad cannot make direct changes into their prices. Along with this they are also
restricted by various government agencies due to which they have to ensure the quality of
product that are offering to their customer.
LO 3 understanding the behaviour of organizations in their market
environments.
3.1 Market structures determine the pricing and output decisions of Nestle.
Market structure defines the nature in which various companies interact with one another.
Notably, market structure is usually determined by factors such as the size of the company, types
of good produced and the similarity of goods produced by different companies. Additionally,
market structure is determined by the existence of new business opportunities for different
companies, ability of organizations to influence market through advertisements, and availability
of customers among other factors. The type of market structures that result from these factors is
perfect competition monopoly; monopolistic completion, oligopoly. All these types exist in
different parts of the world, and where to nestle conducts its business, they affect the pricing of
its commodities. In a case where Nestle has the monopolistic competition, it means that it has
most of the market share in that area and they are able to dictate the price of their commodities in
those areas. That means they can take it as high as they want as far as the largest market share is
theirs. Where oligopoly is practised, the prices of goods are harmonized across different firms,
and the competition here is in terms of quality, technical excellence, and reliability of its
products. Under perfect competition, the companies involved produces goods with almost the
same standards and quality. In this case, Nestle cannot be able to control the price of its products,
but instead, the price is controlled by the demand and supply of goods and services. Nestle
follows oligopoly market structure through which they are producing goods at high amount
along with this they are providing to limited distributors and directly dealing with suppliers. As
various other brands are so giving competition due to which Nestle cannot provide their services
at higher price because due to this competitors may take advantage of this and can promote their
brand at lower price. For this always services should be provided at affordable prices.
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3.2 Market forces shape Nestle organizational responses.
The conditions that affect the supply and demand of commodities in the market are called
market forces. These forces determine the prices, buyers’ behaviours, seller’s behaviours,
increasing the efficiency and quality of work among others. In the market, supply and demand
have a very large effect on the prices of commodities. For instance, if Nestle and other
companies producing the same goods as Nestle produce a lot of goods such that they exceed the
demand, then is means that the market will respond by lowering the prices of those commodities.
This can affect Nestle negatively because it will produce more goods but sell them at low costs.
If the demand is too high such that the firms are not able to produce more to meet the demand,
the prices of goods will be higher, and this will be to the advantage of the producing companies
such as Nestle. Another important market force is the customer perceptions. If Nestle does
something wrong such that its international reputation is tarnished, then the customer perception
towards its products would change. Poor perception increases the possibility that, fewer
customers will purchase the goods despite them being of high standards and it would affect the
company negatively. These market forces can trigger some organizational strategies in the
company. For example, Nestle can invest more in the R&D department with the aim of coming
up with new products or adding value to the already existing products. They can also opt to
outsource some of their products and also apply economies of scale more in a bid to cut the cost
of running the group of companies.
Production cost: By supplying their products across world, they are able to product at low cost
due to which are generating mare revenue. Nestle is able to maintain market chain between
buyers and suppliers by attracting more number of customer towards their products along with
this they are also developing products by considering all demands of customers so that they can
easily maintain relationship between market chain and Nestle.
3.3 The business and cultural environments shape the behaviour of Nestle.
The business and cultural environment has a great influence on a company’s business.
Different businesses respond differently in different business environments and cultures. It is
possible to find that an organization’s strategy that is working in a certain business environment
is not working in a different business environment. The business environment includes political,
economic conditions, legal and social conditions. When Nestle is planning to enter a new market
in a particular country, it must consider very many factors such as employee skills, technology,
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business environment, cultural environment among other factors. For instance, considering
culture, sometimes different things may mean differently in different cultures. It is possible to
find that in a particular culture, the people do not consume chocolate while in a different culture,
they cannot do without chocolate. Considering a factor like technology, it is possible to find that
in a certain locality, the purchase of goods is through online shopping and people no longer go to
the stores to do shopping. On the other hand, in a different place, technology is not advanced,
and people go to do their shopping in supermarkets and other retailers. Nestle would deliver
services to these different people differently depending on the technology advancement. By
considering all the business environment such as political, environmental, legal, economical,
technical and social. Nestle is following all the factors while manufacturing their products such
under environmental they are considering all natural resources, geographical and climatic
factors. Under legal company is strictly following all the rules. They are also involving various
advance technologies in order to simplify their work.
LO 4 Assessing the significance of the global factors that shape national
business activities.
4.1 Significance of international trade to Nestle as a UK business organization.
The exchange of goods and services between countries is known as international trade. It
is through this that a company like Nestle is able to sell its products all over the world as well as
import some raw materials essential in their production. As more countries develop, more market
opportunities for Nestle products are created. When more markets are created, it means more
revenue and could be more profits. However, international trade is not just conducted anyhow as
it is regulated by world trade organization (WTO). This organization is responsible for the
development of trade agreements and also following to make sure that they are implemented.
This organization affects companies like nestle in that it improves performance while allowing
countries to participate in the global economy. Nestle is one of the biggest international trading
company. They import raw material from different parts of world and manufactures it. And at the
end again send it at different parts of world. As they have expanded their business at global level
due to this they are considered as an active participator of globalization and increasing economy
at international market.
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4.2 Impact of global factors on Nestle as a UK business organization.
Just like other businesses are affected either positively or negatively by global factors,
Nestle is also affected. The UK being among the leading countries in the exportation of services
and importation of goods, the businesses conducted there are highly affected by the global
factors. These factors could include business environments, competition, science and technology,
exchange rates, labour costs, taxation regimes among other factors. They all affect the company
either positively or negatively. For instance, if a taxation of a certain country where Nestle
exports its goods or gets its raw materials from is very high, then it means conducting business
there will be challenging for Nestle. The level of technology advancement of a certain locality
can also affect the nature of business of Nestle in that place.
Global growth: Nestle consider all the global factor that are essential for the development of
organisation such as economical policies, trading issues ans so on.
As UK is considered as a country who is actively participating into globalization and increasing
economy at international level due to this lots of consequences are also happing. Nestle is also
facing both negative and positive factors that are causing due to globalization. Such as .by using
advance techniques they are increasing their production but due to different labour cost and
material rate production cost also get increased.
4.3 Impact of policies of the European Union on Nestle as part of the UK business organization.
To guide the UK businesses, the European Union has gained more power over the years.
The Union has come up with policies which aim at the Eco- friendly environment as well as
strengthening the industry. The policies also promote the creation of jobs in small and big
companies such as Nestle. Through associating policies, the EU also helps small businesses by
promoting them with policies like competition policy. The competition policy ensures that all
companies whether large or small are treated equally. It also helps to reduce the cost of
commodities as well as improving the quality of products. The consumers also have the freedom
to choose the products that meet their demands because they are available in wide varieties. The
consumer policy also protects the consumer in that it ensures that the products improve their
health and that they are safe. These policies affect the companies either positively or negatively
but most likely are meant to protect and benefit the consumer and upcoming businesses. In this
they are able to exchange their products without any barriers due to which they are paying less
taxes and also having licences through which they can easily export their products other
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countries. Nestle had positive impact of policies that are provided by European Union, because
they have various policies for supporting small and medium companies due to which, Nestle had
fair competitors and along with this improved quality of services are produced at low quality.
Along with this various other brands are also launched their products in the same field due to
which customers are also have options to choose.
CONCLUSION
Nestle is one of the most successful food industries in the world. However, this does not
mean that it has not been faced with some challenges along the way. It is how the company deals
with the challenges that have kept it going. The customer needs to be been changing with time,
and this has been caused by the change of lifestyles as countries continue to develop. This is not
the only challenge, but it is among the most important challenges that the company has to
address time to time or else they will be kicked out of business by their competitors. The
company must be fully aware that its competitors are working day and night to get a bigger share
of the market and they are doing so by improving the value of their products while maintaining
low costs. It is important that the company keeps on coming up with new ways of solving the
challenges that it will come across along the way.
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References
Books and Journals
Beetsma, R.M.W.J. and Debrun, X., 2004. The interaction between monetary and fiscal policies
in a monetary union: a review of recent literature. Fiscal Policies, Monetary Policies and
Labour Markets: Key Aspects of European Macroeconomic Policies After Monetary
Unification, Cambridge, pp.91-133.
Broeckx, P. and Hooijberg, R. (2008) Perspective for managers’, Nestle On The Move. Available
at: https://www.imd.org/research/publications/.../PFM156-LR_Broeckx-Hooijberg.pdf
(Accessed: 11 February 2017).
Fernando, A.C., 2011. Business environment. Pearson Education India.
Halbert, T. and Ingulli, E., 2011. Law and ethics in the business environment. Cengage Learning.
Online
Kethuz, G. (2015) Nisha Das. Available at: http://www.slideshare.net/kethu23/nestle-
organizational-structure (Accessed: 11 February 2017).
Nestle (2017a) Brands. Available at: http://www.nestle.co.uk/brands (Accessed: 11 February
2017).
Nestle (2017b) Available at: http://www.nestle.com/aboutus/history/nestle-company-history
(Accessed: 11 February 2017).
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