Nestle's Business Environment Analysis

This assignment requires a thorough examination of Nestle's business environment utilizing the PESTLE (Political, Economic, Social, Technological, Legal, and Environmental) analysis framework. Students need to identify and analyze key factors within each category that impact Nestle's operations, strategies, and future prospects. The analysis should provide insights into both opportunities and threats presented by the external environment.

Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1. Different types and purposes of organisations (COVERED IN PPT)..................................3
P2 Size and scope of various organisations (COVERED IN PPT).............................................3
P3 Relationship between organisational functions and their link with objectives and structure 3
TASK 2............................................................................................................................................6
P4 Positive and negative impact of macro environment on business operations........................6
P5 Internal and external analysis to identify strengths and weaknesses.....................................8
P6 Relationship of strength and weaknesses with external factors...........................................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Business operates in society. There are many factors which affect the business. Business
environment is mainly divided in two factors i.e. macro and micro. There might be positive or
negative impacts of such factors. It is important that manager has to keep checking the external
factors which affect decision making of company. There are possibilities that leader has to
change plans and policies in smooth running of business (Agarwal, Grassl and Pahl, 2012).
There are chances that if organisation does not change its policies as per external sources then
they might get out of run from competitive world. This report is based on Nestle which is a food
and drink based organisation. This company was found in the year 1905 having headquarter in
Switzerland. This is the second largest Swiss company in terms of revenue.
This report discusses about various types of organisations with their size and scope such
as private, public and voluntary. There is the relationship in between various types of
organisations with regard to their functions as well as positive and negative impacts of macro
business environment. It also talks about internal and external analysis to know about
weaknesses and strength as well as their interrelation with external macro factors.
TASK 1
P1. Different types and purposes of organisations (COVERED IN PPT)
P2 Size and scope of various organisations (COVERED IN PPT)
P3 Relationship between organisational functions and their link with objectives and structure
Nestle has many products in food, drink, chocolates, etc. so there are many activities
which are required to produce and deliver goods to customer. It is important that manager has to
take care of external factors of business so that they can reduce its negative impact. Manager has
to plan activities of organisation in such way that there is no conflict in the activities
(Aterido,Hallward-Driemeier and Pagés, 2011). As there are many department which in Nestle
they have to create good communication channel which help company in smooth running of
business. It is important that employees must be learned how to deal with situation in order to
provide satisfaction to customer. Nestle has good image in market because they accept the
changes taking place and modify there policies accordingly. Tom level manager's worker does

not resist till here they have to deliver it to subordinates and tell them how is it beneficial for it.
There are various departments Nestle which help company in growing their business. Administration department- Administration department is important as they creates link
between various department such as purchase, store, accounts, sales, etc. This link is
beneficial in smooth running of business. There is proper communication about activities
so there is no conflict among activity. This will help in reduction of waste activities and
every department is aware of what has to be done at what time (Auzair, 2011).
Administration department of Nestle is working with production, sales, marketing, etc.
This is the department which select best resources from market so operations of all
department conducted smoothly. For instance tool through which marketing can be done
in society is selected by administration. This department insist on coordination in
commercial activities of Nestle. Marketing department- Marketing department is most important in telling public about
new product of Nestle. When company come with new product it is essential to market
that product in front of public. It is important that marketing manager has to keep
knowledge about feature of new product and services so they can satisfy query of
customer. This department is very important for enhancing profits and sales of
organisation. Marketing department is closely related with production and accounts unit.
There is difference in demand of consumers as per change in geographical region. Hence
marketing manager of Nestle analysis market and then convey to production department.
There is specific budget for marketing of product and services. Hence marketing
manager plan strategies as per set budget by accounts department. Production department- This department deals with production of chocolate, drinks, etc.
they have to interact with purchase, sales, stock department so that there will not be over
and under production of goods (Avramenko, 2012). As Nestle deals in confectionery
items so they have to take care of stock and production. Up-to date product will help
company to enhance profits. Production department is closely related with marketing
department. They complement each other because when production manger tell about
characteristic of chocolates, biscuits, etc. then this is marketing manager is able to
advertise product and this helps to increase sales and revenue.

 Distribution and logistic department- Merely production is not the task of Nestle. It has
to be delivered to consumer on time. There must be distribution of product on time so
manager has to opt option which is cheap and time effective. At time of Diwali, new
year, Christmas, etc. it is important that product has to be delivered on time so customer
feel satisfied. There is requirement of maintain stock but that stock must be in such a
way that it does not become outdated product. Distribution and logistic department of
Nestle works as per production and sales department. Nestle operates at world wide
level, so it is important to know how much demand arise by sales department and in
order to maintain stock in warehouse, they have to deal with production unit also.
Nestle has talk structure, which means there are different departments headed by
departmental head. There is quality assurance department which checks the quality of goods

produced. This helps in creating trust in mind of customer. There is technical department which
keeps eyes on working technical problems and provide assistance in case of arrival of new
technology. This analysis is done by plant and corporate manager (Burns and Winter, 2011).
Supply chain manger has sees how much time is between required in despatching product from
industry and reaching to customer. There must be minimise time in this process. Finance
manager has to analyse which source is favourable for company and how it can be utilised
appropriately.
TASK 2
P4 Positive and negative impact of macro environment on business operations
Nestle is a company which has huge brand value and they have to maintain that image to
be resistant in market. Business environment which is important factor in today's era. Company
has to make changes as per change in external factor. Business has some internal as well as
external components which emphasis on decisions of company (Chow and et. al., 2011). There
are many products of Nestle which has to be renovated on time, because if there is no innovation
customer will situation to other competitive brand. Macro environment includes PESTLE.
PESTLE stands for political, environmental, social, technological, legal, Economic. These
factors are not in control of manager of Nestle but all these affects business adversely. There is
requirement to alter plans and policies and deliver it to employees. There are possibilities that
employees does not like to work under changed environment manager has to convince the. These
macro factors have positive as well as negative.
 Political factors- Political parties is important role in society. There are many changes in
rules and regulations of society and it is important to modify policies according to it.
Political policies includes tax policies, other society related problems, etc. So change in
political parties affects business operations of Nestle also. There is difference in tax rate
as per change in geographical region. Hence managers has to fix prices of product as per
tax rate.
POSITIVE IMPACT
Political parties some come with policies which are beneficial for company(Commander,
and Svejnar, 2011). Through government interference there is less chance of fraud in society and

it help to improve economic condition of company. As Nestle operates according to government
norms, so this is effective for their brand image and create loyalty among consumers.
NEGATIVE IMPACT
As political parties are dynamic so change in government affects business operations.
There is important role of manager in analysing change in external factors which help company
to take corrective actions. In case of change in political party norms and regulations has to be
altered, this affects core business operation of Nestle.
 Environmental factors- Environmental factors includes nature related changes in society.
Nestle is brand which has business in many countries. So it is not necessary that same
weather will remain in every country. Company has to make policies as per surrounding
where is operates. Nestle has to provide chocolates and other eatable according to
environmental factor. For instance in case of rain product may get delayed in reaching to
customer.
POSITIVE IMPACT
Change in environment will help company to make changes in policies. Through this they
can know about customer preferences (Cronan and et. al., 2011). This will help Nestle to grow
its business. Change in strategies due to environmental factor helps work force of Nestle to work
under dynamic nature.
NEGATIVE IMPACT
There are some negative impact of environmental factors. Due to change in policies this
might create confusion in the mind of employees of Nestle and they does not know what is
beneficial for them.
 Social factors: Nestle works in society. It is important that manager has to frame policies
as per culture of surrounding. E.g. there is change in culture and values of UK and India.
Hence marketing department of Nestle has to analyse changes properly and then deliver
product. This has positive as well as negative impact on business.
POSITIVE IMPACT
Nestle is a company which has drinking and chocolate segment. In UK there is more need
of dark chocolates as compared to India. So it is important for managers of Nestle to produce
chocolates as per need.
NEGATIVE IMPACT

Due to change in social factor company has to modify its policies frequently. This means
Nestle has to modify strategies in that manner. It affects demand of Nestle's product also.
 Technological factors: Technological factors means technology used in organisation to
producer goods and provide utmost satisfaction. There are possibilities that change in
technology means Nestle also has to use updated technique (Dahan and et. al., 2010).
POSITIVE IMPACT
Change in technology will help company to reduction cost and time of production. There
are possible chances of that this provides satisfies the need of customer. It will help Nestle to
improve quality of product and services. Technological up-gradation helps Nestle in easing
business operations and there is less waiting time of consumer.
NEGATIVE IMPACT
Technological factor has negative impact also. It is important that manager has to reduce
them and take corrective actions. There is requirement of training to employees to make them
learn about new techniques. Hence there is involvement of cost. Due to change in technology,
there are possibilities that labour turnover rate in Nestle increased because workers are not
secure.
 Legal environment: Legal factors involves laws related to company. These activities help
company to work under smooth style. There are many workers in Nestle from different
geographical background. In order to create synchronisation among them, managers of
Nestle has to follow some laws such as equal remuneration act, safety and security act,
etc. at workplace.
POSITIVE IMPACT
Legal policies are most important component for business organisation. These policies
help in setting code of conduct of employees. This helps in creating trust in the mind of
employees and they feel that Nestle is working in correct manner. If Nestle works as per legal
norms, then there is less legal authority interference and brand image gets improved.
NEGATIVE IMPACT
Change in legal policies of society hinders the activities of company. As change in law
means change in organisational policies(Fernando, 2011). This means HR has to again frame
plans and then deliver to employees. This might create confusion in mind of personnel. There are

change in legal policies as per change in surroundings. In case of change in legal policies
managers of Nestle has to change plans and policies which affects core business operations.
 Economical factors: Economic means financial aspect of company. It is important that
manager top level of Nestle has to analyse different source of finance and then opt best
among them. Financial position, cash inflow and outflow , etc. are parts of economic
factors. Change in policies of financial source affects business operations of Nestle. This
has positive as well as negative impact.
POSITIVE IMPACT:
Nestle is brand which has scope of expansion and in case finance is available frequently,
then there are possible chances of Nestle's growth and they can perform functions smoothly.
NEGATIVE IMPACT
Change in interest rate of bank loan and other financial sources then it affects business
operations. Shareholders fund is the most appropriate source of fund, but if shareholders are not
satisfied then there is problem in arising funds. When finance is raised through shareholders of
Nestle, then this distributes voting and decision-making right among them.
P5 Internal and external analysis to identify strengths and weaknesses
Factors that impact on business operations of a company includes micro and macro
environment (Gebauer, Paiola and Edvardsson, 2010). These elements affects strategies, policies
and decision-making process. Therefore, it is essential for an enterprise to analyse this concept
using proper methods. For evaluating such factors and their consequences SWOT and PESTLE
analysis are best methods. Micro environment includes internal elements like mission statement,
stakeholders etc. While macro aid the factors which are beyond control of an organisation. Thus,
management of Nestle Company has conducted the following analysis :-
SWOT Analysis Nestle is as follows:
Positive Factors Negative factors
Internal
Factors
Strengths Weaknesses
 Leadership qualities, customer
satisfaction and sustainability
shows current strategic position
of Nestle at marketplace.
 Due to controversial issues, some
products of Nestle like Maggi has
banned for couple of months.
After modifications, it has

 Its has a long-term commitment
to CSR i.e. corporate social
responsibility.
 Diversified product portfolio of
this firm has been successful
implemented in marketplace of
rural and urban areas. It gains
37th highest rank brand in UK.
launched this product successfully
in market.
 Due to harmful containment,
brand image of Nestle has affected
a lot in negative way. Some more
controversies like using child
labour in production, chocolate
price fixing, etc. impact its
business.
 Ineffective brand structure, low
pricing strategies shows
weaknesses of this firm.
External
Factors
Opportunities Threats
 Some nutritional products like
Maggie oats, heavy breakfast
cereals and other alternatives are
heavy for people who concerns
their health first. Therefore, this
enterprise needs to introduce
some light healthy and diet
products by focusing on
nutritional value.
 R&D department of Nestle
needs to analysis demand and
then actions are products must
be delivered.
 Through robust supply chain in
rural markets Nestle has given
an opportunity to expand its
business over there.
 Innovations and technical changes
are threat for Nestle because they
are less innovative.
 These days consumers are aware
about their health, so this might
give impact on sales of Nestle.
 Raising in price of raw materials
affects suppliers, producers and
consumers also.
 Availability of same products with
different company's brands and
purchasing power of customers
create threats for Nestle.

PESTLE Analysis of Nestle:
Political Factors Economical Factors
 Change in government norms gives
negative impact on growth and
expansion of Nestle.
 Nestle need to focus on taxation, import
and export rule including excise duties
in its trading.
 Economic session effects on purchasing
power of buyers which ultimately
impact businesses of enterprises.
 Skimming pricing strategy is followed
by Nestle which depends on economic
rates of country. It is made by focusing
on economic growth, inflation or
deflation rate and income level of
customers.
Social Factors Technological Factors
 Consumer's awareness, preferences
towards healthier products are some
social factors that affect production of
companies.
 Strong values, ethics and principals are
main priorities of Nestle which helps in
building the trust on customers.
 These factors provide an opportunity
for companies to develop their
infrastructure and operational system.
Techniques like internet and e-
commerce helps in improving the
business in an effective manner.
 Nestle has varieties of product such as
biscuits, chocolates, Noddles, etc.
Hence with the help of technological
changes there is ease in coop- up with
external changes.
Legal Factors Environmental factors
 Nestle is required to follow health and
safety laws in their working
environment which result in producing
hygiene products.
 With the help of legal factor, there is
satisfaction among employees at
 Nestle requires to pay attention towards
CSR. It needs to concern on reducing
the wastage of products and packaging
in order to protect environment from
global attacks.

workplace and long and good term
relations is possible with them.
 Nestle needs to introduce process of
three R's via Recycle, Reuse and
Reduce the products if possible.
(Sources: Analysis on Nestle, 2018)
P6 Relationship of strength and weaknesses with external factors
Departments and their functions in organisation are interrelated with each other. All are
working with same purpose i.e. to achieve desired goals and achievement of a company. It helps
in maintaining the strong position at marketplace. Main aim of Nestle is to fulfil demand of
customers on time and build strong image of its brand. Internal and external analysis helps a firm
to identify its strengths and weaknesses (Halbert and Ingulli, 2011). Through which an enterprise
becomes able to reduce the weaknesses by implementing new policies and strategies in
operational activities. Competitors policy, changes in market, legislations etc. are some external
factors that affect business in both ways either positive and negative.
Relationship of strengths and weaknesses with macro factors of Nestle:-
Political Factors: Political powers of regulatory bodies of a country pressurise all
organisations. It demands a company to follow all amendable laws in their workforce. If they do
not precede the same then, they will be legally penalised. Therefore, on Nestle and other
companies, it increases weaknesses of business. Due to frequently change in political parties,
Illustration 1: Analysis on Nestle

managers of Nestle has to alter their business operations which is weakness for them because
concentration of managers may diluted.
There is regular interference of government to know authenticity of business operations
of Nestle, this is strength for organisation. This helps to take money from stakeholders and
provide them satisfaction.
Environmental Factors: Concerning on environment elements like reuse and reduces the
wastage affect on businesses in a negative way. It increases cost of production also. When Nestle
works according to environment, then product such as Chocolates, biscuits are in standard form
which creates satisfaction among customer. Hence this factor is strength for Nestle.
Due to change in environmental factor such as excessive rain, sunlight, which may affect
quality of biscuits, Chocolates, etc. hence this may prove weakness for growth and development
of Nestle.
Social Factors: Elements including in these factors provides a firm to get customer
satisfaction. But it demands to follow CSR responsibility also which may increase social
liabilities of an organisation that creates negative impact. In financial terms, it increases a
company's weaknesses as well as strengths also. As there is change in demand of customers
according to geographical background. There are possibilities that in case of change in demand,
old product may obsolete and ultimately this proves to be costly for Nestle.
Social affects may affect image of Nestle in positive way if managers are able to collect
information related to customer demand. For instance: in festive season such as new year,
Christmas, etc. of chocolates. if demand are satisfied, then this affects sustainable growth of
Nestle in negative way. This is growth opportunity for Nestle.
Technological Factors: It affect promotional activities of organisations. In order to gain
competitive advantage, a firm needs to update its techniques with latest technologies. It result to
increase brand image also (Hamilton and Webster, 2015). Hence, increases the strengths of
company. Technological can be effective if there is training to workers. Sometimes employees
does not want to learn new techniques. In such case technological changes are not relevant for
growth of Nestle and affects growth of Nestle.
If managers of Nestle are regularly accepting technical change, then this improves
quality of product and services and employees are also satisfied to work with latest techniques.
This provides long term sustainability of Nestle in industry.

Legal Factors: Management needs to introduce laws and regulation regarding
employment in workforce. It will help a firm to improve efficiencies of workers as well as
enhance their productivity. Due to excess control of legal factor business may get diluted from
core expansion and growth, hence legal factor may be negative for Nestle.
If Nestle is working according to legal laws, then this is effective for organisational
growth because employees there is less governmental interference. This is relevant for creating
funds from different sources.
Economical Factors: If economic conditions of a country is not good then it will
negatively effect business of an organisation and vice versa. If loan gets increased then profits
and revenue of Nestle gets affected in adverse manner. This is weakness for organisational
growth.
In UK there are different sources of funds, so it is easy for managers of Nestle to raise
fund. This is fruitful for organisational sustainability and growth.
CONCLUSION
From the above discussion, it is clear that business environment is very dynamic and in
case company wants to create long relations with customer they have to accept them. It is not
necessary to accept all changes but as per requirement. Top level management of company can
frame or modify policies but it must be delivered efficiently to subordinates so proper application
can be done. There are possibilities that environmental factors may have negative impact on
business operations. Then manager has to find them and provide appropriate solution. It is clear
that external analysis can be done through SWOT and PESTLE analysis. These days the demand
of consumer is changing is very frequently and to make good and long term relation with
consumer organisation have to do some value additions in their product and services.

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