Business Organisations in a Global Economy

This document discusses the impact of global economy on business organisations, with a focus on Nestle. It includes a PESTEL analysis of Germany, types and nature of Nestle products, Porter's analysis of Nestle, and the demand-supply scheme in the market.

BUSINESS ORGANISATIONS IN A
GLOBAL ECONOMY

Table of Contents
INTRODUCTION...........................................................................................................................1
PESTEL of Germany...................................................................................................................1
Types and nature of NESTLE......................................................................................................3
Porter's analysis of NESTLE.......................................................................................................3
Demand supply scheme...............................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
Business organization in global economy refers to international trade where global
business is company performing business in the whole world. The activity is said to be
established by anthropologists who had established trading long distances in stone age in Europe.
Nestle S.A. is Swiss drink ad food multinational company headquartered in Vevey, Vaud,
Switzerland founded in 1866 by Henri Nestle dealing in baby food, dairy products, coffee,
confectionery, breakfast cereal, ice cream, bottled products and per foods. The report will
address PESTLE of Germany in context to Nestle along with type if product along with their
nature for Nestle (Acquier, Valiorgue and Daudigeos, 2017). The study will further address
applicability of PORTER's five force analysis for justify sustainability in the market and
measures of competition and profitability. Finally, the applicability of demand and supply
analysis will justify impact of prises for consumer goods along with their services with the
economy.
PESTEL of Germany.
Business atmosphere is the total or collection of internal and factors which includes
workers. needs of customers and expectations, demand and supply, and activities of the
government. It is the environment in which business operates and do all the business activities.
Political- It is an democratic country and have federal government. The are different levels of
government levels of government which are Federal level, state level and local level. The Govt.
which is at the local level makes decision about business policy of location which includes
taxations also. As NESTLE has to follow all the decision about business policy taken by the
local government of the country. Political factors also includes tax policy, labour laws, tariifs and
political stability (AlGhazi and et.al., 2017). The political stability of Germany is good so
NESTLE will not to face any issue in performing business activities. The tax rate policy of the
country is very satisfactory, as high tax rates are not charged by the government.
Economic- The country is highly developed and has large capability of industries. It stands at
world's largest Fifth economy (GDP $3.629trillion) and it important market in EU. The country
has large amount of high skilled employees and labours. Growth rate of Germany is very high
that's why Nestle has choose the country for expansion of business. Nestle has selected Germany
as talented and skilled employees can be hired thus, Assist in making business operations
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successful. The country has an great economic growth as it is beneficial for the NESTLE to do
business operations in Germany (Batra, Singh and Sharma, 2017). The growth rate of the country
is increasing so it benefits the Nestle in running business and thus, this assist in improving
overall organisation productivity. Wags rates are not very high so Nestle can easily appoint large
number of labours at lower prices.
Social- Germany is one of the most populated countries of EU. The population in of the country
is very educated and smart. The business culture followed by the Germany is very unique all
over the world. The responsibilities and rol.e are clearly defined and also the business process
are very strict. As NESTLE chosen the Germany because the peoples of the countries are smart
and educated so they will understand the benefits of NESTLE products and make purchases
according to that (Batra, Singh and Sharma, 2017).
Technological- Infrastructural facilities are highly advanced in the Germany which facitilates
the improvememnt of any organisation in the country. Country has the most technological
advanced communication systems. The population of using internet in the country is around
20.416 million and it is the fifth largest all over the world. Latest machines and advanced
working systems are used in the country for carrying out business operations. It impacts the
NESTLE as greater output is generated by the business within lesser interval of time, thus
leading to organisation's productivity. By the use of advanced machines and high technology the
production process is done fastly and lot of time is saved (Carley and Spapens, 2017).
Technology helps in making marketing strategies as with the help of advanced technology
company collects, records, retrieve and use data which thus, helps NESTLE in making new
business plans and strategies.
Environmental- The has country specific enviuronment. The climate of the country imopacts
the business practices as the products and services manufactured must be suitable with the
changes in the climate. So this factor impacts NESTLE as the food products manufactured must
be able to survive in the Germany's climate. The situation is like that if any new business enters
in themarket it has to make contribution with the local retailers and distributors. So this impacts
in this this sense unless NESTLE understands the requirements of supply chain, company can
not set ups the distribution network (Chin, 2016).
Legal- These are external factors which describes that how the laws impacts the business
operations and customers behaviours. profit margins, Product transportation, and viabilities of
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other markets are some examples of things which can be influenced by the the legal factors. The
legal system in Germany implies strict laws for labours with strict laws on lay offs. It impacts the
NESTLE as the laws are strict so labours will not be happy and may leave the organisation, thus
this impacts the overall work productivity. The wage standard allows bargaining of wages unlike
the other developed countries (Debroux, 2017). This is beneficial for NESTLE as the company
can easily do negotiations with the labours. As wage rate standard of Germany gives permission
for that. So more labours are appointed by the company because of low labour rates. Thus this
assist in increasing business productivity and higher revenue is generated the NESTLE.
Types and nature of NESTLE.
Nestle is the worlds biggest food and beverages company. It is the biggest company and
do business activities at global level. Nestle manufactures different types of food products ie,
dairy products, food and beverages. It is the global brand brand as the foods products are soled to
almost each and every country. NESTLE offers high quality products to9 the consumers
according to their taste and preferences. The types of goods which company manufactures are
medical food, dairy products, cereals, tea and coffee, frozen food and pet foods etc. The
company is successfully continuing its business in the market (Fabuš, 2017). The main reason
why the brand is so popular is the quality of the products. Good quality products are supplied by
the company at reasonable prices, this is the main reason why the customers prefers to purchase
the products manufactured by NESTLE. Nestle is a n big brand and almost every products are
been purchased by the people but the products which is been purchased by the customers is
Nestle coffee. Brand has been successful in facing market competition (Carley and Spapens,
2017). The revenues generated by the company bis higher as compare to the other market
competitors like nescafe. The ingredients used in the food products are very controllable as
today mostly people are suffering from diabetes. So the company takers care of the nutritional
values.
Porter's analysis of NESTLE.
This analysis is the technique by which the analysts analyse the competitiveness of the
organisation by making evaluation o9f the internal and external environments.
The analysis evaluates the factors which affects competition and helps the organisation in
making business policies and strategies. Evaluation also assist in dealing with day to day
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business operations . Analysis of five forces which affects Nestle's competitiveness in market
(Kelsey, 2015).
Threats of new entrants- The products manufactured by Nestle are doing well in market and
by selling these company is earning good amount of profit (Freel, 2016). It is very big market
this makes it very unique. As for new business to enter in the market have to make so much
effort as there are long existing food products from NESTLE and other food manufacturing
companies. Thus it is not easy to penetrate the market. Other than that there are different
government policies which are required to be met, as production of foods stuffs is concerned.
And to get Red light from ins pectoral agencies like FDA may become very difficult for new
business start-ups entering in the market.
Threats of substitute goods- There are large number of substitute available as fae as the food
stuffs in the market. There are many other companies whoo manufactures same types of foods
like Group da none and Kraft foods. The products of these companies are similar as those
manufactured by Nestle. The organisation has to remain innovative so that the competition in the
market can be faced effectively and prevents clients from purchasing the prtoducts of substitue
companies (Hickman and Silva, 2018). The one of the smart way by which Nestle has make its
goods unique is by producing healthier and good quality products as when compared to other
food companies. This is the main reason which makes the company different from others and
attract s& retains the consumers who are more health conscious.
Suppliers bargaining power- In these manufacturing industries raw materials make major
difference in the product. Nestle is very well aware of this fact as the most of the company's
products are manufactured with agricultural and dairy raw materials. This results in this way that
the organisation maintains high standards in gathering suppliers who supply quality material
and also makes measures for retaining best suppliers. Nestle provides advices to its suppliers so
that the wastage can be reduced and the work process can be done more smoothly and efficiently
(Hickman and Silva, 2018). This assist in developing great relationship between the business and
its suppliers. As by good communication and relations all the business task are done very easily
and efficiently.
Customers bargaining power- The consumers in the food manufacturing industry has lot of
bargaining power. This happens because there is an easy access to the substitute products as well
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is other food manufacturing organisations besides Nestle. The main strategy through which
Nestle has has encountered the bargaining power of customer is by consistently innovating new
products according to the needs and demand of the customers. Nestle focuses on maintaing high
quality production process and incorporated healthier goods into company's production. This is
the main reason by which customers are attracted towards the brand's products and make
purchases (Zhang, 2016). Consumers focuses more on price so that why Nestle offer the high
quality products to consumers at reasonable prices making customer's satisfied, thus leads to
overall business productivity. This is the practise followed by the company to deal with the
customers.
Competitive rivalry within the industry- There is high competition in food processing market
and Group Danone as well as Kraft foods are the major rivals of the NESTLE. This is proof that
these organisation has advanced methods of doing business activities and has more innovative
ideas. Organisation attract the consumers by consistent innovations in the products. However,
the company has always been top in the food manufacturing industries because of its premium
quality products and consistent innovation. Competition is successfully faced by Nestle as it
manufactures the products according to the need and requirement of the consumers. Company
focuses on offering healthy and premium quality products to buyers. This made the brand best
food supplier in the competitive environment (Zhang, 2016).
Demand supply scheme
Demand and supply is the relation between the quantity of the commodity which
produces wishes to sell at different prices and the quantity which buyers wishes to buy. It is the
model of price determination which is mostly used in theories of economics. The price quantity
relationship are mentioned on a curve called demand curve.
Demand Curve- In demand curve the quantity of a products is dependable on the price of the
commodity and also different other factors like prices of the commodities, seasonal effects and
income and requirements of the consumers. This curve is slopes downward which reflects the
willingness of consumers more commodities at lower prices levels (Khaled and et.al., 2017).
Thus demand curves depicts the demands of the Nestle's product ie, how much is the market
demand and the company is able to meet the demand or not. Any changes made in the non price
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factors causes a shift in the demand curve, where as any Ganges in the rates of products can be
easily traced on a fixed demand curve.
Supply curve- The curve defines the quantity of the commodity which is supplied in the market
and it does not depend only on the price of the commodity but also many different factors like
prices of the substitute goods, cost charged by labors, production technology and other factors of
productions (Pereira and Malik, 2015). Supply involves connection between different prices and
the quantity offered by the manufactures at each single price and hols all others factors which
may influence the prices. The curve is usually slopes upwards which reflects the agreeableness
of producers to sell more amount of commodity which Nestle produces and also at higher prices.
Market equilibrium- It is the market function used to analyze demand and supply through the
price mechanism. If the buyers wishes make more purchase more goods than the prevailing
prices, then they make effort to bring the prices up. And if they wish to make purchases less than
the prevailing prices, suppliers makes effort to make the prices down (Olmedo, 2017). The
measurement of the responsiveness of the demand and supply changes in prices is called price
elasticity of supply demand and it is calculated as ratio of change in percentage and quantity
supplied and demanded to change of percentage on prices. Thus if amount of the NESTLE
products decrease by 10 Percent the sales of the goods increases by 20%., The price elasticity of
demand for the product will be 2.
CONCLUSION
The study summarized that the political environment impacts the working of business
institutions. As there are different types of laws are there like labor laws, tax policy ete. The
economic factors like growth rate, as when the growth rate of the country is high the business act
ivies will also be higher and more productivity is generated by the company. The reason which
makes NESTLE more superior brand is that it offers high quality products to the consumers.
Further the reports contains Porter's five forces model which describes the strategies to deal with
the bargaining power of suppliers and customers.
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REFRENCES
Books and Journals
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AlGhazi, A. and et.al., 2017. December. Exploration of the Misalignment Between Business and
IT Strategic Objectives in Public-Sector Organisations: An Empirical Study in Saudi
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Batra, G., Singh, R.K. and Sharma, J.P., 2017. Incidence and adoption of gri framework for
sustainable reporting by Indian organisations A preliminary analysis. ZENITH
International Journal of Business Economics & Management Research. 7(9). pp.84-102.
Carley, M. and Spapens, P., 2017. Sharing the world: sustainable living and global equity in the
21st century. Routledge.
Chin, C.B., 2016. Cruising in the global economy: Profits, pleasure and work at sea. Routledge.
Debroux, P., 2017. Human Resource Management in Japan: Changes and Uncertainties-A New
Human Resource Management System Fitting to the Global Economy: Changes and
Uncertainties-A New Human Resource Management System Fitting to the Global
Economy. Routledge.
Fabuš, M., 2017. Current development of business environment in Slovakia and Czech Republic.
Freel, M., 2016. Knowledge-intensive business services: Geography and innovation. Routledge.
Hickman, C.R. and Silva, M.A., 2018. The Future 500: Creating Tomorrow's Organisations
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Kelsey, J., 2015. Reclaiming the future: New Zealand and the global economy. Bridget Williams
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Khaled, A. and et.al., 2017. Knowledge management practices in Saudi Arabian public sector
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Entrepreneurship as Driving Forces of the Global Economy (pp. 445-459). Springer,
Cham.
Olmedo, A., 2017. Something old, not much new, and a lot borrowed: philanthropy, business,
and the changing roles of government in global education policy networks. Oxford
Review of Education. 43(1). pp.69-87.
Pereira, V. and Malik, A., 2015. Making sense and identifying aspects of Indian culture (s) in
organisations: Demystifying through empirical evidence. Culture and Organization.
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Zhang, F., 2016. China as a Global Force. Asia & the Pacific Policy Studies. 3(1). pp.120-128.
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