Business Organization and Environment

This report examines the business environment of Nivea in Denmark, analyzing the company's internal strengths and weaknesses through a SWOT analysis and evaluating the external environment through PESTEL and Porter's Five Forces analyses. The report concludes with recommendations for Nivea's expansion strategy in the Danish market.

BUSINESS ORGANIZATION AND
ENVIRONMENT IN GLOBAL CONTEXT

TABLE OF CONTENTS
INTRODUCTION .....................................................................................................................................4
BACKGROUND INFORMATION OF NIVEA...............................................................................................4
Brief introduction of Nivea ...............................................................................................................4
SWOT analysis of Nivea .....................................................................................................................5
BACKGROUND INFORMATION ON THE BUSINESS ENVIRONMENT IN DENMARK..................................6
PESTEL analysis of Denmark..............................................................................................................6
ANALYSIS OF THE BUSINESS SCENARIO.................................................................................................9
Porter’s five forces analysis ...............................................................................................................9
CONCLUSION & RECOMMENDATIONS ...............................................................................................11
REFERENCES ........................................................................................................................................12

Illustration Index
Illustration 1: FDI stocks and income as a share of GDP total ...............................................................7
Illustration 2: Population of Denmark...................................................................................................8
Illustration 3: Gross domestic spending on R&D ...................................................................................9
Illustration 4: Air and GHG emissions .................................................................................................10
Illustration 5: Porter Five Force Analysis..............................................................................................11

INTRODUCTION
Globalization is a procedure that helps firms to have an interaction with other
parts across world either by offering products or services keeping in intellect not to
hurt the sentiments of others. Through this, operations of firm can be performed
successfully and they can gain success and expand their operations in the global
market easily (Gurnani, Ray and Wang, 2011). Furthermore, companies which have
plans to expand in the international market are required to pay attention towards
their financial condition to know whether they can support this expansion or not.
Pertaining to this, main aim of current research report is to analyse business
environment of firm in the global context. For this, Nivea is being taken under
consideration which is planning to relocate in Denmark. In other words, company is
exploring a foreign direct investment opportunity in Denmark. Concerning this, the
report will significantly explore the internal strengths and opportunities available for
Nivea and will evaluate the external business environment of Denmark by adopting
various analytical approaches. Later part of writing will include analysis of the
business scenario for Nivea in Denmark.
BACKGROUND INFORMATION OF NIVEA
Brief introduction of Nivea
Nivea is a German personal care brand that specializes in body care and skin
care product. Company was found in the year 1882 by the name Beiersdorf AG and
currently, they have their products in many parts of the world including Middle East,
Asia, Europe, Africa, Oceania and North America (Flaherty, 2006). It was developed
by Oskar Troplowitz in 1900 and Nivea is a Latin word which means “Snow White”.
In the year 1912, Nivea has first introduced crème in the market of Europe and in
1951, they introduced their first deodorizing soap. There were many surveys being
conducted by many researchers and it was found that Nivea is the only brand which
has wide spread presence in numerous nations of the world along with the product
categories (Gurnani, Ray and Wang, 2011). In addition to this, the brand ‘Nivea’ was
also successful in generating revenue and the sales growth is been increasing over
the years.
Company owns many skin care products for men and women both. In addition
to this, the organization structure of company is also made up of several
departments that significantly include marketing, finance, production, human
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resource, customer relationship as well as research and development department.
All these different departments have their individual managers and executives in a
hierarchical manner (Hockley, 2010). They have their own accountabilities and
duties as well as objectives that are needed to be achieved. Company is one of the
leading and most trusted bands in Europe and has around 13 percent share of
enormous £880 million in the UK market. Talking in reference with the largest and
fastest growing segment in the market, it is facial skin care where the product’s total
sales is around £310 million which is increasing 6 percent on an average with each
passing year. Nivea is also planning to explore a foreign direct investment
opportunity in Denmark and wants to expand their operations in that region as well
(Fiorentini and Montani, 2012).
SWOT analysis of Nivea
Strengths
 It is an international brand with
global presence in more than 20
nations of the world.
 Dominates the cold cream market
and has a hold on consumers.
 Company has huge brand recall
and equity (Wood and Robertson,
2000).
 Distribution network of the firm is
quite strong.
 Excellent brand visibility and
advertising that help the firm in
grabbing the top position.
Weaknesses
 One of the greatest weaknesses of
firm is intense competition being
faced by them from other skincare
segments in market.
 Because of high competition, sales
of products other than cold cream
segment is quite limited (Gurnani,
Ray and Wang, 2011).
 For the purpose of surviving in
market, Nivea is required to change
their brand image and should
become more of a personal care
brand. However, the overall market
of firm is strongly skewed towards
cold creams (The NIVEA Family,
2018).
Opportunities
 Nivea needs to keep innovating its
products and product lines to its
brand portfolio. With this, firm can
establish itself in the new market
and can break image of being a
cold cream provider (Nivea SWOT
Analysis, USP & Competitors,
2018)
 The firm can enter into men’s
segment through focused products.
 Nivea can increase their market
share.
Threats
 Intense competition from the
popular brands such as Ponds and
Johnson & Johnson are taking away
core strength of Nivea.
 Due to expenditure on marketing
and competition in its core segment,
company had a cold cream as a
cash cow has a threat of bottom
line.
 Nivea lies in lazier front while there
is fierce marketing from the
competitors.
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 Since firm is well established brand,
they have a chance to explore in
the emerging economies as well
(Wood and Robertson, 2000).
BACKGROUND INFORMATION ON THE BUSINESS ENVIRONMENT
IN DENMARK
PESTEL analysis of Denmark
Political and legal
Throwing light in relation with Denmark, it is often found in the top positions of
various rankings along with reports being completed by international bodies which
depicts the high level of development as well as political stability (Ministry of Foreign
Affairs of Denmark, n.d). Democracy Index developed by The Economist Intelligence
Unit in the year 2015 stated that Denmark ranks at 5th position for the most
democratic nation out of 167 states being analysed. It was also classified as a full
democracy by gaining the highest scores in five analysis criteria i.e. civil liberties,
political participation, electoral process and pluralism, functioning of government and
political culture (Gurnani, Ray and Wang, 2011).
In addition to this, Denmark was also found as the least corrupt nation for third
time in a row in the world because of strong rule of law and clear rules that govern
behaviour of public positions and support of civil society. Further, it is an open nation
with stable political environment which is quite favourable for the development in
numerous areas. It is also being regarded as one of the easiest places to carry out
business and is generally highly entrepreneurial. The process in relation with setting
up a new firm is quite simple and resource efficient and it does not need high
requirements as well. Ministry of Foreign Affairs has an agency by the name ‘Invest
in Denmark’ which solely aims at rendering support to the potential investors who
want to set up their business in this nation (Godley and Fletcher, 2000).
Economical
Denmark has a small open market economy and unrestricted heavy rules and
regulations. It also has low barriers to trade and investment. Denmark is being
characterized as a wealthy nation where the population has generally high
disposable income as well as high spending as well. The Gross Domestic Product of
Denmark in the year 2014 was around 257,443.8 million EUR. In addition to this, the
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open market economy of the nation is strongly being influenced by economic crisis,
which has dropped GDP by 5.1 percent in the year 2009. Nation is still in the process
of slow economic recovery. Other than this, the major strength of Denmark in the
economic rehabilitation process is its strong and transparent institutional framework
along with stable fiscal position (Fiorentini and Montani, 2012).
The economy of Denmark is in a period of slow expansion which is seeming
to pick up again after its slowdown (Rothaermel, 2012). But the rate of growth is too
low to meet out increased demand of consumers as well as business. Thus, it can be
said that if Nivea is planning to relocate in the market of Denmark then it can be said
that the business profitability is likely but not guaranteed. Finally, there is relatively
high rate of unemployment but this can also be considered as a great opportunity for
creating a good human capital base (Godley and Fletcher, 2000). The level of FDI
in Denmark is still far below the country's potential. Although both outward and
inward FDI stocks have been growing relative to GDP since 2008, outward FDI
(stock equivalent to 57% of GDP in 2015) has grown more strongly, resulting in
divergence in the series.
Social
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Illustration 1: FDI stocks and income as a share of GDP total
(Source: International trade, foreigndirect investment andglobal value chains, 2017)

Focusing towards people of Denmark, they are the happiest across world
being determined by numerous studies by World Happiness report. The main
reasons for their happiness could be trust, freedom, democracy, security, civil
society, wealth, work and balance (Helliwell, Layard and Sachs, 2013). Furthermore,
there is high level of social equality and people are in a position to shape their own
lives irrespective of their age, sexuality, gender and race. In addition to this, gender
equality index of nation has grabbed the position of second in European Union.
Other than this, the workforce of Denmark is also highly educated having good
language skills along with one other foreign linguistic as well (Euromonitor, 2013).
This clearly depicts the international orientation of nation and offers opportunities to
firms like Nivea to establish business relationship with local experts quickly.
Illustr
ation 2: Population of Denmark
(Source: Denmark Population 2018, 2018).
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Technological
In numerous fields and areas, Denmark has made constant progress but the
most vital among them is life science, information and communication, renewable
energy, clean technology, maritime industry and pharmaceuticals. The country also
ranked 11 out of 50 in the global innovation index being developed by Bloomberg
(Bloomberg, 2015). The consumers of the Denmark are also very adaptable to new
products and technologies. It also has the most advanced utilization of digital public
services and the use of technologies in business sector.
The abvoe figure shows the governmental spending on research and
development. In 2008, government highly contributed towards technological
develoment. 3.06% of total GDP was contributed towards technological
developemnt. In 2016 it was declined to 2.87%.
Environmental
Most of the population in Denmark considers protecting the environment quite
important. Numerous measures in regards with more environmental friendly as well
as healthier lifestyle are being adopted both at the authority and individual levels.
People are now making use of products that brings little damage to the society and
environment (Helliwell, Layard and Sachs, 2013). Additionally, the whole nation has
a large network of bicycle lanes and larger cities have city bike rental points. This
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Illustration 3: Gross domestic spending on R&D
(Source: OECD Data, 2018 )

helps in reducing the carbon footprint of a person. Moreover, there are many
regulations and laws that aims at protecting the environment with EU. In addition to
this, there are also some rules specific to Denmark (Barney, 2001). For example,
some cities have low emission zone where heavy duty vehicles are required to have
particle filters that helps in reducing emission to be able to drive in those low
emission zones. Government of Denmark is committed to reduce the CO2 emmision
in environment in order to reudce the environemntal pollutions.
The above figure depicts the reduction in CO2 from year 2000 to 2014. In 2014, CO2
emission level recorded was 6.1 tonnes/capita.
ANALYSIS OF THE BUSINESS SCENARIO
Porter’s five forces analysis
Seeking help from this analytical framework, the state of competition in an
industry will be shaped by five main forces such as bargaining power of the buyers
and suppliers, competitive rivalry, threats from substitute and new entry. As Nivea is
planning to expand their operations in the markets of Denmark, this analysis will help
the firm in analysing their competitors and will have an overview of complete
industry. The analysis is as follows:
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Ill
ustration 4: Air and GHG emissions
(Source: OECD Data, 2018)

Illustration 5: Porter Five Force Analysis
 Bargaining power of buyer – The bargaining power of the buyers is medium to
high. Taking into consideration everyday products, they are not strongly
differentiated and can be found easily in the market and thus, the buyer
enjoys high power (Bloomberg, 2015). Furthermore, the switching cost is also
very low and because of this customer easily move towards other options
easily. Moreover, the consumers are also very price sensitive in relation with
the daily use products. In Denmark, soft discounters are achieving great
success because of the value for money concept being adopted by them
(Dawson, 2007). Bargaining power of suppliers – Suppliers generally have low bargaining
power because the private label products are being sold by the company
itself. Talking about the other brands being sold in the retail stores, suppliers
do not have extensive power if the retailer is featuring 100 brands on its
shelves. Other than this, most of the retailers have their ethical code in
collaboration with Eurofins Steins Laboratorium in relation with the ingredients
as well as properties of the products they sell (Barney, 2001). Therefore,
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suppliers have to follow the rules if they desire to sell products from a
particular retailer. Threats from new entrants – Threat from new entry is low to medium in this
industry. This pertains to the fact that this industry is quite mature and is not
booming. There are few long established players such as Apoteket and Matas
who are enjoying brand loyalty and also has a well-developed distribution
channel (Aastrup and et.al, 2010). Although, it is not quite difficult plus the
need of capital is also not too high to open a beauty retail store, it can be quite
challenging to compete with these chain stores in Denmark. It is vital for the
new player to establish relationship with suppliers in favourable
circumstances, build brand loyalty and good distribution in a short period of
time in such type of mature market. Threat of substitutes – Almost every player in the skin care and beauty retail
are not fully specialized in one single good. However, they are presenting a
wide variety of products from different areas. The thing which can be brought
in on retail sector can often be brought in other retail sector and thus, skin
care and beauty retailers can only substitute each other’s substitute
(Alexander, 2010).
 Competitive rivalry – The competition in the market is medium to high, as
there are two major players in the market i.e. Matas and Apoteket. The market
of Denmark is quite mature and there is slow market growth, it signifies that
firms are competing among themselves for gaining share in the market.
Nowadays, even the grocery retailers have also started conquering the
market of day to day health and beauty products (Helliwell, Layard and Sachs,
2013). The competitors are making efforts towards attracting customers by
providing club membership and loyalty points and many other offers. The
factor which can reduce somewhat this cutthroat competition between the
major players is differentiation. The people of Denmark have high disposable
income and they prone to buy premium products, on this the firm can
differentiate their products and can achieve competitive edge (Carvalho and
et.al, 2015).
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CONCLUSION & RECOMMENDATIONS
From the above report, it was analysed that Denmark is a sovereign state in
Northern Europe which is situated at the South West of Sweden and bordered by the
South of Germany. The Kingdom of Denmark is a unitary constitutional monarchy
with Margrethe II as queen regnant, organized in a parliamentary democracy. It is an
open nation with stable political environment which is quite favourable for the
development in numerous areas (Alexander, 2010). Further, it was also analysed
that the major strength of Denmark in the economic rehabilitation process is its
strong and transparent institutional framework along with stable fiscal position.
Thus, Nivea can relocate in this market as the business profitability is likely
but not guaranteed. If the firm is planning for FDI in Denmark than they have to
create healthy business relationship with retailers which is quite easy for Danish
population. Other than this, it was also explored in the report that there is slow
growth in the industry and there is intense competition in the skin care and beauty
care market, which might not pose favourable environment for achieving greater
performance (Bloomberg, 2015). However, overall Denmark hosts welcoming
business environment for foreign businesses and thus, it can be fruitful for Nivea to
relocate in this market.
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REFERENCES
Books and Journals
Aastrup, J., Bjerre, M., Kornum, N., and Kotzab, H., 2010. The Danish Retail Market:
Overview and Highlights. European Retail Research, 24(1), pp.195-222.
Alexander, N., 2010. Retailers and International Markets: Motives for Expansion.
International Marketing Review, 7(4) pp.75 – 85.
Barney, J., 2001. Firm Resources and Sustained Competitive Advantage. Journal of
Management, 17(1), pp.99 – 120.
Carvalho, E., Fagan, A., Firmin, J. and Piquer, H.C., 2015. EU Member States under
the Spotlight. Paris: Imprimerie de la FIDH.
Dawson, J., 2007. Scoping and conceptualizing retailer internationalization. Journal
of Economic Geography, 7, pp.373 – 397.
Fiorentini, R. and Montani, G., 2012. The new global political economy. Cheltenham,
Glos, UK: Edward Elgar.
Flaherty, M., 2006. Global operations management. New York: McGraw-Hill.
Godley, A. and Fletcher, S., 2000. Foreign entry into British retailing, 1850-1994.
International Marketing Review, 17(4/5), pp.392 – 400.
Gurnani, H., Ray, S. and Wang, Y., 2011. Special Issue of Production and
Operations Management: Global Supply Chain Risk Management. Production
and Operations Management, 20(2), pp.301-301
Hockley, L., 2010. Global operations management. New York: Nova Science
Publishers.
Rothaermel, F.T., 2012. Strategic Management Concepts and Cases. International
Edition. New York: McGraw-Hill Irwin.
Wood, V.R. and Robertson, K.R., 2000. Evaluating international markets.
International Marketing Review, 17(1), pp.34 – 55.
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Denmark Population 2018. 2018. [Online]. Available through:
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