How Macro Environment Affects Business: A Case Study of Nestle

This document discusses the impact of macro environment on the business operations of Nestle, a multinational corporation. It explains how factors like political, economic, socio-cultural, technological, environmental, and legal affect the growth and development of the company. The document also explores the internal factors that affect the business and how Nestle acquires competitive advantage using the Porter five forces model.

BUSINESS
STRATEGY

Table of Contents
BUSINESS STRATEGY......................................................................................................................1
INTRODUCTION................................................................................................................................4
TASK 1 ................................................................................................................................................4
P1 Explain how macro environment affected the business.............................................................4
TASK 2.................................................................................................................................................5
P2 Analyse and examine internal factors which has impact on business........................................5
TASK 3.................................................................................................................................................7
P3 How competitive advantage is acquired by enterprise. Discuss with appropriate framework...7
TASK 4.................................................................................................................................................8
P4 Discuss concepts, theories and prepare strategic management plan in relevance with organni
sation ...............................................................................................................................................8
CONCLUSION....................................................................................................................................9
REFERENCES...................................................................................................................................10
BOOKS& JOURNAL:..................................................................................................................10

INTRODUCTION
Business strategies refers to group of decisions which helps firm to achieve goal and
objectives in appropriate manner. In organisation, to run the business activities, functions and
operations smoothly it important to implement business strategies. Market is expanding and
competition is rising at rapid level so, to survive in this competitive era these tactics as well as
strategies help in overcoming with threats and challenges. Effective decisions are taken when (BS)
is involved.. Nestle, a multinational corporation headquartered in UK is leading food and beverages
company providing quality of products and services to the customers. Due to its goodwill and
adoption of various business strategies in the market their business is expanding at higher level.
Organisation numerous competitors such as Costa Coffee, Harshey, Pepsico, Unilever, etc. Nestle
coffee beans and ingredients of flavour are the most essential resources of the company and which
also prevent them from imitable of the product from other retailers/ vendors. This report includes
PESTEL, VRIO, SWOT, porter five forces model in relevance with firm, models and theories of
strategic planning. In this present report, my main role was to collect the information regarding firm
and strategies that are being used by them in their activities.
TASK 1
P1 Explain how macro environment has impact on business
Corporate world is expanding their business activities at both national as well as
international level. Regions, culture, rules & regulations and many other factors are present which
has deep impact on firm growth. There are ample number of frameworks and strategies available
which help in identifying those factors. One of them is known as PESTEL Analysis. This
framework is used by entities to identify and examine the external factors which affect the
operations of business. With help of this analysis, firm are able to deal with difficult situation and
implement new strategies as well as tactics for their growth and development. It is time consuming
and requires proper knowledge &skills so that decisions are made in appropriate manner (Lyneis,
2020).
PESTEL Analysis
A framework used by organisation to track and monitor the market activities and external

factors which affect the performance level of business (Ukko, 2019).It depends upon the firm to
use this analysis as a whole or PEST+ 1 depending upon the need and requirement. It includes
several elements which has been discussed below-
Political Factor- Whenever the business start or expand, government involvement is
necessary to identify that organisation are doing the business in appropriate manner and within a
boundaries. Political factors are those which comprises of tax policies, government rules and
regulations, foreign trade policies etc. In context to NESTLE, any change in UK government will
direct have impact on bottlenecks of the company and all the functions as well as operations have to
face obstacles.
Economic factors- These are those factors which affect the growth, development and profit
and sales revenue of the business. Economic factors are those which include trade policies,
exchange rates, inflation& deflation rate etc. In relation with NESTLE, they provide goods and
services at affordable rates which helps them in tax and profitability. Company target upper, middle
and lower level people which increases their product value amongst the market (Bentley-Goode,
2019).
Socio-cultural Factors- Then arises the social factors which involve religion, culture,
behaviour, attitude and preferences. To successfully market & sell the product and socio-cultural
factors are important as they help in identifying the people need and requirement. This assists firm
to provide goods and services to right people so that all their demands are fulfilled in proper
manner. In context to NESTLE, they target the market in which products are consumed in effective
manner.
Technological Factors- Organisations are developing their activities at rapid level and this
is due to use of technology. These factors include use of advanced tools and equipment, artificial
intelligence etc. In relation with NESTLE, they have used technology for their product and business
expansion such coffee makers and machines, online ordering management system etc. Mo matter
what, it is time saving but also in many area use of manpower is reducing and giving rise to
unemployment (Leonidou, 2017).
Environmental Factors- These are those factors which affect both customers as well as
firm decision. It include pollution, waste disposal, temperature, resource availability etc. All these
factors are responsible for enhancing the productivity of business. NESTLE, with properly
identifying and by help of research team track and monitor these (EF) so that performance level of
firm does not get affected.
Legal Factors- Law and legislations play vital role in corporate world and which are to be

followed by every entity in appropriate manner. These comprises of securities and safety,
guidelines, consumer rights etc. In relation with NESTLE, legal department of the company make
ensures that all the policies and procedures are being maintained and adopted by each and every
firm.
After analysing the above matter, it is stated competition is rising, to expand the business
activities external factors which affect the growth and development of organisation are to be
examined in proper manner. Decision making is done by proper market research and effective
strategies and tactics are implemented. By use of PESTEL analysis, it becomes easy for entities to
compete with rivals and competitors. Business strategy is divided into three levels; corporate,
business unit and functional level. It depends upon the enterprises to focus on which aspect and
expand it.
TASK 2
P2 Analyse and examine the internal factors which affect the business
Every organisation has strength and weakness of the business and improves them by use
proper market research. Capabilities and calibre of the firm is essential to know because it helps
them in examining their weak point. Internal capabilities are identified by use of SWOT Analysis
and VRIO. These two frameworks assist in tracking and determining the performance and
capabilities of the entities. By applying these tools new strategies are implemented in appropriate
manner. In context to NESTLE, company use both the techniques through which challenges and
threats are faced easily (Wu, 2020).
SWOT Analysis
It is a tool which is used for identifying strength, weakness, opportunity and threats. It helps
in analysing the strong and weaker section of business. This framework is used by NESTLE and has
been mentioned below-
STRENGTH
 Main strength of NESTLE is that it
target market of those people where
product is consumed in proper
manner and this leads to strong
knowledge of geographic variable
 NESTLE, use rare flavour and
resources which makes them different
WEAKNESS
 As the company is developing it also
has weakness which has affected the
business such use of child labour,
plastics, and low wages to staff.
(Cardoni, 2020).
 To attract more customers,
organisation use advertising at bigger

from their competitors.
 Also, it easy for them to raise capital
from the market as firm has goodwill.
 The firm deals in diversified products
which results in awareness of brand to
the different customers at larger scale.
level which leads to high cost of
production and involvement of huge
capital as well as investment.
 Moreover, in many countries
government rules and regulations are
strict which makes down slow for
company to open their store
efficiently.
OPPORTUNITIES
 As the unemployment is reducing,
people are becoming busy in their
work and this leads to more demand
and requirement of the product.
 Energy drinks of NESTLE, might get
a rise in market due to health
conscious people (Çitilci, 2020).
 They can also merge up with other
brand to expand the business at wider
level.
 They also have opportunity of
introducing new products as with
chance of higher demands,
THREAT
 Competitors like Costa Coffee are
providing same line of goods and
services and NESTLE, might lose
their brand value in the market.
 Coffee beans which are being used by
the NESTLE, have the higher prices
in some countries which has deep
impact on finance department of the
company.
 In some of the countries laws and
regulations are strict which makes it
difficult for firm to run business and
might close down their stores.
Strategic decision making- SWOT Analysis direct have impact on decision making process
of firm as the changes are identified they are to be adopted by management. This affects the
decision making of stakeholders & shareholders. Thus, when using SWOT proper consideration is
to be maintained so that strategic decision making is done in effective way.
VRIO Analysis
VRIO analysis is used by organisation to identify which resources are useful for the firm. In
relation with NESTLE, market research team took effective measures to track and determine their
resources through which business get expand at rapid level. To conduct this model, it is necessary to
have appropriate knowledge and information regarding the entity and market. Moreover, while
going through this, it will help in analysing the internal strength and weakness of firm.
Valuable- The first element of this analysis is valuable in which resources which are
important to organisation are used in proper way. Through this, firm is able to use their foods and
beverages appropriately. In relation with NESTLE, their valuable resources is coffee beans which
they used in their flavours because customer demand is more towards these resources. Also, in some
countries they beans are sell at higher prices and which require more capital by the firm. Higher
value of resources leads to optimum use and control on expenses in the entities.

Rare- Further comes the rare element which states that resources which provide and
increase the competition in market and threaten the rivals are crucial and rare. In relation with
NESTLE, company is providing healthy foods and beverages with help of food scientists. This is
taken as competitive advantage by the firm to survive in the competitive market. No, other entity
can use rare element of NESTLE because it is not easy to work with scientists and also is
expensive. So, they can use this element of VRIO as secret tool to enhance the productivity and
performance level of business (Bakhtari, 2020).
Inimitability- Many retailers are available who copy the brand name, product and flavour of
the organisation. In context to NESTLE, inimitability of the food and beverages is not easy because
of their research and development department and loyalty of staff. This makes them stronger
competitor in market and acquire more customers at rapid level.
Organized- Further comes the organised to capture value which means that if resource is
unable to provide profitability and capture product value from the customer and market then it is of
no use. In context to NESTLE, there coffee flavours are the reason for the success of business. This
is due to well organised and structured management system of the firm, managed staff etc. Also, a
discipline is maintained in the entities when enterprise handle and perform their activities in
systematic manner.
After a brief analysis of above internal capabilities, it is concluded that for the continuity of
business it is essential to identify and analyse the capability and performance of entities at so that
activities, functions and operations run smoothly. Both VRIO and SWOT analysis assist
organisation to implement strategies and tactics to survive in market and face challenges in proper
manner.
TASK 3
P3 How competitive advantage is acquired by enterprise. Discuss with appropriate framework
Competition has been rising at rapid level and new firm and businesses are taking places in
the market. This gives expansion to substitute products and alternatives options to the customers
and this affect the profitability of the organisation at wider level. In relation with NESTLE, they use
Porter five forces model to tackle with situation and gain competitive advantage in the market. This
framework has been described below-
Porter Five Forces Model
This is a model used by organisation to determine the competition, performance, and

progress level within the market. It also guides firm to shape the management structure according to
the situation so that decisions in the entities are taken in appropriate manner. (Durdyev, 2020). In
context to NESTLE, marketing team of the company help in identifying these five forces and it is
include several aspect which are explained below-
Entry of new threats- In market, when two or more than two company do the business
within the same line then market share growth and profit share start fluctuating. This factor is
mostly when firm is rising in the market and suddenly new competitors disrupt the environment of
business (Zhang, 2020). In context to NESTLE, they remain active about changing market situation
and trends which helps them in examining the entrants of new corporates. Also, it is not easy to
enter into a market by the new entities because it require time and huge capital to start the business.
This situation is more critical or say high when existing firm cannot make the profit in market, rules
and regulation by the government are flexible, customers trust and loyalty is dynamic.
Competition Rivalry- Every organisation has its rivals and competitors in the market. It is
important to have competition in the business because it pushes the firm to achieve the higher
growth and productivity. This makes entities stronger and with help of new strategies and tactics
they are able to deal with hurdles which affect the business development and profitability. In
relation with NESTLE, their competitors like Costa Coffee, Unilevere, etc. has affected the
structure and management of the company at broader level. But this also motivates them to provide
quality of foods and beverages products so that acquisition of customer is more and activities of
business are expanded at both national as well as international level (Wellner, 2020).
Bargaining power of buyers- At this stage, most of the time it happens that buyers
bargaining power is more as compared to suppliers. This is because products and goods only
consumed by customers or say buyers. So, they act as source of profit in the business and
bargaining is accepted by the vendors. NESTLE, has wider customer acquisition areas across the
globe which makes them strong competitor in the market. In this bargain power of buyer is
basically low because of trust on the brand, quality of product and positive relationship between the
entity and end users. Customers mostly demand quality of goods and services, affordable prices etc.
So, organisation is able to fulfil all the need and requirements of the customers in proper manner.
This helps in gaining more profitability, feedbacks, and preferences and to explore more
opportunities at wider level.
Bargaining power of Suppliers- In this, supplier/ vendors play vital role because they act
as distribution channel and firm is only able to get the raw materials, resources, tools and
equipment’s with help retailers. Bargaining power of suppliers depends upon the resources or say
raw materials which are used by the organisation. Rareness and valuable variables decides the

importance of resources and which determine cost and bargain power. NESTLE coffee beans are
mostly used by the firm in their foods and beverages products. These beans are highly demanded
and are expensive. So, this leads to higher bargaining power of vendors. Customers get attracted
towards the ingredients and flavours which are used by enterprise in appropriate manner and make
ensures that all the resources are used properly (Wu, 2020).
Threats of substitutes- Further comes the threats of substitutes in which availability of the
same product with different suppliers or retailers affect profitability of organisation. There are many
distribution channels which sells the identical product at affordable and low prices. In context to
NESTLE, mostly coffee is targeted by the rivals and competitors and ample number of local
retailers are available who provide foods and beverages with lower prices. This affects the entity
profit and sales revenues at wider level. So, to prevent from such situations firm should provide
offers and discounts on the products, goods and services so that end users are attracted at larger
level. It is essential for company to examine the switching behaviour of customers so that new
strategies and tactics are implemented to acquire market share growth at broader level (Met, 2020).
The above displayed picture shows degree of impact on Nestle over the substitutes.
So, it has been analysed that availability of substitutes have deep impact on Nestle overall of
customer ratio and productivity. Thus, it is essential for them to focus towards the customers’ needs
as well as requirements.
After a brief analysis of above matter is seen that market is wider& dynamic and include
challenges as well as threats. To explore opportunities and acquire customers, strategies, policies
and procedures have to be implemented so that functions and operations of the business are carried

out in appropriate manner. Porter five forces model has been used to examine the forces which
affect the productivity and performance level of business. This analysis is most effective as it helps
in identifying the competition status and capability of the entity so that profit and sales revenue of
the firm is increased.
TASK 4
P4 Discuss theories, concepts and present strategic management plan in relevance with organisation
Due to rising competition, organisation is using theories and models which applied in the
business to enhance their activities, functions and operations at wider level. Concept and theories
are essential in the entities because they assists in guiding the entrepreneurs how to perform, how to
behave and various ways to deal with critical situations (Vrtana, 2020). Strategies are important
because they help in facing the threats and challenges in the market. Time period is also to be
considered as crucial because business strategies are only effective when they are used according to
the variation of time. In context to NESTLE, Ansoff matrix has been used by the company to
implement tactics as well as strategies & which has been discussed below-
ANSOFF Matrix
It is a tool used by firm to identify the growth in relevance with market and product. It is
divided into four quadrants and each quadrant shows market/product status and expansion. Also,
risk associated with each strategy is also explained and involved. In relation with NESTLE, they
use this matrix so that more opportunities is avail by the organisation at both domestic as well as
international level.
Market Penetration- It is the safest and secure strategy because in this existing market is
used by the firm to enhance their existing product profit sales and revenue. Risk associated with this
quadrant is low and market share growth is limited as activities of business are performed within the
boundaries (Lyneis, 2020). In context to NESTLE, enhancing their product line of Nestle fruita
vitals such as offering the different types of flavours such as guava, peach, apple etc and within the
existing market of Pakistan and Bangladesh. Due to trust and loyalty of the customers they have
taken this decision to expand this product with more and new flavours.
Product Development- Further comes the product development in which new product is
developed in existing market. While adopting this strategy a proper market research is to be done so
that to target which segment and customers is known easily. In relation with NESTLE, they use this
quadrant carefully and by examining the need and requirement of the people. Such as nesfruita and
nesvita are being introduced and promoted with help of advertising at larger level to enhance the

business in new market (Ukko, 2019).
Market Development- At this level, market is new and existing product is used for the
development. Demographic variables, customer’s attitude and behaviour is track and monitor
appropriately so that right product is given to people where the demand is more and emerging. In
context to NESTLE, crunch product is developing and targeting the new market because it has
attracted customers and enhancing the productivity level of business (Bentley-Goode, 2019).
Diversification- Then comes the diversification in which market as well as product both are
new in the business. Risk associated with this strategy is higher as compared to other strategies. In
this, events and activity of market is unknown. This types of aspects is only used when organisation
is gaining [profitability and now wants some change in the firm. In relation with NESTLE, they are
providing baby food, bottled water etc. They have use this strategy so that customers have more
options to select the product and more demand will lead to expansion of business at higher level.
Strategic plan
Vision- Main vision of Nestle is to be the global leader and lead the change
Mission- To provide quality of goods and services with measured standards
Objectives-
 To increase the sales revenue and profit ratio
 To access global market for expanding business
 To enhance the productivity and market share growth
Market and strategy development- Then, action plan is also needed in which market and
target customers are being focused by organisation. For example- The chosen entity adopt the
demographic market for their products.
After a brief analysis of above strategy tool it is stated that to survive in the market it is
essential for business to develop and enhance the market as well as product at broader level. With
help Ansoff matrix, different strategies are used by organisation to improve productivity and
performance level of business.
Strategic management plan
SMP refers to set of decisions and ideas through which firm develop and enhance the
business productivity and performance level. With help of strategic management plan, goals as well
as objectives are achieved in proper manner. In context to NESTLE, they use this process to counter
their rivals and competitors in the market. This management plan includes various stages which are

described below-
Aim- Main aim of NESTLE is to be the global leader and to provide quality of life
worldwide.
Vision- Vision of the organisation is to develop the business activities at international level.
Mission- NESTLE mission statement is to provide healthy food to people.
Values- Management of the firm follows principles and maintain discipline organisation.
Market Research- The most important strategic plan is to conduct or go with market
research. It is crucial for organisation because it help them in examining and determining the
challenges as well as threats which affect the productivity of business (Leonidou, 2017).
Strategies- To survive in this competitive era, NESTLE, has used market penetration to
maintain stability of the business and gain profitability (Cardoni, 2020).

CONCLUSION
After a brief analysis of above report it is concluded that business strategies are essential in
the firm to improve performance level. Macro environment factors slow down the growth and
development of business. Internal capabilities assist the entities to analyse the stronger and weaker
area of organisation. SWOT and VRIO are crucial tools which are used by marketers to identify the
challenges and threats. Porter five forces model help entities to track and monitor the competition in
market. Then, with use of strategic management plan effective measures are taken which helps in
expanding the functions as well as operations at wider level. Thus, time, skills and knowledge is
needed to implement business strategies.

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