Business Environment Report: Nestle's Strategies and Analysis

This report provides a comprehensive analysis of Nestle's business environment, examining its organizational purposes, the nature of the national environment, the behavior of the organization in market environments, and the significance of global factors. The report identifies Nestle's strategies, including its focus on sustainable practices, stakeholder engagement, and responses to ethical and economic challenges. It explores the company's interactions with various stakeholders, including shareholders, employees, customers, and environmental groups. The report also delves into the impact of fiscal and monetary policies, economic systems, and international trade on Nestle's operations. It assesses the influence of market structures, competition, and global factors such as EU policies on the company's performance. The report highlights the challenges and opportunities Nestle faces in navigating its complex business environment, including issues related to resource allocation, fair trade, and ethical considerations.

SUBJECT NAME: BUSINESS ENVIRONMENT
NAME: BUSINESS ENVIRONMENT
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Table of Contents
LO1 Organisational purposes....................................................................................3
AC 1.1 Identification.................................................................................................3
AC 1.2 Description....................................................................................................3
AC 1.3 Explanation...................................................................................................4
LO2 nature of national environment.........................................................................5
AC 2.1 Explanation of economic purposes...............................................................5
AC 2.2 Assessment of impact fiscal and monetary policy........................................6
AC 2.3 Evaluating the impact of competition policy................................................7
LO3 Behaviour of organisations in market environments........................................7
AC 3.1 Explanation of market structures..................................................................7
AC 3.2 Illustration of market forces..........................................................................8
AC 3.3 Judgement of business and cultural environments........................................9
LO4 Assessment of significance of Global factors...................................................9
AC 4.1 Significance of International trade................................................................9
AC 4.2 Impact of global factors..............................................................................10
AC 4.3 Impact of EU policies.................................................................................11
References...............................................................................................................12
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LO1 Organisational purposes
AC 1.1 Identification
Nestle is an Irish company, which has globalised the food industry. It is a global
company and facing challenges arising from child obesity as well as deforestation; they have
catered to join other partnerships to improve their business strategies that include providing high-
quality food at sustainable cost. They have targeted many NGOs, Government and
Organisations, Industry and multi-layered agencies to cite different options in the food industry.
Besides, the company has upheld that it would take care to reduce environmental effects as well.
The management has cited that they have addressed environmental, social and economic
challenges through diverse stakeholders. International Federations of Red Cross and Red
Crescent Societies have come forward to help them overcome the socio-economic challenges.
This organisation has furthermore come to assist the Nestle Company to deal with local
collaborations. They have also come forward to respond in cases of natural disasters. In this way,
the International organisation has fostered a relationship to fight back the environmental issues.
Gourio (2012, p.2735) has pointed out that the world is facing issues regarding constrained
resources and natural disasters. Thus, Nestle has aimed in achieving the target set to fight these
factors. The company has highlighted the global food waste. The UN has addressed this issue
and the company as well its partner IFRC have highlighted them to the African Government.
Furthermore, the company has also targeted the human rights policies to contest the issues
related to food worldwide (Nestle.com, 2016).
Nestle has also entered in catering the Chinese Food Company called Yinlu. This
company is well known across the Asian country. Nestle has grabbed the attention of China by
buying its products from the local farmers thereby insisting them to enhance the quantity, quality
as well as efficiency of the food. The Irish food company has efficiently encouraged and
supported the local farmers thus contesting harmful food for foods with the highest quality
(Nestle.com, 2016).
In addition to this, it can be said that public and private sector organisations have
different purposes of operations. By having an assistance of such values the issues can be
overcome in desired manner. It has been noticed that private sector businesses are focused
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towards activities which provide better opportunities in regard to gain profit margin ratio. On the
other side, the public sector organisation focuses on development of products and services for
better social outcome. However, they also consider profit as critical part because the funding of
business is dependent over it. It has been witnessed that each type of enterprise has some
common objectives, vision and mission which they want to accomplish. The main objective of
public sector organizations is to perform national security related works and providing
employment opportunities to people of country. Partnership is done between two or more parties
for the purpose of enjoy limited liability and share skills and the workload. Companies can be
considered as a legal entity and these are typically smaller than public limited companies.
AC 1.2 Description
The Irish Food company has always introduced new strategies to gain the support of the
stakeholders that include the employees, shareholders, environmental groups, agencies,
institutions and customers. The Chairman of Nestle, Mr Peter Brabeck-Letmathe, has introduced
the shareholders of the company and addressed that the company has achieved its target in the
year 2015. The report revealed that as asked by the shareholders, Nestle would continue in
providing organic food. They have satisfied their shareholders by increasing the growth of the
organic food by 5-6% (Nestle.com, 2016). The company has identified the requirements of
training of the employees to deliver the quality product. However, the company has introduced
the Employee Relationship Policy to identify and thereafter build a relationship based on trust,
value , respect and culture. The company allows the employees to refer Human rights as well as
labour practices. Nestle has undertaken the strategy of long-term commitment with its employees
(Nestle.com, 2016). The company has claimed to procure a healthy relationship with the
customers as well. They have introduced operation pillars to gain the trust of the customers
simultaneously building on the brand value and the quality food. Their “Health and Wellness
strategy” and “Nestle Healthy kids programme” has grabbed the attention of the customers. The
company has taken measures to provide the right nutrition by reducing the salts and well as trans
fat to deliver the high-quality product to the customers as they demand (Nestle.com, 2016).
Kashmanian et al. (2011, p.126) have highlighted that Nestle has forwarded various strategies to
grab the attention of the environmental groups as well as the agencies by an approach the
company has named as "life cycle assessment". The company has improved on their resource and
procured commitment for climate change and promotion of proactive and transparent climate
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policy that promises to be a long-term engagement. Furthermore, the company has set objectives
to optimise their packaging portfolio as well as update the sustainable hotspots (Nestle.com,
2016).
AC 1.3 Explanation
Nestle is one of the leading companies in the world as they implement strategies and various
project that help the world cope up with the water, energy resources, waste management and
greenhouse gases. The company has gained advantage over their rivals by introducing
sustainable environmental strategies.
However, Boyd (2012, p.286) has pointed out that Nestle struggled with the ethical issues over
the infant formula a few years back. The company has faced criticism for the past decade as they
failed to abide by ethical considerations with their infant formula. The author has highlighted
that the company has introduced this marketing campaign to enlighten the various positivities of
infant milk formula. However reports of unethical methods of promotion and therefore the
company landed in trouble.
Nestle has introduced legislative measures to highlight customer privacy policies. The company
has stated that the the information of the customers, shareholders and the employees is very
important for them. Thus, in order to answer the anticipation of the customers the company has
to seen for data security and data privacy. Furthermore, the company has strengthened the policy
in 2015 to adopt Consumer Engagement Principles (CGP). Henceforth the company has
launched a more transparent privacy policy for the customers. They can access the websites or
about further information through clear communications. Privacy specialists are appointed by the
company to analyse their weak points (Nestle.com, 2016).
Dragusanu et al. (2014, p.220) have shed light on the fair trade policies in the market. The
authors have highlighted that like ethical issues, the company also stumbled with their fair trade
policies. The infant milk controversy has severely affected their trade policies. The company
struggled with the fair trade policies for chocolate products. The fair trade union of Panorama
has abolished seven of the 33 farming for cocoa. However, it may be pointed out that the
company has come a long way thereby introducing fair trade in their product KitKat that has
boosted the economy of the Ivory Coast.
In order to have better opportunities and meet the needs of stakeholders the business firm
is well focused towards application of effective monitoring system so that goals and objectives
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can be accomplished effectively. Employees involvement has also been boosted so that better
activities can be performed and ensure that long term sustainability can be advanced. By
providing a better dividend to the holders the trust has been gained. It allows to have better
opportunities and lead business to impressive level of success.
LO2 nature of national environment
AC 2.1 Explanation of economic purposes
Gourio (2012, p.2755) has highlighted that the company utilises the mixed economic policies to
allocate the resources. This type of economy has both private and public sectors that assist in the
allocation. The company can utilise the allocations provided by the government as well the
customers. Tkachenko and Mosiychuk (2014, p.64) on the other hand have focussed on the
transnational population and since the company has struggled in the past, the economic growth
of the company depends on the customer growth as well. The authors have furthermore shed
light on the labour force as they also affect the allocated resources. The authors are of opinion
that availability of labour force also affects the economy of the company. Nestle requires
maintaining a high frequency of labour mobility so that more efficient as well as the effective
allocation of the resources takes place. According to Alesina and Ardagna (2010, p.39), the
pundits of business marketing have cited that balance of payments is an important factor for
improvement of the trade performances. Sojamo and Larson (2012, p.619) have highlighted that
Nestle should maintain the average constant price to avoid price inflammation. Many researchers
have claimed to be a serious problem and erodes away the value of assets as well as money.
Nestle should introduce strategies to avoid such distortions of the pricing mechanisms. This may
result in unemployment thus severely affecting the company. Woiceshyn (2011, p.320) has
pointed out that taxation is one of the main factors that determine the fate of allocation. If the
Government endorse high taxes on the company, the resources would move to the companies
having low taxes. Thus, all the factors determine the fate of resource allocation of the company.
It has been noticed that role of economic system is considered as one of key aspect which
allows to have improved focus on resource allocation. If any business firm is not having
allocation of funds and sources according to economic system standards then critical issues
might be faced. Currently Nestle is operating its business in mixed economy so management
need to advance the long term sustainability. Mixed economic system is a combination of both
market economic system and command economic system. Management of company is also free
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from government restriction so that company can develop policies to fulfil the demands of the
customers in a significant manner.
AC 2.2 Assessment of impact fiscal and monetary policy
Nestle has to incorporate the monetary and the fiscal policies to grow as an organisation.
Woiceshyn (2011, p.321) has shed light on the factors required to be focussed by Nestle in order
to achieve the target set. Nestle has highlighted their business principles to upheld their
commitments and business objectives. The economic goal of the company is to set successful as
well as favourable long-term developments by incorporating a healthy profit that is assisted by
the financial markets and the shareholders (Nestle.com, 2016).
Alesina and Ardagna (2010, p.65) have pointed out that fiscal policy allows the organisation, in
this case, Nestle to achieve the desirable objectives of macroeconomy through changing the
composition and levels of aggregate demand. The authors have highlighted that this policy would
influence the bottom line, tax bill, amount of money consumers may be able to afford and the
cost of borrowing. Furthermore, fiscal responsibilities, tight policies, long term effects and
expansionary policies affect the organisation in more than one ways. The company has procured
the sustainable development policy to provide foods of the highest quality while taking care of
the environmental effects (Nestle.com, 2016). Belleflamme and Peitz (2015, p.56) have
highlighted that as the Government makes its spending the company would be profited as they
can focus more on consumers spending as well. However, the author has pointed out that the
company has used both the public and the Government spending for its products. Alesina and
Ardagna (2010, p.67) have on other hand pointed out that the Public Sector Net cash
Requirement (PSNCR) depicts the annual deficit of the fiscal policies which is defined as the
shortfall that occurred between the expenditure made by the company and the public sector
revenues. The authors are of opinion that Public borrowing is controversial in some cases. The
company has not provided any report regarding it. Nonetheless, Lindstedt (2014, p.168) has
highlighted that euro convergence would have severed affect to the company. Nestle as an
organisation would have to abide by the price developments, treaty provisions, fiscal
developments, exchange rate developments and long-term interest rates provided by the
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convergence. The European Central Bank has procured all the treaties to be followed in order to
have trading advantages on the continent.
Any kind of changes in fiscal and monetary policies has great impact on the performance
of organisation so management need to consider it in desired manner. It has been noticed that if
government has advanced the tax rates on food products. In such situation the expenditure and
tax burden on Nestle will be advanced which will impact the overall outcome. It means
consideration of key values is significant to refer so that long term opportunities can be
advanced. As same the policies might also affect the interest rates which influences the
investment range so Nestle to need to consider such values or policies effectively so that long
term sustainability can be advanced.
AC 2.3 Evaluating the impact of competition policy
The competition policy is undertaken by the organisations to procure advantages over the rivals.
This policy allows the promotion of competition to make the markets better by contributing
towards better efficiency as well as enhanced competitiveness. Competition Act of 1998 depicts
the preventions, restrictions or the competitions that can affect the trade in the United Kingdom.
Since, Nestle has originated in Ireland and the UK, thereafter it abides by the law set by the
Government. This law is incorporated by the Government to restrict the abuses happening in the
market to gain the upper hand (Legislation.gov.uk, 1998). Thus, Nestle should make sure to
abide by this law when implementing strategies that aim competitive advantage. Another act
forwarded by the Government regarding competition is the Enterprise Act 2002. This act is
enacted to highlight the mergers and changed the policies of the insolvency bankruptcy
(Legislation.gov.uk, 2002). Nestle company has to abide by this legislative act when consulting
its trading policies. Thus, the company requires following the legislative procedures to provide
their quality product and gain competitive advantage.
LO3 Behaviour of organisations in market environments
AC 3.1 Explanation of market structures
Karnani (2011, p.80) has highlighted that market structure affects the pricing as well as the
output decisions. The two most commonly applied market structures are monopoly and
oligopoly. The organisations make the output decision based on the demands and the pricing
strategies. In a competitive market, the customers decide the price and the organisations
compares the output decisions to determine the prices. Belleflamme and Peitz (2015, p.45) have
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highlighted that every organisation lowers the price of their products to gain the market share,
which is termed as Perfect competition. In monopoly, the market has only one seller and in case
of oligopoly, a few organizations dominate the market. The concentrated market can also be
open to small and medium firms as well. Sojamo and Larson (2012, p.619) have pointed out that
Nestle follows the monopolistic market structure. As an organisation, Nestle can have super
benefits in the long run thereby empowering the market and be the provider of the scarce
products. Genchev and Mortimer (2016, p.45) have argued that Nestle would be able to benefit
from factors such as the economies of the scales and export revenues. However, Karnani (2011,
p.82) has pointed out that Nestles can also exercise high prices and restrain consumer surplus as
well as economic welfare. The company would procure a decreased competitive economy in the
global scenario. The authors are of opinion that being monopolistic in the market structure, the
company can provide higher prices that would directly affect employment. Nestle would produce
lower output and thereby lower the employment labour. Gourio (2012, p.2739) has highlighted
that furthermore, Nestle may also apply the following strategies to gain competitive advantage of
the rivals. The company may implement the predatory pricing strategies to pressurise the
potential rivals. Nestle has owned the various food products so that new entrants would face
problems on entering the market. Since, it produces high quality food products, the company has
built up on the brand value and customer satisfaction thereby exploiting more on their
monopolistic structure in the market.
AC 3.2 Illustration of market forces
Payaud (2014, p.62) has pointed out that supply and demand is one of the most basic
fundamentals of the market economy. When the supply is equal to the demand ten that state is
defined to be at economic equilibrium. This defines the pricing strategy as well. In case of
Nestle, the price balancing and the supply and demand law is followed in context of coffee. The
pricing of the coffee gets determined on the basis of the above factor. The relationship between
the amount of the product sold and the demand dominates the pricing strategies. Demand is
defined as the quantity of product the consumers can buy at their conceivable. Nestle must
consider the elasticity of demand and supply. Sckokai and Varacca (2012, p.310) have
highlighted that if the prices of cereals rise, then substitutes are available. The substitutes and the
elasticity are proportionate with one another in this case. The income level also affects the
elasticity as well. People with high income would not bother the changes in price, henceforth the
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price can itself become elastic. According to Davis et al. (2012, p.1), the supply of elasticity can
also affect the output decisions and the pricing strategies of the company. Nestle can fix the cost
and increase the output if the supply is elastic enough. Furthermore, the authors have highlighted
the perceptions of the customers in shaping the market for Nestle. The advertising, public
relations, reviews and social media affect the perception of the customers. The company can grab
the attention of the customers by introducing new approaches such as the slim milk. The
company can procure the packaging strategies by placing the customers in the center stage so
that they are satisfied. Besides, with advanced technology, the company can implement strategies
to have the attention of the customers through social media and advertisement. Reasonable
pricing strategies taking care of the supply and demand would affect the customer perceptions as
well.
AC 3.3 Judgement of business and cultural environments
Nestle has aimed at procuring foods of the highest quality however, this can be achieved if the
company has focused on the business as well as the cultural environment of the organisation.
Agha et al. (2012, p.192) have pointed out that labour market trends determine the future skills
as well as demands. The company requires increasing the changes in the infrastructure and
thereafter requires innovative thinking in the labour market. The skills of the employee would
increase not only the productivity; henceforth the company would be able to procure the products
of highest quality. In such cases, Payaud (2014, p.60) has pointed out that Nestle may also
provide training to the employees. The authors have also stressed on the technological
developments in the market. Since Nestle has focused on the quality of the food products,
therefore, technological innovation is required to procure the quality product. Thus, as an
organisation, the company would have more market shares thereby satisfying the customers. As
opined by Sa and Lee (2012, p.250), the company needs to focus on the R&D facilities and
incorporate latest technologies to provide the competitive advantage over the rivals. Besides, the
author has highlighted that Nestle also enlighten on the environmental issues as well. As per as
Agha et al. (2012, p.192), core competency combines multiple resources and skills to distinguish
the organisation in the marketplace. This element in the business allows the organisation to
produce the "unique" effect on the customers. Nestle requires to procure the three tests provided
by Hamel and Prahalad in order to shape their organisational structure. Vallaster et al. (2012, 58)
have pointed out that Nestle as an organisation requires to have consistency in their
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organisational culture. The management needs to observe the behavioral patterns to focus the
attention on the forces and the elements that shape the behaviour of the employees in the
organisation. Nonetheless, the company should also highlight their social, environmental,
economic and the political issues to determine their market advantage.
LO4 Assessment of significance of Global factors
AC 4.1 Significance of International trade
Nestle requires the accession to the international trade laws as it is considered to be the backbone
of today's commercial world. Brummer (2010, p.641) have stated that this law allows the
customers to pay less money for their respective products. The authors have highlighted here that
the company may implement the principle of absolute advantage in case of various countries.
The economists have claimed that this principle the company can benefit from the cost
opportunity of the goods. World Trade Organisation (WTO) has aimed to achieve high living
standards, sustainable development and full employment. For Nestle, the international free trade
means they can acquire bigger market and accession to larger markets. This would expand their
customer base increase the market profits. Estrin and Prevezer (2011, p.65) have pointed out that
Brazil, China and India are the emerging markets. In such countries, the labour charges are low
and therefore, they can have low prices points and the products have low prices as well. The
authors have highlighted that even after the transportation fee is deducted they procure items at
low prices and thus, the customers around the world pay less for such products. The WTO
facilitates these savings. The authors have highlighted that these third world countries have
emerged to become economic powers the world is recognising lately. Nestle, as an organisation
has implemented strategies to capture their markets as well.
AC 4.2 Impact of global factors
Nestle requires to recognise the global factors such as the business, education, competition,
employment, growth, finance and environment in order to deliver quality products. The company
needs to consider the global economic conditions. Sojamo and Larson (2012, p.619) have already
pointed out that Nestle has monopoly market structure and therefore has less competitiveness
from its rivals. However, the company requires understanding the local market of the countries
where it trades. The competition from the local companies may provide competition and
thereafter Nestle should implement strategies to contest them. If the employment rates are high
the company would be able to provide high quality products. Chabbott (2013, p.120) have
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highlighted the requirement of education. Nestle or any business organisation would want to
acquire workers who are to be less managed and are more productive at their work. Even, the
WTO recognizes that educational qualification deters the countries as rich or poor. Lowth et al.
(2010, p.12) have pointed out that recession can affect the business strategies of the companies.
Furthermore, the authors have stated that the capital structure and the financial position can
affect the performance of the organisation. Environmental factors such as internal factors like
value system, financial factors, internal relationships, missions and external factors like
suppliers, intermediaries and the competitors affect the business strategies as well. Mapuva and
Muyengwa-Mapuva (2014, p.30) have pointed out that regional trading blocs have their
advantages as well as disadvantages. In case of Nestle in UK the biggest block they faced is the
Brexit. Although the member countries in the trading bloc allow integration, the recent Brexit
would have severe consequences on the consumer goods giant in the country.
AC 4.3 Impact of EU policies
EU has implemented the CAP policy to implement food security across the continent. This
policy allows the Europeans to access food products at reasonable prices. The most important
factors is that this policy supports the environment. As its is already established that Nestle has
aimed to procure food products of high quality and environmentally sustainable. However,
Wickins-Drazilova et al. (2010, p.186) have pointed out that this policy fails to identify the rules
of supply and demand. In some cases, overproduction leads to lowering the market prices and the
policy is a waste to recognise the business perspectives altogether. On contrary, the CAP has
handed millions of dollars to nestle thus helping them gain the market and exercise monopolistic
market structures. Kim and Kim (2012, p.231) have pointed out that Kyoto protocol has banned
the Freon, which is greenhouse gas currently utilised by the Nestle company to freeze dry the
coffee beans. Thus, it would procure negative effect on the company. In G20 summit, Nestle has
supported the food security to the World leaders.
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