The Business Environment of Nestle

BUSINESS AND THE
BUSINESS ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
L01...................................................................................................................................................1
P1. Different Types and Purposes of Organizations and Their Legal Structures...................1
P2. Size and Scope of a Range of Different Types of Organizations.....................................2
L02...................................................................................................................................................4
P3. Interrelationship of the various functions within an organisation and their link to
organisational structure and objectives..................................................................................4
L03...................................................................................................................................................6
P4. Positive and negative impacts the macro environment has upon business operations....6
L04...................................................................................................................................................7
P5. Internal and External Analysis of Specific Organisation................................................7
P6. Interrelationship between Strengths and Weaknesses with Macro Factors.....................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business means group of people come and work together to achieve some common goals.
Business Environment means the combination of external and internal environmental factors
which affect the business. Business and Business Environment are interrelated with each other
and cannot be separate from each other. Nestle is a multinational company providing various
foods and beverages products. It was founded in year 1866 by Henri Nestle. Report will
highlight difference between private, public and voluntary company. This Report will also tell
about relationship between organizational functions and their link with organizational objectives.
It will also describe about PESTLE and SWOT analysis of the Organization (Introduction,
Meaning & Importance of Business Environment, 2018).
L01
P1. Different Types and Purposes of Organizations and Their Legal Structures
Public Company – Public companies are those which are owned, managed, controlled
and operated by government and its authorities. Government can be state or national or local
authority. Purpose of public company is to provide good quality products and services to the
public and welfare of society. Public company has to mention “PUBLIC LIMITED COMPANY
or PLC” in the end of their name. The shares of public company can be freely bought and sold by
the public. Their shares are not required to be listed on stock exchanges. It is the company's
decision that they wanted to listed or not on the recognised stock exchanges. For the investment,
public company is allowed to raise funds from public. They have to incorporate with Companies
House. They must have minimum £50,000 paid capital. The company must have 3 directors with
CS and minimum 7 and maximum unlimited members. Example of Public Company is National
Health Service.
Private Company – Private companies are those companies which are owned, managed,
controlled and operated by Individual or group of Individuals rather than Government. Purpose
of Private Company is to earn profit, become number one in respective industry and beat
competitors. Private company have to mention “PRIVATE LIMITED COMPANY/Pvt. Ltd.
CO.” in their name. The shares of private company cannot be sold to public without being listed
on recognised stock exchanges. That means they have to list themselves on recognized stock
exchanges. They have to incorporate with Companies House. They must have at least one
director. There is no minimum capital requirement but one share must be issued on
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incorporation. Initial share capital must be minimum £100. The company must have minimum 2
members and 200 maximum members. Example of Private Company is Nestle (Drees, 2016).
Voluntary Company – Voluntary companies are those companies in which some people
(known as Volunteers) come together, do an agreement for the specific purpose and try to
achieve them. The best examples to understand about voluntary company are trade union,
professional associations and societies associations etc. These companies can be incorporated or
unincorporated. Membership is not required in voluntary companies. To start the company, there
is no formality. Example of Voluntary Company is The National Trust. Their purposes are to
create social wealth and solve another social issues like proverty, lack of education etc.
Small and Medium-sized Enterprise (SME) – Small and Medium-sized enterprises (SMEs) are
those business in which numbers of workers and turnovers are below certain limited. In UK, if
numbers of workers are fall below 250 members and their turnover is less than £25m, that
company will be considered as Small And Medium-sized Enterprise. Badger Mining and
Pinnacle Financial Partners are the example of SME.
P2. Size and Scope of a Range of Different Types of Organizations
Basis Public Company Private
Company
Voluntary
Company
Small and
Medium-Sized
Company
Name of the Company National Health
Service
Nestle The National
Trust
Pinnacle
Partners
Limited
Type of Company Health Care Company Food
Company
Tourism
Company
Financial
Planner
Company
Types of Industry Healthcare Industry Food
Processing
Industry
Heritage
Industry
Financial
Service
Industry
Objectives To provide best health
services to the public.
To maintain
the number
To look after
the beautiful
To look after
the money of
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To reduce the death
rate.
To provide best
lifestyle to the people.
one position in
the food
processing
industry.
To provide
qualitative
products to the
customers.
To create
value for the
stakeholders
of the
company.
places.
To protect
them from
harms.
people.
To maintain
the stability of
economy.
To provide
best financial
services to the
customers.
Mission To deliver best and
efficient health care by
providing best health
care providers.
To meet the
needs of
nutritious
foods for
world.
To save the
beauty and
environment
of Heritages
for upcoming
world.
To create
outstanding
values for the
stakeholders.
Vision Maintain healthy and
happy communities.
To provide
customers best
food
throughout
their whole
life.
To provide
best memories
of heritage
places to
tourists.
To be best
financial
service
provider in the
eyes of world.
Market Size It is currently working
in Europe and its
region countries like
England, Scotland,
Wales, and northern
It is
multinational
company who
is working at
global level
It is largest
voluntary
organization in
United
Kingdom
It is currently
operating in
London.
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Ireland etc. and providing
its goods and
services in 189
countries.
currently
serving its
services to
England,
Wales and
Northern
Ireland.
Revenue £110.02 million
approx.
£169.69
million
approx.
£8 million
expected
£2.13 million
approx.
Stakeholders Management Team,
Doctors, Surgeons,
Nurses, Patients,
Shareholders.
CEO, Top-
Middle-Front
line managers,
Creditors,
Debtors,
Employers,
Employees,
Shareholders,
End-users.
Management
team, staffs
and
volunteers.
Shareholders,
Employees
and
Customers.
(Difference between Pvt Ltd and Public Ltd Company, 2019.)
L02
P3. Interrelationship of the various functions within an organisation and their link to
organisational structure and objectives
Organizational structure is a layout within which an organization defines and directs the
activities and flow of information to achieve its organizational goals (Erasmus, Strydom and
Rudansky-Kloppers, 2016). Nestle follows HIERARCHICAL (functions based) organizational
structure, in which tasks are grouped into jobs. These jobs are then divided into major functions.
On the basis of these functions, departments are made. After that, these departments are given to
specialised managers to handle it. Employers and Employees are working under these managers
to achieve departmental and organizational goals. Every departments are linked to each other in
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organization, this is called interrelationships. Interrelationships are necessary for Nestle to
achieve its departmental and organizational objectives.
Interrelationship between marketing department and human resource department -
Function of Marketing is to promotes, creates values and sales the products of Nestle. For
that company needs good employees. Thus hiring good employees are the role of HR
department. Therefore there is an interrelationship between Marketing and HR department. So
that marketing can contact with HR, whenever there is a requirement for employees. HR needs to
contact with marketing so that the requirement of Employees with necessary qualification and
skills can be fulfil. Like this, both department can achieve their departmental and organizational
objectives. Both departments have their own managers who work with each other to provide best
for employees and company too.
Interrelationship between Human Resource Department and Operational Department -
HR and Operational Department of Nestle have to create a strong interrelationships
between them. HR and Operational managers come together to decide the payroll, training and
incentive programs and need of employees in the organization. Without payroll or training or
incentive programs will demotivated employees to work in company which leads them to not
able to work proper. Thus, this will create stiff for whole organization. Thus there is necessity of
interrelationship between both the departments for the good working environment in
organization. Moreover Operational manager has to manage the cost, raw materials and finished
goods in which he required highly dedicated employees which are only possible when there is
good relationship between both departments. Like this both the departmental managers manage
and direct their employees to achieve their departmental and organizational objectives (Hamilton
and Webster, 2018).
Interrelationship between Operational Department and Finance Department -
Nestle operational and finance department are closely work with each other because
operational manager have to ensure that resources and funds allotted by finance department are
utilised in correct manner so that they can achieve their and organizational objectives and
satisfied customers' needs. This will leads to make profits and create values for the company.
Profits lead to more funds in the company which leads the enough allocation of funds by finance
department. Correct allocation of funds create peaceful interrelationship of finance with every
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departments in Nestle. Enough funds leads to every department to work better so that they all can
achieve their as well as organizational objectives.
L03
P4. Positive and negative impacts the macro environment has upon business operations
For the analysis of impacts of Macro Environment upon business operations, company do
PESTLE analysis which stands for -
P – Political factors
E – Economical factors
S – Social factors
T – Technological factors
L – Legal factors
E – Environmental factors (Policy, 2016)
Political Factors – Political factors are those factors which are influence due to government and
its policy. Examples of political factors are tax policy, fiscal policy, monetary policy, change in
government etc.
Positive impact of tax policy on Nestle is that government let the firm to do work peaceful if they
fulfil political formality. Negative impact of tax policy on the firm is that their profit reduces due
to pay tax.Economic factors – Economical factors are those factors which are arise due to
economy of nation in which organization is operating. This includes interest rate, foreign
exchange rate, inflation rate etc.
Positive impact of foreign exchange rate is pound is strong currency after dollar which means
nestle export value is high which create profits for the firm. Negative impact of exchange rate is
that too much fluctuation in exchange rate impact the company's import and export.
Social factors – Social factors are those factors which are arise due to social and culture
environment outside the organization. Education levels, family backgrounds, change in lifestyle,
cultural changes are included in social factors.
Positive impact of change in lifestyle is that it can change attitudes, opinions and interests. So it
can increase the sales and profits for the Nestle. Also these factors can impact negative and
reduces the profits for the company.
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Technological factors – Technological factors are those which are happen due to technological
changes in any part of organization. Change in process, digital factors etc. is the example of
technological factors.
Positive impact of change in process is that nestle will produce qualitative products by new
process which reduces its cost and increases profit. Negative impact of change in process is that
employees of company do not accept the new process which creates stoppage of working process
of organization.
Legal factors – Legal factors are those which are create due to particular laws of organization
and nation. Change in laws, change in products due to some restrictions by laws etc. come under
this factors.
Positive impact of change in law is that it can improve the quality of products of Nestle, but
negative impact is that it can increases the expenses of company.
Environmental factors – Environment factors are those which is happen due to change in
environment of nation. Change in weather, sustainability, corporate social responsibilities etc.
are environmental factors.
Positive impact of corporate social responsibility is that it creates the goodwill for the Nestle and
negative impact is that implementation of CSR strategy is too much expensive for the firm
(Abbott, 2015).
L04
P5. Internal and External Analysis of Specific Organisation
Internal and External Analysis is defined as SWOT analysis which stands for -
S - Strengths
W- Weaknesses
O – Opportunities
T – Threats
Strengths – Strengths can be define as the characteristics which help the firm to take its
competitive advantages over others.
Weaknesses – Weaknesses can be define as the characteristics which create obstacles in the
growth of company.
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Opportunities – Opportunities can be define as an elements in the environment, by which an
organization can take benefits and can grow.
Threats – Threats can be define as an elements which can be dangerous for an organization if it
does not pay attention to that elements (Gürel and Tat, 2017).
Nestle Swot Analysis are as follow -
STRENGTHS -
1. Wide range of products – Nestle provides wide range of food and drink products under one
roots. Its products are as follows – Milk products and baby foods, Maggie and noddles, pet
foods, ice-creams, beverages and chocolates.
2. High market value – Nestle is multinational company who is operating in 189 countries.
Nestle's market size is also high as it is working at global level. Nestle market value is 240
billion US dollar.
WEAKNESSES -
1. High Cost – Nestle is multinational company whose expenses on promotions, operations and
legal requirements are high which leads to high cost. This all leads to price high which is not
affordable for middle and lower class family.
2. Controversies – As Nestle is popular multinational company, it create a lot of controversies for
nestle which badly impact the goodwill of company. Maggie controversies, child labour
controversies and Baby food boycott controversies are some popular controversies of Nestle.
OPPORTUNITIES -
1. Market Expansion – Nestle can become more powerful company if it will do its market
expansion. This can be done through corporate restructuring strategies like mergers, acquisitions,
joint ventures, takeovers etc. with another strong companies established in different market
where nestle did not access yet. This will expand its market as well as its revenue and profits.
2. Digital Market – Today's era is internet era which gives birth to digital platforms. Using these
Digital platforms, Nestle can reach its potential as well as existing customers fast. This will
create a brand value for the company. Also, nestle can use these digital platform uniquely in
marketing strategies which is good for company's growth and sales volume. By this, Nestle can
increase its market value on digital market.
THREATS -
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1. High Competition – Nestle has to face highly competition in its industry as well as in another
industries. In its industry Nestle has to face with KRAFT FOODS, PAERLE PRODUCTS,
MARS INCORPORATED, HARSHEYs and DANONE etc. and in another industries, company
has to compete with UNILEVER, SARA LEE CORPORATION, APPLE INC., AMAZON and
MICROSOFT etc.
2. Conscious Customers – with the time passing, Consumers are becoming educating which
leads them to differentiate between right or wrong. They are becoming more and more conscious
about their and their family, which lead them to ignore low quality food, excess contains of sugar
and oil food. Ignorance of these kind of foods makes the demand for the Nestle food
(Phadermrod, Crowder and Wills, 2019).
P6. Interrelationship between Strengths and Weaknesses with Macro Factors
STRENGTHS WITH MACRO FACTORS
Nestlé’s strengths are wide range of products and High market value. Nestle did take
opportunities of every macro factors like political factors, economical factors, legal factors,
social factors, technological and environmental factors, thus become successful. Company
choose every age group (from kid to old), gender(men and women) and income(upper, middle
and lower level) of people who can eat and afford the food this lead to having so many product
portfolio in the Nestlé’s business. This lead to wide range of product. Company is using
technology to make products better and qualitative which attract all the consumer segment which
increases the goodwill of company and having high market value. Nestle have enough all the
resources which make company to expand their business and fulfil all the political requirements
(Brandsen and Honingh, 2016). Also Nestle follows Company Act, Food and Safety Act, Health
and Safety Act, Employment Legislation of all the nation which leads the company to get
support of consumers and governments too. This lead to increase its market shares as well as
market value. Nestle always successful in adoption of countries' culture. For example- people are
becoming conscious about their health and eating healthy foods. These changes are accepted by
Nestle at early stage and company did suitable change in products components. Also Nestle are
doing CSR which strengthens the relationships of company with stakeholders. These all factors
make Nestle popular and increase its revenues, sales and profits.
WEAKNESSES WITH MACRO FACTORS
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High Cost and Controversies are weaknesses of Nestle. Nestle is working at global level
and providing their goods and services in 189 countries. Every countries have their own macro
(legal, political, environmental, technological, economic and social) factors which is affecting
the operation and management of company. Company need to incorporate with corporate house
whose formalities are different and they need paid in home currency which lead company to bear
high cost as expenses will be different in different countries. Also every countries social and
cultural environment is different like in India, where every cultures and festivals are celebrated,
give chocolates and desserts is considering good this lead to high production, promotion and
distribution cost and in Another countries like America, UK etc., where only few festivals and
majority of Christians are living thus demand is low which lead to low production, distribution
and promotion cost (Aithal, Shailashree and Kumar, 2015). Also Technological factors matters.
For example, In Japan, Nestle is using new and innovative production process which leads them
to sell the products at lower cost. On the flip side, In India, where technological advancement is
low, cost is high. Thus these in-differentiate between countries macro factors lead company to
bear high cost which lead the company to keep prices high and earn low profits.
CONCLUSION
From the above study, it has been summarized that Business and Business Environment
is an important aspect for business size and type. To create better business and business
environment, it is necessary for company to create interrelationship between every organizational
departments. To better understanding of business environment, company should conduct SWOT
and PESTLE analysis and create relationships between them so that company can increase its
competitive advantages and reduce its competitive disadvantages by taking correct opportunities
at right time and deflect the threats before they can harm the company and also understand the
positive and negative impact of macro factors on the company so that company can take correct
steps for the betterment of business and business environment.
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REFERENCES
Books and Journals
Abbott, R.J., 2015. Pestle Analysis for Students.
Aithal, P.S., Shailashree, V. and Kumar, P.M., 2015. A new ABCD technique to analyze
business models & concepts. International Journal of Management, IT and Engineering.
5(4). pp.409-423.
Brandsen, T. and Honingh, M., 2016. Distinguishing different types of coproduction: A
conceptual analysis based on the classical definitions. Public Administration Review.
76(3). pp.427-435.
Drees, K., 2016. Nestle and Baby Bottle Disease.
Erasmus, B., Strydom, J.W. and Rudansky-Kloppers, S. eds., 2016. Introduction to business
management. Oxford University Press Southern Africa.
Gürel, E. and Tat, M., 2017. SWOT ANALYSIS: A THEORETICAL REVIEW. Journal of
International Social Research. 10(51).
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Phadermrod, B., Crowder, R.M. and Wills, G.B., 2019. Importance-performance analysis based
SWOT analysis. International Journal of Information Management. 44. pp.194-203.
Policy, P., 2016. What is pestle analysis.
Online
Introduction, Meaning & Importance of Business Environment. 2018. [ONLINE]. Available
through: <https://www.toppr.com/guides/business-studies/business-environment/
introduction-meaning-importance-of-business-environment/>.
Difference between Pvt Ltd and Public Ltd Company. 2019. [ONLINE]. Available through:
<https://keydifferences.com/difference-between-public-company-and-private-
company.html>.
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