Business Environment Analysis Report

This report provides an in-depth analysis of the business environment affecting Nestle, covering various factors such as market structures, fiscal and monetary policies, competition, and stakeholder objectives. It highlights the importance of adapting to market forces and global factors while ensuring compliance with regulations. The report concludes with insights on how these elements impact Nestle's operations and profitability.

BUSINESS
ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
1.1................................................................................................................................................3
1.2................................................................................................................................................4
1.3................................................................................................................................................5
2.1................................................................................................................................................5
2.2................................................................................................................................................6
2.3................................................................................................................................................7
3.1................................................................................................................................................7
3.2................................................................................................................................................8
3.3................................................................................................................................................9
4.1..............................................................................................................................................10
4.2..............................................................................................................................................10
4.3..............................................................................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business environment includes all factors which directly affect the operations and the
profitability of the company. There are many factors which are prevailing in the market and they
have huge or negligible impact on the business. This report talks about the Nestle organization
which is one of the leading food processing organizations in the market (Business environment,
2013). It has been known for the diversity in the products and the services which it is offering to
its customers. The report talks about the fiscal and the monitory policy situation which is faced
by the firm. Besides this, it also emphasizes on the market structure which are the main
determinants for setting the price and making the output decision of the organizations. Further, it
stresses on the EU policies which are made for encouraging the trade in the market.
1.1
All the organizations are established for different purposes as well as the objectives. Even
the functions of the companies are according to the aim which is determined by them. There are
majorly three types of organization which has different aims and objectives. These are as
follows:
 Private organization- The main and objective of the private organization is to earn profit.
For example, Nestle which is a food processing industry aims to increase its market and
expand its customer base to increase its profitability (Al-Najjar, 2012). In this, the
stakeholders are the owners of the firm as they are one who purchases the shares of the
company. The rules and the regulations are made by the stakeholders and in this
government does not have any role to play. Besides this, the stakeholders make strategies
to earn more revenue.
 Public organization- This is opposite to the private sector organization. Majority of the
functions are controlled and regulated by the government of the nation. The stakeholders
of the organizations are the public of the nation (Baldwin and Scott, 2013). Besides this,
the aim and objective of the firm is to serve the public by giving them proper quality of
products. They are not focused on the profit but they emphasizes on the strategies to
accomplish the needs and demands of the customers. The public sector organization of
UK generally deals in making roads, bridges which are for the facility of the individual.
1

 Non- profit sector- These organizations are established for the social cause of the society.
There main aim is to help the needy people (Moon, 2010). The government has major
role to play in the non- profit organization. They are basically for the underprivileged
individuals who are not able to get the proper facility.
These are the objectives of the organizations and they make strategies according to the mission
and vision of the company.
1.2
For the organization to function effectively, it is important to fulfill the objectives of the
stakeholders. Nestle is one of the food manufacturing industry so it is required to identify the
needs and preferences of the customers and meet their demands. Every stakeholder has different
preferences which are as follows:
 Employees- The objective of the employee is to earn money and they are in need of the
proper environment in which they can operate their operations. It is required by Nestle to
provide them with safe environment in which they can carry out their operations
effectively (Parker and et.al., 2014). Nestle follows all the rules and the regulations which
are made by the government and besides this, the pay structure is made according to the
norms formulated by the government. With this, a safe and sound environment is
provided to them so that they can carry out their operations effectively.
 Government- For the successful operations, it is required by the Nestle to pay all the taxes
which they are obliged to pay to the government. The objective of the government to see
that proper rules are followed or not and besides this, they emphasize on the
environmental policy which are to be complied by the company (Stackelberg and et.al.,
2010). Their main objective and motive is to safeguard the interest of the employees.
Nestle has been taking care of all the aspects which are required to be fulfilled by the
government.
 Customers- Without meeting their goals, the Nestle cannot become successful. Their
main objective is to get the food products according to their needs as well as the
requirements. In case of Nestle they have been expanding its products and services
according to the requirements of the customers.
 Environmental agency- The food processing industry emits wastage and the gasses which
are harmful for the people who are living near the factory. In this case, the aim of the
2

environmental agency is that Nestle should not harm the general people and the wastage
should be disposed of correctly so that it does not harm the water bodies as well as the
environment (Viswanathan and Dickson, 2007).
1.3
There are certain strategies which are employed by the Nestle to meet the objectives of
the stakeholders. The initiatives which are taken by the Nestle are as follows:
 Consumer legislations- Nestle is complying with the public protection laws which are
made for the right of the consumer. In case of any of the grievance, the Nestle takes step
to resolve the issues and satisfies them by solving the problem. The organization is
focusing on the fair trade policy as well as the competition. This helps in fulfilling and
meeting the responsibility of the consumers (Zdravkovic, 2013).
 Ethical issues- These are concerned with the environmental agency as well as the
customers. Nestle has been conducting its business by taking due care of the customers as
well as the environment in which they are operating their business (Brinkman, 2014). In
this, they have made certain policies as well as the strategies which can curb the pollution
which emerges out of the factory.
 Employment acts- There are several employment acts which are made for the safety of
the individual. Nestle has been complying with the industrial dispute act, factories act
etc. this will help the workers to work effectively and will also assist in enhancing the
productivity of the firm (Chen and Mohamed, 2008).
2.1
There are basically four types of economic system. According to the economy system,
the resources are allocated in the nation. All economic system has different rules as well as the
regulations which are as follows:
 Command economy- This is also known as the command economies where the power is
in the hands of the government (Gregory, 2013). All the resources are allocated by the
government as the agency is appointed by the authority and they have the power to
distribute the resources among the nation. It is beneficial at the time of crises as all the
distribution is done equally which is helpful in the long run.
3

 Free market economy- There is no interference of government in the economy. All the
resources are distributed according to the interaction between the supplies, producers and
the consumers. In this, the big industries are the decisions makers. The main decision
what to produce, how to produce are in the hands of the customers as well as the
producers (Jones, Hillier and Comfort, 2007).
 Mixed economy- this economy is basically combination of the command and the free
market economy. Most of the countries follow mixed economic system as in this, the
important resources or the scare resources like water, land etc decisions are taken by the
government. In this market forces allocates the remaining resources of the nation. UK is
the example of mixed economy.
 Traditional economy- in this, economy the past norms are followed and according to that
the resources are distributed in the market. This economy is adopted by those nations
which are recently established and work according to the past culture (Pride, 2013).
2.2
Fiscal and monetary policy majorly affects the business activities of the organization.
Monetary policy is basically controlling the supply of money in the market through the interest
rates. This is done by the government to ensure price stability in the environment. Through
lowering down the interest rates, Nestle can take money for expanding their business in different
areas. By taking loan they can introduce their project as well as can make the expansion plan. In
case when there is low interest rate, the banks provides easily loan to the business and the
consumers (Services, 2009). Generally, it has positive impact on the Nestle as through this the
planned projects can be started and it will help the organization in expanding their product.
Further, the organization can make investments in the untapped markets.
On the other hand, fiscal policy is also made to control the supply of money through
adjusting the spending levels as well as the taxes. At the time of controlling the spending of the
individuals, the government increases the taxes (Zdravkovic, 2013). This directly impacts the
consumer purchasing power which results in lowering down the profitability of the Nestle. If
government increases the tax then the Nestle raises the price of the product as they have to
maintain the profitability. Due to this, they do not purchase more. On the contrary if government
spends more in the market, it is beneficial for the Nestle as most of the consumers will be
employed and will be able to spend huge amount in the products (The Impact of the Tax System
4

on Business Environment, 2008). So this is beneficial for the organization. But in this case,
Nestle luxury products will be affected by the change in monetary and fiscal policy because the
products which are necessary will be purchased by the users at the time of change also
(Worthington and Britton, 2015).
2.3
Competition policy and the other regulatory mechanism have a significant effect on the
business of Nestle. Competition act is made so that all the organization can work ethically and
without creating terror of their dominant position. The competition policy has impacted the
Nestle effectively as it encourages innovativeness in the products and the service (Iskanius, Page
and Anbuudayasankar, 2010). Through this, the organization has expanded its products and its
catering new target market. The competition policy is made for increasing the growth of the
economy. Through this, the firm, will be determine for offering better goods and services in the
market for satisfying the needs and preferences of the users. The competition policy includes
competition act 1998, enterprise act 2002 etc. On the other hand, different mechanism are made
by the government for ensuring that the products and the services are of the standard quality and
better technology are used for manufacturing the product. With the help of these means, Nestle
has been focusing on the services and the quality standard of the food products (Muhammad,
Char, bin Yasoa and Hassan, 2010). Besides this, for competing with the competitors, Nestle has
expanded its product by offering the customers with variety of flavors in the Maggie as well as
the yogurt. On the other hand, Nestle has been operating in the market without hurting the rivalry
companies. As according to the competition act they are allowed to directly target the rivalry
firms. The competition policy and other regulatory mechanism are beneficial for the customers
as well as the organization. It has encouraged better quality of products and even it has helped in
manufacturing the goods according to the needs of the customers. Through this, it will result in
fair environment (Klapper and Parker, 2011).
3.1
Market structures are the main determinants which determine the price of the product in
the nation. The price is determined according to the number of firms which are working in the
market. In case of the monopolistic competitive market, there is only one service provider who is
offering services to the customers. He is the one who is responsible for determining the price of
5

the product. But if the price is higher and the quantity decreases then loss will be seen in the
monopolistic market (Botha, Kourie and Snyman, 2014). So in this case, seller has to set price
according to the consumer. Another is the perfect competition where there are many sellers as
well as the buyers. In this case, the demand of the product is perfectly elastic and there is low
barrier to entry. As there are large number of buyer and sellers so the price is influenced by them.
But if any of the producer’s increases the price he will only have to bear the loss because the
price and the output decisions are not influenced by any of them. Further, the price and output
decisions are made according to the market forces (Baldwin and Scott, 2013).
Another is the oligopoly market structure where there are few firms and all the
organization has large number of market share. Nestle comes under the oligopoly market
structure where the decisions of one firm influence the strategies and decisions of the other. In
this, the demand for the product is more and the sellers providing the products are less. This
market structure faces very high competition which forces the organization to expand its market
structure and acquire more number of customers (Parker and et.al., 2014). In case of Nestle they
are regarded as the price setters as according to their price only the organization sells their
products to the customers. Basically, the competition it’s carried out on the basis of loyalty and
differentiation in the products. In case of Nestle for retaining their customers they are focusing
on giving quality products and further their emphasis is on the loyalty and the differentiation. So
the organization is meeting the demands of the users so that they can create competitive
advantage in the market (Stackelberg and et.al., 2010).
3.2
Market forces basically include the demand and supply of products in the market. The
organization operations are carried on the basis of the market forces. Nestle is operating its
function in the highly competitive market so in this case it is required to respond effectively to
sustain its position in the environment t(Viswanathan and Dickson, 2007). If the demand for the
food products is high in the market, then Nestle manufactures and produce variety of flavors in
the market and even the supply is increased to meet the needs of the users. Besides this, the
strong effect of market forces is on the price of the product. In the recent time, when the demand
for Maggie increased, Nestle maintained the same price but reduced the content in the packet.
This helped the Nestle to increase its profitability. At the same time, when the price for the
product reduces the demand rises. The same example of Maggie can quoted that when the supply
6

of the Maggie reduced. The consumer demand increased. Due to this, with increasing demand of
the food products, Nestle has been targeting the new customers and increasing supply of the
products which can satisfy the needs of the buyers (Zdravkovic, 2013).
Another market force which affects the responsiveness of the business is competition.
This has huge impact on the operations of the firm. With the increasing competition, Nestle has
been expanding its product lines and offering various schemes which can attract and retain their
customers in the organization (Chen and Mohamed, 2008). There is inverse relation between the
demand and the price. If the price of the commodity will rise, the demand will decrease. With
this, if the Nestle increases the price of products then the consumer will switch to the other
brand.
3.3
Business and the cultural environment are the one according to which the operations of
the business are decided. Cultural environment can be defined as the belief and the attitude of the
individual living in the society. For example; in case of UK, Nestle generally sells the frozen
products because in this most of the individuals uses the frozen food items. So in this case, the
organization produces these types of product in that country (Jones, Hillier and Comfort, 2007).
The Nestle is operating its business in many countries so it has been witnessing different
behavior of the employees. This has huge impact on the behavior of organization. Another factor
which affects the organization behavior is the use of technology and the innovation which is
prevailing in the country. If Nestle is operating in the developed country then there will be up-
graded technology which will be used by the company (Pride, 2013). This will have positive
impact on the behavior and the Nestle will able to work efficiently. Labor market has also major
effect on the behavior, in the developing country where the labor is cheap then the Nestle will
provide low salary to the employees and the same vice versa is seen when the labor is costly.
Besides this, employee skills highly impact the behavior of Nestle because if the manpower is
capable then the company will plan to expand their market as well as launch new techniques and
tools to operate it. If the employees are less skilled then new effective tools and techniques will
be adopted because for operating it the company has to provide training to the employees. These
are some of the factors which affect the behavior of Nestle (Services, 2009).
7

4.1
There are huge benefits attached in the international trade. One of the major benefits of
the international trade for Nestle is the low production cost which is incurred on the goods in the
developing countries like India and China. The price of the Nestle products is same all over the
worked but because of the different labor market the cost of the labor is less which makes the
production cheaper. Through this Nestle can enjoy huge profitability in the market. Besides this,
another importance of the international trade is the target market (Botha, Kourie and Snyman,
2014). The organization has huge market share which helps in balancing the loss which have
been occurred in one of the nations. It is seen that in many countries Nestle has to incur loss so in
this case it is balanced with the profit which is earned in the other nation. This is basically
balancing the risk of the organization. The main reason is that the international trade helps in
growth of the business which further results in increasing revenue of the business (Stackelberg
and et.al., 2010).
4.2
Global factors are the one which helps the organization to change its strategies as well as
the tactics. The global factors which are generally witnessed are taxation rate and the changing
rules and regulations of the nation in which they are operating their business. For the operating
their business, Nestle has to comply with the taxation policy and the tax rates which is prevailing
in the industry. The organization is required to levy the taxes which are required by the nation.
The company will include the entire Tax rate in the price of the product (Zdravkovic, 2013).
Then in this case the product will become expensive for the customers. This can reduce the
customers which will directly impact on the revenue of the Nestle. Competition is another global
factor which has direct effect on the operations of the Nestle. Through the intense competition in
the market, Nestle will have to focus on the marketing activity through which it can attract the
customers. Besides this, the company will make certain strategies to fight the competition
prevailing in the market (Brinkman, 2014). Employment is another global factor which directly
impact on the functions of the market. In case of India, where there is high unemployment rate so
the Nestle will easily able to find the labor who will work for them. In other case, where the
labor is not sufficient and efficient then it will be difficult for the organization to carry out its
work. Besides this, innovation, technology also impacts the production and manufacturing
process of Nestle.
8

4.3
There are several policies which are developed by EU for the growth and prosperity of
the business. The major emphasis of the policies is on the fair trade between the companies who
are operating in the nation. EU policy Kyoto Protocol has been made for the reducing
greenhouse gas emissions (Worthington and Britton, 2015). This has made a revolutionary
change in the environment of the nation. Nestle organization is part of the protocol which has
been helping the companies to fight against the global warming which is increasing day by day.
Besides this, EU has made policies which focusing on the sustainable development of the
organization. This has assisted Nestle to make products but by not degrading the environment.
Even according to the EU policies they have removed the trade barriers as well as the tariffs
which encourage the small industry to expand their business in different nations. It has helped
the developing nation to become developed through increasing the standard of living of the
individual. On the other hand, through competition act it has encouraged Nestle to produce
innovative and new products for satisfying the needs of the customers (Pride, 2013).
CONCLUSION
From this report it can be inferred that there are many factors which Nestle has to
consider while performing their operations in the market. Major impact on the profitability is of
the fiscal and the monetary policy which forces the company to change its functions and affect
the profitability of the firm. Besides this, Nestle is working in the competitive environment so it
is required by the firm to effectively respond to the market forces which changes frequently. It is
significant for the firm because if it does not change then it will negatively impact on the
customers. Further, the major global factor which affects the Nestle is the workforce as
according to them only the production and manufacturing decisions are executed by the
company.
9

REFERENCES
Books and journals
Al-Najjar, B., 2012. The determinants of board meetings: evidence from categorical analysis.
Journal of Applied Accounting Research. 13(2). pp. 178–190.
Baldwin, W. and Scott, J., 2013. Market Structure and Technological Change. Taylor & Francis.
Botha, A., Kourie, D. and Snyman, R., 2014. Coping with continuous change in the business
environment: knowledge management and knowledge management technology. Elsevier.
Brinkman, J., 2014. Unlocking the Business Environment. Routledge.
Chen, L. and Mohamed, S., 2008. Impact of the internal business environment on knowledge
management within construction organisations. Construction Innovation: Information,
Process, Management. 8(1). pp.61-81.
Gregory, R. P., 2013. The Global Economy and Its Economic Systems. Cengage Learning.
Iskanius, P., Page, T. and Anbuudayasankar, S.P., 2010. The traditional industry sector in the
changing business environment-a case study of the Finnish steel product
industry. International Journal of Electronic Customer Relationship Management, 4(4),
pp.395-414.
Jones, P., Hillier, D. and Comfort, D., 2007. Changing times and changing places for market
halls and covered markets. International Journal of Retail & Distribution Management.
35(3). pp.200–209.
Klapper, L.F. and Parker, S.C., 2011. Gender and the business environment for new firm
creation. The World Bank Research Observer, 26(2), pp.237-257.
Moon, H., 2010. Global Business Strategy: Asian Perspective. World Scientific.
Muhammad, M.Z., Char, A.K., bin Yasoa, M.R. and Hassan, Z., 2010. Small and medium
enterprises (SMEs) competing in the global business environment: A case of
Malaysia. International Business Research, 3(1), p.66.
Parker, L. and et.al., 2014. Self Expression versus the Environment: Attitudes in Conflict. Young
Consumers: Insight and Ideas for Responsible Marketers. 15(2).
Pride, W. F., 2013. Marketing 2014. Cengage Learning.
Services, C. R., 2009. Agriculture and Environment Strategy, 2009-2014. Catholic Relief
Services.
Stackelberg, H. V. and et.al., 2010. Market Structure and Equilibrium. Springer.
10