Business Environment Report: Nestle's Strategies and Impact

This report provides a comprehensive analysis of Nestle's business environment, examining its organizational purposes, stakeholder objectives, and market dynamics. It delves into the impact of fiscal and monetary policies, competition regulations, and global factors on Nestle's operations. The report explores how market structure influences pricing and output decisions, and how Nestle responds to market forces and cultural environments. Furthermore, it assesses the significance of international trade and the policies of the European Union on Nestle's activities. The report covers various aspects, including stakeholder responsibilities, economic systems, taxation policies, competition acts, and pricing strategies, offering a detailed overview of Nestle's strategies and their effects on its business performance.

BUSINESS ENVIRONMENT

TABLE OF CONTENTS
BUSINESS ENVIRONMENT........................................................................................................1
Introduction......................................................................................................................................3
LO1: Understand the organizational purposes of businesses..........................................................3
1.1) Identify the purposes of different types of organizations.....................................................3
1.2) The extent to which Nestle meets the objectives of different stakeholders..........................3
1.3) Responsibilities of Nestle and strategies employed to meet them .......................................4
LO2: understand the nature of national environment in which business operates..........................5
2.1) How economic system attempt to allocate resources effectively.........................................5
2.2) Impact of fiscal and monetary policy on business organization and their activities............6
2.3) Impact of competition policy and other regulatory mechanism on the activity of Nestle....6
LO3: Understand the behavior of organizations in their market environment ...............................7
3.1) How market structure determine the pricing and output decision of Nestle........................7
3.2) The way in which market forces shape organizational responses........................................8
3.3) How the business and cultural environment shape the behavior of Nestle..........................9
LO 4: Be able to assess the significance of the global factors that shape national business
activities ..........................................................................................................................................9
4.1) Significance of international trade to UK business organizations........................................9
4.2) Impact of global factors on UK business organizations.....................................................10
4.3) Impact of policies of the European Union on UK business organizations.........................11
Conclusion ....................................................................................................................................11
References......................................................................................................................................12

INTRODUCTION
Business environment refers to the internal and external factor which affects the business
functions of the company (Breinlich and Criscuolo, 2011). Both internal and external factors of
the environment can influence each other. In this case, the entire report is based on Nestlé S.A,
which is world's leading food company in terms of revenue and has annual sales over CHF 1
billion (About us. 2016). The company is headquartered in Venvy, Vaud, Switzerland. The
company was formed by Merger of Anglo-Swiss Milk Company, established in 1866. The report
explains the purposes of different types of organizations and their purposes. Apart from this,
roles and responsibilities of an organization and its describes its strategies to meet their
objectives. Other than this, effect of fiscal and monetary policies are also elaborated. Effect of
all the internal and external factors are elaborated which assess their impact on revenue of the
company.
LO1: UNDERSTAND THE ORGANIZATIONAL PURPOSES OF
BUSINESSES
1.1) Identify the purposes of different types of organizations
KraftHeinz is one of the organization which has business relationship with Nestle. Their
major objective is to give sustainable health to the customers and feed America with healthy
food services. Apart from this, they also have an objective of getting profitable sales growth,
best-in-margin and ensure a superior return of capital (Davig and Leeper, 2011). Other than this,
their mission is to make big innovations in the business and also they have a mission to expand
their business internationally. They are also working on maintaining dividend policy. They have
a great market share with an annual revenue of 18.218 billion. In addition to this, they served the
major area of America through which they are able to get more customer satisfaction from the
people.
1.2) The extent to which Nestle meets the objectives of different stakeholders
Stakeholders are basically the people who majorly invests their money in the company
for the achieving the organizational goals and getting more revenue than their investment. This
people have more interest in the growth and profits of the company, so that they can get more
annual dividend.

 Shareholders: Shareholders are the person who have invested their money in the Nestle.
Through shareholders Nestle will b able to achieve its objectives. They are willing to get
more revenue than their investment (Diefenbach and Sillince, 2011). Customers: Customers are the people who create demand in the market through which
Nestle will be able to met its organizational goals. Their main aim is to get the right
products from the company in the market. They need more safety and guarantee of food
products (Eden and Ackermann, 2013). Suppliers: Suppliers are the people who makes availability of raw material to Nestle.
They focus on the thing that what is the Major demand of the firm from them. It shows
that whether Nestle is demanding for raw material or semi-finished products. They are
interested in what the firm regularly order from them, whether they are making proper
payment to them (Ferraro and Brody, 2015.). Financial institutions: Financial institutions has the major role in providing money to
Nestle. They will examine that whether the company will be able to make timely return to
them or not.
 Government: Governmental authorities are those which are interested in collecting more
taxes from Nestle. Apart from this, it will also expects the employment of firm. They will
also views that firm's actions are directing according to the legal compliance (Jordan,
2012).
1.3) Responsibilities of Nestle and strategies employed to meet them
The basic responsibility of Nestle is to provide good food to their customers. Corporate
social responsibility means the responsibility of the company towards the society and its
consumers. In consultation with all the stakeholders, Nestle decided to make focus on its
activities on the following criteria through which they can give maximum profit to the
customers. Nutrition: Nestle has the aim to provide better nutrition to their customer through which
they can get healthy products and become more healthier. They have done major focus on
school children so that they can better nutrition in their diet (Koos, 2011). Water and Sanitation: As, major of the countries are facing the problem of water stress.
Apart from this, safe drinking water is also an major issue in now-a -days. For removing

this problem, Nestle helps the farmers to reduce wastage of water in their agricultural
needs (Kose and et.al., 2012). They give them knowledge about water conservation and
also provide access to water and sanitation through which they can save the water for
long time usages. Rural development: Apart from all this, Nestle is also focusing on sustainable
development of the rural areas through which those areas will make improvement in their
growth.
 Nestle to form Working Parent Support Coalition: Nestle affirmed it global
commitment to working parents by becoming founder member of Working Parent
Support Coalition which is a leading business that implement progressive policies to
improve workplace wellness for new parents and their children (Madi, 2013).
LO2: UNDERSTAND THE NATURE OF NATIONAL ENVIRONMENT IN
WHICH BUSINESS OPERATES
2.1) How economic system attempt to allocate resources effectively
As, Nestle is operating its business in different countries, they will have to face a range of
economic system such as mixed, free enterprise and in transitional population. Mixed economies
are that type of economic system in which both the state and private entities are comprises. In
this type of system prices of the product are identified by market forces. As the economy of UK
is faced recession previously which make a major impact on the profitability of Nestle. They
faces high negative budget during this period. Due to increase in VAT of the county, consumer
demand will be automatically reduces which is a loss for the company (Maes and et.al., 2012).
On the other hand, reduction in interest rates will not majorly affect the business activities of the
company. Apart from this, balance of tared will be affected by the changing policies of interest
rate and governmental policies of that country. Inflation due to money supply causes demand to
fall, this will not affect the supply of Nestle as they have their businesses across the world. Other
than this, taxation policies of the country will affect the profitability of the business. Apart from
this, business behaviors like investment, risk assessment and cost of capital and behavior of
consumer will also used in efficient ways so that it can make profit for them (Maggetti and
Gilardi, 2011). As, getting investment is very important for the business to grow. They are

making regular payment of dividend to their shareholders which influence the shareholders to
make investment in the company.
2.2) Impact of fiscal and monetary policy on business organization and their activities
Fiscal policies of a country are related to governmental policies of that country while
monetary policies are related to those which are related to the nation's money supply. Both of
this policies affects the business of Nestle. Tax policies: A very important factor of fiscal policy is taxation policies of the
government. If tax policies of the country are high. It will impact the business of Nestle.
On high tax rate, Nestle have to give more tax to the government. As, they are operating
across the world, they have to deal with different taxation policies of the country (Men,
2012). Rate of unemployment: If the country has high rate of unemployment, the government
have to implement or maintain low interest rates (Müller and Timofeev, 2016). If
government curbed overheated economic resources with tight fiscal policies, Nestle have
to make immediate respond against it and hire new people in the business. Borrowing: The federal rates decides some rates at which banks borrows money from
them. If the fed rate increase, Nestle have to pay more interest to banks for borrowing
money. It will increases the liabilities of the the business.
 Foreign exchange: When the Federal Reserve introduces cheaper cost of borrowing, it
makes more increased flow of money in the economy. Change in foreign exchange rates
will impact the earning of Nestle. It will impact the percentage of raw material imported
from the other country (Ogunlana, 2010).
2.3) Impact of competition policy and other regulatory mechanism on the activity of Nestle Competition Act, 1998: Competition act is the major source of competition law. It deals
with an updated framework of identifying and dealing with restrictive business practices.
He main purpose of this act is to harmonize the UK and EU policies (Ostrom, 2010). This
act makes the companies protected from the illegal practices. Competition Commission: Competition commission is responsible for investigating
mergers, markets and other inquiries which are related to regulate the business industries

under competition law (Pache and Santos, 2010.). This will prohibits companies to adopt
illegal and force mergers of the company. This will impact Nestle's merger policies. Office of fair trading: It is not-for -profit and non-ministerial government department
which is established by Fair trading act, 1973. It deals with both consumer protection and
competition law (Radaelli and De Francesco, 2012). This will prohibiting any type of
unfair practices such as rogue trading, scams and cartels. It studies that how business is
working in market for customers and consumers both. Nestle have to take care about all
the marketing activities of their business. Apart from this, it will also shows that how
competitive markets are working for consumers, fair trading business and economic
preferences.
 European commission: This is the executive body of European union which is
responsible for proposing legislation, implementing decisions and managing the day-to-
day activities of business. Nestle have to work according to the rules and legislation of
the European commission.
LO3: UNDERSTAND THE BEHAVIOR OF ORGANIZATIONS IN THEIR
MARKET ENVIRONMENT
3.1) How market structure determine the pricing and output decision of Nestle
Nestle has the monopolistic competition, in which number of sellers are producing the
same product but they are slightly different. In this, every seller can their own price without
affecting the marketplace. Pricing strategies in this type of market structure is a long term pricing
framework. Deciding the good price will require to choose good pricing strategies. Pricing strategy: Nestle can decide their prices according to their own choice as the
company is working in monopolistic market. Nestle can choose the market skimming
pricing in which they can charge highest initial prices that consumer will have to pay. As
the demand of the product raises, company have the option to raise its prices for
generating profits (Scullion and Collings, 2010). On contrary to this, if the demand of the
product is satisfied in the market, company have the choice to reduce the prices according
for attracting the customers in the market.

 Output decisions: If the company is about to set higher prices for its products, Nestle
have to ensure that the quality of product will be according to the prices. If the prices of
the product are high, the quality should be also high. Quantity and quality of the product
should be suitable enough with their prices (Snijders, 2011). Apart from this, they will
also use eco pack fr the customers which make people attracted towards the company and
make good perception of the company in the market. Apart from this, Nestle have the
option to make the output decisions according to their choice.
3.2) The way in which market forces shape organizational responses
Market forces the major role in shaping organizational responses in terms of profit and
market share. Consumers: As, demand of product is depend upon the responses of consumers in the
market. If the prices or quality of the product get change, this will impact on the supply
and demand of the products in the market. This will also affect the elasticity of supply as
demand of the product decreases, supply of the product get decreases with it (Ulrich,
2013). Apart from this, cost and output decisions of the company will also get change
with the change in behavior of the consumers. Competitors: Competitors also have the role in changing the organizational responses.
They have the power to make change in organizational responses of Nestle. Competitors
have the power to change perceptions of people by introducing new products. If there are
strong competitors in the market, Nestle have to decide their strategies according to the
market moves.
 Change in supply chain: This will impact on the elasticity of supply of Nestle at the
marketplace. Apart from this, If the distributor of the company get change, organization
have to face the problem of product distribution in the market (Wood and Wollenberg,
2012). They have to manage their supply chain in the form that they will make
availability of product in the market more easily.
3.3) How the business and cultural environment shape the behavior of Nestle Labor market trends: Labor market trends impact the organizational productivity of
Nestle. If labor policies of the country changes, it will impact the business behavior of
Nestle. This are basically related to ethical and morale of workforce. It includes change in

the working hours or change in minimum pay. Company have to shape their business
according to this, which either can cause profit or loss to the profits of the company. Skills and abilities of employees: If the company do not have skilled and experienced
people with them it will also affect the behavior of the company (Davig and Leeper,
2011). Nestle have to develop proper training and development programs for the
employees, for this they have to change their organizational shape in context with making
the employees skilled and experience of the work. Technological factors: it deals with use of latest technology through which business can
gain profit. If there is any new technology is used by the competitors of Nestle for
making the product more good in quality and reduces the cost of production. Nestle will
have to adopt this technology or better than this through which they are able to reduce the
cost than their competitors and gain more profits from market (Eden and Ackermann,
2013).
 New innovations: Nestle will be also get affected through new innovations of the
competitors. If its competitors are introducing new products which are more attractive to
the consumers, Nestle will also have to make investment in research and development of
new products so that they are able to face the competition in the market. This will impact
the organizational shape of the company.
LO 4: BE ABLE TO ASSESS THE SIGNIFICANCE OF THE GLOBAL
FACTORS THAT SHAPE NATIONAL BUSINESS ACTIVITIES
4.1) Significance of international trade to UK business organizations World trade organization(WTO): World trade organization helps Nestle to increase their
business worldwide. This will make others know about the company's products and
growth. The trade of the company will get more popular (Koos, 2011). This will also
raise trade incomes of the company. Companies are able to settle disputes and can reduce
tensions regarding international trade of the products. Apart from to his, it will also help
the countries to develop more effectively. Other than this, it will also stimulate economic
growth and employment within the company.

 European union membership: The members of European Union have the profit of
setting low prices of goods and no custom tax are made on goods which are transported
between states and countries (Kose and et.al., 2012). Other than this, they can generate
more jobs through which they can get more skilled and experienced staff. Apart from
this, Nestle is able to trade freely in the member countries of EU. This will reduces the
additional expenses of the company.
 BRIC: It is refers to Brazil, Russia, India and China in which companies are allowed to
make business freely as this four countries have the same economic condition. This will
help Nestle to make trading activities more efficiently in this countries and they van trade
freely.
4.2) Impact of global factors on UK business organizations Competition: As, Nestle is operating their business in different countries, various
competitors are there which are there in which they have to operate their business.
Competitors affects the profitability of the business (Madi, 2013.). If there is very strong
competition in the market, Nestle can face loss in their business. Technological factors: As different business uses different type of technology in their
respective country. Adopting every technological moves of each country will become
more cost consuming for Nestle, as high maintenance cost is there in adopting any
technology (Maes and et.al., 2012). Labor cost: Cost of labor of every country is different. As, Nestle have to pay the salary
to the workers according to the labor policy of the country. It shows the minimum and
maximum wage pay to the workers on working per hour. This can be different from
country to country.
 Taxation regimes: this will also affect the business of Nestle. Different types of taxation
policies and tax rates are charged in various countries for continuing business in that
country (Maggetti and Gilardi, 2011). Nestle have to take care about the different tax
policies which have to be given by the organization on their trade.
4.3) Impact of policies of the European Union on UK business organizations
The European Union is the largest market in the world in which organizations are
allowed to conduct their business freely and make effective trade practices through other

member countries. Companies which are added in the EU have to pay less taxes on their business
activities (The economic impact of EU membership on the UK. 2013). Apart from this, Nestle
can build more effective relations with the other countries in respect of their business activities.
It will also make international business environment factors more friendly such as political,
social, legal, technological and economical factors of a country. Other than this, it helps the
business in making global financial stability through which they can efficiently make business
profitable in the member countries.
CONCLUSION
The entire case is based on business environment of Nestle S.A. The report highlights the
extent in which Nestle meet the objectives of different stakeholders. Apart from this, it will also
asses the roles and responsibilities of Nestles through which they can meet their objectives.
Other than this, impact of fiscal and monetary policies are also evaluated which affects the
organizational activities of the business. In addition to this, competition policies and other
regulatory mechanism are elaborated through which organizational activities of the business are
identified.

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