Comprehensive Analysis of Nestle's Business Environment Factors

This report provides a comprehensive analysis of Nestle's business environment. It begins by identifying the purposes of different organizational types (public, private, and voluntary) and then assesses how Nestle meets the objectives of its various stakeholders, including shareholders, customers, employees, and the government. The report then examines Nestle's corporate social responsibilities and strategies, including its approach to 'Creating Shared Value'. The analysis extends to how economic systems allocate resources effectively, with a focus on Nestle's operations within a mixed economy and the impact of fiscal and monetary policies. The report further explores market structures, pricing decisions, and the influence of market forces on Nestle's responses. It evaluates the impact of competition policies and regulatory mechanisms. The report also considers the significance of international trade, global factors, and the policies of the European Union on UK business organizations like Nestle. Finally, it discusses how the business and cultural environments shape the behavior of the organization. The report concludes with a discussion on the allocation of resources by economic systems and the effects of taxation and interest rates on Nestle's profitability.

BUSINESS
ENVIRONMENT
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Identify the purposes of different types of Organization.......................................................3
1.2 Describing the extent to which the Nestle meets objectives of different stakeholder...........4
1.3 Explaining the responsibilities of Nestle plc and their strategies..........................................5
TASK 2............................................................................................................................................6
2.1 Explaining how economic systems attempt to allocate resources effectively.......................6
2.2 Assessing the impact of fiscal and monetary policy on business organizations and their
activities.......................................................................................................................................7
2.3 Evaluating the impact of competition policy and other regulatory mechanisms...................8
TASK 3............................................................................................................................................8
3.1 Explaining how market structures determine the pricing and output decisions....................8
3.2 Illustrating the way in which market forces shape Nestle responses....................................9
3.3 Judging how the business and cultural environments shape the behavior.............................9
TASK 4..........................................................................................................................................10
4.1 Discuss the significance of international trade to UK business organizations....................10
4.2 Analyzing the impact of global factors on UK business organizations...............................10
4.3 Evaluate the impact of policies of the European Union on UK business organizations......11
Conclusion.....................................................................................................................................11
References......................................................................................................................................12
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INTRODUCTION
There are various factors which affect the functions of the organization. These constitute
the business environment (Hamilton and Webster, 2015). The external factors highly affect the
micro environment. External factors are uncontrollable and the company has to make strategies
for overcoming its effects. On the other hand, internal factors are closely related to activities of
the company. The scenario provided in the file presents Nestle, which is leading food and
beverage organization of Switzerland. In terms of revenues, Nestle is the largest company in the
world. In 2014, it was ranked 72 on the Fortune Global 500. In the present report, purpose of
different organizations have been explained along with the extent to which the objectives of
stakeholders are met by Nestle. Furthermore, this report also explains the impact that various
policies such as fiscal and monetary have on organization as well as their activities. In addition
to this, the Significance of international trade to UK business environment is covered in this
report. Further, it also emphasizes as how decisions related to pricing and output are determined
by market structure. Moreover, the impact of policies of the European Union on UK business
organization is explained in this report.
TASK 1
1.1 Identification of different organizational purposes
Corporate world comprises of different types of organizations. This different
organizations are divided into different sectors (Edelman, 2015). Public, private and voluntary
sectors are the different types of sectors. Different sector organization has diverse purposes. Public sector organization- this is the organization which is owned and operated by the
Government or local bodies for the benefit of people. The authority uses the money that
is paid by people in the form of taxes, for financing public sector companies. This sector
woerks with the purpose of providing public services to the people. Organizations
operating in this sector do not have any motive to earn profit (Lainema and et.al., 2012).
Resources are used by these organizations for providing benefits to the community.
UKAEA, BBC, Royal mail, etc. are examples of different public sector firms. Private sector organisation- The organization which are owned and operated by the
private or group of people is private sector organization. Partnership, sole trade, franchise
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are the example of private sector businesses. The company works with the purpose of
earning profits, increasing the market growth and shares of the company (Lainema and
et.al., 2012). and in addition to this, they do not focus on providing services to the
public. If the company identifies that the organization is not giving profit then they can
also close the firm. Some private sector companies are Nestle, JCB, Greenergy, John
lewis, virgin Atlantic etc. For example: Nestle is a leading private organization which
deals in food and beverage and wants to become the most valuable firm in the world.
 Voluntary sector organization- These organizations are denoted as charitable companies.
Their purposes is of supporting venerable groups and these are non – profit organizations.
Voluntary sector organization are those which are owned and run by any non
governmental or non profit making organisations (Hartwell and Michael, 2015). In this
sector, their motive is to fulfil the purpose of gathering a group of people and entering
into an agreement to achieve the objective. These organizations work with the aim of
providing services to the people involved. It works for the betterment of the community
(El-Manstrly, Liu and Rosenbaum, 2016). The various examples of companies are
Barnardo, NAS, and NSPCC etc.
1.2 Description of extent of meeting stakeholder objectives
Nestle is the largest company in the food and beverage sector. It carries out its operations
in a number of countries in the world. The different stakeholders take initiatives for achieving the
organizational goals (Stakeholder engagement, 2016). They take interest in achieving goals and
objectives of the organization. Stakeholders are the people who influence the business of a
corporate entity and also get influenced by the practices of company. The different internal and
external types of stakeholders are shareholder, customers, employees, financial institution etc. Shareholders- Those people who invest their money to get good return for their
investments are the Shareholders. Nestle’s Shareholders are interested in earning good
returns on their investment, therefore company invest in profitable products and provide
them chance to earn good (Rubtsova and et.al., 2015). This group comprises of the most
important stakeholders of the chosen organization. They are part of the organization’s
important decisions and they are the one who attend the annual meetings. Besides this,
they have right to take decision in the business.
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 Customers- The other important part of stakeholder is the customers of Nestle.
Customers of the cited company help in increasing the profit and sales of the
organization. Nestle maintains relationships with its customers and makes an effort to
understand their needs and lifestyles. It also invests in research and development so that
healthy products can be introduced which provide customers nutrition as well as taste. To
increase the sale and profit of the Nestle, the firm focuses on increasing the customers.
By satisfying their needs and demands and also by producing quality products at
reasonable prices (Cornwell and Lee, 2016.). Hence, they help the company in achieving
their organisational goals and objectives. Employees- Employees are motivated is to earn high wages and also to keep their job
safe. Cited company provides high wages, bonus, salary, incentives to the employees sop
that they get motivated in their work (Yu and Ramanathan, 2012). With high wages, they
are more motivated in their work and can easily influence the customers to purchase
products of the cited company. Employees help in increasing the growth of the
organization. To meet the expectation of employees the mentioned company follows
regarding Labour standards, human rights and it has incorporated great respect for and
integration with diverse cultures.
 Government- . They provide loans, subsidies to the organization. Government wants the
company to pay tax, follow all the laws and employ more and more individual. This
directly and indirectly helps the company in achieving goals and objectives (Popescu,
2013).
1.3 Explaining the responsibilities of Nestle plc and their strategies
The responsibility of Nestle is to provide food and beverages to people. The other
responsibility is to make the customers aware about services and varieties of food which the
organization is providing. By using of better communication and technology system, mentioned
company can improve the supply system.
Nestle is the world's largest leading Nutrient and wellness company. Nestle believes that
Corporate social responsibility helps in creating a good image among community in which the
company operates (Zhang and Huang, 2012). By delivering benefits for all the stakeholders,
corporate social responsibility assists the organization in contributing sustainable development in
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the company. In addition to this, to create economic and social value the company focus on
'Creating Shared Value (CSV) 2006' concept. It was launched by Nestle by focusing towards
social issues (Nestle Australia and UK, 2016). This approach was focused in three major areas
such as nutrition, water and rural development. To support farmers and cocoa growing
communities, Rural Development Framework 2012 is designed.
The cited company have a great participation in the development framework. On the
basis of the activities, they focus on improving life of the people where they operate the business.
Various steps are taken by Nestle such as water separation, management of waste and
community awareness program in collaboration with local authorities and NGO. This is done
with a motive to reduce environmental issues which the company and people are facing. Various
programs were designed by employee for the children from marginalised communities, like
employee volunteering program so to create awareness about health habits among the children.
Through the sports and other activities they designed the program to create awareness about
nutrition and hygiene food within the children (Hamilton and Webster, 2015).
A large part of the population is affected with the malnutrition. For improving the
awareness, the company focuses on students so to make them aware about malnutrition and also
emphases on providing better nutrition in their diet (The Nestlé Sustainability Review, 2016).this
is done with a motive to reduce wastage of water as well as to increase the awareness on water
conservation. In 2014, Henry Spira Corporate Progress Awards was won by the mentioned
company. The reason is for minimizing adverse impacts on animals. Cited company focuses on
helping the farmer with a motive to reduce problems related to water (Gani, 2011). Hence,
corporate social responsibility contributes a lot in the sustainable development.
TASK 2
2.1 Effective resource allocation by economic systems
Nestle is an international organization and operate their business in different markets.
The effective use of available resources is the major problem which the organization is currently
facing. The major concerned area for a manufacturing company is of determining what to
produce and for whom to produce. The economic system of a country is a major answer of how
to produce, as it is dependent economy resources and their availability to produce more
profitable. The Nestle Company operates under mixed economy (Hartwell and Michael, 2015).
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In the mixed economy, company receive equal opportunity from the public as well as from the
private sector organizations. However, the activities are closely monitored by the public bodies.
As, determined by market forces of demand and supply and government, system mainly affects
prices strategies. In case of the Nestle, The decision of what to produce is based on the
consumers and government influences. Due to increase in VAT in UK, the demand of the
customers for specific products decreases. This results in decreasing sales and profit of the
Nestle. The availability of labour force, market growth; inflation, consumer behaviour all affect
the production decisions. The decision related to how to produce depends on demand as well as
on availability of resources in the market. Within missed economies mixed economy income
inequality found due to government role in business functions. In respect with Nestle, Mixed
economy system is helpful in allocating resources in a productive manner. In addition to this,
increase or decrease in the interest or taxes also affects the business of Nestle. With this, the
purchasing power of the customers are also affected (Kim, Suresh and Kocabasoglu-Hillmer,
2013). Hence, due to the taxation policies in UK, the profitability of the company is also
impacted.
2.2 Impact of fiscal and monetary policy
Fiscal as well as monetary policy significantly impacts Nestle and their activities. Fiscal
policy is designed by the government (Paliwar, 2014). On the other hand, the monetary policy is
formulated by monetary authorities. The central bank is also involved in designing the monetary
policy. The impacts are as follows: Fiscal policy- The tax rates which is to be paid by the government is the fiscal policy.
Increase or decrease in tax rate has a great impact on cited company. If the government of
UK increases the rates of tax level then Nestle have to spend more money for making
payment to the government in terms of tax (Micevski and et.al., 2016). The result is that
the company has less money to make investment. In addition to this, company may sell
products and services at a higher price and also charge more money for products and
services to the customers. On the other hand, if the rates of the tax will decrease then the
company has to pay less money in a form of tax. This indicates that the company has
more money to invest and recruit candidates for the business. Investment by the company
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in many sectors may also increase, with this they need more employees. For this, more
recruitment and selection procedure will also increase.
 Monetary policy- Monetary policy is controlled by the central government. The business
as well as the entire economy is affected by changes in monetary policy (Groza and
Ragland, 2016). Interest rates are affected by monetary policy in the short as well as long
term. To control the inflation rates in the country, the central government increases the
interest rates. The borrowing cost will increase, with the rise in the interest rates. By this,
the consumer spending power will fall down (Reynolds and Rohlin, 2014). With the
decrease in the consumer spending power, the sales of the Nestle will decrease which
result in loss for the cited company. Hence, these policies have a positive and negative
impact on Nestle.
2.3 Evaluating the impact of competition policy on the activates of the company
Competition policy have a great impact on the activities of Nestle. Competition policy
improves the efficiency of the company and also promotes competition in the market. The policy
ensures technical innovations in product which results in increasing the dynamic efficiency and
effective price competition between different suppliers. Enterprise act 2002, made major changes
in the UK competition law. To enhance the enterprises, this act covers a range of measures.
(Enterprise Act 2002, 2016). In addition to this, the Act strengthens UK's competition
framework, bankruptcy, consumer protection, etc. The other act is competition act, 1998 is also a
major source of competition law. Updated framework for identifying and dealing with restrictive
business practices and abuse of the dominant market position are provided by this act. This act is
designed with a motive to protect companies from the illegal activities. European commission is
responsible For proposing legislation, managing the business day to day activities, European
commission is responsible. To manage day to day activities, it is necessary for the cited
organisation to follow the rules and regulations regulated by the European commission (Onyido,
Boyd and Thurairajah, 2016). Any type of unfair practices like cartels, are prohibited under
office for fair trading.
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TASK 3
3.1 Explaining the market structures that determine the pricing and output decisions
The market structure changes, according to the changes in price and demand of the
customers. With slightly changes in price of any product, buying behaviour of the consumer is
affected. If there will be decrease in the price of the product then the purchasing power of
customer will also decrease. On the basis of the different market structure, the pricing and output
decision are made (Cai and Yang, 2014). Hence, the market is further divided into different
structures such as perfect competition, oligopoly, monopoly etc.
In monopoly, only one company is operating which owns all the market by producing
identical product or services. With an identical product, there is no competition in the market,
furthermore, the prices of the product and services will be high. Under the perfect competition,
there is larger number of similar company manufacturing homogeneous products or services.
When, there is large number of small firm existing in the market then the price of the product
will be low. Oligopoly market is where there is less number of supplier for more than two
commodities. Under this market, company produces brand products and most of the times there
is barrier for new entry. Hence, the cited company is operating in the oligopoly market, in this
there are fewer competitors and suppliers (Nestle. About us, 2016). The competitors of Nestle are
Danone, Kraft group, Unilever etc. By changing the output of the business, cited company can
change their pricing strategy.
3.2 Illustrating the different way in which market forces shape
There are different ways by which market force can shape. As these ways have a major
role in shaping the organizational profits and sales (Hamilton and Webster, 2015). The relation
between the demand as well as supply within market is illustrated by the market force. The
demand of the product is based on the customer's need, requirement, preference, etc. If the price
of the product will decrease the sales of the company will increase. On the other hand, if the
price of the food and beverage will increase the purchasing power and demand for the product
will decrease. With the increase and decrease of the price the elasticity of the demand will
change (Bryman and Bell, 2015).
The supply of product will change, with the changes in the price and the demand. There
is a direct relationship between demand along with supply of product. The supply of food and
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beverage will decrease, with the decrease in the demand of the product. On contradictory, if
demand of the product increase then directly the supply of the product will also increase.
3.3 Judging the business and cultural environments shape the behaviour
There are different business and cultural factors that have a great impact on
organizational behaviour (Weatherly and Otter, 2014). Nestle is the world's largest food and
beverage company. The culture is a winning culture, in which every one is benefited along with
this the business is keep on growing (Nestle Culture. 2016). Company has to deal with different
factors like social and cultural factor. These factors affect the performance and developments of
the mentioned company. Different countries have different labor policies; the organizational
behavior of Nestle is affected by the changes in the policies (Park and Kincade, 2011).
Demographic environment such as income, age and growth rate of population also affects
demand of Nestle products along with this the factors related to natural environment,
geographical including available natural resources, weather and climatic condition also impacts
on the behavior of Nestle in different countries. As compared to India, per capita income is
higher in UK, even the prices of the product is higher in UK compared to India. On the other
hand, social environment such as expectancy literacy, poverty rates, values, beliefs, traditions
and customs are changed in both the countries. The people of different countries want different
varieties of food and beverages. Hence, this affect the business behaviour.
TASK 4
4.1 Discussing the significance of international trade in Nestle
There are different components which help the Nestle in increasing their business
worldwide. The first factor is the World trade organization. WTO helps organization this will
help the mentioned company by making others aware about the products and growth (Sloman,
and Jones, 2011). The Nestle will get popular as well as income of the company will increase by
using this factor. Furthermore, with the help of this aspect company can easily settle their
disputes along with this related to the international trade they can reduce the problems (Kim,
Suresh and Kocabasoglu-Hillmer, 2013). Another factor is European Union as at the time of
exporting or importing the products from one country to another they charge minimum custom
tax on goods. On the basis of this, Nestle can freely transfer goods or services from their home
country to other country. The other is BRIC economics; it refers to Brazil, Russia, India and
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China. This has great significance of international trade as these countries are allowed to
transport business freely because of same economic condition (Singh, 2016).
4.2 Analysing the impact of global factors on Nestle
Global factor like taxation regime, labour cost, competition etc. affects the operations of
Nestle. Nestle is the world largest food and beverage company hence, there are various
competitors. The global factor has a positive impact on the Nestle company as well as on the UK
economy. As this gives an opportunity to the cited company to expand their business in all over
the different countries. The profitability of the business and sales of the company are affected
because of competitors in the market. Hence, competition between the largest companies has a
negative impact (Lianos and et.al, 2016). The other factor is of taxation regime it means that
different countries have to follow various taxation policies and rates. While trading
internationally, taxation regime affect the Nestle as they charged different tax rate. Hence, these
factor has an unsupported impact on Nestle. The another factors is that impact the business is
labour cost, as different labour policies are designed by different countries. If one country has
high wage rate then the wage paid to the worker will be high and due to this it will affect the
mentioned company.
4.3 Evaluating the impact of policies of the European Union on Nestle
For the improvement of civil aviation sectors, EU has established different policies. The
authority of UK formulated a policy with a motive to render better services to the customers.
According to the situation of EU, any kind of situation or carelessness by the employees are
allowed to claim the compensation. Another policy formulated by the EU is fair pricing policy
(Lainema and et.al., 2012). This policy impacts the profit margin ratio as well as brand image of
the organization. According to the policy all the companies have to ensure that their businesses
are not involved in any kind of ethical practices (Miceikiene and Butvilaite, 2015). Hence,
according to the fair pricing policy, the management of Nestle is required to ensure that the
prices of food and beverages is suited according to worth of the commodity. After joining EU
policies, Nestle have to follow all rules and regulations. If any company wants to do their
business in UK then they have to contact with European money union. Hence, establishment of
different policies by EU policies have positive impact on the Nestle.
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CONCLUSION
The aforementioned report explained that Nestle is owned and managed by the
government and individual bodies. Being the largest food and beverage company and operates in
different countries, the company believe itself to be socially responsible therefore, it conducts
corporate social responsibility programs. These help Nestle in creating good image among
community in which it operates. It can also be concluded that, within international environment
different taxation policies affect the profitability of the company. In addition, monetary and
fiscal policies have positive and negative impact on the Nestle. In addition to this, Nestle is
operates in an oligopoly market and as a leading company the competitors of Nestle are Danone,
Kraft group, Unilever etc.
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