Business Environment Analysis: Nestle's Strengths and Weaknesses

This report examines Nestle's business environment, focusing on the interplay of internal and external factors that shape its operations. It begins by outlining the organizational functions, such as marketing, finance, human resources, and production, and their interrelationships in achieving business objectives. The report then identifies and analyzes the positive and negative impacts of the macro environment on Nestle using PESTEL analysis, considering political, economic, social, technological, legal, and environmental factors. Furthermore, the report conducts an internal and external analysis of Nestle through a SWOT analysis, highlighting its strengths, weaknesses, opportunities, and threats. The strengths include brand image, distribution network, large product portfolio, increasing workforce, and R&D centers. Weaknesses include legal and consumer issues, and controversies. The report concludes by synthesizing these analyses to provide a comprehensive overview of Nestle's performance within its business environment.

Business and the Business
Environment

Table of Contents
INTRODUCTION ..........................................................................................................................2
TASK 1............................................................................................................................................2
(Covered in PPT).........................................................................................................................2
TASK 2............................................................................................................................................2
P3 Explain relationship between different organisational functions related to business
objectives.....................................................................................................................................2
TASK 3............................................................................................................................................4
P4 Identify positive and negative impacts of macro environment upon business operations.....4
TASK 4............................................................................................................................................6
P5 Conduct internal and external analysis of organisation to identify strengths and weaknesses
.....................................................................................................................................................6
P6 Strengths and weaknesses interrelate with external macro factors........................................8
CONCLUSION..............................................................................................................................10
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INTRODUCTION
Business environment is defined as all internal and external factors that have major
impact on the organisational functions including employees, management, customers, demand
and supply etc. This is a combination of internal and external elements which influence on
business and its operations. On the other side, business environment is collection of all
individuals, entities and several forces that may not be in control of an organisation. In this
included suppliers, customers, competitors, technologies, government activities and policies,
market, social as well as economic trends that can affects on the business functions and
operations various ways (Al-Swidi, 2012). This report is based on Nestle which is a Swiss
transnational food and drink company. It deals in number of products including baby food,
medical food and confectionery items in the international market. This assignment will explain
different types and size of organisation and their interrelationship with various functions. It will
define the positive and negative impacts of macro environment on the business operations as
well as determine strengths and weaknesses of external factors of organisation.
TASK 1
(Covered in PPT)
TASK 2
P3 Explain relationship between different organisational functions related to business objectives
Organisational functions are various including sales, marketing, research, productions,
human resources and finance that perform different activities and task as per the structure to get
success. Nestle is one of the largest food company in the world and serve varieties of products in
the international market (Al-Hosam, 2012). They are dealing in baby food, confectionery items,
frozen food, breakfast cereals, medical food, dairy products, pet foods and many more. It is not
easy to manage entire operations at large level so better relationship and coordination must be
required. Therefore, management always focus on creating better working environment with
maintaining harmony system among departments of an organisation. There are number of
activities and functions that are to be performed by different departments for the purpose of
attaining higher growth and sustainability as well. Here, defined various roles of organisational
functions such as:
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Marketing: This department has vital role in every organisation as they support in
enhancing sales volume and increase profitability with well manner. Their main focus on
analysing current situations and trends of market by conducting research for achieving better
outcomes. Marketing manager examine the customers choices, purchasing behaviours,
competitors, demands and needs, trends and fashions so that they can get ideas regarding what to
produce for meeting consumers desired expectations (Bryman and Bell, 2015). Therefore,
Nestle also consider the market demands and consider effective tools of promotions for
promoting particular food items among target audiences. Marketing function support in
providing adequate information and data regarding current situations, market condition,
customers demands, competitors and trends to the operations department so that better quality of
goods and services can be made to meet desired expectations.
Finance: This is another important department in which all types of budgets are to be
formulated for running business entity. Finance department take responsibilities to provide
adequate funds and financial services for running business operations with effective manner.
They decided the budget to produce goods and services and allocate financial resources among
different business activities to achieve goals or objectives. This function is interrelated with all
departments because finance is needed to operate entire business operations including marketing,
information technology, human resource, productions and distribution etc.
Human resource management: In the business organisation, there are necessary to
recruit suitable candidates for performing various activities in an appropriate way. Human
resource manager of Nestle try to find best qualified persons who have ability to perform
different difficult tasks or activities for accomplishing goals (Cross, 2011). Manager generally
organise training and development program for enhancing employees skills, knowledge as well
as abilities so that set targets can be accomplished. They take support from Information
Technology department which support in finding various suitable candidates by using social
media such as LinkedIn and other tool so that particular vacant position can be fulfilled.
Operation and production: This department get information from marketing study or
research where decisions are to be made for manufacturing particular goods or services so that
market share can be enhanced. They try to satisfy customers needs and meet their desired
expectations with the help of better quality of products. Nestle is dealing in number of food item
including confectionery, baby food, medical food, and many more so they focus on effective
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productions and supply to the right customers. This function is related with marketing
department where they get information about new trends, fashions, customers needs, demands
and many more so that effective goods and services can be produced.
Organisational Structure:
A organisational structure is defined as the system which outlines different activities and
tasks in order to accomplish set goals or objectives. In this included various activities such as
rules, regulations, roles and responsibilities and many others (Miller, 2011).
(Source: Matrix Organisational Structure, 2018)
For example; Nestle has adopted a matrix structure that support in provide more flexibility as
compared to hierarchical organisation. In this structure, every employee perform various task as
per the functions of organisation such as marketing, finance, human resources and operations.
They also complete some assigned projects under different managers as well as team to achieve
goals.
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Illustration 1: Matrix Organisational Structure

TASK 3
P4 Identify positive and negative impacts of macro environment upon business operations
There are various environmental factors that have negative and positive impacts on the
business operations. Therefore, it is necessary to manage such factors and formulate better
strategies for dealing with several critical situations in an effective manner. There are mentioned
PESTEL analysis for identifying positive and negative impacts that must be considered by Nestle
such as:
Political: In this defined the government intervenes in the economy which is beyond the
control of organisation so it is necessary to follow various rules, policies, tax policy, labour law,
foreign trade policy etc. therefore, Nestle plc has required to undertake several policies and
procedure for running business operations. There are positive and negative impacts of political
factors such as: Positive: Nestle has their major operations in developed nations where political situations
are stable in nature which provides the opportunity to organisation to easily grow their
operations.
 Negative: It is difficult to consider different country's legislation and laws so Nestle
required to conduct research in appropriate manner.
Economical: It has major impact on the organisational profits and revenues as in this
included various factors such as economic growth, exchange rates, fluctuations, GDP rate and
many more that cannot be controlled by firm (Dibrell, 2011). Therefore, Nestle needed to
consider economic crises and make strategies accordingly for achieving success. Positive: As the economic situation in many countries here Nestle have predominant
operations is good which provides the opportunity to increase the demand of their
products and enlarge the sales to earn huge amount of profits.
 Negative: Changes in tax policies regarding excise duties, custom duties and other
charges can affects organisational import and export as well.
Social: Society has significant role in developing business firm as it is necessary to
identify customers needs and wants as well as their behaviours which change as per the changing
environment. Nestle need to find appropriate customers and their demands to produce effective
items.
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 Positive: It will be beneficial in identifying right customers by analysing their behaviours
and choices so that relationship can be build with them in well manner.
 Negative: There are difficulties to identifying customers needs due to changing
environment which can affects on the organisation (Craig and Hansen, 2011). Company
may have to face various problems regarding decreasing sales if they do not meet
customers requirements.
Technological: This is very important for every organisation that to adopt bets
technology or get up to date with new advanced techniques so that entire operations can be run
effectively. Nestle has required to adopt better technologies for reaching at potential customers. Positive: Nestle can meet customers requirements by providing better quality of products.
They can undertake internet technology for spreading information among target
audiences.
 Negative: Company have to spend more money as technologies are expensive and they
also required skilled staff for handle the operations.
Legal: In this included various legislation, rules and regulations and code of conducts
that formulated by government (Gharajedaghi, 2011). Nestle has to follow those legislation to
operate business at different countries. Positive: Nestle is doing CSR (Corporate social responsibility) for social welfare that
directly affects on its reputations in the marketplace.
 Negative: changes in regulations or legislation can be create complexities in maximising
wealth and size of the firm.
Environment: There are several responsibilities of organisation to maintain the
environment system so that they can avoid harmful aspects and keep secure to the natural
climate. Nestle has to focus on cleaning and greening environment while running business. Positive: This will support in keeping more effective and clean atmosphere so that natural
things can be protected such as saving water, tree, animals and many others so that brand
image can be increased.
 Negative: company have to undertake various rules such as reduce carbon emission that
can affects on the production procedure.
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TASK 4
P5 Conduct internal and external analysis of organisation to identify strengths and weaknesses
SWOT Analysis:
SWOT analysis is the arranged list of strength, weakness, opportunity and threats to an
organisation, where strength and weakness are internal factors and opportunity and threats are
external factors of an organisation (Kolk, 2016). Internal factors are like reputation, patents, etc.
and controlled by an organisation's performance whereas external factors are like suppliers,
competitors etc. and cant be controlled by organisation.
SWOT Analysis of Nestle:
Strengths:
 Brand Image.
 Increasing distribution network.
 Large product portfolio.
 Increasing workforce.
 Research and development centres.
Weaknesses:
 Legal and consumer issues.
 Controversies.
Opportunities:
 Expanding market.
 More focus on R&D to fulfil market
needs.
 Strategic alliances.
Threats:
 Highly competitive market.
 Price of raw material and equipments.
Strengths of Nestle:
 Brand Image: Nestle is biggest food and beverages company across the world and does
individual branding of its different food brands which increases awareness of the same. It
also help in keeping balanced sales of product and two different products do not get
affect by each other's brand image like controversies of Maggie should not affect the sale
of Nestle kit-kat or Nestle coffee.
 Increased Distribution Network: Nestle offers a wide variety of products with which it
has been successfully penetrating in urban as well as rural areas (Li, 2011). Nestle adopts
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decentralization of supply chain and different distribution method that are adapted locally
which makes Nestle products easily visible in market.
 Large Product Portfolio: Nestle is dealing in approximately 8000 products under its
name which includes beverages like coffee, mineral water and food products like
breakfast cereals, soups, chocolates etc. In each product categories, there are deep
assortments to satisfy various needs and wants of the customers.
 Increasing Workforce: Nestle have approximately 340000 of workforce globally who
are continuously engage in making their products available globally in every nook and
corner.
 Research and Development Centres: Nestle owns the world's largest food and nutrition
research organisation, and around 5000 people are involved with it. This R&D
organisation have twenty one research centres across the world.
Weaknesses of Nestle:
 Legal and Consumer Issues: Being a global food giant, Nestle remains in controversies
many times since many years like boycott of Nestle baby formula, child labour used by
suppliers, chocolate price fixing etc. They affect the brand image and increase negative
WOM.
 Controversies: Recently, Maggie was banned in some Asian countries due to some
health and ethical issues, this affected the brand name of Nestle and Maggie too for big
time (López-Gamero, 2011). However, Maggie came back in the market soon with better
additives and assurance to convince their customer about its quality.
Opportunities of Nestle:
 Expanding market: By penetrating more and more into market and by entering into
other markets through its wide supply chain will be a lead to expand the company's
business especially into rural segment of customers.
 More focus on R&D to fulfil market needs: For controlling controversies and ethical
issues to safeguard the future growth of the company Nestle must invest in R&D more to
bring highly hygienic and safe food.
 Strategic Alliances: Nestle is one of the main shareholder of L'Oreal, the world's largest
cosmetic brand and also is in partnership with many other companies which acts like a
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opening door of opportunities of Nestle an assist in its growth (Molina-Azorín and
Claver-Cortés, 2011).
Threats of Nestle:
 Highly competitive market: In increasing competitive market in local and national
market, its hard for a company to differentiate themselves from others, and become a
threat for an organisation to safeguard their brand image.
 Price of raw material and equipments: Increase in prices of commodities and
equipments will result increasing the price of products which will further result in
decreasing its sales, and margin profit and brand switching.
P6 Strengths and weaknesses interrelate with external macro factors
PEST Analysis of Nestle:
Political Factors: Political Factors determines to what extent government intervene in an
economy. It includes tax rules and laws, trade restrictions,tariffs, etc.
 Strengths: For example, government provided flexibility for labors of Nestle, as in,
leniency in labor law, in which they are been paid higher than before (Meiners, 2014). So
there will be improvement in production capacity of Nestle because they will work with
greater motivation and boosted morale.
 Weaknesses: On the other hand, if government proposed new rule that Nestle has to
reduce amount of emissions released out by factories. It will affect production capacity of
Nestle because it have to produce in limitations which will ultimately reduce customers
availability of Nestle.
Economic Factors: An organization exists in a surrounding called business economy
which at times gets affected by economic factors because economy is dynamic in nature. It
examines outside economic factors that are crucial in organization's success. It determines
changes in interest rates, inflation, etc.
 Strengths: Changes in economy have various impacts, for example, inflation which rises
prices if commodities. So to increase sales, Nestle have to increase its sales by decreasing
its prices because of competition (Ringleb and Edwards, 2014). As a result, it will
increase sales of Nestle and it will also able to compete with competitors.
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 Weaknesses: On other side, inflation is a weakness for Nestle because it have to decrease
prices to met customer's demand. This will increase sales, but also decrease profitability
which is not good for Nestle.
Social Factors: An organization is surrounded by social factors which includes
demographics, population growth rate, age distribution and market trends. Organization to
survive, have to take care these social factors because they leave impact on organization in a
number of ways.
 Strengths: Social factors can prove strengths if taken care. Nestle have to research over
new market trends and target customers accord their satisfaction levels. This will help
Nestle in increase its sales and profit margins.
 Weaknesses: Social factors are affected by buying behaviors of customers and their
satisfaction levels. Customer's needs and preferences can be change at any time which
will affect customer availability of Nestle.
Technological Factors: Technology plays a vital role in an organization which reacts
either positively or negatively, ultimately affects it (Nishitani, 2012). It includes introduction of
new products and technologies, automation and rate of innovation.
 Strengths: If Nestle has done innovation in its product line, then it will help Nestle in
offering new and innovated products among customers which will make customers brand
loyal and will increase Nestle's brand image.
 Weaknesses: New technologies are coming in the path. Automation is a technology
development which if adopted by Nestle, it will create problems to employees by
increasing unemployment. Nestle will also face loss by losing potential employees.
CONCLUSION
Form the above report, it has been concluded that business environment is surrounded
from different internal and external factors. In the successful organisation, there is necessary to
collaborate and cooperate with different functions for achieving predefined objectives. It play
crucial role in business firm to perform entire activities with effective manner so that they can
gain sustainable advantages. In this assignment, various topic has covered such as different types
and size of organisation and their legal structures. It also described the roles and responsibilities
of various functions in achieving business objectives.
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