Business Environment Analysis of Nestle: Macro Factors and SWOT

This report provides a comprehensive analysis of Nestle's business environment, focusing on the impact of various internal and external factors on its operations. The report begins with an overview of the business environment and the organizational structure of Nestle, highlighting key functions such as finance, production, research and development, marketing, and human resources, and how the matrix structure supports these functions. It then uses PESTLE analysis to assess the macro-environmental factors, including political, economic, social, technological, environmental, and legal aspects, and their positive and negative impacts on Nestle's operations. Following this, a SWOT analysis is conducted to identify the company's strengths, weaknesses, opportunities, and threats, and how these factors influence the decision-making process. The report also explores the interrelationship between the SWOT analysis and the external macro factors, concluding with a summary of the key findings and recommendations for Nestle to navigate its complex business environment.

Business & Business
Environment

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 & P2........................................................................................................................................1
P3. Organizational chart to explain the functions for Nestle and the way it links to its
objectives and structure................................................................................................................1
TASK 2............................................................................................................................................3
P4. Various macro environmental factors that impact on the business operations of Nestle
through pestle analysis.................................................................................................................3
P5. Conducting internal and external analysis for organization to identify strengths and
weaknesses with explaining how they influence the decision-making process...........................4
P6. Explaining the interrelationship of SWOT analysis with the external macro factors...........5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

LIST OF FIGURES
Figure 1: Organizational chart of Nestle.........................................................................................2

INTRODUCTION
Business environment refers to the combination of all internal as well as external factors
that affect the operational situation of any company. These are inclusive of employees,
competitors, rival firms, governmental bodies, laws etc. They may have a positive or negative
impact on working of company and must be thoroughly analyzed (Gornall, 2015). The present
study has thus given emphasis on existing business environment of Nestle so as to assess the
macro environmental factors that impact its operations followed by SWOT analysis. Focus will
also be given on how SWOT affects decision making undertaken by firm.
TASK 1
P1 & P2
Covered in PPT
P3. Organizational chart to explain the functions for Nestle and the way it links to its objectives
and structure
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Figure 1: Organizational chart of Nestle
(Source: Davis and et.al., 2018)
As per the above organizational chart, there is an existence of many functions in
company. These are inclusive of finance, production, research and development, marketing as
well as human resource. Other than this, there is also a use of matrix organizational structure by
Nestle so as to carry out its organizational activities. The structure has assisted a lot in
development of functional departments within organization. For example, HR team of Nestle is
there to appoint dedicated employees in various work areas such as operations, marketing,
finance as well as sales (Davis and et.al., 2018). The matrix structure thus assists Hr. team in
maintaining a good work related communication with other department who are in need of
employees. The structure not only helps in top down communication but also one that occurs
between various departments. The Hr. staff can communicate with senior members as well as
managers about job requirement in various departments. As the structure favors occurrence of
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communication on a daily basis hence functional and project goals such as recruiting staff,
carrying out induction sessions, maintaining salary records etc. can be attained.
Then there is also a presence of research and development department which carries out
R and D activities for the company so as to create trustworthy products to be consumed by
consumers. It further focuses on developing packaging and equipment for company. This is
made possible by taking help of scientists, engineers, nutritionists, food technologist who work
on various areas. Matrix structure within Nestle thus aids in boosting up overall team working in
department (Wood, 2018). The structure helps to increase interaction between various members
of R and D department thereby fostering a sense of team work as well as cooperation. There is a
good sharing of information by employees followed by utilization of skill set so as to complete
the project in hand.
Then comes marketing department which focuses on area of brand management and
enhancing overall brand value of company not just in UK but all around world. The employees
of this department make sure that the company brand is promoted as a trust worthy one so as to
lure consumers in best possible manner. Matrix structure in this respect does work of
empowering employees so that they can work with increased sense of autonomy. This is as
marketing department can work well only when there is a generation of unique ideas for
advertising and promotion (Ashurst, 2016). The structure further favors in maximum utilization
of skill set that is possessed by employees. It does this by not only making employees come out
of there comfort zone but also manage those projects that are in need of a specific skill set. They
can thus focus on what can be done best by them.
Overall it can be said that matrix structure makes sure that the varied functions present in
organizations are able to adapt themselves as per need of changing world. It is only on account of
the matrix function that firm is able to retain above mentioned functions.
TASK 2
P4. Various macro environmental factors that impact on the business operations of Nestle
through pestle analysis
There has been a usage of PESTLE analysis, so as to assess how macro environmental
factors put an impact on overall business operations of company. The impacts can however be in
a positive or negative matter which has been discussed in detail in sections given below. With
respect to political aspect, it has been found that UK has a presence of quite stable government
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and policies which is most likely to be positive for overall working of company. But brexit crisis
may put an impact on its strategies formulated for future (Nixon amd et.al., 2015). This is as
Nestle sells product that are somewhat costly hence consumers may not prefer to use its services
which may led to decrease in sales. In the same lines, company also imports coffee beans from
Brazil hence UK must maintain good relations with nation. The present relations seem to be
good enough but future is not known.
Then comes the Economic factor where unemployment is on a rise in UK hence an
overall decrease has also been observed in wages given by companies. This may led to a
negative impact on recruitment of the company if Nestle officials reduce wages of employees
(Graham and Potter, 2015).
On a positive front, social factors are favoring overall growth of Nestle in UK. A study
by Statista has revealed that revenue that has been generated in Chocolate Confectionery
segment for year 2018 amounts to $6,394m US dollars. The expected market growth may be of
1.5 percent on an annual basis. This is good news for Nestle in terms of growth opportunities
(Statista, 2018). With respect to technological front, the nation has been regarded as quite
advanced. Nestle has also been using technology in its everyday working such as mobile
ordering, phone charging mats among others. It is also using instagram as a marketing tool so as
to spread brand awareness in consumers. These strategies are most likely to favor overall growth
of the company in UK.
In terms of environmental factor, company is required to focus on reducing is carbon
footprint and bring substantial cuts on packaging through plastics. It can also showcase itself as a
firm that adheres with concept of go green (Gornall, 2015). Along with this, it is also required to
be in tune with regulations such as provision of fixed working hours to employees; data
protection policies as well as competitive pay structure to the employees.
P5. Conducting internal and external analysis for organization to identify strengths and
weaknesses with explaining how they influence the decision-making process
There has been a usage of SWOT analysis in order to assess strengths and weakness of
the company. As per strengths, Nestle is largest food brand in world and is far ahead of rival
firms such as Coca Cola. It also offers diverse product offerings such as water, chocolates, and
cereals among others. Hence it has been able to serve needs of all segments of the society.
Studies further suggest towards the existence of good research and development capabilities
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which has led to creation of innovative foods by Nestle such as GMO-free Buitoni pasta as well
as gluten-free Lean Cuisine (Eccles, 2017).
The firm has also got its own share of weakness such as high sales dependence on just a
few well-known brands of Nestle on account of their increased popularity in consumers. This
usually leads to cannibalization of its own brands and firm may not be able to survive if there is a
change on taste and preferences of customers. In the same lines, the company has been spending
heavily on advertising and promotion activities which somewhere increase its cost factor. This
cost is usually carried forward to consumers who then do not prefer buying high cost products.
UK has also been suffering from post brexit issues that have brought a substantial decrease in
overall sales revenue (Chapman, 2016).
In terms of revealing opportunities for Nestle, there has been a huge demand for
prepacked foods due to working mothers, fast lifestyle as well as increase in working hours.
Other than this, with enhanced mobility as well as usage of car a surge in demand has also been
seen in area of bottled water and snacks items. People of UK are quite health conscious in the
present times hence demands for healthy products have increased greatly. There is also a new
trend to consume comfort foods such as chocolates and coffee. As this is product niche of Nestle
hence it can be advantageous for the company (Trott and Sims, 2017). In terms of threat,
company is already facing immense competition from established firms like Unilever; Kraft
Foods etc. not only in UK but all over the world. Along with this, there is also a rise in prices of
coffee beans on account of global warming.
It can be analyzed by the above SWOT analysis that strengths of Nestle can aid it in
becoming world leader with respect to health nutrition and consumer wellbeing. It has also got
an advantage of a good trust factor through its clients which can assist in reaching objective.
There is however a presence of weakness with respect to marketing and advertising cost spends
by company which should be reduced for smooth working (Seyfettinoglu, 2016). This can help
to lower down prices of products and generate good sales revenue.
P6. Explaining the interrelationship of SWOT analysis with the external macro factors
As per the above paragraph, strength of nestle lies in its recognition as the biggest and
trusted food brand. Hence in area of political factor the company may not face any issue when it
makes an attempt to expand itself in other nations, this is as government is most likely to provide
needed support (Scott, Hawkins and Knai, 2017). This concept is also applicable in social front
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where consumers on account of its brand image will be ready to accept the offerings. It is also
known that company sells diversified product offerings hence it is in a better position to face
economic shocks such as recession. The social factors in UK further depict a presence of fast
paced life style in nation hence the need is that working mothers are offered prepackaged foods
by the company (Alkaya and Demirer, 2015). There is further a trend of healthy food
consumption in masses which can be used as a source of opportunity by Nestle.
CONCLUSION
A conclusion can be derived from the above report that Nestle is required to take care of
varied internal and external factors that may put an impact on its overall working. This is
essential as company has presence in most of the nations around globe and every country has its
own work environment. These factors may put a positive or negative impact on its functioning.
The need here is to grab the opportunities and work on threats and weaknesses.
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REFERENCES
Journals and Books
Alkaya, E. and Demirer, G.N., 2015. Water recycling and reuse in soft drink/beverage industry: a
case study for sustainable industrial water management in Turkey. Resources,
Conservation and Recycling, 104, pp.172-180.
Ashurst, P.R., 2016. Chemistry and technology of soft drinks and fruit juices. John Wiley &
Sons.
Davis, B. and et.al., 2018. Food and beverage management. Routledge.
Gornall, J., 2015. Sugar: spinning a web of influence. Bmj, 350, p.h231.
Graham, S. and Potter, A., 2015. Environmental operations management and its links with
proactivity and performance: A study of the UK food industry. International Journal of
Production Economics, 170, pp.146-159.
Nixon, L. and et.al., 2015. “We’re part of the solution”: evolution of the food and beverage
industry’s framing of obesity concerns between 2000 and 2012. American journal of
public health, 105(11), pp.2228-2236.
Scott, C., Hawkins, B. and Knai, C., 2017. Food and beverage product reformulation as a
corporate political strategy. Social science & medicine, 172, pp.37-45.
Seyfettinoglu, Ü.K., 2016. Analysis of relationships between firm performance and open
innovation strategies and stages in the Turkish food and beverage industry. New
Medit, 15(1), pp.42-52.
Trott, P. and Simms, C., 2017. An examination of product innovation in low-and medium-
technology industries: Cases from the UK packaged food sector. Research Policy, 46(3),
pp.605-623.
Wood, R.C., 2018. Strategic questions in food and beverage management. Routledge.
Online
Chapman, B., 2016. Brexit: Nestlé hints at price rises after pound value crash. [Online].
Available through: <https://www.independent.co.uk/news/brexit-nestl-price-rises-pound-
crash-dollar-euro-currency-exchange-unilever-a7371131.html>. [Accessed on 16th
August 2018].
Eccles., 2017. 5 Nutrition Innovations You Didn’t Expect to Come From Nestlé. [Online].
Available through: <https://medium.com/nestle-usa/5-nutrition-innovations-you-didnt-
expect-to-come-from-nestl%C3%A9-22f49f28f4f4>. [Accessed on 16th August 2018].
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Statista. 2018. [Online]. Available through:
<https://www.statista.com/outlook/40100100/156/chocolate-confectionery/united-
kingdom>. [Accessed on 16th August 2018].
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