Analysis of Nestle's Business Operations and Market Environment

This report provides a comprehensive analysis of Nestle's business operations within its market environment. It begins with an introduction to the business environment, emphasizing the impact of internal and external factors on a company's functions, including stakeholders, regulations, and consumer demands. The report then delves into Nestle's organizational purpose, exploring its relationships with various public, private, and voluntary organizations and how it meets the objectives of its stakeholders, such as employees, customers, the government, suppliers, and shareholders. The study further examines Nestle's responsibilities concerning environmental and ethical issues, consumer legislations, fair trade practices, and related strategies. The report also assesses the influence of economic systems, fiscal and monetary policies, and competition policies on Nestle's business activities. Finally, it explores how market structures impact Nestle's pricing and output decisions, providing insights into the company's market strategies and competitive positioning. The report references several academic sources to support its analysis.

Table of Content
Business environment suggests the influences of internal and external factors on
operations and functions of any company like administrations, clients, legislations,
employees and demands of the product. The adequate protections and security of these
environmental factors are very much required as responsibility of these factors is shared
between government, public and private organisations. Present report is based on Nestle
which is one of the leading food company. It refined some policies and regulations which
decrease impact of company on environmental factors and this is done by Nestle
Environmental Management System (NEMS) (Nestle.in, 2016). Cited firm able to attain their
target with the help of their stakeholders. Fiscal and monitory policy having impact on its
existence.
1

Figure 1: Logo of Nestle
(Source: Nestle.in, 2016)
2

LO1 Understanding the organisational purpose of business
AC 1.1 Identifying according to the structures, purposes of different types of
organisation that Nestle caters for or have business relationships with
Nestle, the Swedish food giant, shares a good relationship with various organisations
from sectors according to their structures and purposes. The company’s internal structure is a
decentralised one and the company operates per the matrix structure. However, Nestle deals
with public, private and voluntary organisations in various parts of the world as a
multinational company, it is the duty of Nestle to maintain and cater the relationships for their
own benefit. Nestle is a multinational brand and that is why it must abide by the various laws
and rules of different countries.
Therefore, it is necessary that Nestle maintain a cordial relationship with the
government organisations to make their business operations smoother and hassle free. The
government organisations play a very important role in Nestlé’s business as Nestle deals with
various food and beverage products, they must get the legal documents and no-objection
certificate from the government to maintain their business. The private sector organisations
are the main supplier of raw materials for Nestle. It collects its raw materials for foods and
beverages from different private organisations. Therefore, Nestle always looks forward to
maintain a friendly relationship with those organisations. Apart from that, Nestle also
maintains a good relationship with voluntary and charitable organisations as a part of their
CSR activity (Nestle.com, 2016).
Types of organizations-
Public- These types of companies are incorporated for the purpose of social welfare
of people. NHS is the non profit making organization which is incorporated in order to
provide health related treatments to their users at a reasonable prices which is easily
affordable by them. Main objectives is increase standard of living of people.
Private- These firm are start for the purpose of earn profit through providing goods
and services to their targeted customer. The main purpose of Nestle business is providing best
quality of goods and services to their customer in order meet current market demand and
fulfil their needs. Organization have to provide product which meet their expectation. They
need to build market presence and provide best customer services to people. Company have
to improve their relationship with their customer in order to attract them.
3

4

AC 1.2 Describing the extent to which Nestle meets the objectives of different
stakeholders will influence its operations in various ways and to varying degrees
According to Greenwood et al. (2014, p.1210), the stakeholders in Nestle are mainly
the employees, the customers, the government, suppliers and the shareholders of the company
who have an impact on the organisational decision making procedure. That is why Nestle
always try to meet the demands and objectives of different stakeholders to maintain a smooth
operation in the organisation.
The employees: In order to meet the organisational goals, Nestle tries to cater every
needs and objective of its employees. Nestle tries to motivate its employees in such a way
which can boost the growth of the company. This needs a certain practice of giving adequate
opportunity to grow with the organisation and introduction of reward systems.
The customers: They are the driving force for which a company runs. Without
customers, the company will no longer remain a company and that is why Nestlé’s dusty is to
provide the customers with excellent products and services so they will remain loyal to the
organisation.
The government: In the viewpoint of Gonenc and Nicoletti (2000, p.302),
Government is the key to a hassle free business in any country. Therefore, Nestle must
comply with the governmental rules. Thus, Nestle needs to maintain a cordial relation with
the government.
The suppliers: The suppliers play an important role in Nestlé’s business by supplying
the necessary raw materials for Nestlé’s food products. Therefore, Nestle needs to cater the
suppliers’ and their needs to continue the business.
Shareholders: The business in the international market depends on the activities of
shareholders. Actually, the shareholders passively control the business and every activity of
Nestle. Therefore, it is crucial that Nestle listens to the demand and objective of the
shareholders and have to value their opinions (Arnold and Parker, 2007, p.29).
.
5

AC 1.3 Explaining the responsibilities of Nestle such as environmental and ethical
issues, consumer legislations, fair trade, all codes and compliances and strategies
employed to meet them
Environmental legislations: As a food and beverages company, it is the duty of
Nestle to abide by all the international environmental policies. Nestle should maintain its
industrial wastes in a scientific manner so that it will cause no harm the environment. Also,
the food manufacturing units of Nestle should not produce harmful gasses for the
environment. Apart from that, there should be a clear declaration from Nestle that their
manufactured food products do not contain that harm the human body. Moreover, there
should be a declaration that making of those food products and beverage does not involve any
manipulation of the normal ecological system and food chain, as stated by Nicoletti (2000,
p.305).
The policy of fair trade: According to World Fair Trade Organisation, 10 guidelines
should be followed in fair trade. These policies are creating opportunities for disadvantaged
producers and producers belonging to developing countries. Maintaining a transparency in
business processes and accountability, make fair payments, no child labour or forced labour
can be implemented, no discrimination can be practised, good and healthy working
conditions should be provided, capacity should be built, fair trade should be promoted,
environment should be respected and fair trade should be practised Fischer (2016, p.184). All
of these guidelines are maintained by Nestle in order to make their business comply with fair
trade policies.
Customer legislation: This is another legislation, which provides a window for the
customers. Nestle, being a very respectable brand, always try to gather feedback from the
customers about their product or services
6

LO2 Understanding the nature of the national environment in which business operates
AC 2.1 Explaining how economic systems will attempt to allocate resources used by
Nestle in the most efficient and effectively way
According to Jallow (2009, p.513), there are mainly three types of economies,
namely, free economy, mixed economy and command economy. A free economy highlights
on the government has no intervention in the market, mixed economy is where the
government as well as the market fix together the need of the market and a command
economy is where the government controls the full market.
The mixed economic system features the attributes of capitalism and socialism, which
secure the property, and allows the specific limit of capital to use which is not laissez-faire
system because of the government's involvement and control on it followed by Nestle. As it
is a private organisation, it is a free enterprise, which is independent of the control of the state
in competition and investments.
In a command economy, the company cannot allocate its resources in its own way
which acts as an impediment to their business whereas the free economy allows Nestle to
allocate and reallocate the resources in its own way which benefits the organisation as
observed by Irwin (2015, p.35). The supply of skilled and innovative labor is very much
necessary for any company as it has the effective impacts on the production of the company,
which is again dependant on the type of economy.
7

AC 2.2 Assessing the impact of fiscal and monetary policy on Nestle business activities
as an organisation
The decisions of the government regarding the spending and the taxation are under
the fiscal policies. For the growth of the economy government can increase the spending of
the goods and the services and as a result of this the demands of the products grows up. Then
the production increases and the company need to hire more people which can offer the
chances of jobs to the unemployed people. Again, the government can slow down the growth
of the economy which may result in the increasing number of unemployed people. Another
aspect of the fiscal policy is the tax (Knill and Lehmkuhl, 2002, p.256).
The lower tax rate increases the economy and the higher rates of tax decrease the
demands of the product. The monetary policies encompass the decisions of government
regarding the supply of money and the interest rates. Public Sector Net Borrowing (PSNB)
measures the fiscal leftovers and deficit likewise the amount of the new debt. The positive
number refers the fiscal deficit where the negative number expresses the fiscal leftovers. The
Public Sector Net Cash Requirement (PSNCR) is the formal term of the budget deficit of
government in the UK. The more the PSNCR the more the National capital will be increased
will finally influence the businesses running in the country. Euro convergence criteria
manage all the criteria of the factor which have been discussed above.
8

AC 2.3 Evaluating the impact of competition policy and other regulatory mechanisms
on the activities of Nestle as an organisation
The Competition Act 1998 is an updated framework which identifies and deals with
the practices of business and the market positions. It stops the organisations in fixing prices
and the agreements of the limit productions with the competitors for reducing the competition
in the business market. It is also illegal to share the customers with the competitors which can
affect the economy of the country. The Enterprise Act 2002 ends the individual dishonesty by
engaging in some specific types of conglomerate conduct.
According to these laws the competition and the market, the authority can take
effective action against the organisations that are engaged in the anti-competition agreements.
Nestle cannot engage in any anti-competition contract with its competitors which is illegal
and can cause penalties for it. Competition Commission is responsible for the maintenance of
Competition Act and Enterprise Act in the competitive business market opines Lunn et al.
(2011, p.469).
It helps Nestle to be secure in the business market without any external obstacles. On
the other hand, the Office of Fair Trading (OFT) focuses on the consumer protection and the
competition law. The employment, regional and inflation policies are construed with similar
intentions. Along with these, the government and the European Union in the UK design the
education and training policies of the employees, taxation policies, and international market
policies. Nestle needs to strategise their future business strategies regarding those policies.
9

LO3 Understanding the behaviour of organisations in their market environment
AC 3.1 Explaining how market structures will determine the pricing and output
decisions of Nestle as a business organisation
Nestle has a prominent idea about the products, pricing strategies, target market and
the customers of its competitor which supports the company to design better market strategies
to rule the market. Several of market structures are there for the different types of market. In
the monopoly, structured market, there is no competition as there are one existing seller and
the unique selling product. Therefore, in this market, the seller can price their product per the
production cost.
Per Ott and Hebenstreit (2014, p.295), monopolistic competition defines rudimentary
competition where the different seller sells different types of products which are not a perfect
substitute for one another. In the case of oligopoly market structure, two or more
organisations dictate the market. The small number of organisations has the large market
share in the market the competition is low.
Duopoly is the fundamental form of the oligopoly. It is the advantage for the
organisation as the competition is very much low. As per the market structure, Nestle takes
the effective strategies for the selling of its products, but it has to be aware of the competition
rules. If Nestle engages in any type of any competition agreement that can be a threat to the
business and it can suffer from the various legal disturbances.
10

AC 3.2 Illustrating the way in which market forces can shape Nestle organisational
responses using a range of examples
The organisational responses of Nestle can be shaped by the various market forces.
The company needs to supply their products according to the demands of the customers.
They have to cover the all target market and to the target customers. According to the
competition of the market and the competitors, Nestle can change their pricing strategies.
Sometimes the customers will buy the products if the company lessens the price regarding the
elasticity of demands.
The perfect distribution of the product of also necessary, the entire target market
needs the adequate distribution regarding the demands of the market. The elasticity of supply
measures the ratio of the change of the quantity of the supply which is proportionate with the
changing of the price of the product (Alt et al. 2015, p.169). Low elasticity indicates the
lower sensitivity for the price changes; higher sensitivity indicates the higher sensitivity and
the no elasticity reflect no relationship with the price changes.
Nestle produce their products according to the demands of the customers by
following their feedbacks. They have to follow the pricing of the competitor and must be
attentive about their pricing strategies, opines Manova (2013, p.712). Any substitute product
can decrease the demands of the products, therefore, Nestle has to examine the penetrated
market conveniently and after that, it can set the strategies.
11

AC 3.3 Judging how the business and cultural environments will shape the behaviour of
Nestle as an organisation
It is important for any business to critically analyse and evaluate the business, as well
as social and cultural environment to shape the behaviour of the organisation. As Nestle is an
international player, the pressure of social, cultural and business environments on Nestle is
more. Nestle believes in working culture which includes the belief that through the reflection
of organisational culture, a business can prosper. It can be applied in its homeland but does
not necessarily fit in the other countries.
Two types of business environments are there, namely economic business
environment and the non-economic business environment. The Economic system, economic
condition, and economic policies fall under economic business environment while social,
political, environmental, technological, demographic and legal environment falls under non-
economical business environment, as opined by (McCann and Ortega-Argilés, 2015, p.1293).
As the economic environment is not the same for all the countries, therefore. Nestle
needs to reshape their business strategies and behaviour according to the country's need. For
example, Nestle can fix a higher price for a country with a higher per capita income, whereas,
for a lower per capita income country, it should introduce low priced products. Economic
policies also define the behaviour of the organisation in that country as the industrial policy,
monetary policy, foreign investment policy and fiscal policy will have an impact on the
business.
Social environment also plays a vital part in reshaping the behaviour of Nestle as life
expectancy rate, poverty, literacy, beliefs, customs, traditions and values will have serious
impacts on the buying decision of the customer. Legal environment varies across countries.
Therefore, the business policies of the company will also change with that. Technological
factor denotes how Nestle manufactures the products and the demographic factor will tell
about the distribution, size, and density of the population who will be the targeted customers
(Nestle.com, 2016).
12

LO4 Be able to assess the significance of the global factors that shape national business
activities
AC 4.1 Discussing the significance of international trade to Nestle as one of the UK
business organisations
International trade be the exchange of goods, capital or services across international
boundaries and regions. In short, it can be said that the exchange of goods and money among
the nations of the world can be defined as international trade. International trade contributes
significantly to a country’s GDP.
With international trade, comes the idea of absolute advantage cost theories and
comparative advantage cost theories. As per Guo (2013, p.122) Comparative advantage refers
to the production of goods in a lower price than other manufacturers in the market. In this
way, the company gets comparative cost advantage in the international market. Absolute
advantage compares the difference among different economies or different producers.
Producers who need the little input to make a good is said to have an absolute opportunity
than others.
International trade is important because it helps the organisations to explore new
domains of business and to expand their business. It has both advantages and disadvantages.
For advantage, the company can make its business broader and can earn more profits.
However, as the new domain is unknown to the company, there is a chance that the
investment will not pay off and the company can suffer a loss. As a leading food
organisation, Nestle expands their business globally. They penetrated in the market of Brazil,
Russia, India and China and established their market strategies according to the BRIC
economy. According to the EU business regulation, the organisation maintains their budgets,
market share, production limits, pricing and the expansion., opines Guo (2013, p.19).
13

AC 4.2 Analysing the impact of global factors on Nestle as UK business organisations
To achieve and keep the position in the international business market the analysis of
global factors are very much necessary as they have the positive and as well as negative
impacts on the business. The convenient knowledge about the global target market and the
target customers can be effective for Nestle. The proper education and training of the
employees about the market and their job can drive them to serve more efforts for the
development of the company (Wei et al. 2014, p.55).
The labour cost in the developing countries is low therefore the shifting of production
in those can have the positive impact on the budget of the company. The skilled labour or
workforce is the asset for the company. The proper training and education of the employees
enhance the chances of employee retention. The competition in the specific market has its
domination on the profit and growth of the company. On the other hand, the stability of
labours and the exchange and foreign tax influences the economy of the company. The
increase in the rate of exchange and tax decreases the profit margin which is a threat for the
company. in addition to some of these core factors, Brexit is equally responsible for
determining the extend of impact on the business organisation (BBC News, 2016).
14

AC 4.3 Evaluating the impact of policies of the European Union EU policies on Nestle as
part of the UK business organisations
As an organisation of the UK, Nestle ensures the rules and regulations of the EU
policies. They maintain their budget, market share, target customers and the pricing of their
products. The external factors of international business influence the business. If the country
is political or economically unstable it is very much difficult for any company to attract the
customer and buy their products in those circumstances (Campbell et al. 2015, p.49).
Besides, the international relationship between the country and the UK has to be
good to get the permission and the security for the business in the country. According to the
Kyoto Protocol Nestle has to be aware of a number of greenhouse gasses if there any in the
time of production as every organisation is responsible for the environment which it operates.
They also have to follow the Rio Earth Summit in the case of the preserve of nature and the
climate change. Nestle must have to be wise in pricing their products for the third world
markets. The impact of global financial stability also influences the business of Nestle in the
international market. European Union frame various types policies which having impact the
existence of Nestle organization. Government support fair trading which is beneficial for UK.
Various types of policies are support trading which are fair and beneficial for businesses
areas aligned below-
Agriculture policy- The food of entire country is based on agriculture sector. EU
needs to frame rules and regulation which are able to support agricultural sector.
Fisheries- Most of the part of country is depends on fisheries. Through it
organizations are able to expand business in international market.
Regional development- These are focuses on innovation and research which is
beneficial for the entire country. Through which information can easily pass from one place
to another.
Economic- European union needs to maintain equal distribution among members
through provide equal pay for equal work. This policy assist entire country to reduce poverty.
15

Conclusion
The assignment understands the organisational purposes of the business by identifying
the structure of the different types of organisations, describing the objectives for the Nestles
of the different stakeholders and explaining the responsibilities of the organisation for the
environmental and ethical issues. The various economic systems are also discussed here for
allocating resources, which are used by Nestle.
This assignment assesses the impacts of the fiscal and monetary policies of the
government on the business activities. The importance of market structures in a determination
of the pricing and in the output, decisions is also explained. The behaviour of the organisation
is explained properly in respect of Nestle. In the final section, the assignment assesses the
significance of the global factors, which are responsible for shaping the activities of the
national business.
16

17

18