Introduction Business Environment
Business environment can be said to be a combination of different internal factors that have a major impact on working of an business organization. Effects of such an environment can be felt in every operations of the company and its various facets (Fernando, 2011). The following report has been undertaken in order to help the reader understand the very reason as to why a firm operates in the way it does. This study has been divided into two parts – the first section provides description of various economic systems and its related features. While in the second part, Nestle has been taken as an example so as to discuss about different types of organizational structures and responsibilities that it has towards the various stakeholders.
Economic systems present within the organization provide an altogether defined location which provides on effective utilization of work towards various activities. Basically the different countries are adopting three general types of economic systems which are free market, planned market and mixed market and while through operating in these markets, supervision and monitoring is done on by the government (Morgan, 2008.).Through taking in the policies which are generally formed throughout the centre, these possess minimum impact on the markets and control of economic resources through within the private sector. With goods and other services being supplied within the market, these are directly determined through the price mechanism. Market structures present directly determines the flow occurred from these decisions. Supply and demand functions finds out the capability of maintaining these decisions within the process. With directly relating to the open free system and issues coming out concerning different aspects of production of goods and services and the required infrastructure. This is mainly composed of neutralizing the different needs associated within the growing population. Planned economy basically consists of broader aspects providing on dominant roles attached through within the government for formulation of policies (Ramos, 2005).Planning out for the economical activities are basically attached through within the private sector providing on significant involvement in the accumulation of economics.
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American, Asian and European economies providing on more planned economies along with the other countries such as West Cuba, North Korea and Iraq. These economic systems providing broader advantage through creating gap through within the the employment and consistently filled through implementation of policies and other resources which are directly aligned to occurring needs of the people. Mixed economies basically consist of mixture of all the other systems operating. Factors covering both socialism and capitalism are included within such economic systems. Through working down on the global scenarios, many countries are employing down these systems. Through mixed economic systems directly focused on dividing the resources through within the country with the needs of government and private sector. These systems are having broader advantage that creates the gap through within the employment and provides consistent filled through defined implementation of policies and other defined resources which are directly aligned to occurring needs associated through the people. These mixed economies provide mixture of all the other systems operating within. Factors affecting both socialism and capitalism are included within such economic systems. Mixed economic systems directly focus on dividing the resources of the country through needs between both government and private sector (Rao, 2009).Participation within private sector within continuous encouragement and effective utilization of resources directly focus on gaining on the economic profits linked to the whole country. UK, Russia and China are adopting the mixed economic systems. Benefits generally attached to these related systems covers on resultant effective co-ordination occurring in between the private and public sector through which maintains the economic balance of the country.
Based on economic structure associated through within the country, these economic systems provides on allocation of resources based on the effective economic balance linked through within the economy and these functions of market forces (Jallow, 2009). Demand and supply function are significant through within the marketplace. Demand provides significant role in allocating the resource. Central planning and defined authorities are directly responsible for production and control of various resources.
Private and public sectors are currently operating within the economies that plays significant role associated with demand and supply which is particularly linked through within the private sectors. Centralized planning and different measures are involved with applying this allocation.
Transitional economies provides on elongation and reduction associated through trade barriers through restructuring role of government provides in maintaining different functions linked with supply and demand Through defined process of transition these centralized planning is defined method for measuring and applying this allocation (Rossman. 2003).Foreign direct investments (FDI) are focused on relaxing the immigration policies thus creating more and more capital for people thus ultimately decreasing the dependency on the state. Economies such as Cuba are showing transition over open market conditions showing on different benefits related to international trade agreements. Import is currently being financed through steady interest rates related to foreign investment while exporting different management assignment allotted to skilled labor.
Business organizations are of various types and they all operate just to be able to either earn good amount of profits or provide quality services to different stakeholders. But most companies today thrive and operate so as to fulfill both of these objectives (Kárpáti, 2001). In UK alone there are many types of business organizations, but not all of them have the same reason of existence. Some of these organizations are functioning for the benefit of public, while rest operates to earn profits and make money. Companies in the country can majorly be divided into three categories: Public, Private, and Voluntary. All of them have different purposes and sets of objectives which they strive to attain in a given time period. A public sector organization’s main purpose is to serve the society and general public; also the interference or involvement of government is such firms is more (Rodgers, 2008).Decision making power and authority rests with this body only. But, conversely to it, a private organization’s main purpose it to earn maximum amount of money and profits by selling its products and services. For any country, having such firms operating it is very important from the view point that they help the nation to walk on path of growth and prosperity, and also that it helps in keeping the residents happy and satisfied.
Of all the reasons discussed above, the main reason as to why a business organization exists is that it wants to satisfy the needs, wants and desires of its various stakeholders. This is the main purpose, or goal of any company (Griffiths and Walls, 2001). It is so because of fact that without accomplishing such demands, organizational cause cannot be attained, nor can its existence be justified. It is a widely known and accepted fact that only those firms can survive which are able to fulfill such needs of customers.
Stakeholders for any business organization are the most important entities that have to be satisfied through different operations of the company. In this regard it is also crucial that they are kept happy and content, so that long term loyalty can be ensured. Stakeholders are those persons, individuals or entities that have something at stake in the company (Buthe and Milner, 2008).They may be in the form of customers, shareholders, investors, creditors, suppliers, government and regulatory bodies, etc.
There are numerous parties and individuals who have something or the other of interest in company and its various operations. They are also known as stakeholders. For Nestle, just to be able to survive in market, it is essential and crucial that such individuals are satisfied first. But meeting their needs and desires is not a very simple job. A lot of efforts have to be put in by the management along with its numerous resources (Doving and Nordhaug, 2010). This is so because of the reason that each of them have different expectations and desires from the company. Following are some of the stakeholders and ways through which management at Nestle can satisfy them:
Customers: These are the most important stakeholders for the company. This is because of reason that all of its operations and activities are directed towards fulfilling needs and wants of them. Main expectation that customers have of the company, is that it provides them with good quality products, so that they can lead their lives in a much better manner. For them, quality is very important (Heugten, 2011). Apart from this their perception and attitude towards the organization also to a great extent is dependent on how the products are priced.
Employees: Other very important stakeholders for the company are the employees themselves. For the organization it is important that they are satisfied and happy by working in company. The main reason as to why the employees are so important to company is that they are the ones who will be performing various activities, so that tasks and duties assigned to them are completed with great ease and efficiency (Moxham, 2010).
There are various roles and responsibilities that have to be carried out by the organization, so that not only it is able to survive in market, but also earn huge amount of money, and also in attaining its goals and objectives. For management, it is imperative that they carry out such responsibilities precisely and accurately, or else they can put very existence of company in jeopardy. Performance of such roles is so important, because of reason that they have a direct link with success and failure (Worthington and Britton, 2009).If and only if the firm is able to carry out these roles and responsibilities with efficiency and effectiveness, can it survive in the market and continue to make its name and also maintain it. Such responsibilities basically are related to satisfying customers, employees, suppliers, government, society, and various other bodies (Grier, J2006). The main responsibility that the organizations have to fulfill over a period of time is to satisfy the numerous stakeholders by providing good quality products at cheap prices and follow all the rules and regulations laid down by the government and various other regulatory bodies.
Business organizations policy
Fiscal policy is that piece of legislation formulated by the government to adjust and/or manage the level of spending, so that financial situation of the country can be monitored and controlled (Schaefer, 2001). The current fiscal policy adopted by the government of UK has had a major influence on working of Nestle, as it is the policy that regulates and determined amount of money which can be spent on the company sector that it operates in. According to the existing fiscal policy, tax rates like VAT have been increased, which means that organizations working in nation will now have to pay more to government in the form of taxes. On the other hand, monetary policy of the country has a major influence on working of businesses as they have to pay higher interest rates for the short term, which eventually affects long term interest rates of the country (Delener, 2000).
It is due to these policies that the government is able to influence the spending done by it on various aspects of the economy for instance the organizations which operates and restrict the amount of goods or raw materials that can be imported. Through such policies national authorities also keep an eye on the number of people who are not residents of the country, but are working with different companies in the nation (Adams, 2013). This means that they want to control import of labor, so that outflow of currency can be minimized.
One of the most developed nations currently in the world is UK and is also the headquarter to a lot many business organizations and companies. In last some years it has transformed into economic hub of the world, as most of financial and other business related transactions and decisions are taken in the country only. This also means that the level of competition in the country will also be very high (Lipsey, 2009). Realizing this fact national government has made a lot of rules, regulations and policies, so that they can better monitor the activities of companies functioning in country. Such policies and legislative monitor level of competition and performance of organizations like Nestle in the country. To ensure that there are no unfair practice followed by such companies in order to leave the other ones behind in this blind competition. Such policies include the likes of Competition Act 1998, Enterprise Act 2002, etc. Both of them look at state and national level competition among all the business organizations within geographical boundaries of the country (Freeman, 2010). These policies and norms have a very extensive impact on working of companies, as it prohibits them to enter into any agreement which will restrict free trade in the nation. It also stops the leading firms of every industry from misusing their power to influence any other organization functioning in the market. To keep a strict eye on level of competition in various industries, the government has established a new body by the name of ‘Office of Fair Trade’ which enforces different laws related to competition and penalizes those business firms which are found to be engaged in wrongful trade practices (Halbert and Ungulli, 2011).
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Company holds in monopolistic competition within the market. Through different products produced which are identical and consumers working on preferences based on perceptions. Profits within these organizations are not related to difference in costs or cost-reduction techniques but the difference associated with the products present and their characteristics.
Company present is not focused on altering the pricing as this would lead to restructuring of the whole line products. Situations present are attracting down new competitors in the market and more similar products to be present within the markets (Boyd, 2012). Long term benefits of the company needs to be reviewed and product whose prices is equal should be introduced to neutralize the long average cost. Other competitors are also making profits in the market. Competitors in the future would continue to cover profits. Besides these, varieties of products are made available which would in turn minimize the negative aspect of monopoly.
Monopolistic competition differentiating itself from oligopoly monopoly provides the firm like Nestle operating in the monopolistic competitions influencing the market price through defined virtue of size. Products being delivered by Nestle affect the market price and control the other prices. Through these actions firms gain control over the prices existing in monopolistic competition with differentiating the products (Cram, 2010). Features differentiating monopolistic competition differentiate from pure monopoly that provides on good substitutes that are currently available within the competitive industry. Monopolistic competition provides in various enhanced methods that provides companies such as Nestle more association with other companies through adopting fair means that are generally linked with effective functioning of the economies. There are different measures through which these economies come in close contact with each other providing on enhanced methods that links them with each other. Monopolistic competition currently delivering on effective methods that provides on well effective measures focusing on the enhanced initiatives linked with the functioning of companies such as Nestle.
Being in monopolistic competition, in the home country, prices are not a big issue for Nestle. Market having a strong hold of prices is decreasing the role in company’s part. All other competitors are having identical prices over their products and are exercising innovation based on product differentiation. Marginal costs are susceptible to rise with the entry of new competitors looking to expand the business. Example, as the overseas markets are concerned, Nestle is doubling the dairy output in Pakistan which will tend to increase the cost. The price strategy adopted by company is a non-price competition. Setting the pricing based on competitors so that price of product is not affected by company policies and marketing campaigns (Exchange rates affecting Nestle profits, 2003). Pricing objectives are different, the profit oriented helps to attain a target return and maximize the profit while sales oriented helps in stabilizing the prices and maintaining the market share. Last objective is status in question oriented which helps in stabilizing the prices, withstanding the competition and maintaining the quality of the products to standard set.
Exchange rates have greatly impacted the operations of Nestle but the firm has been able to stand on the consecutive performance through within the fiscal year of 2003. Company has been currently focused on making diverse products and different measures focusing on the current growth rates operating in the markets. Market growth rates currently bringing in enhanced measures that provide the current economies achieving organic growth rate in the industry. Delivering in s objective which delivers on these organizations directly on through path of success defining different measures attached to measures related to the services. Despite the continued concerns within the economies, companies are focused on providing one different measure associated to service and product that brings in enhanced productivity.
The proper allocation and efficient use of rare resources among different countries are dealt with international trade. The concept of free trade benefits production efficiency such as better quality product with low prices that have to be sold in free competitive market (Matthews, 2005). Nestle is a multinational company and it has various significance over international trade such as:
- Nestle exports its products to other countries which have high demand in consumer market and import raw materials from local vendors.
- Company has focused its balance of power towards large scale retail stores such as supermarkets and discounted chain stores (Dawes, 2005).
- In spite of focusing on developed markets like North America and Switzerland, it has decided to increase focus on emerging markets like India and China.
There are various global factors that possess a significant impact over the UK business organizations. This involves high amount of technological advancement that certainly makes an impact over the operations of any company and hence they have to entail steps in this regard in order to attain more of efficacy and proficiency (Morfaw, 2009). A next factor is inclined towards socially and companies also have to consider various social and cultural factors of target audiences in order to operate in most effective manner. Moreover companies have to entail more of innovation and uniqueness in their product in order to meet with the dynamic needs of the customers (Fernando, 2011). In this regard, an economic factor also makes an impact over the operations and profitability of the company and therefore they have to incorporate appropriate steps in this regard so that they can operate in a desirable manner with minimum deviations.
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There are some policies of European Union that control the business activity of Nestle. Such as:
- Employment policies
- Regional policies
- Inflation policies
- Education and training policies
- Taxation policies
- International policies
The above study was intended at analyzing the business environment study in which Nestle, the giant of food and beverages industry. Main purpose of carrying out this study was to help understand the environment in which company operates and also the various factors and forces that affect its operations. During the analysis, it was seen that the organization has to comply with many laws and regulations so that it can operate in a proper manner. Management of the company also has to ensure that their numerous stakeholders and such associated parties remain satisfied and happy with their operations.
- Cram, T., 2010. Smarter Pricing: How to capture more value in your market. Pearson UK.
- Dawes, B., 2005. International Business: A European Perspective. Nelson Thornes Publishers.
- Delener, N., 2000. Strategic Planning and Multinational Trading Blocs. Greenwood Publishing Group.
- Doving, E, and Nordhaug, O., 2010. Investing in Human Resource Planning: An International Study.
- Fernando, C. A., 2011. Business Environment. Pearson Education India.