Strategy For Business Environment of Nestle
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28645 Downloads I Published: 30 Jun ,2016
Business environment is the combination of both internal and external forces that affect the functioning of an organization. There are various factors involved in the surroundings that affect the operation of an enterprise in an effective way. It includes following such as suppliers, competitors and government etc (Wantao and et.al., 2012). In order to access the business environment of the company an organization is selected which is named as Nestle. It is the Swiss based multinational food and beverages company that offers different types of products. It includes baby food, bottled water, breakfast cereals, coffee and tea, confectionery, dairy products as well as ice cream (Cornuel, 2007). The report basically showcases the purposes of different types of organization along with the nature of national environment where business operates. In addition to this the study also depicts the behavior of an organization in market environment as well as it also showcases the significance of global factor that shape the activities of an enterprises.
Economic system is the way through which countries are able to allocate their scare resources in an effective way. Here scare resources are those resources through which functioning of any countries cannot be possible in an appropriate manner (Murillo, 2005). It basically involves the combination of all factors of production such as men, machine, material and resources etc. The countries have to make the efforts in order to make effective allocation of its scare resources. It is because of this activity only government is able to meet the needs and demands of it citizens. However allocation of scare resources is not the simple activity but it requires efforts from all the organization that are functioning within nation. The management of wealth is termed out to be very important aspect in an economic system (Al-Najjar, 2012). However there are various systems involved in it and each have their own way in relation to the management of wealth in nation. It involves command economy, transitional economies, Free enterprise, Mixed Economy, Private finance initiatives as well as Public and private sector initiatives.
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Free enterprise economy is that system where power to make decision in relation to the production and distribution of goods and services lies in the hand of private entrepreneur (Paul, 2008). On the other hand in order to carry out the production, here producer basically depends on the technique that helps them in understanding the forces of demand and supply. However the decision relating to what is to be produced is depends on the level of profitability achieved by particular goods and services. Accordingly producer tends to make judgment in relation to the production of goods and services (Comfort, Jones and Hillier, 2007) Here private entrepreneur main aim is to earn profit and for which they charge any prices from the buyer of gods and services. However it can be said that free economic system is not for those buyers who are not able to pay high prices for the product. But here purchaser can avail themselves from variety of options. On the other hand this type of system encourages competition and thereby entails producer to give their best services to the buyer of product.
Private finance initiatives is that method through which fund are provided for the major financial initiatives. In this type of system responsibility relating to the management of project rests in private hands. Here the utilization of private capacity is done in order to attain the desired results of government. Private finance initiatives type of strategy is being considered as the government tactic which is performed in order to accomplish goals and objectives of the administration (Oberholster, 2010). The economic system of private finance initiative allows government to fund the infrastructure economically. This is to be perfumed by government by making the adequate use of scare resources. However the main aim, of private sector initiatives is to earn profit in an enterprise. With an aim to comply with this type of situation private sector has to go for extensive utilisation of scare resources.
There are different types of organization found out in the market of UK that possesses various types of purpose. It includes following such as partnership, sole trader, franchising and company. Sole trader is that form of business enterprises where responsibility to make decision rests in the hand of one person (Kuenkel, 2013). The main purpose of Sole trader, corporation is to carry out the work of their client and accordingly charge sufficient amount for the same. On the other hand partnership is that form of an enterprise which is run by two or more persons in an effective way. The main objective of partners in partnership business is to work in a collective manner and thereby share profit and loses with each other. In addition to this franchising is that form of business where producers uses business model of another successful firm. It is considered to be one of the effective tactics which tends to enable corporation to attain its global presence aim in an effective way (Poak, 2013). There are various famous organizations like MC Donald and KFC that has used this model and had marked their remarkable presence in whole world. Company is termed as the voluntary association of individuals who meet with each other with an aim to carry out the goals and objectives of an enterprise. It has been categorizes into two sections that are public and private ventures. The present chosen organization for this report named as Nestle comes under category of company that has the objective to earn profit within an enterprise.
Stakeholders are the group of individuals that are affected with the functioning of an enterprise carried in nation. There are various group of individuals identified for Nestle that expects something from organization (Wallace, 2002). It involves following such as customer, suppliers, shareholder, employee along with the government.
Customer: It is considered to be the king for an enterprise that invests their money in corporation product. However in return of their money buyer expects quality goods and services from Nestle along with the value for money. On the basis of analysis it is accessed that Nestle has effectively comply in meeting the needs and demands of its customer (Gatti, Gallegati and Kirman, 2000). It is to be performed by them by producing high quality goods and services.
Employee: Working of any organization cannot be possible if its employees are not directed and motivated in an effective way. Their motivation can be maintained if they are given adequate opportunity in relation to their career growth along with the organization (Calderini, Garrone and Sobrero, 2003). However it is accessed that Nestle has complied with the situation and this is the reason why comply offers all kinds of financial benefits to their workers.
Government: The main expectation of administration from Nestle is related to the following factors that are timely payment of taxes and works for the betterment of society through generating employment within nation. Nestle has meet out these objectives in an effective manner by complying with the practice of corporate social responsibility that encourages Nestle to work for the betterment of society.
Shareholder: They expect high rate of dividend from the profits of company. However on the basis of analysis it is accessed that Nestle has fully complied with the satiation and this is the reason why company distribute favorable rate of dividend to their shareholders (Manners and Whitman, 2000).
Supplier: Expectation of supplier is related to the timely payment of their services. On the basis of analysis it is accessed that Nestle has meet their supplier expectation through marinating strong bonding with them along with providing timely payment for their services.
Nestle has their responsibility towards those individuals for whom they produces or purchase goods and services. On the other hand in order to meet out the responsibility of an organization, management of Nestle has formed various kind of strategy (O’Connor and Netting, 2009). Nestle has its responsibility towards the purchaser of goods and services that expects high quality products and along with the reduced price. In order to perform it Nestle has to form strategy relating to the reduced cost of production by complying with the practices of eliminating all sorts of unnecessary activity. With the help of this type of tactics, Nestle is able to give their customer utmost quality of goods and services and thereby satisfaction of customer can also be maintained in an effective way. On the other hand Nestle also conduct various kinds of loyalty programs for its customers where reward are given to those buyers who repeatedly purchases product of an organization (Sledge, 2011). In addition to this, Nestle has their responsibility towards working for the betterment of society. It has been performed by Nestle by organizing various kinds of environmental campaign which encourages their customer to comply with the practices of using eco friendly product.
The economic system of includes the policies such as monetary and fiscal policy which impact on NESTLE and its business activities. Monetary policy controls the supply of money in nation (FISCAL AND MONETARY POLICIES, 2014). Policy can control the interest rates, credit supply and inflation in country.Limit of inflation control the prices of products that have direct impact on activities of organization. The monetary policy controls the supply of money and stimulates economic growth. The fiscal policy includes the government expenditure, subsides and taxes that have direct impact on allocation of resources. The rate of interest depends upon the political conditions of nation.
Increase in the taxes rates will reduce the purchasing power of customers as products are available at higher prices which would result in decrease sales of organization. On the other hand decrease in rate of interest or taxes rates would increase the purchasing power of organization as company is providing products at low prices and people are able to buy product at that prices. This would increase the sales and profitability of company (Cornuel, 2007). Exchange rates are differing from one country to another which also affects functioning of organization. Increase in interest have direct impact on activities of organization as it increase the cost of company that would automatically enhance the prices of goods and services and reduce the sales of company as people are interested to save money rather than spending.
Competition policy in the UK maintains and promotes healthy competition in market through anticompetitive conduct by organization. It promotes the fair trading in order to provide quality products to customers at affordable prices. The competition policy of UK includes many laws which are enumerated:
Fair Trading Act 1973 deals the business operations that are related with the merger and acquisition of organizations. The situations in which companies are restricted to compete freely are deals within the Restrictive Trade Practices Act 1976. The conditions that are related with the resale of goods and services are handled by the Resale Prices Act 1976. This act puts minimum prices on products at which they can be resold (Jones, Hillier and Comfort, 2007). The Competition Act 1980 develops several laws and regulation to deals with the anti-competitive practices of different types of companies. The legal authorities in the UK analyze the each case and inspect the conditions that are included in the above discussed acts and also evaluate the quality of each problem. Effectively deals with the each situation the legal authority of nation monitor the suitable remedies and also provide efficient recommendations. The other regulatory mechanism developed by the UK government also affects the functioning of NESTLE. These are Scale and complex monopolies, Transparency policy, Utility regulation Act etc highly influence the activities of organization. NESTLE follow all the laws and regulations developed by the government of UK and provide highly quality products at affordable prices in order to provide satisfaction to customers and to maintain healthy relationship with legal authorities (Hin Li, 2012).
Market structure includes those features that highly affect the interaction and behavior of seller and buyer (Sheeba, 2012). It is the organizational and other characteristics of market. This determines the group of companies who are producing homogeneous and identical product and services. There are four types of market structure that impact on pricing and output decisions of NESTLE, these are enumerated:
Perfect competition: It is the efficient market in which product are developed by using the most effective technique. There are many firms which are producing standardized and homogeneous products and they have no control over the supply and prices of products in market. The supply of products is in very less proportion and firm is prices taker in this market structure. NESTLE produce unique products in order to attract customers and they set competitive prices.
Monopolistic competition: In this market firm have no competitor in their industry and they reduce supply of product in order to increase prices and profits. Companies produce less output from their capacity and develop goods at higher prices and make profits (Goyal and Grover, 2012).
Oligopoly: In oligopoly market the number of companies is few and they reduce output in market in order to make profits. In this industry organizations are price maker and they gain profits by making higher prices. In this market NESTLE set its prices according to their competitors.
Monopoly: In this market company have no competitor, all the control over supply of output is in the hands of one organization. In it firm produce exclusive product which have no competitor and they are the price maker and gain higher profits. NESTLE has develop its brand image and due to this they are price maker of their products. For example maggi enjoy the benefits of this type of market structure (Campbell and Craig, 2008).
The cultural and business environment highly shapes the behavior of people within and outside the organization. These environments play an important role in success of company and they are intercalated concept. The cultural environment includes the beliefs, values, way of doing business and the objectives of organization which reflects in the structure of business. The business environment includes the stakeholders of company and the way firm treat them which also shape the behavior of people (Sledge, 2011). NESTLE create confidence and trust among its stakeholders by involving them decision making process. They consider suggesting of their staff in order to provide job satisfaction to them and motivate them towards higher level of performance. Company provide healthy work environment in order to develop positive behavior among them towards firm. They provide effective training and development opportunity to their employees in order to develop their efficiency and skills and create passion or commitment among them for attainment of goals and objectives of company. They use advance technology in their business operations to attract customers towards company and follow all the rules and regulation formulated by government and develop healthy relationship with them (Hin, 2012). Company provides positive work cultural t their employees which increase productivity and growth of firm in context of market share. So, market forces shape the behavior of people within and outside the organization.
International trade provides the opportunity to countries and customers to expose the goods and services that are not available within the country and also provide opportunity to companies to expand their markets across the world (Floyd and McManus, 2005). It allows NESTLE to take full competitive advantages by expanding their business environment assignment in all over the world. The significance of international trade is as follows:
The business of NESTLE is highly affected by global factors such as political, social, technological, economic, environmental and legal factors. The impact of these factors on business of NESTLE are as follows:
Political factors: The rules, regulations developed by government of particular nation highly affect the business of organization. NESTLE support the efforts of government and encourage active lifestyle and healthier diets to counter problems associated with diabetes, obesity etc (Laborde, 2005). So company follows their strategies and policies according to laws formulated by government.
Economic factors: The interest rates, distribution of income, highly affect the business of organization. Inflation in country also affects trade activities as it reduces purchasing power of people and create propensity of saving among them.
Social factors: People are demanding high quality products at affordable prices which affect the company. Change in demographic characteristics of population, needs, preference and life style of people highly affects the business of NESTLE.
Technological factors: It also has great impact on NESTLE as technology reduces cost and improve quality of products. They produce healthier products by using research and development expertise (Tyc, 2008).
Legal factors: Government develops different laws such as health and safety laws, employment law, business regulation, advertisement, and pollution control and consumer protection. These regulations impact on business of NESTLE as they follow all regulation which increase profitability and employee loyalty towards firm.
Environmental Factors: Change in climate, natural resources, air emissions highly affects the business of NESTLE. Company develops its strategy to reduce wasted and their recycling for environmental protection (Goyal and Grover, 2012).
The policies developed by European Union (EU) highly impact on business of organization. It is a political and economic union which operates through a system of intergovernmental of member states. The impact of EU policies on business of NESTLE are as follows:
Agriculture policy: EU develops the agriculture policy which is related with domestic and agriculture products. It was formulated to increase the domestic production of agriculture products (Hin Li, 2012). This policy highly impact on business of NESTLE such as offered assistance to decide reasonable prices, increase production at domestic country. This policy helps farmers to receive adequate income.
Employment policy: They develop employment policy for welfare and safety of employees. NESTLE follow this policy and provide healthy working environment in order to improve their efficiency and motivate them for higher level of performance.
Inflation policy: EU formulates this policy to control inflation in nation and to increase economic growth. This helps NESTLE to increase their sales and enhance the growth of firm in context of market share (Lihitkar, 2013).
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From the above report it can be articulated that NESTLE identify the needs of its stakeholders and develop strategies to meet their expectations in order to increase their business operations and get success. Several global factors such as political, legal, economic, environmental etc impact on business operations of organization. Market structure helps in determination of price and output decisions of NESTLE and the market forces such as supply, demand, competitors etc force the responses of company. The policies developed by EU also affect the business strategies of organization so they follow these policies in their strategies.
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