Introduction to Business Environment
Business environment is the term that cause the business operations with the accumulation of all the internal and external factors. All the functions which affect the business as well as all the employees, customers, demand and supply of the products and all the rules applied in business. The business environment of Nestle has been discussed in this present report (Palmer and Hartley, 2008). Factors of the business environment are favourable and unfavourable for the business operation of the Nestle. Along with this, research spotlights on the organization’s objectives and structure of the market. Enquiry moves towards various economic system which provides assistance in distributing resources for different activities of the organization. The report also describes the different financial policies and their impact on Nestle and its operations. Further, market involves with different type of structures that help in survey the price of other business and elaborate the path which form the culture in organization with all the forces of market. In addition, importance of international business environment is inform in coming paragraphs of t
The study focuses on the Nestle which is a major organization in all the food market industry. Its products are listed in the international markets, with all the micro and macro factors of environment that affects business operations and activities. Thus, all these factors have a impact on strategic planning and different decision making that involves in the company.
1.1 Organization’s objectives as per their characteristics
Organization should be limpid and have well-defined purposes to complete the target of the business that motivates the people to achieve the result in the given time . For improving the performance of all the individuals and organization objectives are the important instrument which measure the functions and activities(Moutinho, 2011). On the basis of objectives of the business organization can divide in five parts which are as follow:
- Government or public sector
- Non- governmental
Main objective of the organization is to increase the company profit at the maximum level. All these organizations use various well-defined skills and efficient knowledge to receive maximum profit in company by allotting proper resources for accomplish the cost-efficient objectives (Lambsdorff, 2007). With the another objectives of non-profit organizations are to supply precious life to all the stakeholders and shareholders by doing charity, donation. Under company profits and revenues are not involved as an main objectives of companies. Public and government sector objectives are to provide benefits to all the society people and people of organization. They encourage people to participate in the functions by giving them equal opportunities in the society. With many organizational objectives, Cooperative organizations have numerous objectives for survival with many reasons such as achieve maximum profit, consequence in quality of product and services, customer satisfactions between the representative parties. Non-organizational government is facilitates with the objectives that serves resources and services in the society for accomplish social and political objectives also (Halbert and Ingulli, 2011). NGO's provides services to help society in controlling the populations, fight against dishonesty , provide education services to every people for overall development of the society.
1.2 Extent to which Nestle meets the objectives of the different stakeholders:
All individual and group of persons in the different companies who may change or can be affected by the various operations and functions are called as stakeholders of the organization. Nestle have various stakeholders in the internal and external environment which help the company to increase the market share. Internal stakeholders involves employees and shareholders who overlook all the internal functions in company and all the customers, suppliers and buyers or government who work at external level as an external stakeholders. Now stakeholders entered with the objectives to ascertain the needs and demand to carried out the essential requirements of organization that include in the public sectors businesses. Organization additive the goals by using strategic planing and management policies to enhance the performance of the Nestle. Stakeholders needs more capabilities to reach the objectives of company (Ramachandran, Gelb and Shah, 2009). Various objectives of stakeholders are describing below:
- Nestle Shareholders evaluates the returns of their investments so they can easily utilize dividend policies in the stock market.
- Employment policy of the Nestle is very impressive which fulfill the employee’s expectation and provides bonus and compensation the organization and provides appropriate return bonus, job position of stakeholders , responsibilities, safe working environment and appropriate training and development programs which modify the skills and knowledge of whole workforce present in the company(Welford, 2013).
- Customer expects valuable return for their purchasing investment for achieving the objective of Nestle how furnish quality products and services with effective price which is good for wellbeing.
- Nestle use appropriate pricing mechanism which is well-compatible for customer need and belief.
- They supply quality amount of products to their customers and suppliers in time to maintain the effective relationship among all the people of company.
- Nestle provides resourceful environment for all person which is living in the community as well as business operation of the Nestle increase the overall employment service for different people.
- Organization view all international trade policy of the country government which makes faithful structure in the market with taxation policies (Lambsdorff, 2007).
- Thus, Nestle is very resourceful to their stake-holder's to fulfil their objectives as well as of organizational objectives.
1.3 Responsibilities and strategies of the Nestle:
Major responsibilities of the Nestle for attaining the profitability objectives of the organization are as follows:
- Responsibility towards the management: Nestle is responsible for obtaining funds from different resources by strong employment policies in operating the management. Organization develop the management to achieve active and valuable outputs present in the financial and operational resources of company. By providing effective training and development program in the society for all the workforce of organization for safe working Nestle is accountable for all the developmentm (Solomon and et.al., 2014). Nestle have the obligation to supply quality and healthy products and services to their customers or consumers.
- Responsibility towards ethics: Corporate social responsibilities for organization’s stakeholder area responsibility of Nestle for attaining their sustainable development objective. For managing the trades of organization at international level Nestle has to follow all the ethics that consist in culture, import and export of products in all other countries.
- Responsibility towards the environmental: For producing all food products organization requires different natural resources for acquiring all the natural resources company needs to believe their responsibility towards the environment . Cocoa goods are used by Nestle for producing different products (Kotler, Bowen and Makens, 2006). World Cocoa Foundation has developed several rules and regulations for the cocoa agricultural to evaluate different farming techniques with their policies so they deal with each cocoa farmer in the environment. Therefore, Nestle needs to follow effective method for cropping which does not have negative outcome of the environment in the country. Along with this different distinct development programs helps in improving the business environment.
2.1 Optimum allocation of resources in distinct economic system
Economy system is defined as an organization structure by creating from raw materials and producing assorted food products by effective used of scare resources in the environment. Economic system provides the business optimum allotment of resources, help in preventing the stability and help in enhancing performance of products and services for effective production system that make the decision in the organization such as what, how and for whom to manufacture (Hill and Hernández-Requejo, 2011). According to all of the decisions and structure of company economic system can be divided in four parts; these are
Traditional: Primary organization is the another name of traditional economic system. This type of business use all the traditional method for framing and hunting the duties with sharpness. Discussions are made on the background, social process, history of the company to take effective decisions with the power. Tribal areas in South America and Asia follow traditional economic system with the various advantages on each elements which is totally different from our own task and work. Networking of public are very powerful, risk-free and affordable at workplace (Wild, Wild and Han, 2014). Change in the management for utilizing the skills and knowledge is not competent with the workforce.
Market economic system: Market economy is based on self production in the organization y obtaining objectives of higher profit. All the allocation of resources is based on the market forces, demand and supply of services in the company. With the various price mechanics organization distinct price of the product. All the associations will get benefits by this system because by this company produce different type of products without having the involvement of government and all the decisions are taken by single authority. Company will face dis-advantage as well in this economy system due to no participation of government which separates customer of organization.
Command or planned economic system: Government play an important role in the organization to direct and control the production system, operation and functions in the company. Allocation of resources and decision making in the company is the appropriate planning method which is used in the business. With the various objectives in the economic command consist with the use of valuable resources, creates perfect competition in market with qualitative product (Reddick and Roy, 2013). On the other side with the inflexibility and slow adaptation of changes customer has no options for purchasing the product from the environment. They do not use personnel in management to follow paper work for data base management.
Mixed economic system: Name itself suggest the meaning of this economy system which the combination of above two economic system like command and socialist system. Economic system use every resource present in the public and private organizations for allocating the various resources at different levels. All the price decisions are supported with the government policies and price mechanism which are decided in the company to get maximum profit and social interests. United states are most suitable example of this type of economic system. Suitable laws are follow to keep the customers from partial and unethical prices for making impressive pricing decisions (Björklund, 2011). On other hand vary much involvement of the government reduces the association’s strength and better the environment of the monopoly organizations.
Therefore, different methods of economy allocate with different type of resources and decisions making related to objectives.
2.2 Fiscal and Monetary policy and their impact on Nestle:
Fiscal and monitory policy of the financial system:
Fiscal policy: It can define by law which government has definite such as, the tax rate, borrowing capacities, expenditure level of distinct organizations and revenue allocation.
Monetary policy: The government of the country managing the total money supply which affects the explosion rate in the country.
Fiscal and Monetary policy causing the Nestle operations and functions and decisions . Fiscal policy control to concluded the taxation policy of the Nestle and decides the level of taxation featured by the company. If policy of tax rate is at low level than it will bring large amount of cash which they used in the investment (Solomon and et.al., 2014). On other hand if tax rate is very high than Nestle will face the cash insufficiency which leads low investment and high price for the future products and services of the company.
Monetary policy concentrate in the Nestle for the money supply and interest rates which increases the cash flow at the high interest rates. As well with low interest rate Nestle leads high profit and revenue. Thus, variation in the currency rates also affects the global trade of Nestle.
Accordingly, both the parties have positive and negative impact on decision making which indirectly effects the policies of Nestle. for example in hiring process of the company , rising the capital , international trades as well as increased global market also.
2.3 Competition policy and their impact on other regulatory mechanism and activities of Nestle:
For keeping market competition at different level of economic system with the region rules. This policy provides qualitative products with affordable price and broad range of choice for their customers. It causing different sector of Nestle by:
- Increase introduce: For increasing the demand competition requires high innovation to enhance the demand of the product and services. For differentiate the products with the competitors more innovations should be needed in the production and operating systems at Nestle.
- Focus on qualitative products: competition policies develop quality standards which affects the attribute of the product and services of Nestle. These quality standards consist efficient products, effective customer support in services.
- Competent Price: Competition policy introduce many rules related to efficient price mechanism to help in deciding the price of product on the basis of quality. The demand and supply of product influence the decision which is taking in the Nestle. Thus, it increases the market share, market growth which modify the economic system in the organization.
- Strong competition in the global market: In the global market policies which creates competitions to help in maintain the tough competitions in international market (Commander and Svejnar, 2011).
- A range of choices for customers: Innovation in the products followed with high choices of customer which is the main focus in the competition policy.
3.1 Market structure and determination of the price and output decision of the Nestle:
Structure of the market should be characterized to operates the same field production and compare goods and services at various organization. Market is consist with large number of sellers and buyers with different competition levels to enter in the market. All the pricing decisions affects the structure of market with different type of markets which are as follow:
- Perfect Market - Price taker
- Monopolistic Market - Price on value
- Oligopoly Market - Mutual interdependence
- Monopoly Market - Price Maker
There are no restrictions over entry and exit because it has powerful information which communicates in the company that helps in communicating the information to their stakeholders at different levels (Chavis, Klapper and Love, 2011). Nestle are facing the competitions of price and non-price.
3.2 Nestlé’s response towards the market forces:
Market structure includes various forces which helps in distribution of Nestle goods and helps them to take decision related to pricing in the company. Due to the clean competition Nestle has five forces which are as follow:
- Huge customer and vendors
- Competition in the all organization is very perfect.
- Free entry and exit.
- Similar products
- Effective communication of the information in each customer and seller.
Nestle follows various policies which are present in the company such as fiscal, monetary and competition policies that gives the very positive response in the direction of the each market force. For enhancing the production and operation policy company improves the demand and supply mechanism with positive factor. Pricing policy leads the market trend and price of the product which is followed by Nestle. To develop effective strategy of pricing with high production in the organization Nestle have to face competition with al the sources.
3.3 Nestle’s cultural and business environment
Business environment consider internal and external element of the Nestle which contains in the environment (Aterido, Hallward-Driemeier and Pagés, 2011). Internal environment of Nestle involves all the employees and shareholders and External environment includes all the supplier, government and customers which built strong, participative and energetic surrounding in the organization. With the external Nestle manage an efficient culture, rules and regulations with the perfect market structure. Company is consist with the skilled organizational culture which includes all the values, system , logo of company,beliefs and habits that further effects the employment policies of Nestle. Change management of the company at the time of merger, consolidation and joint ventures also effects the policies of Nestle.
Organization’s competitors are the leading part of the business environment and which plays an crucial role in executing all the competitive advantages of the company. Some principles are followed by Nestle for attaining the competitive advantages these are as follows (Yu and Ramanathan, 2011).
- Optimum allocation of the available resources
- Qualitative, healthy, nutritious and safe products for customers
- Effective relationship with the stakeholders of the organization
- Effective communication between customers and suppliers
- Valuable training and development program for employees
- Resourceful working environment for workforce
4.1 Evaluate the importance of international trade, economic integration to Nestle:
Exchange of different food product of the company in local and global market then it is refers to international trade. International trade increase the competition and production capacity and their demand in the global market of the organization. For developing the new market of Nestle with the present finished goods and services. International trade is following competitive pricing mechanism that offering low price product for their home and to international customers.
Economic integration provides proper maintenance between both the policies of Nestle. International trades that helps in forming arrangements for this type of business between several countries to reduce the oppositions. These types of integration is important for Nestle to increase the outlook for global trade and which reduces the cost of goods and services in the organization.
4.2 Impact of Global factor on Nestle:
Nestle is using various international trades and economic integration which affects the business by various factors. All these international factors are divided into two parts; these are (Holik and et.al., 2015):
- Micro factors which can be controlled by company
- Macro factors which cannot be controlled by organization
Major worldwide factors are economical, technological and social which have an impact in the Nestle for which a brief discussion on these factors are describe:
Economical impact: All the global factor of economic involves various factors such as supply of money, currency rates and both the policies, fiscal and monetary. Stability of Nestle is affected by uncontrollable factors which reduces the cash inflows of company.
Technological impact: Global market apply the latest technology in the production system of organization to require high investment from existing technology using by Nestle. And the negative impact of technology which display at market and promotional strategy of Nestle (What are the Different Components of Business Environment. 2015). For success, Nestle have to use all the latest technologies like mobile and internet which help the business in the marketing strategy.
Social impact: International factors causing the demand and supply of the products and services which have an impact on buying the behavior of customers in the organizations.
4.3 European Union and its policies and their impact on NESTLE
Nestle has to follow all the rules, laws and regulations which comes in the public limited organization that are successfully made by the European Unions (Mahmood and Hanafi, 2013). Some policies are:
- Inflation or exchange rate
- Training and development
- Global and international market
With the impressive international trades EU has to follow all the policies and functions of Nestle for becoming more flexible. and negotiable. To enhance the market share , growth and profit of the company policies help with some strict rules and restrictions in the operating and production of Nestle.
The present report concluded with the objectives of Nestle to provide good food as well as good life to their customers with better services. It has very effective in carrying environment due to business strategies which assist in effective sharing the resources with very strong relationship with their stakeholders. Along with this Nestle has responsibility for maintaining the competition in the market with the involvement of management , society and whole environment (Brixiova, 2013). For deciding the price and outputs in organization Nestle leads with the appropriate market structure. Study in the report found all the various cultures, business environments with all the global factors which change the international trades and economic group actions. In addition, investigation also find out that various policies of European Union increase the international market percentage of the Nestle.
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