Unit 13 - Business Environment of Nestle - Pearson BTEC Level 5 HND Diploma Health and Social Care

LO1 Explain the different types, size and scope of organizations

P1 Explain different types of organizations and the growth of the international business environment

• Limited company – A limited organization is the one in which liability of the members is limited to what have been invested by them or guaranteed to the firm. It may thus be limited by shares or guarantee. Limited companies are said to be their own entity. Finances of limited firms are completely separated from personal finances of the members or owners and the company has to pay taxes separately. Limited companies are limited either by shares or guarantee. Those limited by shares are divided either into private or public. A private limited company does not have the limit of the number of members or shareholders it can have, however, it is limited only to sell its shares privately (Surbhi, 2014). This restricts private limited company in the amount of capital that it can raise. On the other side, public limited company can attract public to invest in its shares and so there is no limit in raising the capital. For example, Nestle is a private limited firm that has a presence of operations in worldwide basis.
• Charity – A charitable organization is a non- profit organization which work with objective of social wellbeing and conduct activities that serve public interest or common good. Charitable organizations may not use any of its funds to profits its entities or individuals. The legal definition of a charity organization varies from country to country and so the tax implications of a charity firm is also dependent on country or region in which it operates. Financial figures like revenue from fund raising and sales of goods and services as well as tax refund indicate the financial suitability of a charitable firm. For example, cancer research UK.
• Public company – A public company is a government owned organization which conducts business and commercial activities on behalf of the government. The legal status of such companies varies from being a part of the government or stock companies. Both state owned enterprise or government owned corporation have a distinct legal form and these have been established to function in commercial affairs of a country. These organizations might be having public policy objectives but still these can be differentiated from other forms of government agencies or entities of the state by pursing purely non – financial objective. In addition, a subsidiary of a public or government company can be considered as a government company provided the government organization has a control over the composition of Board of directors and also on more than half of the total share capital either at its own or together with the subsidiary companies (Garrison, 2018). For example, department of health UK.

Growth of international business environment

International environment of business refers to all those surroundings that have an influence on a business that is being carried across national borders. Managing a business in a foreign country demands that managers have to deal with a variety of environmental and cultural differences. International managers must have a thorough approach on socio cultural, legal, political and economic environment of the foreign country. International business is being carried out through various modes like foreign direct investment, franchising, import-export trade and licensing (Gupta, 2013).

Over the past five decades, international business has shown huge growth as it facilitates flow of capital, idea and goods and services all over the world. Physical goods account for a larger share in international trade as compared to services which accounts for a lower share. Over the last decade, world trade in goods has increased to a huge extent, rising from about $10 trillion in 2005 to more than $18.5 trillion in 2014. Trade in services also increased between 2005 and 2015 (from about $2.5 trillion to almost $5 trillion). In spite of the financial crisis of 2009, developing countries have shown a double increase in volume of trade in goods since 2009. Import volumes for the developing countries have been growing relatively more than export volumes while the opposite has happened for the developed countries (KEY STATISTICS AND TRENDS in International Trade 2016).

There are a large number of companies that carry international business but for that conducting effective international marketing is also equally important. Companies like Red Bull, Dunkin Donuts, Domino’s and Rezdy have carried excellent international marketing to conduct business internationally. There are several factors that have led to the growth of international business. Firstly, saturation of domestic markets happened because of continuous production of similar products in most of the countries. Secondly, companies started finding opportunities in foreign markets. This was because as domestic markets in many countries got saturated, there were many developing countries where such markets were at boom (Fleishman, 2018). Organizations found opportunities to boost their profits by selling their products in these markets. Another factor that caused the growth of international business was development of communication and technology. Over the past few years, technology has enabled the companies to conduct business across national borders by sitting at one place. Technology and way of communication has become so much advanced that organizations are aware of needs and demands of customers at another place. Reduction in trade barrier is yet another factor that has caused the growth of international business (Zirra, 2018). Countries now allow multinationals to enter their domestic markets and conduct trade which has facilitated cross border trade.

P2 An explanation of each of the chosen organizations

Cancer research UK

Cancer research UK is a charity and nonprofit firm that was created in the year 2002 in coordination with Cancer Research Campaign and Imperial Cancer Research Fund. It provides services in the area of cancer therapeutics; vaccinations; technologies as well as diagnostics. It further conducts research for preventing, diagnosing as well as treating cancer and these activities are carried out by institutes; universities and hospitals. The firm also provides information about cancer and runs campaigns for increasing the awareness about cancer and influencing public policy. In terms of size, the firm has a network of 90 institutions that is spread in 40 cities of UK. As per the scope, it has been regarded as the largest cancer research charity firm of the world that runs on an independent basis. Its working is funded entirely by the public. The company is further spending 2 million pounds on research in Belfast where focus is given on bowel and prostate cancer; radiotherapy as well as personalized treatments (Cancer Research UK, 2018). The working of cancer research UK is further supported by 4000 plus scientists, doctors as well as nurses that can serve the cancer victims in UK. As per its mission, the firm wants survival within UK to become the best in the world. While its vision is to look forward to the day when the entire world will be cured of cancer. On the basis of these, the company has formulated an objective which is to reduce number of deaths caused by Cancer.

In terms of organizational structure, Cancer research has a presence of flat structure which is shown in above figure and is depicted by less number of layers The Company is governed by council of trustees which sets the overall direction and ensures that objectives of firm are achieved. It is then supported by a number of committees who look over the day to day business operations. The internal stakeholders of cancer UK are inclusive of doctors, nurses, director and other employees while external ones include government, media, general public patients and business partners. They have diverse impact on overall working of the organization and are thud require to be managed in different manner. Stakeholder analysis of Cancer UK has been prepared which is as follows. Here all the stakeholders have been grouped into different segments which are shown in below mentioned figure.

Nestle

Nestle in the largest food and beverage firm of the world that has more than 2000 brands and it serves in over 191 nations (Arora and Singh, 2017). It offers products such as bottled water, breakfast cereals, and chocolates, coffee, dairy, food and drink products among others. The mission of nestle is Good food, good life. While the vision is to be leading as well as health, nutrition and wellness brand of the world (Miah and et.al., 2015).  The objective of the company is to enhance the overall life quality of people and contributing towards a better future. The company adheres with decentralized and matrix organizational structure. It thus permits the employees to have a higher degree of work related independence. Still major strategies are made at headquarter level while the decisions related to every day operations are in the hands of subordinate branches (Moura, Branco and Camoesas, 2015). There is a presence of many stakeholders at Nestle whose analysis is as follows;

Department of health

Department of health in United Kingdom is that branch of government that is responsible for maintaining the overall public health. It further provides leadership to NHS and social care sector of government as well as public health agendas. The department of Health in UK is responsible for developing; policies as well as providing guidelines on improving the quality of care and meeting the consumer expectations. Its major work of funding the health care and is accountable to parliament of UK. Its mission is to bring an improvement in the health and wellbeing of UK people. The vision is to render support to ministers of health and social care area of UK so that they can work on making the lives of people more independent and healthy. It is a public sector firm in UK and also a ministerial organization that gets the support of 15 arm length bodies and agencies among which the largest is NHS England. In terms of size and scope, the department employs around 2160 employees that are spread in different locations of UK. It further had a booking of 1.1 million patients during the year 2016-2017 and was able to attend 87.6% patients in the first quarter 0f 2017 (Department of Health, 2017). The activity of department is led by secretary of state health; state ministry and Parliamentary Under-Secretaries of State. The stakeholder analysis for Department of health UK is as follows;

LO2 Demonstrate the interrelationship of the various functions within an organization and how they link to organizational structure.

P3 In detail, explain the functions for Nestle using an organization chart to show how the functions interrelate and an explanation of how they link to the objectives and structure of Nestle

Usage of matrix organizational structure by Nestle has provided greater flexibility to the management in terms of carrying out the overall business functions. This is as matrix structure has aided towards development of functional department in Nestle such as marketing or finance and every employee works as per the department. For example, The HR team is involved in selection of dedication staff members who are capable to work in operations, sales, and marketing, research and development units among others. The quality staff members thus ensures that good products and produced for the consumers which are best in terms of quality. As per the organizational structure, Nestle has a presence of research and development department where the function is to carry out research activities for creation of new products and betterment of existing one (Pandey and Puntambekar, 2016). The organizational structure thus assists in ensuring that management to train the employees in best possible manner so that good performance can be rendered so as to fulfill the needs and requirements of consumers. The managers of this department also keep the staff members motivated enough so that they do their work diligently. The marketing department at Nestle works on brand management and increasing the overall brand value of the company not only in UK but all over the world. The department ensures that the company is promoted as trustworthy brand that provides quality offerings to the consumers. Overall the matrix structure ensures that the organizational functions are able to adapt themselves as per changing business needs. It is on account of matrix structure that the company is able to retain its functions within the organization.

LO3 Use contemporary examples to demonstrate both the positive and negative influence/impact the macro environment has on business operations.

P4 Using PESTLE analysis, identify and discuss the various macro environmental factors that impact on the business operations of Nestle highlighting the positive and negative impacts with specific examples to Nestle

The present section is all about carrying out the macro environmental analysis with respect to operations of Nestle in UK. This will assist in finding out what are the impacts of the factors on the overall operations of the company which can be of positive or negative nature (Bocken and Bocken, 2017). In terms of political factor, studies suggest that UK has a presence of an overall stable political environment that has been assisting the overall running of the company in a proper manner. But brexit issue has somewhere impacted the working of the company as very few consumers will opt for costly product offered by the company on account of an overall decrease in their purchasing power. This can impact the sales and revenue figures of the company if brexit issue is not worked on time (Margea, Hurbean and Artene, 2014).  The working of Nestle is also dependent on how UK maintains its political terms with Brazil as the company gets coffee beans for its products. As of now, the nation has a presence of good relation with Brazil hence this is likely to favor the overall operations of the company.

Economic factor such as Brexit issue is likely to bring policy changes in working of UK which can affect operations of Nestle in a positive or negative manner. As per the estimate, if the country decides to leave EU then a situation of recession is almost likely to be crated that may lower overall consumer spend. As products lf nestle like chocolate is not a daily use item hence its sales will be affected. The impact may however be less on everyday use products like dairy, coffee, bolted water among others. Unemployment is further on a rise within UK which is also marked by san overall decrease in the wage structure. This may put an impact on the recruitment plans of the company (Heiens and et.al., 2017). In the Social factor, studies suggest that chocolate confectionary segment in UK is mostly li to grow at an annual rate of 1.5 percent which may favoury the overall growth of the company. The firm has further adapted the trend of vegetarian consumption and has focused on increasing more vegetables in on line and on pack meals for Maggi (Verbeke, Kano and Yuan, 2016). This is most likely to provide a competitive advantage to the company against the other firms. London has been regarded a technologically advanced nation and has a presence of citizens who prefer visiting those shop that adhere with use of technology (Quinn and Kristandl, 2014). This trend can be utilized by Nestle as an opportunity and it can serve the consumers through options like Wi-Fi facility, mobile ordering; use of apps; phone charging mats etc. It is further require interacting with the consumers by posting pictures on instagram as a part of its social media marketing. This is most likely to increase brand awareness among the consumers.

Environmental sustainability norms are in trend these days among the consumers of UK which can act as a source of opportunity for the company. Hence Nestlé is required to cut on packaging waste and include environmentally friendly modes of packing. It is further required to advertise itself as the firm that is in rune with environmental friendly norms followed by rendering support to the concept of go green activities that happen all over UK (Chernova, Voytkevich, and Ivanova, 2015). The management at Nestle is required to adhere with all the legislations in the area of data protection, fix working hours as well as competitive pay structure along with health and safety (Bryer, Lebson and Montalvo, 2015). It should also keep itself away from all legal scandals lese it may impact the overall reputation of the company.

LO4 determine the internal strengths and weaknesses of specific businesses and explain their interrelationship with external macro factors.

P5 Conduct the internal and external analysis for the chosen organization in order to identify the strengths and weakness. Explain how they influence the decision-making process.

The overall objective of nestle company as per its website is to become leader in nutrition, health and wellness in the world. Keeping the objective in mind an overall SWOT analysis has been carried out which is as follows. As per the strengths, Nestle is regarded as the biggest food brand in the world and is also ahead of PepsiCo and Coca cola. Nestle has diversified itself in the food and drink segment as it offers chocolate, dairy and food products, water among others. It is thus able to serve the needs and requirements of the markets where the company has based its operations. The variety of brand has given nestle a chance to bear economic shocks as it serves different segments within a market. It is regarded as most recognized as well as trusted brand of the world. There is a presence of families that are using the products of Nestle since many generations (Swinburn and et.al., 2015). The firm has maintained strong research and development capabilities which give it a wide scope in terms of providing varied offerings to the consumers. The company has been found to take a lot of initiatives when it comes to environmental sustainability. These are inclusive of efforts to reduce wastage, keeping environment clean.

With respect to weakness, Most of the sales revenue of Nestlé is dependent on few of the recognized brands as all are not so popular among the consumers. This may make the company vulnerable if there is a sudden change in consumer need and preferences. The marketing cost of the company is very high as the management has a heavy dependence on advertising that shapes the opinion of consumers and drives salves revenue (Dhanes and Srirames, 2017). The company also adheres with increased costing when it comes to launching new brands that supplement the old and less fashionable ones. Post brexit factors have resulted in low sales revenue in the UK market.

Opportunity wise, there is an increased demand within UK consumers for prepackaged foods due to presence of fast lifestyle, working women, increased work hours (Galalae and George, 2017). Increase in mobility and car ownership within UK has enhanced the overall demand for candy, bottled water and other snack items. There is an increased health consciousness within people of UK hence the company can focus on producing healthy products. An opportunity for increased sales of comfort foods like Kit Kat, Nescafe among UK consumers to deal with stress (Zaharia, Musetescu and Chira, 2015). It can further focus on reducing the sugar content in chocolate bars so as to increase sales. Threats wise, There is an increased competition from food and beverage firms within UK that include Unilever; Kraft Foods; Hersheys, Mars among others. The price of coffee brans may undergo a substantial rise due to changing weather conditions. This may led to increase in overall cost structure for the company.

From the above SWOT analysis it can be assessed that the strengths of company are most likely to assist in attaining the objective of becoming a world leader in products related to health nutrition and wellness. This is as the company is widely trusted among the consumers and is also adhering with enviornmental friendly practices. The weakness in the area of increased marketing and launching cost is however required to be worked by the company. This can influence the decision making process as the lack of finance with the firm can led to compromise in certain areas like research and development. This may led to a control of the market by other rival firms.

P6 Apply a SWOT or TOWS analysis to your organization to identify their key strengths and weaknesses. Explain the interrelationships these have with the external macro factors previously discussed. 

In terms of strengths, Nestle is a biggest and most trusted food brand of the world which is likely to favor its overall operations in all the nations. As per political factor, the company is least likely to face any issue of its starts business in new nations. This is as the governments are well aware about its overall reputation. Same concept applies to social factors where the consumers readily accept the brand on account of its brand image and variety of offerings. As per the strength, the diversified product offerings are likely to help the company face the economic shocks like recession etc. at ease. In this regard, the company is required to utilize the opportunities available in front of it. As per the social factors, the consumers have a presence of fast paced lifestyle hence prepackaged foods can be offered to working mothers. The social factor has also revealed a trend towards health consciousness hence the firm can offer healthy products. Strategies can also be utilized in the area of technology by offering Wi-Fi facility, mobile ordering; use of apps; phone charging mats etc.

Conclusion

From the above report it can be concluded that there is a presence of various internal as well as environmental factors in Nestle has an impact on its business operations. There are various types of organizations that conduct international business in an effective manner. Also, there are a number of factors that have resulted into growth of international business for a number of companies. Nestle is a private limited company that has a presence all over the world and is impacted by PESTLE factors within UK. These factors have positively as well as negatively affected the overall growth of the company. The SWOT analysis further reveals towards good brand value of the company and trust bestowed by consumers. However it has a presence of high marketing and launch cost followed by threat from Unilever; Kraft Foods; Hershey’s, Mars among others. In this regard it is required to utilize the available opportunities such as trend towards health consciousness; fast paced lifestyle among others.

References

• Bocken, N. and Bocken, N., 2017. Business-led sustainable consumption initiatives: impacts and lessons learned. Journal of Management Development. 36(1). pp.81-96.
• Margea, C., Hurbean, L. and Artene, A.S. 2014. Electronic Services for Business Environment. Procedia - Social and Behavioral Sciences. 124. pp. 351-360.
• Quinn, M. and Kristandl, G., 2014. Business information systems for accounting students. Pearson Education Ltd.
• Bryer, L., Lebson, S. and Montalvo, F., 2015. Shared Branding: Associated Use of Trademarks and Trade Dress through Shared Retail Space. Trademark Rep. 105. p.772.
• Heiens, R.A. and et.al., 2017. The impact of advertising, goodwill, and other intangibles in the retail foodservice industry: Do intangible investments bite into investor returns?. Journal of Foodservice Business Research. 20(2). pp.177-191.
• Swinburn, B. and et.al., 2015. Strengthening of accountability systems to create healthy food environments and reduce global obesity. The Lancet. 385(9986). pp.2534-2545.

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