How Nestle meet its responsibilities towards stakeholders and the environment of operation
Business environment in economies relates to the human activities of production, sales and extraction performed for earning money while taking into account the aspects of environment. The current study discusses the background of sustainability taking into consideration Nestle, market leader in the foods and beverage industry. Apart from these, the study discusses the responsibility of Nestle along with the measures adopted to meet the objectives of various stakeholders. A discussion on the economic system for allocation of resources, effect of market structure for pricing and output decision-making have also been highlighted in the study. Along with these, significance of the international trade and impact of global factor and policies have also been highlighted in the study.
Lo 1: Understanding on the organizational purpose of the business
1.1 Identification for the structure and purpose of different types of organizations that Nestle caters for or have business relation (AC 1.1, M2)
As in the words of Cavusgil et al. (2014), the organizations not only differ in structure but also differ in purposes. The organizations are categorized in three main sectors namely, public, private and voluntary organizations. The public sector organization are managed as well as controlled by the government agencies while on the other hand, the private sector organization are owned and managed by the private individuals. The purpose of the public sector organization is to provide vital public services while on the other hand, use the resources in the favour of the society.
However, the purpose of the private sector organizations is to earn profit, increase market share and grow business. In this context, Hamilton and Webster (2015) added that the funding for the public companies are made through public taxes while the private organizations are funded by the private individual using various sources of finance. In case of the voluntary organizations they are not owned by the individual but are responsible for the operational efficiency of the voluntary groups. The purpose of these types of organization is to survive in the market while on the other hand, achieve break even. In the present case of Nestle, all the above-mentioned different types of organization would prove to be relevant. However, the private organization for business venture and voluntary group for increasing sustainable responsibility and growth in market reputation would prove to be effective.
1.2 Discussion on the extent to which Nestle meets the objective of the stakeholders (AC 1.2)
In the words of Sena Ferreira, et al. (2012), taking into consideration the perspective of the objective of the stakeholders helps the businesses to not only increase profitability but also survive during difficult times. The reason behind this is that it enables development of market image, which would ensure funding during economic unrest. In the present of Nestle, the company take into consideration the objectives of stakeholders by providing quality products to the customers, ensuring cleanliness in the workplace for the employees while on the other hand, striving to higher return on investment for the shareholders.
In addition to this, Nestle also ensures that the products provide value for money for the customers while ensuring that the personal objectives of the employees are also taken into account while preparing the organizational objective. These in turn enable the work force perform their duties more responsibly in order to achieve desired personal objectives. In addition to this, nestle all takes into consideration the objective of the government agencies and community as whole. In order to achieve them, Nestle ensures that the tax obligations are accounted for on time while on the other hand; ensure optimum utilization of resource to consider the community as a whole.
1.3 Explanation on the responsibilities of Nestle and strategies employed to achieve them (AC 1.3, M3)
The responsibilities of Nestle are as under:
- Prove quality products to the customers
- Ensure value for money
- Disseminate information about the products and provide nutritional tips as well
- Improve the system pertaining to supply with the help of technology and innovations
- Pay tax obligation on time while on the other hand, also ensure prepayment of taxes up to certain extent
- Ensure optimum utilization of resources
- Avoid environmental and ethical issues
- Ensure fair trade activities
In order to ensure that these responsibilities are adhered to, Nestle adopts various strategies, which include purchase of standard quality of raw material from certified suppliers, ensure reasonable pricing of the products in accordance to the quality. Apart from these, use software systems to manage the stock or resource thus, enabling improvement in inventory management and supply chain. Moreover, the responsibility pertaining to the environmental and ethical issues are accounted for by adhering to all the prevailing government rules and regulations. In addition, the responsibilities toward fair trade are achieved by entering into pre made agreements with the partners and keeping up to their end until conclusion.
Lo 2: understanding on the nature of the national environment in which the businesses operate
2.1 Explanation on the economic systems attempted for effective allocation of the resources (AC 2.1)
As mentioned by Sena Ferreira, et al. (2012), there exists different economic systems and these systems are implemented into the countries based on their demands. Wetherly and Otter (2014) agreed to this, further added that the economic system includes free market, mixed economy, and centrally planned economy. In addition to this, factors like balance of payment, balance of trade and exchange rates play a vital role in the growth and development of the economy. In this context, Hamilton and Webster (2015) added that the in case the factors like exchange rates and balance of trade are in favour of the company, they tend to increase the allocation of the resources in order to gain the opportunity of cost saving.
While on the other hand, if the factors were unfavourable the allocations would be reduced while leading to only necessary items accounted for. In addition to this, Thanetsunthorn and Wuthisatian (2016) added that the taxation and government borrowings also influence the allocation of resources of the companies. Business behaviour like investment, risk awareness, cost of capital and consumer behaviour plays a vital role in the allocations of the resources too. The decrease in investments leads to lower fund, non-feasibility in the investments due to lower cost of capital and increase in risks ensure revision on the allocation of resources.
2.2 Assessment on the impact of fiscal policy and monetary policy on Nestle and their activities (AC 2.2, M1)
In the opinion of Sena Ferreira et al. (2012), the government determines the fiscal policy and monetary policies, which affects the amount of tax payments by the companies and the prices of the commodities. In the present case of Nestle, the fact that the company is a multinational organization, the fiscal and monetary policy tends to have varied impact. The reason behind this is that the control of aggregate demand and supply are mitigated using the inter branch transactions by nestle. While on the other hand, in case the fiscal and monetary policy favours the organization, it leads to lower interest rates and increase in easy availability of credit. In this context, Mellahi and Frynas (2015) added that the fiscal policies and the monetary policies also influence the government spending which in turn affects the investments by the company towards sustainable measures.
In the present case of Nestle, the Euro Convergence criteria also influence the process of the company. The reason behind this is that the increase in the amount of Euro with respect to foreign currency leads to increase in cost thus, leading to limited purchase. While on the other hand, from the perspective of sales to the other nations it leads to increase in profitability thus, resolving issues pertaining to lower return for the shareholders and shrinking operational margin.
2.3 Evaluation on the impact of the competition policy and regulatory mechanism for Nestle (AC 2.3, M3)
As stated by Botha et al. (2014), the competition policies tend to promote competition while on the other hand, ensure that the market remain a better place for business. In addition to this, Cavusgil et al. (2014) added that it also help in improving the efficiency of the various organization while on the other hand, ensure fair business rivalry among the companies. Nestle ensures that the market competition with the rival are in accordance to the competition policies which include Competition Act 1998. In addition to this, the organization also adheres to the Enterprise Act 2002, which again enables avoidance of ethical dilemmas and fair market competition. In this context, Sena Ferreira et al. (2012) added that the competition polices enable wider customer choice, promotes efficiency and effective pricing of the products and services.
Babatunde and Adebisi (2012) agreed to this and further added that the competition policies enable regulations enforcements, which in turn leads to forecasting market jobs and outcomes effective for both organizations and customers. The regulatory mechanism for Nestle as bestowed on the Competition Commission, the Office of Fair Trading and the Directorate general for competition in the target market. To summarize, the competition policies and regulatory commission tends to influence both the companies and the customers. The competition policies and regulatory mechanism ensure that the competition is fair and the pricing of the products are effective.
Lo 3: Understanding the behaviour of the organization in the market environment
3.1 Explanation on how the market structure determines the output decisions and pricing decisions (AC 3.1, M2)
Market structure determines the number of buyer and sellers of the products and services while on the other hand also highlights the supply and demand for the products and services (Mellahi and Frynas, 2015). This assessment on the buyers and sellers, supply and demand enables the company to make decisions pertaining to the prices and output. In this context, Müller and Timofeev (2016) added that the major type of market structure includes, perfect competition, monopoly, monopolistic competition and oligopoly. Each of the above mentioned market structure have varied impact on the decisions. The companies tend to assess the number of buyer in the market and set price accordingly.
However, in case of increased number of seller the companies tend to assess the market condition and ensure that the prices are set to influence the customer decisions. Similar is the case with the output decisions of the companies, which are again influenced by the market structure. Increase in the demand for the products in the market leads to increase in supply while on the other hand, decrease in demand leads to decrease in supply. In this context, Lambert and Schwieterman (2012) added that the competition in the target market also affects the pricing decisions for the companies. In the current case of Nestle UK, the company faces competition from the domestic businesses therefore, affects the cost decisions along with pricing and output decisions.
3.2 Illustration on the ways in which market forces shape Nestlé’s response with examples (AC 3.2, D1)
In the words of Hamilton and Webster (2015), the market forces illustrate the relationship between the demand and supply within the market. However, the organizational response are referred to as the reaction by the companies to the economic circumstances. This relation between the demand and supply for the companies can be achieved by predicting the desires of the customers and making amendments for fulfilling them. In the current case of Nestle, the market forces are used to determine the determine the relation between the supply and demand which is in turn used by Nestle to make amendments in the products and thus, resolves issues of lower operating margin and return on investment for the stakeholders. For instance, Nestle takes in extensive research to determine the customer’s perception while implementing them in the pricing decisions to shape responses. The market forces enable Nestle to monitor the changes and assess the market condition. For instance, Nestle assess the market forces and increase the production of coffee while also increasing the demand for raw material like coffee beans from Ghana. During the peak season, Nestle ensures that the market research is conducted and the customers’ demands are satisfied with the adjacent increase in supply.
3.3 Judgement on how the business and cultural environment shapes the behaviour of Nestle (AC 3.3, M3)
In the words of Dollard et al. (2013), there are two types of business environment, namely, economic environment and non-economic environment. The economic environment comprises of economic policies, economic condition and economic environment while on the other hand, the non-economic environment comprises of the natural, technological, political and legal environment. In the present case of Nestle, the organization aims to achieve both types of business environment. The measure adopted in order to achieve them includes aims for profitability of the organization in the operational activities while ensuring adherence to the governmental policies and regulations in order to ensure that the ethical business and sustenance in the environment within which it operates. Moreover, with respect to the cultural environment Nestle ensures taking advantages of employee skills and technological advancement in UK for ensure efficacy in the supply chain management. While on the other hand, also ensuring that the research and development are made complete use of to both increase the profitability for the shareholders and ensure growth in the market share for the company by predicting customers desires and fulfilling them.
Lo 4: Assessment on the global factors that shape national business activities
4.1 Discussion on the significance of international trade to Nestle (AC 4.1, M3)
International trade plays a major role in the operational efficiency of nestle. The major supplies pertaining to coffee material are outsourced from Ghana thus, making it necessary for Nestle to ensure international trading. Some of the benefits for Nestle with respect to international business are as under:
Market opportunities: The trading in the international market would enable Nestle to explore wider market while leading to decrease in cost and increase in revenue. For instance, the majority of the resources are outsourced by the company which enables cost saving. While on the other hand, also ensure that it also increase the revenue thus, enabling increase in profit margin.
Growth in international markets: the international trade leads to growth in the horizon for the companies while also including the target market. In the context, Cavusgil et al. (2014) added that the trading in the existing location would provide steady return while expansion in the international market would provide opportunities for growth and expansion. The reason behind this is that it would increase sales, consumer base and increase in market reputation.
BRICS: the international trade have become a major threat for the United Kingdom, as the economies of Brazil, Russia, India and China are fast growing creating threat for the UK economy.
In this context, Carper (2014) added that the international trade in order to prove effective for the companies needs to function smoothly; freely and predictably the World Trade Organization in turn ensures this. Moreover, protectionism plays a vital role in the international trade. The reason behind this is that it ensures fair competition and variety of other government relations to protect the domestic sellers.
4.2 Analysis on the impact of global factors on UK business organization (AC 4.2, M2, D3)
The global factor impact the businesses include employment, finance for operations, exchange rate and work skills of the employees. In the present case of Nestle UK, the factors tend to ensure that the productivity is maintained at a significant level while on the other hand, profitability is also maintained. In the words of Botha et al. (2014), the global factors comprises of essential factors, which in turn influences the operational efficiency of the organization. Some other global factors include trade duties, tariffs by the government organizations and taxation. These factors like other global factors affect the cost and productivity therefore affecting the operations of the company as a whole. In the present case of Nestle in UK, the global factors like workforce skills and labour movements play a major role on the operations of the organizations. The inefficient labour management and untrained work force tends to adversely affect the resources utilization, which in turn has direct impact on the business process and operations of the company.
4.3 Evaluation on the impact of the policies of EU on the UK business organization (AC 4.3, M2)
After United Kingdom had joined European Union, the business rules and regulation for UK had were mainly influenced by EU, which had led to increase several new policies and regulation. This includes the European Money Union guiding financial transaction in Euro. The impacts of the policies of European Union on the UK businesses were mainly influenced by the taxation law, spending of the government, business activity support and subside. In addition to this, Craig and Campbell (2012) stated that the UK entry in the EU had ensured that there were no border barriers within EU for UK. However, Babatunde and Adebisi (2012) stated that the exit from the EU would lead to increase in barrier for United Kingdom organization while also affecting the trade of materials for the companies. In the present case of Nestle, the UK’s entry to European Union would ensure easy export to EU countries and similar case with the imports. In addition to this, Nestle would also have to maintain the business relation with the other EU countries while complying with the international business environment and climate changes legislations.
From the above study, it can be concluded that business environment play a vital role in the growth and development of the company. While on the other hand, also proves to be effective in resolving the issues lower return for shareholders and lower profit margin. Moreover, the structure and purpose of the organization differ from one another therefore, providing differentiated benefits to Nestle. Adherence to the competition policies by the companies proves to be fruitful for both the companies as well as the customers. UK’s entry to EU would ensure easy export to EU countries and similar case with the imports.