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Essay on Nestle: Analysis of Industry, Background Information, Organizational and Market Structure
Task 1
To classify the types of industries, there are three types of industries which are Primary, Secondary, and Tertiary. Primary factor are the basic production of the company. For the Secondary factor, it is based on the production of goods like industries and construction craft. The industry which based on the providing services is the tertiary. As Nestle is a company which includes these three industries form, it has a good relationship with their farmers which provide the source raw materials for their product. Then, it also has a factory which made the raw materials to become finished goods. As well as it also has a distribution and retailing. And it always remains fully aware of changes in consumer behavior and consumer taste. Therefore it can satisfy the customer expectation.
There are three types of organization size. They are Small, Medium and Large. Therefore, we can measure the size of organization by Number of Employees, Sales turnover and Capital employed. Among them, the Number of employees can be said its the most effective one. So, the firm which has less than 50 employees can be said to be small firms. And the firm which has less than 250 employees is medium-firm and more than 250 employees is large firm. For Nestle Company it has340, 000 employees over the world. Therefore the size of it is large. Sales turnover of Nestle Company for 2016 to 2018 has increased. That is, the sales for 2016 is about 89469, 2017 is 89590 and 2018 is 91439.With percentage, we can say that it has increased about 2% from 2016 to 2018.
Legal structure can be classified into four groups. They are sole traders, partnership, private limited company and public limited company.
Sole traders are the smallest form and most common type of organization. But it is said to be One Man Show and has unlimited liability.
Partnership means that at least two people are needed in the business and it is small but it has unlimited liability.
Private limited company means the share of the company cannot be sold to public. It also has limited liability.
Public limited company is a very large business and it must have a minimum of one shareholder. Then, the shares of the company can sell to the public and it has also has limited liability.
Nestle is a public limited company which has a stock exchange which means that it is easy to buy and sell the shares to shareholder. And the Capital invest to Nestle is large amount.
The sectors of the organization are public sector, private sector and voluntary (third) sector. Public sector means it is run by the government and wellbeing of citizens. Private sector is for profit making organization. Voluntary sector is for non-profit making organization. Nestle is a private sector because its objectives is for profit-making and it is public limited company which includes in private sector.
Stakeholder is a person that interest what is happening in the organization. Stakeholder is classified into two forms (internal and external). Internal Stakeholders means that he/she is a part of the organization and External is that he is not in an organization but will be affected by the organization.
Power Interest Matrix for Nestle Company
High power Director, NGO Government, Owner
Low power Community, Employees Media, Competitor, Suppliers
Low Interest High Interest
This is a part of the stakeholders that affect the Nestle Company in direct or indirect way. Government, communities, employees, consumers, NGOs, trade association and academia are the stakeholders group of Nestle which is their continuing business success therefore it has been helped by them for creating shared value (CSV) strategy.
Task 2 Background Information of Nestle
Nestle was started in 1886 and Henri Nestle, the founder of Nestle develops a breakthrough infant food in 1867 and in 1905 the company merges with Anglo-Swiss, which become well-known Nestle. The headquarters of Nestle is at Vevey, Switzerland. Nestle is the world largest food and beverage company and it have over 2000 brands ranging from global icons and local favorites, and are present in 190 countries worldwide. But the main brands of Nestle are Coffee like Nescafe. Water, Drinks like Milo, Chocolate like Kit-Kat and frozen food like Maggi. (Nestle.com, 2019)
The ambition of Nestle is that To enhance quality of life and contribute to a healthier future. (Nestle.com, 2019)
The mission of it was Good Food, Good Life which means to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions, from morning to night. (Nestle.com, 2019)
The vision and values of it was To be a leading, competitive, Nutrition, Health and Wellness Company delivering improved shareholder value by being a preferred corporate citizen, preferred employer, and preferred supplier selling preferred products. (Nestle.com, 2019)
Task 3
Functional organization plays an important role in organization. The function of organization are based on the size of the organization, this means that the function will increase when the size of organization becomes large. A functional organization is the process that carries out within a department of a company. It includes operation, marketing, human resources, information technology, finance and warehousing. The importance functions of Nestle are Marketing, Finance, Human Resource and Production.
In Marketing, it classified into four departments which are Customer Relation Department, Sales, Distribution and Research & Development. The Marketing function of Nestle is to fulfill the objectives of organization. Therefore it collects the survey in order to know the customers taste and satisfy the customer their expectation. As well as it always need to observe the lifestyle of people. There must have a good relationship to the retailers in order to have better estimation of demand of the product and get a feedback from the sales person. In Nestle, marketing FOUR Ps is also important. Therefore the production will know how much demand is there and how much units will be needed. But to be fixed with the objectives of the business it always maintains the quality of the product.
Then the finance function in Nestle controls all the expenses of the departments. But in Human resource function, that it is to hire people if there are no sufficient employees and it also settle down all issues related to employees needs and wants. It also needs to prepare salaries and some financial rewards or non-financial rewards for employees. Therefore in Nestle, the employees of HR departments visit the fields in order to have in touch with farmers and they also arrange events and some meeting in an organization.
In addition Nestle also has a Safety, health and environment Department to ensure the hygiene of the product. This department ensures the employees are covered by a safety environment and health management system (Nestle.com, 2019).
The Organizational Structure
The Organizational Structure means the arrangement of lines of authority, right and duties of an organization. It determines how the roles and responsibilities are assigned and coordinated and how information flows between the different levels of management. BusinessDictionary.com. (2019) .There is four types of organizational structure. They are Functional, Divisional, Matrix and Project-Team.
Functional is the structure based on the arrangement of the Department such as marketing, Production, Finance and HR. It arranges people in their techniques and specialist expertise which can make the organization get facilitate their coordination in the service of the whole enterprise. Therefore functional arrangement gives better opportunities for promotion and career development.
Divisional structure is a design which an organization is split into a number of self-contained business units, each of which operates as a profit center. Usually this structure is based on the products/services, or geography or both and with certain key of functions such as planning, finance reserved for headquarters.
Matrix structure is a structure based on combination of functional organization with structure built around products, projects or programs.
Project team is a temporary structure that carries out a particular task, often in a highly unstable environment. Once the task is finished, the group is disbanded and individuals return to their usual department or assigned a new project.
Organizational structure of Nestle
The Organizational structure of Nestle is global matrix structure which means that it has a functional organization with a structure of product/ project type based and in addition it also has a geographical division which let the market and distribution of the organization wide. (Nestle.com, 2019)
Organizational structure of Nestle
Task 4 (a)
There are two types of environments which are internal and external.
The general environment (PESTLE) of Nestle
A PESTLE analysis is an analytic tool used by an organization to track the environment they are operating in and it also has a wide view from many different angles for the environment.
Political factors
Political factors relate to how the government takes place in the economy. . Political factors include Government Stability, Taxation, Industrial policy and foreign trade policy .As Nestle is a multinational food and beverage company which sell its products in190 countries. Therefore the government stability and taxation are important because each countrys political is not the same. Thus Nestle is unprotected to political power in different regions of the world then it is exposed to government authority and overlook in the diverse regions that it operates in. The risk of production bottlenecks has been happened because of the government policies and changes. If the taxation for government increases, it will cause the price of Nestle selling increase. Then this will let the demand of the product decrease and will cause our customers decrease. But Nestle has prevention this to happen.
Economic factors
Economic factors include Inflation, Income, Interest rates, Economic growth and Exchange rates.
As Nestle is a multinational company in more than 190 countries, foreign exchange rate are an issue. Therefore the exchange rate and prices always be eased to affect the company. As Nestle product is sell in reasonable price, if the customers income increase, the demand of the product will also be increase. If in other hand, the demand will decrease. But Nestle tries to maintain the price of the product. Because of the inflation of U.S dollars in 2018, the prices have been raised but these tendencies will help them for 2019 and beyond.
Social factors
Sociocultural influences businesses vary from country to country. Social factors include Demographic trends, Lifestyles, Health and Taste & Preference. It also must be enable to offer products and services that aim to complement and benefit peoples life style and behavior. As Nestle mission is Good Food, Good life , it has focused the food they produce in good quality which is healthy and nutrients. So, Nestle focus on reducing salt, sugar and saturated fat in some product for obesity. Nowadays, food and beverage is important for people according to their lifestyle therefore they have a segmentations for them and also aware of changes in their behavior and taste. For example Magi soups in China and Indonesia have different flavors according to the local taste, habits and culture. Thus Nestle always fulfill the expectation and requirements of customers. (Nestle.com, 2019)
Technological factor
Technology todays affect company in their production process and marketing. For Nestle, technologies are a vital part of their R&D. Therefore the technologies and processes enable the safe development and the nutrient of foods and beverages. It also has advance technology in packaging and equipment and new beverage system. (Nestle.com, 2019) This helps in increasing production. Mobile technology, social media and internet is important for nowadays. Thus Nestle creates a website for customer who wants to get the information from them. As well as it can get the feedback of customer. It also promotes and advertises their product in social media in order to increase the sales.
Legal factors
Legal factors involve the labeling rule, employment law and consumer protection law which influence on the operation. They have GDA based labels which is to give consumers the information about calories, sugars, fat and other nutrients in a food and beverage. It has QR code on certain packaging which can get the information and ingredients of the product by scanning. (Nestle.com, 2019) Nestle has child labor in the supply chain of cocoa plan. Therefore Nestle is tackling child labor in cocoa. In 2012, they setup a Child Labor Monitoring and Remediation System (CLMRS) in Côte dIvoire and in 2016 it began rolling out in Ghana. Therefore Nestle helps children in cocoa plan to attend school and built schools for them. Nestle has the health and safety laws for their employees and they must sure the quality and hygiene of the product for consumers. (Nestle.com, 2019)
Environmental/ Ethical factors
Nestle has taking action in plastics and pollution. This means that their packaging, plastics, has been ended or as little. Therefore they have Nestle institute for packaging sciences to develop sustainable packaging material. Not only this, they also looked at water usage, non-renewable energy use and solid waste generation. They also committed to use a communication method s to engage consumers on environment. Therefore they have launched an application to help recycle waste packaging correctly. (Nestle.com, 2019) Nestle has unethical in the baby milk formula in 1970s which cause the baby to die and suffer the infants. This happens as they promote it as an option to breastfeeding. From this, Nestle has been has an unethical in the formula of the product and advertising.
Conclusion
Nestle is a multinational of food and beverage company which exists in more than 190 countries. Therefore in PESTLE analysis, the social factors can affect the company as it is a company to enhance Good Food, Good Life . So, the life-style, culture and the consumer behaviors are important for the taste and preference of the product. (Nestle.com, 2019)
Task 4 (b) Market Structure
There are four kinds of market structure. They are the perfect competition, monopolistic, oligopoly and monopoly. Perfect competition is the most competitive market structure which means it has many buyers and sellers. It is homogeneous and it has no barriers to enter the market. And there is only one price for the good so it is a price taker. And the profit for this market is normal. An example is fruit and vegetables market.
Monopolistic competition is slightly different from perfect competition because it has different products instead of identical products. Therefore customers have many choices and the price is little difference. An example is restaurant.
In oligopoly, there is only small number of firms in the market. The competitors of this market are few and it is difficult to entry and exists. The price is stable and this price is set by the price leadership. Also the abnormal profits can exists in this market. An example is Music Entertainment, Pharmaceuticals.
Monopoly is at the end of the market competition which means it has no competitive at all. That is, it has only a single producer who supplies the whole market which means only one seller. Therefore it is difficult to entry and the power in this market is absolute. Abnormal profits are exits due to the price discrimination which is a price marker. An example is Microsoft Word.
Nestlés Market Structure
Nestle is a monopolistic market structure because it has many competitors in this market. The competitors are not only for the large company, but also the product which competitive with Nestle in local and international competitor. And key competitors of Nestle are Mondelez, Kraft Heinz, Hersheys and Unilever. Therefore to survive and growth in this market which has many competitors, Nestle has to develop new products which can satisfy the customer. As Nestle has market in EU, ASEAN, BRICS, MINT/MIST therefore to find new market it is not easy as Nestle exits in 190 countries worldwide. And the world has 193 countries so in this way Nestle do not need to find new market. But instead of this, Nestle can produce some luxury goods and accessories for kitchen.
To differentiate the product with the competitors, Nestle can change the packaging of the product in creative design which is recycle to environment. And the qualities of the product can always develop and the taste of the product can always change according to the lifestyle of the people. It can also have promotion in seasonal movements and events like Back to School Program and Mothers Day. The price of the nestle is affordable because it is a First moving Consumer Goods ( FMCG ) product which means it can be used or eat easily in this fast social lifestyle. Therefore the price of the products cannot be raise and it is price maker. But if it wants to raise the price, it must do the packaging, advertising and the quality of the product to be suitable with the price, but the price range cannot so be high.
Task 5 SWOT analysis of Nestle
A SWOT analysis is an analytic tool which states the internal and external factors that affects the business. And it also helps to work out a plan for future.
Strengths
It is the advantages of internal factors to the firm. Nestle is the most famous brand name in the world because it has established a good reputation in the food and beverage system which provides the products quality high for daily life in global. It is a multinational company which operates in 190 countries and it is the largest FMCG market with variety of product brand name. Therefore it has over 2000 brand and the most famous brand is Maggi, Milo, Kit-Kat and Nescafe. And it has strong relationships with suppliers, retailers and distributors. It has maintained a strong supply chain and R&D network. It also has mergers, acquisitions and joint ventures to enhance its market share. And the company also has CSR for the environment. And the company always improves the products taste and quality due to the customers behavior.
Weakness
It is the disadvantages of internal factors to the firm. As it is company which operates in worldwide therefore it has different controversies in each country and this cause issues to the brand image of the company. This issue is unethical like child labor which is used in cocoa farms. Therefore to decrease the issues and controversy, Nestle should announce new rules, principles and strategy to this case in order to reduce the harm to company. Or it can also do some prevention to let the issues be prevented. It has many competitors in the market. Therefore to competitive with others, it always has to find new product and market. The product of the Nestle is plenty and this are under in the same group therefore to manage the product is a challenge work. So, to be easy to manage, it must find a new structure or develop new advanced technologies to manage with system in the computer.
Opportunities
It is the advantages of the external factors to the firm. Nowadays, people are taking care of their health so they have high requirement on food. Therefore Nestle has focus on the Nutrition and hygiene of the food which is to introduce healthy food products to consumers. Due to the decreasing of tax, the price can decrease so that the consumers and product demand will increase. And the income levels increase will also carry out the sales demand. The decrease of taxation and increase of incomes are due to the government stability and inflation rate. The less power the competitor have, the more power Nestle will get. This means that Nestle can have less competitive. The Foreign Direct Investment can also be opened as it is a large multinational company.
Threats
It is the disadvantages of the external factors to the firm. Due to the increase of government taxation, the price of the products will increase which will cause the demand of the consumers and product decrease. This can be maintain if Nestle has a good relation with government and pay government the tax regularly due to the law and regulations. If the power of the competitor is high, Nestle cannot be able to competitive with them. To solve this problem, nestle should find out new product and market to be competitive with competitor. The irregular movement like disasters and climate change causes the raw materials they planted be decreased or destroyed. To prevent this, Nestle should have a backup plan in order to decrease the harm of it.
Conclusions
This analysis can help the Nestle when expanding the company. And the threats and weakness of the company can be prevented and reduced. Strengths and Opportunities can let the company be growth than before. Therefore, the SWOT analysis an useful analytic tool.
Task 6 Trade Bloc
It is a group of countries within a geographic region that protect themselves from impact from non-members. It is a form of economic integration and shaped the world trade pattern rapidly. There are four types of trading bloc. They are Preferential Trade Area, Free Trade Area, Custom Union, Common Market and Economic Union. The advantages of Trade Bloc are the trade barriers among the member countries is reduced, the better relations can be maintained, the free transfer of labor, capital and other factors can be promoted, common currency is created and higher employment is being promoted. The disadvantages are that the benefit of free trade between countries in different bloc is lost and the inefficient producer within the bloc can be protected from more efficient ones outside the bloc.
As Nestle headquarters is in Switzerland, therefore it is the main trading partner for EU. And Swiss is also a member of the European Free Trade Association (EFTA) which is competitive in several sectors vital to global economy. EFTA was set up in 1960 for promotion of free trade and economic integration between its members. It also developing EFTAs worldwide network of free trade agreements (FTA). Therefore there are 7 countries in EFTA Joint declarations on cooperation which include Myanmar, 4 countries in Negotiations currently on hold which include Thailand, 4 countries in Ongoing Negotiations or Talks which include Vietnam, India and Malaysia, 29 countries in FTA which include Singapore, Hong Kong, China, Korean, Indonesia and Philippines.
Globalization
Globalization is the growing interdependence of the economy of the world, cultures and population which is joined together by the worlds developing network of trade and communication. The economies of nations are brought closer by trade, foreign direct investment, capital flows and the spread of technology. And the key drivers of globalization are technology, transportation, GPS and containerization.
Nestle has operates in 190 countries, so the transportation of it is easy whether by land, air and water. The technology of Nestle is that it has a global website of its company and has good advertising through social media. It also has GPS to know the location for the headquarters and factories.
Therefore trade bloc and globalization factors are important for Nestle while operating.
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