Various Aspects of Business Environment in an Organization
Business environment refers to the set of internal as external surrounding in the organization. It Includes political, social, legal and technological changes which impact the functioning of the enterprises. Therefore, it is essential for the firm to address these fluctuations and adjust operations accordingly to run a successful business. Under this report, various aspects of business environment will be studied in the context of Nestle company . The present report covers various types of stakeholders wants to the company for fulfilling their needs and objectives. An organization takes the responsibility for maintaining the environment at the work place. It includes health and safety act and consumer protection act for reducing the unfair practices in the business. In addition to this, fiscal and monetary policy has great impact on business activities. Further, it also focuses on different types of market structure which affects consumer purchasing power.
There are different types of organization which are divided into three sectors such as public, private and voluntary sectors. These are described as below:
- Private organization- Private enterprises objective is to drive larger profitability by distributing their products and services to the large number of consumers. (Arellano-Gault, Rouillard and Thoenig, 2013). It includes Sole trader, partnership which these firm are also profit making organization. For instance; Nestle is the profit making organization which provides FMCG products to the customers.
- Public sector organization- Businesses which have been established to provide best and qualitative customer service for their welfare rather than maximizing net return are called public enterprises. This organization is owned by the government and their motive is to ensure society welfare (Bah and Fang, 2015). For example, National health services are the public sector organization which provides better facility to their customers.
- Voluntary sector- Voluntary sector is another type of organization which is regarded non- profitable firm and associate group of people. For example, charitable company is the voluntary firm which collects funds for charity.
There are different types of stakeholders like customers, employees, suppliers who influence the company by fulfilling its objectives and needs. These are described as below:
- Customer- Consumers play an important role in the organization because they generate income for the company. Customers want the firm to deliver goods at the reasonable price and of higher quality. Users are interested to get information related to products and services as quickly as possible. For this purpose, organization strives to satisfy their customer under which Nestle render provides verity of products and dileverled the products on time.
- Employees- Subordinates and trade union are interested in getting information about the company’s development and productivity (Costa and Menichini, 2013). Human resource wants the company to provide some remuneration, job security. Henceforth, by using the rewards system, Nestle gives promotional opportunity and bonus to their employees according to their performance. Furthermore, it helps the workers to generate interest towards the task.
- Suppliers- Under this, suppliers are good source of company because they provide raw material and semi finished products to the organization. Suppliers are interested to get information about the order and material as well as amount of the firm. In this way, they want that the corporation should not break the contract between firm and suppliers at the time of dealing and get the amount of material on time.
Nestle takes the responsibility for maintaining environment and following customer legislation for maintaining the consumer relation. Company adopts regulatory frameworks and legalization under which it creates positive environment at the work place and maintain balance between customer and employer relation. There are various ethical issues which are occurred in the company and the firm follows legal norms for reducing these types of issues. These are stated below:
- An organization adopts the Health and Safety Act 1974, under which Nestle provides safety equipment to their employees while they work at the workplace. In this way, firm also informs the employees about the danger place in the organization (Dragusanu, Giovannucci and Nunn, 2014). This act helps to create positive environment in the organization which affects employee’s productivity in work.
- Nestle follows Equality legislation under which firm do not discriminate individual as per age, caste, religion etc. According to Equality Act 2010, firm provides equal opportunity to their employees which help to increase motivation level for attaining the business goals.
- Company focus on customer’s welfare under which it provide relevant information to their consumer regarding products features, manufacturing and expiry date and they are mentioned on the package. According to Consumer Right Act 2015, company provides best quality of material which helps the customer to get information provide by the Nestle and maintain relation with consumer.
- An organization takes responsibility to maintain friendly environment under which Nestle give paper bag while purchasing the products to its users.
Economic system is regarded as the process of allocation of resources to the corporate and distribute the goods and services to the community.
There are different types of economy which include mixed, free enterprises and command economy. Mixed economy is the mixture of free and command economy in which, private sector operates for profit motive whilst non-profit organizations are controlled by government for the society welfare (Kazadi, Lievens and Mahr, 2016). For the purpose, mixed economy is created as per public interest and government. Other one is free enterprises, government has no role in supply and any other decision making of the company and due to this export and import of the products is easily transferred from one country to another. Apart from this, command economy is fully controlled by the government. In free enterprises situation, Nestle allocate the resource without involving government and freedom for import and export of the products in one country to another. . In this way, company is not required to follow the rules and legislation.
It has great impact on the firm because it is free to supply the products which increase the profit margin and productivity of the business (Meixell and Luoma, 2015). Hoverer, in mixed economy condition, Nestle allocates the resources as per their own need and government distributes the resource to the firm. Furthermore, it has full freedom to use resource for the production but still, government has the right to control business activities. On the other hand, under command economy situation, organization allocate the resources with the help of government and they contribute in the decision making process.
Fiscal policy is created by the government under which organization pay the amount of tax to the government. In this way, the success of economy is highly dependent upon the collection of taxation from the individual as well as company. For example; increase in VAT will change the Nestle pricing strategy as they have to set little higher price so as to generate pre decided return.. It affects production of the business and decrease the productivity (Osborne, 2013). Further, it impacts the performance of the organization and decreases the sales turnover because of less production in the firm.
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Monetary policy is formed by the government under which this policy controls supply of money, the interest rate, cash reserve ratio (CRR), statutory liquidity ratio (SLR) and purchase and sales of securities. For instance, decline in interest rate will increase supply of money and hence, people will spend more on buying Nestle products which in turn will boost up company's sales and return as well. Furthermore, decline in CRR and purchasing of security will increase the monetary supply under which Nestle will be able to borrow money from the bank and meet the capital requirement respectively (Park, 2012). Contrary to this, SLR, CRR and high interest rates are increased which adversely affects the Nestle operation.
There are different types of policy and regulatory framework under which company follows these policies for reducing unfair practice in the organization. These are described as below:
- Competition Act 1998- This act developed by the Parliament of UK government under which it aims to prevent unfair and unethical business practices and assure fair level of competition among all business unit. It is an obligation for Nestle that they have to follow all rules and regulations of such legislation and do not involve in any illegal activities which encourage or promote unnecessary competition in the market.
- Enterprise Act 2002- This act is created by the UK government under which a range of measures designed to enhance enterprices. (Parrenin, Rau and Zhong, 2015). As per this act, it includes changes in law governing the insolvency of the firm. Nestle strictly abide by the principles and policies of this act.
- Company Act 2006- An organization complies with rules and regulation for removing unfair practises in the firm under which it helps in maintaining the work environment. For example, maintaining proper records, preparing all the necessary accounts and auditing in the financial terms are some of the rules which company needs to follow.
- Office of fair trading- According to this, firm is required to follow the regulation related to consumer protraction and its right. It helps the organization in overcoming unfair practice and providing better service to their customer which assist to maintain customer relation (Cimadomo, 2012.). It affects performance of the organization and increase sales turnover as well as productivity.
Apart from this, corporation includes other regulations which impact on organization activities such as equality opportunity, health and safety, minimum wages, flexible working hours etc. There are various regulatory mechanisms which Nestle has to address while carrying out their day to day operation.
Market structure is the area in which the buyer and seller exchange goods and services. There are three types of market one is perfect competition, monopoly and monopolist competition oligopoly. These are stated below:
- Perfect competition- Under this competition, there are different types of seller in industry who sell the homogeneous products. Company is not able to control the price of product because many firms sell the same products in the industry. In this way, price is decided by the firm as per demand of product in the market (Coenen, Straub and Trabandt, 2012). An organization determines low price because there are many competitors in the same industry.
- Monopolistic competition- In this competition, there are large number of firm in the market under which they produce same products but the brand is different. Nestle decides the price of products on the basis of their differentiation. For example- several companies produces noodles but Nestle Maggie have uniqueness in the products which helps customer to strive to buy this products.
- Oligopoly competition- In this type of market there are many small firms is the sole producer or this seller has no close substitute. (Kuri, 2014). Oligopoly forms the own market structure under which company decides the price as per its product and demand in the market because there is limited competitors in a market.
There are many factors which are affected by the Nestle; these factors are like Supply and demand, elasticity of demand and customer perception. Here, supply and demand as well as other factors are explained below:
- Supply and demand- Market force is the relation between demand and supply in the market. In this way, company increases the price of products. For example, Nestle produces products like Maggie under which the demand is increased in the market accordigly firm is also increaced their price It shows the direct relationship between price and demand of the products. Apart from this, if product demand is decreased in UK market then it will affect the sales of the organization. In this situation, company reduce the price of goods in the market which compels the customer to buy more products (Sandaruwan, 2012). Moreover, it represents inverse relation between supply and demand.
- Customer perception- Company focuses on consumer perception related to the product and its price. It directly affects the company’s image and its product because consumers communicate regarding products feature and integrates otherwise they are shifted other brand of product. Moreover, Nestle adopts strong advertising for promoting the products and services in the market because consumer see the this and attracts towards the products. It affects performance of the organization and increase the market share in manufacturing industry.
Business and culture environment has great impact on the organization behavior. There are two types of business environment first one is economic and other one is non- economic environment (Arellano-Gault, Rouillard and Thoenig, 2013). Here, non economic environment under which it includes economic,political, legal, technological, social, etc. On the other hand, business culture includes technological, core competence, market trends etc. These are the key points of business culture and environment are help to shape the organization. By using technology, corporation produces the products and services in effective manner which help to employees deliver the products on the time. It affects performance of the organization because consumer are satisfied his services on time to time is provided by the employees. On the other hand, culture environment is also affected operation of the business under which different types of culture followed by the organization for maintain work environment. In this way, manager give the task and projects to their employees as per his interest and knowledge which helps workers to work in effective manner (Kuri, 2014). Further, company appoints the skilled employees as per vacant post which aids to manage day to day operation and work based activities in the organization.
The economic condition include the interest rate and policy etc under which company follows these types of policy for maintaining business environment. If changes in policy, rate is direct impact on behavior of the organization and its production. Nestle follows legal factor for maintaining the work surrounding in the organization (Bah and Fang, 2015). In this way, by applying all these regulatory framework, employees behave in ideal manner and work in appropriate manner. Furthermore, company also affected by changing the labor market because government formed the legislation related to the employees. It includes health and safety legislation which will maintains work environment in the organization.
International trade refers to exchange the goods and services between countries. It helps in rising in the world economy which has a great impact on exchange rate. Nestle is required to exchange goods and services in other country like India, Brazil and Japan etc. Furthermore, if company deals with another country which creates the profitable for the firm. These poits describes as below:
- World trade organization- The world trade organization deals with the global rules of trade between countries. In this way, it responsible for the development and implementation of new trade agreements under which Nestle deals various countries and expand its business. (Biswas, 2015). Furthermore, company has increased its number of outlets in various nations across the globe under which help to increase the overall productivity of the business.
- Emerging market- An emerging market economy refers to the nation of economy which develops the advance technology for progressing in the economy. With the help of emerging market, Nestle has expanded its supply chain in manufacturing sector.
In the international market, Nestle will be directly affected by the global factors such as political regulations, governmental rules, social, economical and climate changes, technological advancements etc (Borry and et al, 2012). For example, if developing countries are rising rapidly than their supplier will charge high prices for their material and as a result, it will increase Nestle material cost. By using technological, company develops the innovation in the package of the products which help to consumer are attracted towards the packaging and products and influencing for buying the goods. Furthermore, an organization give the job opportunity to the individual and fulling the vacant post as per candidates qualification or its knowledge. It affects performance of the organization because expanding its production and increase the sales turnover. Corporation focuses on the internal growth which expand their production and supply chain. It helps customer to easily purchases the products and it directly impacts on organization because increase the revenue of the firm.
Through the training, employees enhance its performance and improve knowledge or skills. The great impact on firm activities as they employees contributes the best result of the outputs and manage the day to day operation in effective manner which clients are satisfied his service provided by the workers. Apart from this, Nestle follows rules and regulatory frameworks related to consumer protection, trade blocks, equality etc under which maintain work environment and build-up good relation with the customer, clients, employees (Costa and Menichini, 2013). With the help of monetary unions, company exchange the currency as per other country which control by the government. An organization faces many challenges in the market because various competitors sale the products in the market which creates the high competition between firm. It affects performance of the organization as they reduce the profit margin as well as productivity in manufacturing industry. Furthermore, if changes in economical factor under which it direct impact on business activities and buyers demand. It decreases the sales turnover of the organization and its productivity.
Summing up the whole report, it can be concluded that, different types of stakeholders such as , employees customers, suppliers wants to company for fulling their objectives and needs. . Nestle adopts the legislation related to the consumer protection and employees welfare under which it maintains relation with the customers and employees. . By international trading, organization expands its production and supply chain which helps customer to easily purchase the products. With the help of technology, employees works in an effective manner and manage day to day operation in organization with the effective manner. Business and culture environment has great impact on performance of the organization. Economical and technological changes are affected business activities which helps employees to maintain overall productivity of the business and its work quality.
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