The environment is a key subject that affects us all. Protection of the environment and the move towards sustainable development remains a responsibility that must be shared between the public, governments and the private sector. This case study examines the background to sustainable development, the environment and its protection. It also looks at how Nestlé S.A., the world’s leading food company, developed a policy and current business practices that reduce the company’s effect on the environment.
Following years of work on environmental issues dating back to the 30’s, in 1996 the Nestlé Environmental Management System (NEMS) was introduced which consolidates all environmental measures taken by the Nestlé
Group. NEMS is now used to ensure continuous improvement in Nestlé’s environmental performance covering all its business activities (www. Nestle.co.uk); (www. Nestle.com)
You are shadowing a senior manager of Nestle Company Ltd. A team of middle management business research analyst were appointed and approved by the top management of Nestle to carry out a specialised and highly competitive market and business opportunities research. You were part of this newly approved group of researcher’s and analysts.
For the business to succeed in the current environment, it would need to find cost-effective ways to manage operations, while delivering high quality and differentiated consumer durable products.
In addition, companies operating in this industry face numerous other challenges, including uncertain demand, shifting tastes, operating at a profitable level, changing standards and regulations, and relying on the global supplier network, among others.
Below are the specific and broad challenges posed for Nestle Company Ltd.
Changing Consumer Demands: Today, consumer products companies need to be consumer focused. Demand has a tendency to fluctuate rapidly. For example, consumer preferences have altered greatly in recent years as demand shifts toward healthier and sustainable options. Consequently, manufacturing success is closely related to time-to-market and new product introduction (NPI) capabilities. Additionally, demand can fluctuate cyclically and with economic volatility. The success and profitability of any organization in this industry is heavily dependent on how effective these companies are at addressing the changing demands of consumers.
2. Shrinking Operating Margins: With global competition, companies are faced with the challenge of meeting global price points. This creates additional pressure, as manufacturers need to ensure the delivery of high quality products while finding innovative ways to cut costs. Companies also need to account for fluctuations in factors such as oil prices and their effect on transportation costs or petrochemicals which may be used for agrochemicals and packaging.
3. Compliance and Regulatory Pressures: The global regulatory environment is dynamic. Companies are faced with the challenges of mitigating operational risk and managing non-conformances. Creating additional pressures, as manufacturers rely on the global supplier network to battle shrinking operating margins, meeting international compliance and regulations becomes a factor.
4. Globalizing Economy: Leveraging the global supplier network, (that is condition of having a relatively small amount of cost yield a relatively high level of returns); is a means for reducing costs; however it does come with numerous risks in terms of compliance, product safety, and other areas.
5. Data Granularity and Visibility: With compliance and regulations becoming stricter, traceability functionalities are more pertinent and requisite than in the past. Consumer products companies need strong data granularity to reduce operational risk, properly respond to an adverse event with a targeted recall, provide high quality and compliant products, and avoid counterfeiting issues associated with global trade.
Note: the above challenges highlighted are highly interconnected.
For example shrinking operating margins are dependent on the globalizing economy and increased competition.
NOW To survive in these tough times, companies need to effectively assess the priority and criticality of these challenges, developing strategies to effectively overcome them.
Use the above information to guide your detailed report to the team.
You have been asked by your team to report:
LO1 Understand the organisational purposes of business:
• IDENTIFY according to the structures, purposes of different types of organisation that Nestle caters for or have business relationships with, (this will provide evidence for AC 1.1)
• DESCRIBE the extent to which Nestle meets the objectives of different stakeholders, like Shareholders, employees, customers, institutions, environmental groups and agencies will influence its operations in various ways and to a varying degrees, (this will provide evidence for AC 1.2)
• EXPLAIN the responsibilities of Nestle such as environmental and ethical issues, consumer legislations, fair trade, all codes and compliances and strategies employed to meet them, (this will provide evidence for AC 1.3)
LO2 Understand the nature of the national environment in which business operate
• EXPLAIN how economic systems, such as mixed, free enterprise and even transitional population; labour force; growth; inflation; balance of payments; balance of trade; exchange rates; public finances; taxation; government borrowing; business behaviour e.g. investment, objectives, risk awareness; cost of capital; consumer behaviour- will attempt to allocate resources used by Nestle in the most efficient and effectively way, (this will provide evidence for AC 2.1)
• ASSESS the impact of fiscal and monetary policy such as economic goals; fiscal policy: control of aggregate demand; central and local government spending; Public Sector Net Borrowing (PSNB) and Public Sector Net Cash Requirement (PSNCR); euro convergence criteria; interest rates; on Nestle business activities as an organisation, (this will provide evidence for AC 2.2)
• EVALUATE the impact of competition policy (up-to-date legislation including Competition Act 1998, Enterprise Act 2002); Competition Commission, Office of Fair Trading; Directorate General for Competition); European Commission); and other regulatory mechanisms on the activities of Nestle as an organisation, (this will provide evidence for AC 2.3)
LO3 Understand the behaviour of organisations in their market environment
• EXPLAIN how market structures, like perfect competition, monopoly, monopolistic competition, oligopoly, duopoly; competitive advantage, strategies adopted by firms; regulation of competition will determine the pricing and output decisions of Nestle as a business organisation, ( this will provide evidence for the AC 3.1)
• ILLUSTRATE the way in which market forces can shape Nestle organisational responses using a range of examples: such as; supply and demand, elasticity of demand; elasticity of supply; customer perceptions and actions, pricing decisions; cost and output decisions; economies of scale outsourcing; (this will provide evidence for AC 3.2)
• JUDGE how the business and cultural environments, such as core markets; labour market trends; employee skills, technology; innovation; research and development; core competencies; business environment (political, economic, social, technical, legal, environmental); cultural environment, will shape the behaviour of Nestle as an organisation, (this will provide evidence for AC 3.3)
LO4 Be able to assess the significance of the global factors that shape national business activities.
• DISCUSS the significance of international trade, (that is, the report should look closely at (market opportunities; global growth; protectionism; World Trade Organisation (WTO); emerging markets (BRIC economies – Brazil, Russia, India, China); EU membership; EU business regulations and their incorporation in to UK law) to Nestle as one of the UK business organisations, (this will provide evidence for AC 4.1)
• ANALYSE the impact of global factors, such as, business, competition, growth, employment, education, economics and finance, employment, environment, science and technology, regional); labour movement; workforce skills; exchange rates; trading blocs (e.g. monetary unions, common markets; customs unions, free trade areas); labour costs; trade duties; levies; tariffs; customs dues; taxation regimes; international competitiveness; on Nestle as UK business organisations, (this will provide evidence for AC 4.2)
• EVALUATE the impact of policies of the European Union EU policies e.g. agriculture (CAP), ; international business environment (political, economic, social, technical, legal, environmental); investment incentives; cost of capital; commodity prices; intellectual property; climate change e.g. Kyoto Protocol, Rio Earth Summit; third world poverty; the group of 20 (G-20); global financial stability on Nestle as part of the UK business organisations, (this will provide evidence for AC 4.3)
The module will be assessed meeting all the Assessment Criteria (AC), as specified by the awarding body, Pearson Edexcel.
Please read the instructions carefully while addressing the tasks specified.
Contribution: 100% of the module
Outline Details: Individual report approx. 3,500 words. Details enclosed in the assignment brief
Guidance in addition to the Pass criteria’s, this assignment gives you the opportunity to submit evidence in order to achieve the following Merit and Distinction grades. Assessment Grid indicating their pass, merit and distinction:
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