Table of Contents

1. INTRODUCTION..................................................................................................................................1
2. STRATEGIC BUSINESS.........................................................................................................................1
2.1. Definition of Porter’s Five Forces...................................................................................................1
2.2. Definition of PESTLE...................................................................................................................4
2.3. Definition of SWOT....................................................................................................................5
3. The impacts of the macro evironment upon business operations...............................................6
3.1. Porter’s five forces model...........................................................................................................6
3.2. PESTLE analysis of Nestle............................................................................................................7
4. Internal analysis of Nestle – its strengths and weaknesses................................................................9
4.1. Internal factors of Nestle............................................................................................................9
- Vision and Mission.........................................................................................................................9
4.2. Nestle: how internal strengths and weaknesses interrelate with external factors and how they
influence decision-making......................................................................................................................9
 1. INTRODUCTION

This report will demonstrate both the positive and negative influence/impact the macro
environment has on Nestle. Nestle is the oldest and largest food, nutrition, fitness, and well-being
system in the world. Created and headquartered in Vevey, Switzerland. Determine the internal
strengths and weaknesses of Nestle and explain the interrelationship with external macro
factors.

Firstly, applying PESTLE to research plenty of macro-environment factors, making a

threat to Nestle group. Secondly, based on five forces porter to learn about the
competitiveness of food and drink processing in Vevey, Vaud, Switzerland. Finally, using SWOT
to evaluate the influence of micro and macro environment on the objectives of Nestle.

2. STRATEGIC BUSINESS
2.1. Definition of Porter’s Five Forces
Porter's Five Forces model, initially developed by Michael E. Porter of Harvard Business
School in 1979, discusses five essential factors that decide whether a business will be profitable
against other industrial enterprises. An overview of the Five Forces will help businesses
determine the competitiveness of the market, how developments will impact the industry's
competition, in which markets the organization can compete—and how companies should
prepare themselves for growth.
In Porter’s model, the five forces that shape industry competition are:
 Figure 1. Five Forces Model

- Competitive rivalry
This force is the determining factor of how competitive and efficient the business is. In
a competitive industry, companies must compete actively for a market share that
results in low earnings. The competition between rivals are intense when:

 Exit barriers are high;

 Industry of growth is slow or negative;
 Products are not differentiated and can be easily substituted;
 Competitors are of equal size;
 Low customer loyalty.

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 The bargaining power of suppliers

This force analyzes how much power the company's supplier has and how much impact
it has over the capacity to boost its prices, which in turn decreases the viability of a
business. It also assesses the number of producers of raw materials and other services
available. The fewer suppliers there are, the more power they have. Businesses are in a
stronger position if there are multiple sources.
When input elements of the supplier provide a substantial proportion of the overall
cost of the commodity to the purchaser, the possible bargaining power of the supplier
is massively enhanced.
● For individual firms with a reasonably secure market position, the supply-side sector is
not plagued by fierce rivalry on the market. 
● Supply-side products have specific aspects. Purchasers are challenging to convert, or
conversion costs are too high. 
● The retailer encourages forward integration or otherwise imposes an extra fee on the
manufacturing process.
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 The bargaining power of customers

This force explores the influence of the customer and their effect on price and quality.
Consumers have the capability because there are fewer in number, but there are many
sellers, and it's convenient for consumers to change. Conversely, purchasing power is
limited as customers purchase products in limited quantities when the vendor's
product is somewhat different from that of its counterparts. Suppliers promote future
integration, while buyers find it tough to blend or incorporate backward. (Martin, 2019)

 The threat of new entrants

This force considers how easy or difficult it is for entrants to enter the market. The
easier it is for a new rival to achieve access, the greater the risk of an established
company's market share is exhausted. The obstacles to entry include mainly the
following factors:
● Economies of scale
With the extension of the business scale, the manufacturing features of reducing unit
product prices, the higher the industry's lowest prominent rating, the more substantial
the barriers to entry.
● Differentiation degree
Distinction refers to a particular targeting of products and services to the needs of the
client. The higher the gap, the greater the entry barrier.
● Conversion cost
The transfer expense of the customer or purchaser applies to an added cost that the
customer must spend to change the manufacturer.
● Technical obstacles
Includes patented inventions, proprietary technologies, and learning curves.
● Control of sales channels
● Policy and Law
Global laws cover specific industries, such as the financial system.
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 The threat of substitute products or services

This force studies how simple it is for customers to turn from a company product or
service to a rival. It analyses the number of competitions, how their pricing and
efficiency correlate with the business being threatened, and how much profit those
competitors are making and decides whether they should lower their costs any further.
The danger of alternatives is told by swapping prices, both immediate and long-term,
and the tendency of customers to shift.
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2.2. Definition of PESTLE

 PESTLE analysis is a method for reviewing the macro environment that considers six
groups of external factors that could affect enterprises. PESTLE will inform the
circumstances in which a person, commodity or company finds itself, help make decisions
and understand the present or potential market place. The six categories included are:

Political Political factors influencing business are also given a great deal of
priority.
Several aspects of government policy can affect companies. All
companies must abide by the law. Managers must figure out how
potential legislation will impact their activities.
The political environment will affect corporate organisations in many
ways. It could add a risk factor and lead to extreme losses.
It may also have an impact on government policy at the state to the
federal level. An example of a political aspect may be a rise or decrease
in tax. The political environment is probably the least stable elements of
the corporate environment. [ CITATION PES15 \l 1033 ]
Economic In PESTLE's study, economic factors are related to the general state of
the economy, products, services and money. Environmental analysis is
the concept used to understand all the various environmental factors
that influence a company. Economic conditions affect the industry to
make wise choices and lead the enterprise to a greater extent. [ CITATION
Tho161 \l 1033 ]
Sociocultural Social factors such as age, gender ratio, population growth, urban-rural
split, employment rate, health statistics, preferences, etc. of the
population affect the selling of the good or service and, hence, the
company's benefit. Those are the socio-economic and cultural influences
in demographics. Effects of evolving cultures are also debated. People
must understand that these changing trends also have an impact on
companies. Changes in social factors may affect an organization in
several ways.[ CITATION Wha20 \l 1033 ]
Technological Technological factors are variables that contribute to the development,
availability and advancements in technology. This may include anything
from computing power to engine quality. Common categories of
technical trends impacting industry include:
 The existence of 3D technology
 Computer calculation speed/power
 The ability of computers to create truly ‘random’ numbers
 Engine efficiency
 Internet connectivity
 Wireless charging
 Automation
 Security in cryptography
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Legal Legal factors refer to how the legislation affects, how companies work
and how consumers behave.
Product transport, profit margins and the viability of particular industries
are also examples of things that can be influenced by legal
considerations. Legal factors may determine whether or not a company
sells a specific commodity (perhaps drugs or sharp objects) and may also
 affect the processes by which a company stores its products or interacts
with the consumer.
Environmenta In the context of PESTLE research, environmental factors—called
l 'ecological factors'—refer to physical environment variables. This could
include consumer welfare, environmental issues, the supply of
resources, or the direct effects. Environmental factors may affect on 
many different significant aspects of the company. For example:
 Climate change
 Weather
 Pollution
 Availability of non-renewable goods
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2.3. Definition of SWOT

SWOT (strengths, weaknesses, opportunities and threats) analysis is a tool used

to determine an organisation's competitive position, offer useful insight into the
many diverse aspects of economic strategy, and facilitate strategic planning. The
SWOT analysis assesses both internal and external variables as well as current
and prospects.
Strenghts  Strengths are internal—that is, each company has a particular set
of strengths which they have worked on themselves. It explains what
an enterprise excels and what distinguishes it from the competition: a
firm name, loyal client base, a strong balance sheet, unique
technologies, and so on. For example, a hedge fund may have
developed a proprietary trading approach that produces market-
beating returns. It would then determine how to use the results to
attract potential investors.

Weaknesses  Weaknesses are internal characteristics and resources that work

toward a satisfactory outcome to deter an enterprise from operating
at the optimum level. There are places that business has to enhance
to stay competitive: outdated brands, higher-than-average turnover,
high debt levels, short supply chains, or lack of capital.
Opportunities  Opportunities refer to advantageous external factors that could give a
company a competitive advantage. For example, if a country lowers
tariffs, a vehicle manufacturer may export its vehicles to a new
market, increasing revenue and market share.

Threats  Threats refer to causes that may affect an organization. Hazards

include something that could adversely impact the outside company.
For example, drought is a danger to a wheat-producing organization,
as it can kill or reduce crop yields. Other common threats include
increasing commodity prices, increased competition, tight labour
supply, etc. It is essential to anticipate risks and take action against
them before becoming victims of them and the progress stalls.

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3. The impacts of the macro evironment upon business operations

 Various macro-environmental factors affect the corporate practices of multiple companies
at international, national and regional levels. External factors allow the company to achieve its
goals by modifying the strategy according to business requirements. The related conditions of
the business environment, a necessary condition that implicitly influences and specifically
affect the enterprise's activities. These factors and basic needs of business environment
always interactions together and company's activities impact. [ CITATION Sam20 \l 1033 ]

Nestle is a Swiss-based global food and drink company. Nestle is well known for its steady
development through creativity and analysis, which has led it to become an industry leader
and recognize what consumers want. The following is a detailed analysis of Nestle's macro
and micro environment
3.1. Porter’s five forces model
 Competitive Rivalry – High
The food industry is highly competitive in nowadays. As a result, the food industry
has become more like a commodity, an area in which the food company with the
low-cost structure, greater efficiency and better customer service will beat out
competitors. In the long run, larger companies prefer to take over or merge with
other companies rather than spend the money to market and advertise to people.
Nestle has an essential role in the food processing sector, but few big rivals in the
food processing industry such as Kraft Foods and the Danone Company.
Competition in the food manufacturing sector is violent, and it is a bonus for
customers. The competition is for product variety, creativity, promotional ofers, and
so on. Thus, competitive rivalry for Nestle is high. [ CITATION Ada17 \l 1033 ]

 Threat of new Entrants – Low

It is challenging for a new entrant because the consumer food industry is diverse.
The existing players hold large market shares. Nestle is well experienced and
understands consumer needs. They have developed customer loyalty over time.
Several new entrants enter the industry increasing every year to grab market share
at the local level. Nestle has been the market leader for a century almost so now it
has become an enormous challenge for the new entrants to work over their quality
and cut Nestle's share to survive, which is relatively equal to impossible.
Fundamentally, Nestlé is persistently on the board, and therefore the threat of new
entrants is low.

 Bargaining Power of Suppliers – Low

Bargaining the power of suppliers is a significant factor to consider in any industry,

as they are the main strength of the business. Nestle is known for its strong
relationship with manufacturers worldwide because of its tremendous purchasing
power, and quality is often vital in specific dairy and agricultural products. Nestle, as
always, concentrated on robust and robust business relationships to improve long-
term performance.
 Bargaining Power of Buyers – High
 Owing to the high degree of rivalry, the bargaining power of the purchasers is high.
They can quickly move from one brand to another. Nestle or any other brand is
trying to manipulate the market or boost prices. Nestle acknowledges this control
of purchasers and aims to ensure that Nestle's consumers remain satisfied. Nestle
customers have very influential choices but the quality that has been maintained by
Nestle has made it very successful among the users. These factors helped Nestle
build brand loyalty from many of its customers.
[ CITATION Nes17 \l 1033 ]
 Threat of Substitutes – High

Many Nestle products, such as bottled water and pasteurized milk, have
alternatives that are also readily available. Some items have homemade subtitles,
such as baby food. There are also complaints against some of the effects of Nestle's
refusal to be safe for consumption. This has contributed to a rise in the selling of
replacements to health-conscious people. Nestle is committed to highlighting the
nutritional aspects of its products to address the deposits. Thus, the threat of
substitutes is high for Nestle.
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3.2. PESTLE analysis of Nestle

Nestle announced revenues of $99.09 billion on 31 December 2015 and projected
sales of $92.62 billion for the current fiscal year. According to YCharts.com, Nestle
has a market capitalization of $245.71 billion; as the corporation is headquartered
in Switzerland, it does not have to disclose its valuation as an American company.
 Figure 2: Pestle analysis for Nestle [ CITATION Nes20 \l 1033 ]

 Political factors: The company’s ability to impact the government

Since Nestlé operates in more than 190 nations, any change in regulatory
environments can have a massive effect on operations. Multinational companies
like Nestlé are at increased risk of creating bottlenecks due to government
regulations and reforms. The more countries in which company activities take place,
the greater the risk of policy shifts that will disrupt operations.

For example, Nestlé's plans put a wrench on the breeze situation.

Shift affects the livelihoods of food and development workers.
Europe is an essential market for the production and profits of Nestlé.
And the instability of Brexit has affected the whole UK food supply chain.
It was so terrible that Nestlé proposed replacing production in Newcastle and York
with Poland.

Nestlé must now deal with changes to food standards and regulations.
Every nation has its own set of rules. If Nestlé does not abide by them, they will be
cut off; in the eyes of the law, the items will not be purchasable or edible.

 Economic factors: A surprising increase in profits after a slow year

Foreign exchange movements are a significant economic problem for Nestlé. As a
global corporation, the shift in foreign exchange rates and costs has a rapid effect
on the company. If the currency weakens, it may lead to a loss of earnings,
depending on the region. It may also result in the reverse—benefits boost. Or
cheaper alternatives for the importation or exportation of goods.
 Nestlé has been in an upswing for sales in the last few years.
In reality, the company's earnings rose by more than 40% in 2018.
According to the company, revenues have changed from $7.6 billion to $10 billion.
Most of this popularity is attributed to three things: The United States economy, the
Chinese market, and the confectionery company's sale.
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4. Internal analysis of Nestle – its strengths and weaknesses

4.1. Internal factors of Nestle

 Vision and Mission

Nestle's mission statement is "the world's leading foods, fitness and wellness business."
"Good Food, Good Life" is to provide consumers with the most delicate tasting, the most
sustainable options in a wide variety of food and beverage categories and food
opportunities from morning until night." This statement suggests that Nestle ranks its
customers' experiences at the top of its objectives. It has these essential points:
Boosting health
Improving lives
Improving communities
By doing this, Nestle has boosted the overall health of communities continuously.
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 Human Resources

Currently, there are around 300,000 workers, and Nestle offers products and
services in 187 countries.
As a feature that recruits, grows and engages more of the outstanding talent that
our company wants to flourish, HR provides an opportunity in three main fields.
Employees could continue their careers in the HR Business Relationship, allowing
line managers to boost business results by people. If people have demonstrated
expertise in recruiting, growth or other HR professional fields, you can join our team
committed to specialization. Or you could join our Scale Center, a community that
guarantees that Nestle workers have their basic needs taken care of so that they
can concentrate on what they do best. [ CITATION Nes201 \l 1033 ]

4.2. Nestle: how internal strengths and weaknesses interrelate with

external factors and how they influence decision-making

 Aids to decision making

SWOT
 Figure 3: Table of SWOT
- STREGTHS

 According to Nestlé, one of the key strategic advantages in R&D. The company
invested CHF 1.678 billion or US$ 1.697 billion on R&D in 2015.This amounted to
1.89 per cent of the overall sales. In contrast, the Coca Cola Corporation invested
0% of its sales on R&D and PepsiCo, Nestlé's biggest competitor spent just 1.2% or
only US$ 754 million of its revenue on R&D.

 Strong geographical presence, with one of the greatest geographically diversified

sources of revenue 
 Unlike most of its competitors, Nestlé does not rely on anyone the nation or a few
different countries to produce most of its sales. The U.S., which is the single largest
business sector, produces only CHF 25,293 billion or 28.5 per cent of global sales.
The second biggest sector, China, makes CHF 7.06 billion or 8% of global sales.

- WEAKNESSES

o Criticism over high water usage, selling contaminated food, anti-unionism,

forced child labour and using other unethical practices

o Contaminated food recalls