NIIENTT INSTITUTE OF INTERNATIONAL EDUCATION

Edexcel BTEC Higher National Diploma in Business

Unit: Business Environment Unit ID: Y/601/0546

Facilitator: Nguyễn Tân Thu Hiền Class: 13NIIE

Students: Students’ ID:

Phạm Cao Khánh A1131007

Trương Bích Trâm Anh

Nguyễn Hoàng Bảo Châu

Lê Ngọc Khánh Vân

1/ Market structure : Monopolistic competition

Definition: A market structure in which several or many sellers each produce similar, but slightly differentiated products. Each producer can set its price and quantity without affecting the marketplace as a whole.

Characteristics:o There are many producers and many consumers in the market, and no business

has total control over the market price.o Consumers perceive that there are non-price differences among the competitors'

products.o There are few barriers to entry and exit

o Producers have a degree of control over price.

o The good is slightly differentiated in some ways (advertising, branding or local

production)o There is some degree of consumer loyalty

The advantages of monopolistic competitiono Monopolistic competition can bring the following advantages:

There are no significant barriers to entry; therefore markets are relatively contestable.

Differentiation creates diversity, choice and utility. For example, a typical high street in any town will have a number of different restaurants from which to choose.

The market is more efficient than monopoly but less efficient than perfect competition - less allocatively and less productively efficient. However, they may be dynamically efficient, innovative in terms of new production processes or new products. For example, retailers often constantly have to develop new ways to attract and retain local custom.

The disadvantages of monopolistic competitiono There are several potential disadvantages associated with monopolistic competition,

including: Some differentiation does not create utility but generates unnecessary waste, such

as excess packaging. Advertising may also be considered wasteful, though most is informative rather than persuasive.

As the diagram illustrates, assuming profit maximisation, there is allocative inefficiency in both the long and short run. This is because price is above marginal cost in both cases. In the long run the firm is less allocatively inefficient, but it is still inefficient.

Price strategy is a basic, long-term pricing framework, which establishes the initial price for a product and the intended direction for price movements over the product life cycle.

It consists of 3 type of pricing strategy which is Price skimming, Penetration pricing and Status quo pricing.

Nestle currently practicing penetration pricing to market product which is a way where Nestle charges a relatively low price for a product initially as a way to reach the mass market.

o Choose the price strategy :

When Nestle has decided the product price, they will choose a good pricing strategy that will give them direction of price movements over the Product Life Cycle. Nestle are aware about higher price. If they set higher price, they have to produce a good quality of product. Besides that, the competitors also will influence the pricing strategy.

For example, if Nestle introduces a new product that same with competitors, the price will be restricted and close to the price of competitors. Unless, Nestle Milo can differentiate and convince consumers, they can set the higher price for the product

Output decissono For the price, Product should make a good pricing strategy. If they want to put a high

price for the particular product, they have to make sure that the quality and the quantity are suitable enough with the price.

o Other than that, they also can do the packages which contain the chosen product in

one pack and they will set the price for the pack in a moderate value. This is also known as eco pack. This pack is affordable whereas not only the high income persons who are willing to buy it but people from low income are also able to buy.

o By doing so, consumers can make a good perception for the company who are

concern with the society. Generally we can conclude that Nestle are not bias and are suitable for all level of person.

2/ Market forces:

Demand and Supplyo Establishing pricing goals

Marketers have 2 choices whether to use profit oriented profit maximization or satisfactory pricing. The marketers need to have an understanding of trends and changes in the market place to set a goal. If Nestle have decide to go for profit maximization objective, they must be able to afford large sum of investment. It is easy to follow competitors pricing but they may not have the best considering cost, demand and changes in Product Life Cycle. So they have to require a careful analysis before setting the price.

o Estimate demand, costs and profit.

After the pricing goals have been established, Nestle have to estimate demand, costs and profit. It is important for Nestle to know the corresponding cost for each product price. So they need to estimate the profit that they will earn, determine level of price and how much market share they will get.

PESTEL Analysis-

Analysis-is a simple and effective tool used in situation analysis to identify the key external (macro environment level) forces that might affect an organization.

Therefore, the aim of doing PEST is to:

Iind out the current external factors affecting an organization; Identify the external factors that may change in the future; To exploit the changes (opportunities) or defend against them (threats) better

thancompetitors would do. The outcome of PEST is an understanding of the overall picture surrounding the

company. Political : The United States is a representative federal democracy driven by elections in which citizens' and lobbyists' diverse interests compete.

Strict quality control played a role in political factor. It means that Nestlé’s products quality will not be different with other countries. Consumers are guarantees with full satisfaction of the products all over the world.

Nestlé’s products are always come with the seal of guarantee. By having the seal of guarantees, consumers are now more confident and trust of Nestlé’s products. Strict quality control played a role in political factor too. It means that Nestlé’s products quality will not be different with other countries. Consumers are guarantees with full satisfaction of the products all over the world.

Economy : The United States, with an economic freedom score of 75.5, is the 12th freest economy in the 2014 Index. Its score is half a point lower than last year, primarily due to deteriorations in property rights, fiscal freedom, and business freedom. The U.S. is ranked 2nd out of three countries in the North America region, and although its score remains well above the world and regional averages, it is no longer one of the top 10 freest economies.

GDP (by sector) : agriculture: 1.2% industry: 22.1% services: 76.7% (2011 est.)

Corporate tax rate of 35%

Nestlé also collaborates with local government to provide technical assistance to farmers in planting and harvesting crops. The farmer will get income and Nestlé will get to

purchase good and fresh raw materials to produce their food. By having own local productions, Nestlé should no longer needs to import any raw materials from other country where they will save much more money. It will also benefit the consumers whereby consumers could enjoy the local productions with low price. More consumers will use this product and therefore Nestlé will gain more profit from that.

Socio cultural : Multiculture American has a variety of expressions due to its geographical scale and demographic diversity.

->A good diet and adequate food supply, the central for promoting health and well-being is the focus of every person even these days; whether people tend to value products that incorporate with them healthy benefits.

Technology : Internet and Mobile Technology is currently growing so rapidly in the market where almost all of the people nowadays will get contact with it. Nestlé could use this advantage to benefit them by using technology to promote their products over those advanced technology.

->Customer could get any information from their site. Nestlé’s employees could use this internet service to connect to its industry in other country such as Australia, Singapore, U.K and more. They did research and development by using the technology to find more information to satisfy the local tastes and cultural flavours in each country market. By understanding what each country asks for, Nestlé could market difference product according to the customer demand in difference country. It is already proven that the technology factors are important for Nestlé Company.

Environment: The industry environment has a more direct effect on the firm’s strategic competitiveness and to earn above-average returns. The intensity of industry competition and an industry’s profit potential are functions of five forces of competition such as the threat of new entrants, bargaining power of supplier, bargaining of power buyers, threats of substitute products, and intensity of rivalry among competitors.

->Porter singled out five different forces that impact competitive intensity which portrays an image of the overall attractiveness and profitability of a market. To aid in my evaluation of Nestle and its status in the industry, I will apply Porter’s Five Forces Model to the company.

Legal: Protection of crucial business processes by copyrights and patents

-> They have to make sure that they follow not only the laws in US but also the laws in the countries they operate

3/ Culture

Definition:Culture is the characteristics of a particular group of people, defined by everything from language, religion, cuisine, social habits, music and arts. Today, in the United States as in other countries populated largely by immigrants, the culture is influenced by the many groups of people that now make up the country.

• Spelling of name

Name of Americans own name written in the first name, then the middle name and finally is surname. Surname taken from their father and do not taken from their mother.

• Way of communicating

Except for some special cases, Americans often call each other by their first name. However, there are some common principles that foreign traders should follow.

For once direct contact or by mail first, should call each other by Mr., Mrs., Miss, Ms. or Dr. and then is surname.

• Greeting

As in other places in the United States, shaking hands is a common greeting .Sometimes , man with woman or woman with woman greet each other by hugging, and even has the cheek to cheek or kiss cheek each other. Forms are usually offered only to those who are longtime friends, or at least have known each other well.

• Equal treatment for women

• Equal treatment with the other races

2/ Market segmentation

• Market segmentation: dividing a market into distinct groups of buyers who share the same or similar attitudes and patterns of behavior.

• Market can be segmented by:

₊ Demography

₊ Geography

₊ Age

• Demography:

₊ Nestlé’s demographic segmentation than they will find that our product is for everyone. People from any area, any culture, any age, any sex, any belief and an income will use it. It is not any luxury item which is used by a specific people.

• Geography:

₊ The company segments its market geographically on divisional basis. They divide each division in different zones and every distributor is restricted to sale its products.

• Age:

₊ The products for everyone, for all age, for all social. Anyone can use the products as per need.

Psychographic segmentation:

• Social class and life style: People belonging to the higher social classes tend to spend more on luxuries as compared to people in the lower classes. Such people can be easily targeted as they are very health conscious. Nestle can urge these people to buy Nestlé’s product which is rich in nutrition.

• Personality: People who are outdoorsy and are involved in sports can also be targeted by tagging the brand with some sport celebrity.

Reference: https://economicsonline.co.uk/

https://www.academia.edu/5366973/Nestle_Global_Strategy_INTRODUCTION