NAME OF STUDENT

REGISTRATION NO.
UNIT TITLE

Unit 1: Business Environment

UNIT CODE
ASSIGNMENT TITLE

Nestle Market Environment and Global Factors

ASSIGNMENT NO

1 of 2

NAME OF ASSESSOR
ISSUE DATE
SUBMISSION DEADLINE

I, __________________________ hereby confirm that this assignment is my own work and not
copied or plagiarized from any source. I have referenced the sources from which information is
obtained by me for this assignment.

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Unit Outcomes
Outcome

Evidence for the

criteria

Feedback

Assessors decision
First

Understand
the behaviour
of
organisations
in their
market
environment

Explain how market

structures
determine the
pricing and output
decisions of
businesses

3.1

Illustrate the way in

which market
forces shape
organisational
responses using a
range of examples

3.2

Judge how the

business and
cultural
environments
shape the
behaviour of a
selected
organisation

3.3

Discuss the
significance of
international trade
to UK
business
organisations

4.1

Analyse the impact

of global factors on
UK business
organisations

4.2

Evaluate the impact

of policies of the
European Union on
UK business
organisations

4.3

Internal
Verification

Re-

LO3

Be able to
assess the
significance
of the global
factors that
shape
national
business
activities
LO4

Merit grades awarded

M1

M2

M3

Distinction grades awarded

D1

D2

D3

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Outcome

Evidence for the

criteria

Feedback

Internal
Verification

Assessors decision

Assignment
( ) Well-structured; Reference is done properly / should be done (if any)
Overall, youve

Areas for improvement:

ASSESSOR SIGNATURE

DATE

DATE

NAME:.........................................................................................

(Oral feedback was also provided)

STUDENT SIGNATURE
NAME :..............................................................................
FOR INTERNAL USE ONLY
VERIFIED
YES
NO
DATE

: ...........................................................................

VERIFIED BY : ...........................................................................
NAME

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: ...........................................................................

SCENARIO NESTLE UK
Nestl employs almost 7,000 people across 23 sites in the UK and Ireland. It
manufactures a wide product portfolio which includes some of the UKs most popular
brands, such as Nescaf, KIT KAT, Carnation, Shredded Wheat, Buxton Water, Ski
and Bakers Dog Food. It is estimated that around 95% of households in the UK
consume Nestl products.
KIT KAT, Nestls biggest-selling chocolate biscuit, is manufactured in York.
Approximately one billion KIT KAT bars are sold in the UK every year. The product,
originally called Chocolate Crisp, was developed as a four-finger wafer bar in 1935.
Since then sales have grown steadily. There have been many variations of KIT KAT
produced and currently it is possible to buy:
Four-finger milk and dark,
Two-finger milk, mint, orange and caramel,
Chunky milk and caramel
KIT KAT Senses Caramel Cream.
KIT KAT was first advertised on television in 1957 using the iconic line Have a Break
Have a KIT KAT. In 2006, Nestl moved production of another famous brand,
Smarties, from the York factory to Germany, in order to enable KIT KAT production
facilities to be modernised. Many parts of the manufacturing process are now fully
automated. Nestl states that it favours long-term business development over shortterm profit.
The UK chocolate market is currently dominated by three large manufacturers.
Although Nestl managed to achieve a 20.4% market share in November 2009, it
lags behind rivals Mars and Kraft. In such a market structure, the importance of
getting the marketing mix right is crucial.
Evaluate the usefulness of price elasticity of demand, to Nestl, when making
business decisions in relation to KitKat.
Competitive Conditions
The chocolate confectionery sector is particularly concentrated between the three
leading manufacturers, who possess long established brands. Cadbury, Nestl and
Mars (Master foods) accounted for a combined value share of 77.5% in 1999; by
2002 this had increased to 80% (Mintel, 2003). In the block chocolate segment
Cadbury are the most successful with a market share of 53.1% (Simms, 2004). The
economies of scale afforded by the international resources of these leading firms
make it increasingly difficult for smaller national players to compete in terms of price,
distribution, range of products and marketing spend (Euromonitor, 2003). For
example, Nestle UK spent 9m on the launch of Kit Kat Chunky (Mintel, 1998). To
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compound these competitive conditions, Green and Blacks were already in the UK
chocolate market with the first ever Fairtrade chocolate product, Maya Gold,
launched in 1994, which contains 70% cocoa solids and tropical spices, creating a
specialist flavour.
The Chocolate Industry
The industry has weathered a global recession and is still seeking growth. But with
some markets saturated, where does its future lie?
The global chocolate industry is many things, but as a bellwether for the wider
economy its use is limited. Revenues have remained resilient despite a recessive
global picture, falling disposable incomes, volatile commodity prices and increasing
competition.
Chocolate is often described as recession-proof. Some economists call it the lipstick
effect: when facing an economic crisis, consumers are more willing to buy less
costly luxury goods, such as cosmetics and chocolate, even as they cut back on
other luxuries. Revenues over the past few years would seem to back this
hypothesis, although year-on-year growth remains relatively sluggish and the spectre
of volatile input prices continues to cast a shadow over future projections.
Although the global market is still dominated by Western Europe and North America,
emerging markets clearly represent the future. The BRIC countries (Brazil, Russia,
India and China) accounted for55% of global confectionery retail growth in 2011.
Other emerging economies with youthful populations and an acquisitive middle class
are likely to develop a taste for chocolate and, as their disposable incomes grow,
they will represent important target markets.
With the traditional markets of Western Europe and North America seemingly
saturated, manufacturers are being forced to pull even more innovative tricks out of
the bag to attract consumers, from enigmatic flavour combinations to bolder health
claims, portion control and personalized bars.
Source: KPMG The Chocolate of Tomorrow; Published by Hay market Network Ltd

When Is Chocolate Not Chocolate?

Sometime this year the European Union will have to decide at what point chocolate
stops being chocolate. As defined by a 1973 European Commission directive,
chocolate can only contain cocoa butter, cocoa solids, sugar and, in the case of milk
chocolate, milk.
But Britain, Ireland and Denmark as well as new EU members Austria Finland and
Sweden are exempted from the directive and allow manufacturers to use cocoabutter equivalents (CBEs) such as palm oil in making chocolate.

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Now, as the EU brings its policies into line, it is considering whether to allow up to 5
percent CBEs in chocolate manufacturing. Chocolate producers stand to profit from
relaxed standards, especially if the price of cocoa were to soar. But the ingredients
are less likely to be as much a sticking point as the labelling issue.
"What is to stop the chocolate industry from putting pressure on the EU to allow 10
percent or even complete substitution of cocoa butter and still call the remaining
product chocolate?" said Gerrit Ribbink of the Netherlands Development
Organisation (SNV) in The Hague. Its misleading to the consumer to use other
ingredients and still slick to the name chocolate."
A British consumer spokesman said Britain, which is keen on keeping its current
practice of using up to 5 percent CBEs, would oppose new laws that would change
labelling standards.
"The UK would say the products are still called chocolate", he said.
For cocoa - producing countries, the packaging issue is secondary to the fear that an
increase in the use of CBEs will lead to a drop in the demand for cocoa.
In a statement last October, the 13-nation Cocoa Producers' Alliance, which
produces more than 90 percent of the world's cocoa, urged the European Union not
to enact the proposals.
SNV estimated that if the EU allowed CBEs in chocolate, demand for cocoa could
drop by anywhere between 100 000 and 200 000 tonnes. Affecting up to 10 percent
of world cocoa production.
What scares producers even more is that American chocolate manufacturers could
lobby the US Food and Drug Administration (FDA) to follow the EU's example, and
this could cut demand even further.
The case above has been based on a real life organisation, but details have been changed for
assessment purposes and do not reflect the current management practices. Students are to
refer to your earlier assignment (assignment 1) and encouraged to search the internet for
cross references in answering this assignment.

Source:

www.nestle.co.uk
www.nestle.co.uk/media/pressreleases
www.nestle.com/investors/publications

Role
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You have move to UK this month to work with the Assistant Marketing Manager in
Nestle, managing at least 4 new sales personnel and 1 support staff.
TASKS
Write a report on the following:
Explain how market structures determine the pricing and output
decisions of Nestle UK especially Kit Kat brand
3.1
illustrate the way in which market forces shape Nestle responses using
a range of examples
3.2
Judge how the business and cultural environments shape the behaviour
of Nestle UK
3.3
Managing Director of Nestle has informed your marketing manager and you in a
casual discussion, that this section would also be responsible for the European
region. You have been asked to write a report to your Marketing Manager on the
following areas:
Discuss the significance of international trade to Nestle in UK

4.1

Analyse the impact of global factors on Nestle in UK

4.2

Evaluate the impact of policies of the European Union on Nestle and its
competitors in UK
4.3

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GRADING
Pass

is achieved by meeting all the requirements defined in the assessment

criteria.

Merit

Identify and apply strategies to find appropriate solutions.

(M1)

Characteristics / Possible Evidence An effective approach to study

and research used to investigate behaviour of organizations and the
market environment as well as their expansion into other European
countries.
Select and apply appropriate techniques.
(M2)
Characteristics / Possible Evidence a range of methods and
techniques have been applied in the market structures determine the
pricing and pricing decision
Present and communicate appropriate findings

(M3)

Characteristics / Possible Evidence An appropriate structure and

approach have been used to prepare a report. Present data using a
range of methods e.g. tables, diagrammatical and graphical forms.
Distinction Use critical reflection to evaluate own work and justify valid conclusions
(D1)
Characteristics / Possible Evidence Creation has been used to
generate and justify valid comments based on investigation in the
behaviour of organization and its market environment as well as global
and European dimension.
Take responsibility for managing and organising activities

(D2)

Characteristics / Possible Evidence Demonstrates substantial

investigations have planned managed and organized for the given
organisation market structure practices; competitive strategies
employed and also impact of policies.
Demonstrate convergent, lateral and creative thinking

(D3)

Characteristics / Possible Evidence An innovative and creative

thought has been used to investigate Nestle within their environment at
local, national and global level and the impact of government policies
as well as the European dimension.

BE A1 QCF

PRESENTATION
1. The assignment should have a cover page that includes the assignment title,
assignment number, course title, module title, Lecturer/tutor name and
students name. Attach all the pages of assignment brief/cover sheet with your
report and leave them blank for official use.
2. Ensure that authenticity declaration has been signed.
3. This is an individual assignment.
4. Content sheet with a list of all headings and page numbers.
5. A fully typed up professionally presented report document. Use 12 point Arial
or Times New Roman script.
6. Your assignment should be word-processed and should not exceed 3,000
words in length. A CD should be included with references and
accompanying notes.
7. Use the Harvard referencing system.
8. Exhibits/appendices are outside this limit.
9. The assignment should contain a list of any references used in the report.
NOTES TO STUDENTS FOR SUMMISSION

Check carefully the submission date and the instructions given with the
assignment. Late assignments will not be accepted.

Ensure that you give yourself enough time to complete the assignment by the
due date.

Do not leave things such as printing to the last minute excuses of this nature
will not be accepted for failure to hand-in the work on time.

You must take responsibility for managing your own time effectively.

If you are unable to hand in your assignment on time and have valid reasons
such as illness, you may apply (in writing) for an extension.

Failure to achieve a PASS grade will results in a REFERRAL grade being

given.

Take great care that if you use other peoples work or ideas in your
assignment, you properly reference them in your text and any bibliography.

NOTE: If you are caught plagiarizing, the College policy and procedures
will apply.

BE A1 QCF