The companies of my choice are Diageo plc and Nestle Company. The following is a thorough description of the internal and external environments of the above stated companies using an environmental scan.
Introduction
Diageo is a UK based, global leading company in the production and distribution of alcoholic and non-alcoholic beverages: alcoholic beverages being spirits, wines and beer. Diageo products can be found in nearly all 180 countries of its operation all over the world. The company also has its manufacturing plants spread all over the world.
Environmental scan
Similar to all other companies, Diageo also experiences the impacts of two broad categories of environments: internal and external environments.
Internal environment
At the top of the company is the president who commands the global business: Paul Walsh is the current president. There is also a diverse board of directors at the global level composed of four women and six men. These directors bring independent sets of business ideas and also admit any creative contributions from the global arena. There is a clear chain of command from the global president to the lowest employee in the company. The chief executive has a delegated authority to all committees as illustrated below:
The internal environment basically expounds on the corporate culture of the company. The corporate culture of the company seeks to foster sustainability and responsibility among all employees and operations of the company. This is overseen by the corporate citizenship committee under a chief executive officer.
The internal environment which mainly focuses on the conduct of all employees in the discharge of their daily obligations is guided by the Diageo code of business conduct. This code is in turn dictated by the UK corporate governance code of 2010. The code of business code seeks to protect the business and image of the company by such restrictions such code of conduct include, Diageo employees are not allowed to trade in the company’s stock in the stock market. This is because they are deemed to possess inside information about the performance of the company stocks. Insider trading is also prohibited among the employees: They are not allowed to give any information whatsoever to any interested party who intends to rely on such information to decide whether to invest in Diageo. New hire information systems are also cited in the code. Confidentiality among the employees such that they should never share passwords to enhance privacy and accountability among the employees. Safety of employees everywhere everyday is also emphasized.
Diageo code of business conduct also outlines five key values which are placed at the heart of all business of the company: We are passionate about our customers and consumers: The success of the business is based on the customer satisfaction, We value each other: this enhances cooperation among the employees, We give ourselves freedom to succeed: The employees are free to make any contribution to the success of the company provided that it does not break any law, We are proud of what we do and how we do it: production and distribution of beverages and We strive to be the best.
External environment
The external environment is made up of the following different environments:
- Economic Environment
Diageo is a direct victim of any global economic event and such occurrences directly affect the performance of the company. Economic upheavals such as inflation affect the company unsparingly just like all other firms in global business.
- Technological environment
Diageo is currently investing heavily in modern methods of production by acquiring modern machines which increase output at minimal cost and environmental conservation.
- Cultural Environment
Diageos’ interactions with different cultures in the world are varied due to the types of products of the company. For example in Islamic cultures, alcohol is highly opposed and that hinders success of business. However the company majors on the available opportunities after an intensive SWOT analysis of the cultural composition for any potential market.
- Natural Environment
Diageo is devoted to the ultimate conservation of the environment in all its activities across the globe. The commitment of the company towards environmental conservation is stated as follows:
"We recognize that our management of environmental issues is important to our stakeholders and fundamental to the long-term sustainability of Diageo.
Our aim is to achieve and maintain environmental sustainability – a condition where our business causes neither long-term critical depletion of natural resources nor lasting damage to species, habitats, biodiversity or the climate.
This policy sets out the commitments we have made to achieve this aim. It covers all Diageo businesses and operations. Our leaders are responsible for fully integrating the policy elements into their functional management. Recognizing that some sites and offices have different environmental impacts from others, parts of this policy are more relevant to particular locations than others.
Environmental performance is a shared responsibility and it is only by working together that we will make progress on our journey to becoming truly sustainable.”(David Gosnell)
- governmental and legal environments
This varies across the globe depending on the alcohol regulatory laws in different countries all over the world. E.g minimum drinking age varies from one country to another, some countries it’s 21 years, while others have it at 18 years.
Diageo’s’ competitive advantages
The company enjoys exclusive advantages which include, being the global leader inn the beverage production and distribution, the company enjoys a commanding position over its competitors, above being a global leader the company has also a large market share which gives the company an outright guarantee to survive and grow favorably than the competitors. The company has also enjoyed a stable and expanding market as well as unmatched market compared to other companies.
Strategy
The company aims to achieve peak growth and marginal improvement in a reasonably sustainable way and create a consistent value for its shareholders in the long run. This is enhanced by the global expansion and outstanding brands in the market.The company also expect to make selective acquisitions across the globe to foster its growth agenda. E.g the acquisition of Meta and Serengeti breweries in Africa. Consumer engagement through digital and analogue channels to achieve a success in marketing and innovation. This facilitates world class marketing campaigns for the company products.
Diageo innovation program which has in the recent past concentrated on the consumers’ tastes and preferences with the aim of giving the highest level of satisfaction for the consumers. Commitment to ensure prosperity of the communities in which the company operates. This is enhanced by participation in the social activities of such communities, such as sports and education. Commitment to be the leading industry performer through a diverse and talented workforce and superb leadership. Reasonable distribution and consumption of the products by the company. This seeks to ensure a balanced lifestyle for the consumers of the products with knowledge of the adverse effects. Commitment to efficient and sustainable production of the different brands. This takes into account the available resources and the risks associated with the use of such resources. Promoting responsible drinking and combat the misuse of alcohol. This is championed by several digital and traditional campaigns such as w.w.w.drinkIQ.com.
Value creation and competitive advantage sustainability through business strategy
The administrative and leadership machinery is responsible for the functions of value creation and sustaining the competitive advantage of the company in a number of ways: the observation of the five key values of the company.
- We are passionate about our customers and consumers: The success of the business is based on the customer satisfaction.
- We value each other: this enhances cooperation among the employees.
- We give ourselves freedom to succeed: The employees are free to make any contribution to the success of the company provided that it does not break any law.
- We are proud of what we do and how we do it: production and distribution of beverages.
- We strive to be the best.
Measurement guidelines to verify strategic effectiveness
The corporate governance structure of the company best does these actions by establishing a series of committees which oversee the daily activities of the entire company:
Remuneration committee: The committee is responsible for review and analysis of the remuneration/payments made to the employees of the company. It seeks to ensure satisfaction for the employees by ensuring that their remuneration matches the economic conditions, thus a source of motivation.
Audit committee: As the name suggests it checks the truth and fairness of all transactions within the company.
Nomination committee: It is responsible for the selection of different staff within the company with due consideration for quality.
Executive committee: Generally runs the company by issuing commands and supervising the other functions in the company. It is also responsible for external communications within the company.
Nestle Co. ltd
This is a food processing company established in 1905 as a merger between the Anglo Swiss company and Farine Lactee Henri Nestle.
Internal environment
The companys’ corporate structure is led by a board of directors who determine the mode of operation of the company.
The internal environment is defined by the cooperation and devotion of the employees towards the discharge of their duties on timely basis. The employees are guided by the international corporate governance code which also guides the operation of other companies.
The employees internal conduct and operation constitutes the mainstream activities in the internal business environment. It has internal checks and controls to regulate the conduct of employees.
External environment
- Economic Environment
The global economic trend directly affects the performance of the company at large and any instability in the economic arena is duplicated in the position of the company.
- Technological environment
Nestle uses the modern forms of technology to ensure high quality products and a sustainable environment in the process of its business.
- Cultural Environment
Being a food processing company, nestle seeks to distribute its products to the consumers where the cultures so permit to avert instances of consumer apathy.
- Natural Environment
The company seeks to achieve maximum production and still maintain a sustainable environment: it has recycling plants to detoxify the wastes of production. It enhances an environmentally friendly production.
- governmental and legal environments
The company deals with specific governments and laws as they appear in different states of the world, with special consideration to international consumer laws.
Competitive advantages
There are various attributes which have sharpened the competitive edge of the company,such attributes include the following; Unmatched brands and products, broad share in the market, Unrivalled retailing and distribution ability, broad consumer base and Cultural diversity.
Strategy
The basic business strategy is consumer centric and the company believes that excellence in the following areas will accelerate performance in all key areas of the business hence an overall success.
- Commitment to attain operational efficiency
- Innovation, invention and renovation
- Consumer engagement
- Wherever, whenever, whoever.
Value creation and competitive advantage sustainability through business strategy.
Nestle seeks to create more value and uphold competitive advantage by the continuous devotion to the attainment of consumer satisfaction.
Through the daily innovations and renovation, the company seeks to remain unique in its products in the market. Patents and copyrights also help the company to foster its competitive advantage.
Aggressiveness in the market also serves to enhance value and increase competitiveness of the company.
Measurement guidelines to verify strategic effectiveness
The strategic effectiveness of the company can be verified from the financial performance and profitability of the company in which the company has continued to enjoy a favorable market share to capturing advertisement and promotion of their products.
The cooperation of the company with its internal departments such as internal audit which checks and recommends proper operation of the companies operations.
The management has continuously set its goals which act as benchmarks as well ensuring that the company remains on tract toward achieving its set goals. The company has also continued to engage in external survey and research which helps boost the status of the company
