SID: 1135893
Table of Contents Company Introduction:................ Introduction:................................... ....................................... ........................................ .................................. .................... ...... 3 Vision and Values:................................. alues:..................................................... .......................................................... ................................................. ........... 3 Company Objecties:............................ Objecties:................................................ ........................................ ........................................ .............................. ..........3 3 Strate!ic "nalysis:......................... "nalysis:............................................. ........................................ ....................................... ..................................... .................. # $%S&%' "nalysis....................... "nalysis........................................... ........................................ ........................................ ....................................... ....................... .... # S(O& "nalysis:.............................. "nalysis:.................................................. ........................................ ................................. ........................... .................... ...... ) $orters 5 *orces:....................................... *orces:........................................................... .......................................................... .............................................. ........ + $orter,s $orter,s diamond and competitie adanta!e:........................................ adanta!e:........................................................... ................... 9 "nso- atri/:................................................. atri/:.................................................................... .................................................... ....................................... ...... 10 oston atri/:................................................ atri/:.................................................................... .................................................... ...................................... ...... 11 Value C2ain "nalysis.......................... "nalysis.............................................. ....................................... ....................................... ................................ ............13 13 ecommendation:......... ecommendation:............................ ....................................... ........................................ ................................. ........................... ................... ..... 1# %aluation 4 Conclusion:...................... Conclusion:......................................... ....................................... ................................................. ............................. 1# 'ist o* e*erences:.............. e*erences:.................................. ....................................... ....................................... .............................................. ............................ 15
Company Introduction: Nestle is one of the world’s largest and most known companies. It is a Swiss company with its headquarters located in Vevey, Switzerland. he company was inaugurated in !"## !"## $Nestle $Nestle %&!%' and since since its incepti inception on has grown through through leaps leaps and (ounds (ounds to 1
(ecome the world’s largest food and nutrition company $)nn money %&!!'. he company is also a ma*or stakeholder in the cosmetic company, +’real. -or a company to start from a small domestic town and then epand internationally, the strategic vision of the company plays a central and key role. he su(sequent chapters shall discuss the company’s internal goals and strategy and how that strategy paves way for Nestle to (uild its competitive advantage in all the markets it operates in.
Vision and Values: he vision of Nestle reflects ideas of fairness, honesty and long/term thinking. hese ideas are reflected in the company’s corporate (usiness principles that have shaped the company culture and strategy for the past nearly !0& years. he core values that the company has are its people, the quality of its people and (rand, the company’s (rand portfolio, their consumers, their customers and the company’s sustaina(le performance. $Nestle, %&!%'
Company Objectives: he main o(*ective of Nestle can (e appropriately summed up (y the phrase 1)reating Shared Value’ $Nestle, %&!%' his principle at Nestle can (e descri(ed as having a conviction to (uild long term and (eneficial relationships with their stakeholders, comply with all legal requirements and ensure all activities that the (usiness undertakes are sustaina(le and result in value creation for (oth the company and the society at large.
2 strategy that the company has developed to mark their achievements is that they would like to (ecome the (enchmark of $Nestle, %&!%' !. Nutrition, 3ealth and 4ellness %. Sustaina(le -inancial 5erformance
6. rust (y all stakeholders. In order to achieve these (enchmarks Nestle underwent heavy ependiture in 7esearch and 8evelopment and relies greatly on new research and innovation, (oth in terms of food production and processes.
Strategic Analysis: he 5estel analysis is a tool made for analyzing the 5olitical scenario, the 9nvironmental scenario, Socio political scenario, technological scenario and legal scenario of a the macro environment of a (usiness. his is a management method that eamines the effect that events or influences from outside may have on the performance of a company or organization $)am(ridge8ictionary %&!%'. 5estel analysis is usually conducted keeping in mind the situation of a particular region. -or the sake of this marketing plan, the pestel analysis of Nestle will (e conducted keeping in mind the market of :reat ;ritain.
PESTE Analysis Political: 9ngland is a mem(er of the 9uropean
mem(er of the is the third largest economy in 9urope after :ermany and -rance
however 9conomists within the <> market predict a mild slip (ack into recession for the country in the year %&!% $((c.co.uk %&!%'. 8ue to the economy presently (eing in a low growth stage it is very essential for Nestle to understand the market and come up with products and processes where it could continue to offer the same high standard of 3
products that it offers and yet try and minimalise costs. ingdom was also hit (y the recession of the year %&&? and there was a fair amount of *o( loss. >eeping this in mind If Nestle were to set up more production plans and hired local population, it would contri(ute to value creation. Social: 2round ##.%@ of the 5opulation of <> lies (etween the age (rackets of !A/#0
years. his means that there is a large la(or force availa(le however a ma*ority of population is also aging. -or Nestle this could (e an opportunity if it decides to introduce a line of products that are compati(le with its competitor’s products such as high fi(er cereal offered (y >ellogg’s or protein (ars. 4ith a large young population, nestle can introduce new flavors of its chocolate line with added health (enefits as well $3ill, . B 7. 4est(rook, !CC?'. Technological: he <> is a technologically advanced country with heavy focus on
research and development and computed aided simulations and designs his is a positive point for Nestle as 7esearch and 8evelopment is a key competitive advantage for the company. 4ithout heavy epense incurred in this department, the company would not have (een a(le to reach the glo(al num(er one position that it has acquired today. 4ith a technologically friendly environment in <>, Nestle has the options of introducing new technology and conducting (etter research without the fear or incurring too high costs or the consumers finding it difficult to adapt $((c.co.uk %&!%'. Environmental: he government of the ingdom pays stress on companies
doing their operations on environmental friendly principles. ;ecause Nestle is a company that is within the food and nutrition industry therefore the environmental compliance is etremely essential for it to cater to. hese include the correct and green processes through which the company manufactures $9nvironment protection act, !CC&', as well as ensuring that all the edi(le products meet the health standards as set (y the government of the ingdom. Legal: 4ith regards to the legal situation of ingdom the company needs to pay
attention to various kinds of laws that are prevalent. hese include health and safety laws, consumer laws, and employee laws as well discrimination laws. -or operations #
within the united >ingdom it is essential for companies to not only align their processes with the legal standing of the government (ut also their management style and organizational culture to ensure that all employees are treated equally and fairly, there are no reported cases of harassment of any kind and that the products have a health and safety assurance otherwise the company is lia(le to (e sued.
S!OT Analysis: he swot 2nalysis is part of a strategic planning process for small and medium sized organizations mostly $3ou(en, !CCC'. he analysis measures the company on two fronts= internal and eternal. In the internal area the strengths of the (usiness and the weaknesses it posses in its own operations are analyzed while in the eternal analysis, the opportunities and threats faced (y the (usiness in its macro environment are analyzed. Strengths: ne of the (iggest strengths of Nestle is the (rand image that it has. Its
(rands such as >itkat, Nescafe, Nesquick are almost synonymous with the (rand name. he company also has the heavy financial muscle to invest in its research and development which can further enhance its product line as well as invest in marketing. It also has a very strong glo(al presence (oth in terms of production capacities as well as market share. Weaknesses: ne weakness of the company is that it has had to recall many of its
products due to (ad quality and that has greatly hampered its (rand image. -or a company as (ig as Nestle the customers do not epect such a dangerous mistake to (e made especially since it operates in the food industry. he company also is the target of (eing (oycotted (ecause of media pressures and environmentalists for engaging in non/green practices and usage of child la(or $I+7-, %&&A'. OpportunitiesD he fact that Nestle has gone from (eing merely a food (rand to (eing
nutrition and well (eing (rand is a good opportunity for the company as it opens many new areas for product line etension. 9ntering into emerging markets and esta(lishing manufacturing plants also helps the company in reducing its costs. 5
Threats: he food industry is pro(a(ly one of the most saturated industries in the
world. >eeping this in mind Nestle faces the very strong threat of competition. his competition can emerge (oth from international (rands as well as local (rands of the market in which Nestle enters and tries to operate. he rising prices of raw materials, fuel as well as the political insta(ility in many third world countries where nestle has set up their production plants also threatens to cause unrelia(ility in the supply line $+in, %&&?'.
Porters " forces: Eichael 5orter $!C?C' gave a framework (y virtue of which the competitive advantage of companies can (e assessed in the market in which they operate in. he framework includes an analysis of five concurrent forces that affect a (usinessF a(ility to compete $Eichael 5orter !C?C'. >eeping in mind the glo(al market in which Nestle operates in, the 5orters five forces analysis will (e carried out keeping a general view of the entire world as the potential market for Nestle. Threat of New Entrants: Nestle despite (eing in a food and nutrition industry faces the
serious threat of new entrants in the market. 4eather this threat is domestic or from international firms, it eists (ecause it is an industry where the (arriers to entry are very low. If we discuss Nestle in India for eample there are low (arriers to entry and many small domestic players can enter the market and challenge the market of nestle through their pricing or product offering which is tailored to the local culture and tastes. Bargaining Power of SuppliersD he (argaining power of suppliers of Nestle is very
low especially in regions where the countries are economically (ackwards such as 5akistan or ;angladesh. hat is (ecause Nestle (eing such a giant in the market has the a(ility to (ring lots of new (usiness to the suppliers and therefore the suppliers have to produce the raw materials according to the outlines set (y the company or they can (e replaced.
)
Bargaining Power of consumers: he (argaining power of the customers of Nestle is
high. hat is (ecause it is a (rand which greatly relies on consumer appreciation for the product. If a product is launched in any part of the world where the consumers do not like the taste, they will refuse to (uy it. Similarly in third world countries the consumer (ase is very price sensitive. his raises their (argaining power if Nestle wants to penetrate, then it will have to reduce its prices to their afforda(ility level. Threat of Substitutes: hreat of su(stitutes for Nestle is also very high. In all areas of
its operations there are multiple other firms that are offering either similar products or su(stitute products. -or this purpose Nestle has to ensure that it offers a product eperience that cannot (e imitated and is demanded (y its consumers. n!ustr" #ivalr": Industry rivalry for Nestle is very high in no matter what part of the
world it operates in. In ingdom it faces threat of competition from (rands like >ellogs, in India it faces competition from local (rands and (rands such as >norr which are starting to venture into the food industry.
Porter#s diamond and competitive advantage:
Eichael 5orter presented his theory a(out the competitive advantage of Nations through the use of this self designed diamond model. 2ccording to his theory, nations can create a sustaina(le competitive advantage for themselves if they use the following four factors efficiently. It is called a diamond model (ecause the effect of one varia(le causes a change in the other varia(le. 2ccording to 5orter, a country can create competitive +
advantage for itself rather than merely relying on natural endowments. >eeping Nestle in mind, Switzerland has created a glo(al recognition for itself (ased on this huge multinational giant’s image $9conomics/papers %&!%'.
6irm Strate!ty . Structur e 4 3ialry
6actor Conditio ns
Demand Conditio ns
3elated Industrie s.
-actor conditions talk a(out the country creating its own factors of production. Gapan for instance does not have any local metal or steel however it has (ecome synonymous with the manufacturing of metal cars. Similarly, factor conditions include (uilding up on a country’s skilled resources and putting them to (est use such as Nestle has done (y acquiring raw materials from other parts of the world and treating them through innovative processes to suit its own needs $Nestle, %&!%'. 8emand conditions mean that when the demand of a certain product is high locally, the company can focus on it and (uild that as its competitive advantage. he demand for healthy food was very high In Switzerland and taking that demand Nestle (uild its company and has now succeeded in creating such a glo(al giant. ;ecause Nestles related and supporting industries are also thriving and are competition with each other, this gives Nestle the opportunity to (uild on its cost advantage and focus on its innovation so that it can continue its differentiation strategy in the market. he local conditions affect the firm strategy and culture. 4ithin Switzerland there was high focus 8
on doing things after thorough research and therefore the same Ideas were inherent since the inception of Nestle. $Nestle)ompanyStrategy, %&!%'.
Anso$ %atri&:
E&isti
%ar'et Penetration
Product (evelopment
%ar'et (evelopment
(iversi+cation
ng %ar'e ts
)e* %ar'e ts E&isting Products
)e* Products
Nestle operates in a multitude of different markets. >eeping each market in mind it develops different strategies. he 2nsoff matri shows four different kinds of strategies that companies can follow in order to achieve their goals. he first is the market penetration. In this strategy companies lower their prices so that they can enter into the market more quickly. In the case of 5akistan it was seen that when Nestle entered 5akistan, they introduced their eisting product Eilo at very afforda(le rates, even in smaller su( sizes so that the market can readily accept the product. In Earket development strategy, the company takes an eisting product into a new market. his can (e seen as when Nestle took >itkat to foreign markets or when it launched Nescafe coffee in )hina. 5roduct development is when a company remains in the same market it is presently operating (ut starts to epand its product line. Nestle was seen using 9
product development when it remained in the 9uropean market (ut started venturing into health and nutritional products and epanding its product line. Nestle also has a diversified portfolio as it invested in the cosmetic company +’real and is also the stakeholder in a num(er of pharmaceutical companies worldwide $;onn, I. %&&!'.
,oston %atri&:
$Eayareynoldswriter %&&"'.
Nestle is a house of (rands. It consists of over a hundred different products and each product is at a different stage in the market depending upon the region in which it is (eing sold. :enerally the product lines of nestle can (e divided into (ig su( categories such as (a(y foods, which includes )erelac and Nestum. )ereals and ;ottled water, chocolate items, 8airy products, drinks, ice cream etc. 9ach product from each of these different categories is places on a different point in the ;): matri. -or the sake of simplicity of the pro*ect we will only discuss a few of the known and flagship products of Nestle $;oston )onsulting :roup, %&!!'. he cash cows of Nestle are very easily most of its chocolate (rands and (a(y food items. )erelac is a universal cash cow as well as >it >at that has a very strong (rand presence worldwide $7euters, %&!%'. Nido is fast growing nutritional milk that is gaining 10
popularly in the 2sian region and in the year %&!& $New Hork imes, %&!%', a new >it >at manufacturing plant was set up in ingdom that was to produce over ! (illion (ars of the chocolate each year. he Stars are those products which have potential in the market and Nestl’s lines of frozen product are quick to capture a declining cooking market within the eeping in mind the culture of India, the (reakfast is a wholesome meal and the culture of cereals is very low $New Hork imes, %&!%'. he particular products in the Indian markets are still struggling to figure out their future.
Value C-ain Analysis : 2 value chain analysis is a specific set of activities that are linked together and through their use the firm can produce a competitive advantage for itself. his value chain analysis was also developed (y Eichael 5orter and can (e summed up (y the following representation $5orter, !C"A'D
11
Inbound 'o!istics
Operatio ns
Outboun d 'o!istics
.ar7etin !4 Sales
Serice
If we conduct the value chain analysis for Nestle we can see that it has a very good supply chain and integration of all operational (usiness units otherwise it would (e very difficult for the company to achieve glo(al dominance. he in(ound logistics include warehousing and inventory control. In Nestle it is a computerized and automated system of inventory control that is different for each country. his is why the supply of Nestle products is hardly ever scarce in the market. he operations of nestle are very successful as they transform a lot of raw material into very nutritional products and create value for their customers. ut(ound logistics is the process (y which finished goods are transferred to the sellers. -or this purpose Nestle has started to set up distri(ution channels in each country where its production plant is set up so ensure timely delivery. Earketing and Sales of nestle help in creating the (rand that Nestle has evolved into today. he service area is that which responds to concerns and after sale service and Nestle tries its (est to provide good customer service to any customers that may (e dissatisfied (y the product $;onn, I. %&&!'.
.ecommendation: Nestle has a very esta(lished setup of (oth its operations and marketing. 4hat the company should however invest in is (uilding its pu(lic image as a corporately responsi(le company as well. 2s it has already (een pointed out a(ove Nestle is one of the world’s most (oycotted companies (ecause of a certain perception that it commits 1
corporate crimes when coming to environmental practices. he company needs to make sure that that particular image is altered. 2lso, the products of Nestle which are not doing so well in certain markets should (e pulled out rather than constantly spending more on them to turn their value around. Some products are difficult to sail (ecause of the culture of the market that Nestle operates in and therefore should (e avoided to ensure sunk costs do not occur.
Evaluation / Conclusion:
In conclusion it is safe to say that Nestle has a lot of positive attri(utes (acking its larger than life product portfolio and therefore the company has managed to sustain its position in the list of the fortune five hundred companies. he company through the use of efficient management procedures, innovation, capital infusion and research and development continues to epand its portfolio and also serves as an eample of not *ust a an eceptional food and nutrition providing company (ut also a real multinational corporation. here are many lawsuits against the company and it is also generally considered to (e one of the world’s most (oycotted companies and despite all off that the revenues of the company have hardly slumped since its inception. hat is a testament to their value chain creation and streamlined processes that ensure that nestle (ecomes a part of the livelihood of the people of the !6& countries it serves.
ist of .eferences: !. ((c.co.uk $%&!%' the world of technology. KonlineL 2vaila(le httpDMMwww.((c.co.ukMnewsMtechnologyM K2ccessedD Ath august %&!%L.
atD
%. ;elch, : B ;elch, E. %&&6. 2dvertising and 5romotion= an Integrated Earketing 5erspective, #th edition, Ec/3 )ompanies. 13
6. ;onn, I. $%&&!', 8eveloping Strategic hinking as a )ore )ompetencyO, Eanagement 8ecision, 6C$!', #6 / ?#.
0. ;oston )onsulting :roup. $%&!!', About BCG. KnlineL. 2vaila(le at P httpDMMwww.(cg.comMa(outQ(cgMhistoryMhistoryQ!C#".aspR. K2ccessed #th 2ugust, %&!%L. A. ;ryson Hork. %&!!. Nestle: Aisles to go with products . 2vaila(leD httpDMMarticles.chicagotri(une.comM%&!!/&6/!&M(usinessMct/(iz/&6!!/frozen/food/ side(ar/%&!!&6!&Q!Qpizza/nestle/usa/chairman/cooking. K2ccessed #th 2ug %&!%L.
#. )nnEoney.%&!!. :lo(alA&&. 2vaila(leDhttpDMMmoney.cnn.comMmagazinesMfortuneM glo(alA&&M%&!!MsnapshotsM#!%#.html. K2ccessed #th 2ugust %&!%L. ?. 8ictionary.)am(ridge $%&!%' PESTLE nlysis. KonlineL 2vaila(le httpDMMdictionary.cam(ridge.orgMdictionar&yM(usiness/englishMpestle/analysis qTpestleUanalysis K2ccessedD #th august %&!%L.
atD
". 9conomics/papers $%&!%' The Study nd !e"iew on #ichel Porter$s the Co%petiti"e Ad" . KnlineL 2vaila(le atD httpDMMwww.economics/papers.comMthe/ study/and/review/on/michael/e/porters/the/competitive/advantage/of/ nations.html K2ccessedD ?th august %&!%L. C. 9uropa.eu $%&!%' 5olicies and activities of the 9uropean
!&.3ill, . B 7. 4est(rook $!CC?'. S4 2nalysisD It’s ime for a 5roduct 7ecall. +ong 7ange 5lanning 6& $!'. !!. 3ou(en, :, !CCC. 2 knowledge/(ased S4/analysis system as an instrument for strategic planning in small and medium sized enterprises. Gournal of 2pplied 9conomics, KnlineL. %#, !%A/!6A. 2vaila(le atDhttpDMMwww.cuaed.unam.mMpuelQcursosMcursosMdQgcfeQmQdosMmoduloMmodul oQ%Mm%/!&.pdf K2ccessed &0 2ugust %&!%L.
1#
!%.International +a(or 7ights -orum. %&&A. he !0 4orst )orporate 9vildoers. KN+IN9L 2vaila(le atDhttpDMMwww.la(orrights.orgMcreating/a/sweatfree/ worldMethical/consumerismMnewsM!!060 . K2ccessed &0 2ugust !%L. !6. Gohn >atsaros B 5eter )hristy %&&A. Getting &t !ight the 'irst Ti%e: (ow &nno"ti"e Co%pnies Anticipte )e%nd . 4estport, )D 5raeger
!0.+egislation.gov.uk. %&!!. En"iron%entl Protection Act *++, . KN+IN9L 2vaila(le atDP httpDMMwww.legislation.gov.ukMukpgaM!CC&M06Mcontents .R K2ccessed &0 2ugust !%L. !A. +in, G.N, %&&?. S
!?.Eichael, >athleen, :oold, Sommers +uchs, !CC#. Eanaging the Eulti(usiness )ompanyD Strategic Issues for 8iversified :roup. !st ed. +ondonD 7outledge. !".Eichael, 5orter, %&&". he -ive )ompetitive Strategy. 3arvard ;usiness 7eview, !A Ganuary %&!!.
-orces
hat
Shape
!C.Nestle.com.%&!%. 3istory. KN+IN9L2vaila(le atD httpDMMwww.nestle.comM2(out
%!.7euters. %&!%. Chins %o%s /ey to Nestle bby %il/ del. KN+IN9L 2vaila(le atDhttpDMMwww.reuters.comMarticleM%&!%M&0M%0Mus/nestle/(a(ymilk/ id
atD httpDMMwww.nytimes.comM%&!&M&CM%6M(usinessMglo(alM%6nestle.html . K2ccessed &0 2ugust !%L.
%6.he telegraph. %&!%. Nestl serves up FcrackingF results. 2vaila(leD httpDMMwww.telegraph.co.ukMfinanceMnews(ysectorMretailandconsumerM"66!#AAMN estle/serves/up/cracking/results.html. K2ccessed #th 2ug %&!%L.
1)
