It was founded in 1866 with the launch of infant formula. Scholars give different classifications of corporate-level strategic possibilities that firms can pursue to gain competitive advantages in the market. Its direct rival includes Kraft Foods, an American company that sells a range of packaged products. In order to utilise its current resources, and take advantage of the market opportunities created by Milo and Nescafe, Nestle developed new brands such as Nesquik and Nespresso (Bell and Shelman, 2009). Great product diversity characterise the Swiss consumer food industry. Greater vertical integration with farmers or partners can fortify its supply network and reduce supplier power. This was by shifting away from small decentralized units set up globally to limited large “resource-intensive” centres. 1, pp. (Dessler 2016). 1. Lasserre (2012) suggests that organizations such as Nestlé could be trying to gain a critical mass advantage. Despite having some slow growth periods due … As a response, Nestlé ensures that its product development efforts are driven by consumer insights to create brand loyalty. Here is the Nestle SWOT Analysis that highlights the strengths, weaknesses, opportunities, business values, revenue and profits of the retail giant. Secondly, Nestlé’s current strategy was focused on renovating and innovating its product line through reorganizing its R&D. With such a large portfolio, resources from the parent company have to be divided among many, thus some segments would underperform compared to their main competitors because of the lack of investment. – Employees move from the bottom up in the organisation. Nestle should first identify the competitors, evaluate their strategies and compare the strengths and … Regarding emerging markets, Bulcke found out that these markets are growing at a faster pace and therefore Nestlé should integrate further into it as there is a high potential for growth. Instead of holding on to unrealistic goals, the company could reposition itself in the market as becoming ‘healthier’ than the competition. This report discusses the strategy of Nestlé, a multinational enterprise (MNE) with a broad brand portfolio in the processed food industry. Matzler, K, Bailom, F & Kohler, T 2013, ‘Business model innovation: coffee triumphs for Nespresso’, Journal of Business Strategy, vol. December 16, 2020. https://ivypanda.com/essays/nestl-entreprise-under-strategic-analysis/. Jenny Craig -personal nutrition counselling / Jenny Direct website and phone /Home delivery. To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: Our academic writing and marking services can help you! Table 2: Porter’s Generic Strategies and Ansoff’s Matrix. In comparison, The Coca Cola Company spent 0% of its revenue on R&D and PepsiCo, Nestlé’s chief rival, spent only 1.2% or just US$754 million of its revenue on R&D. Another group of strategic possibilities for Nestlé is portfolio analysis. 2, no. An intense competitive pressure in the Swiss packaged food market implies that buyer power is high. In this paper, the outer-organisational analysis using Porter’s five forces reveals that the threat of substitutes, buyer power, and competitive rivalry are high in Nestlé’s industry. We will write a custom Essay on Nestlé Entreprise Under Strategic Analysis specifically for you for only $16.05 $11/page. Do you have a 2:1 degree or higher? Nestlé also has competitors in specific segments, for example, it competes with Kellogg Company in the cereal sub-sector (Schneider 2017). As a result, switch of costs are low for buyers, as competitor firms offer substitute products, such as chocolate confectioneries. It primarily involves portfolio or business unit management for optimal value. Porter (1980) defines such firms as “stuck in the middle” (Barney, 2011). The first part provides a brief background to Nestlé, its product offerings, market share, and position in its industry, among others. – Deliver long term value to shareholders. By applying both strategies, the company would be able to spread its corporate risk and share its costs as its return on capital employed still continues to generate profits for the company. [BUMGT 3702 STRATEGIC MANAGEMENT] September 24, 2012Nestlé Company 189.2.4 Firm InfrastructureThe Nestlé Report provides a fact based analysis of how, over time, their manufacturingplants have helped to create large, skilled labour forces in rural areas and educate the peoplewho supply them, as well as build an important infrastructure such as roads and watertreatment … However, the current players have reported good performance in this industry with significant market shares. which have helped the brand grow. Lastly, Nestle used product development to introduce new products such as Buitoni, Carnation, and Kit Kat to grow within its existing market of food, powdered drinks and confectionary. Bauwens (2012) outlines this as a social innovation where knowledge is shared and can be used by others. Copyright © 2003 - 2020 - UKEssays is a trading name of All Answers Ltd, a company registered in England and Wales. Therefore, customers would, in the long term, respond positively to the company’s efforts of producing healthier products. Moreover, to enhance the reliability of its suppliers, Nestlé implemented a strategy of forming partnerships with its suppliers by creating direct links with them and providing them with support and technical advice. Company’s Management Analysis Though Paul Bulcke, the company’s CEO, is very reticent when it comes to determining the marketing strategies of the company, claiming that Nestlé’s marketing approach is based on the idea of segmentation almost entirely would not be a mistake. Therefore, few smaller entrants succeed in this industry; hence, the threat of new entrants in this industry is low. It entails going global by setting up operations in new destinations or overseas locations through franchise agreements, joint ventures, etc. Their objectives are to deliver the very best quality in everything they do, from primary produce, choices of suppliers and transport, to recipes and packaging materials. Therefore, in order to maintain a strong position, Nestlé should carry on with mergers and acquisitions as well as growing internally. A way in which this issue could be overcome is by applying both strategies. An abridged version of Nestlé’s vision is “to bring consumers foods that are safe, of high quality and provide optimal nutrition to meet physiological needs” (Nestlé 2018, para. 1, pp. One of the future strategies of Nestlé is to grow internally instead of growing through mergers and acquisition. According to Lasserre (2012), country specific cultural values influence managerial values and assumptions in an organisation. Nutrition has always been an integral part of Nestlé’s vision, dating back to its first nutritious infant formula. According to Christopher (2005), companies such as Nestle seek to spread geographically, whilst reducing costs through economies of scale by prioritising manufacturing and operational processes. We've received widespread press coverage since 2003, Your UKEssays purchase is secure and we're rated 4.4/5 on reviews.co.uk. On the one hand, three of its strategic pillars indicate the company’s intention of becoming a cost leader through low cost operations, restructuring its product line and efficiently managing its knowledge. – Decentralised and relatively flat organisational structure which helps to cater for local needs thus increasing flexibility. An analysis of the company’s external … Nestlé, as a significant player in the Swiss consumer food industry, buys raw materials in large quantities. (Bell and Shelman, 2009, p. 9). 50, no. Nestlé spends about CHF 941million on supplies sourced from local farmers for production in its Swiss factory (Varma & Ravi 2017). Competitors Analysis in the Marketing Strategy of Nestle. Your privacy is extremely important to us. 34, no. As a result, a lot of their organizational requirements such as organizational structure and management control systems are stuck in the middle for example the fact that certain products need to be managed globally especially in the nutrition division while others are locally managed. A very few CPGs are offering online services to make the shopping experience more comfortable and pleasant. Although total sales have increased, most products that have led to this increase in sales were unhealthy. Nestlé’s products, such as bottled water, have substitutes in the Swiss market. The responsibility of subcontracting activities relating to manufacturing rests with Technical and Production. We utilize security vendors that protect and Truthfully, not all of these categories will affect a business equally. This is referred to as their “milk district model” which allows farmers to supply milk to the company directly and in exchange Nestle provides its resources and know-how, such as providing storage and chilling facilities (Nestle, 2012). Barney (2011) would argue that Nestlé could be trying to alter perceptions of current and potential consumers by altering its product features. Developing people from acquired companies. Introducing new distribution channels for some brands (e.g. The company is structured through 43 regional organisations reporting to directors of three geographic zones (zone Europe, Asia/Oceania/Africa and zone Americas). They include directional growth strategies and portfolio analysis. It uses demographic, geographic & behavioural segmentation strategiesto cater to the changing needs of the most competitive industry. 11, pp. Nestle has to operate within the framework of laws set by Parliament, and that’s why it depends on political considerations. 34-43. It is structured in four main sections. However, they may reduce the quality of the products because of using lower quality raw materials. However, it seems that some product diversifications through mergers and acquisitions led to the downfall of its profits; especially visible in the years leading up to Maucher’s administration (Bell and Shelman, 2009). 30, no. Porter, ME 1980, Competitive strategy, Free Press, New York, NY. Wheelen, TL, Hunger, JD, Hoffman, AN & Bamford, CE 2014, Concepts in strategic management, international management, and business policy, 14th edn, Pearson Prentice Hall, New York, NY. Nestle is one of the largest companies in the world in the drinks, food and snacks industry. Moreover, Nestlé has the capabilities of doing so with its ‘open innovation’ model (global network with 5,000 scientists and technologists as well as R&D centres worldwide) which enables the company to maximize its chances of coming up with new and innovative products. The firms also invest in aggressive brand promotion campaigns and compete on price, product innovation, and variety. As a top brand, a significant proportion of Nestlé’s costs result from quality raw material purchases. This report presents a strategic analysis of Nestlé. They are equivalent to Dessler’s (2016) concentration and diversification orientations. (2020, December 16). -About half of the factories are in developing countries/ production for the local market. Implementing this strategy could be catastrophic for the company as its growth has been largely relying on acquisitions and joint ventures. This helped the company cope with the volatility of the supply market and enhance its operations. The main element that links everything together is shared values. All work is written to order. First of all, if Nestlé was to pursue a health, nutrition and wellness strategy Nestlé would then have to restructure its product portfolio by getting rid of its unhealthy products such as Hot Pockets, and Kit-Kat. Executive Summary: Nestle is a company which provides the food products from farm to fork. Nestlé’s rich history of providing high-quality products makes it the third largest player by turnover (Euromonitor International, 2017). 21 - 30 of 500 . Moreover, making the same products available in every market might not be adapted to the needs of every customer in terms of tastes, preferences and nutritional value so Nestlé should make sure at least every different product are tailored to the needs of every different market. It sources coffee, milk, technology products, and packaging materials from suppliers. Valcic, SB & Bagaric, L 2017, ‘Return on strategic effectiveness – the need for synchronising growth and development strategies in the hotel industry using revenue management’, Economic Research, vol. It could use concentric diversification to offer products closely related to its current portfolio or the horizontal option to provide new brands (Hill, Schilling & Jones 2017). It could also utilise these strategies to expand into new industries or locations to avoid bottlenecks associated with market saturation and intense rivalry. One such strategic option proposed in this paper is low-cost leadership. Thus, if Nestlé actually succeeds in changing people’s perceptions and position itself as a health driven company, it can manage to maintain its competitive advantage in the future. The success of Nestlé in Africa country respective to their socio-cultural aspects is presented as an example (Davies, 2000). This accounted for 1.89% of the total revenue. Nestlé sells over 10,000 products with distinctive features, including nutritional value, packaging, labelling, etc. To overcome this issue, other elements of the 7s framework have to be adapted. Strong brands – product and brand differentiation. IvyPanda. 1. Ansoff, HI 1980, ‘Strategic issue management’, Strategic Management Journal, vol. Moreover, Nestle made the strategic decision of establishing local supply chains which meant deploying its agricultural capabilities down to the farm level through strategic alliances. These aspects indicate that buyer power is significant. 3, no. Additionally, Nestlé acquired more brands consistent with its presence in the water and pet foods market: e.g. This has allowed Nestlé to sustain its competitive advantage by adapting much faster to change and delivering value to customer (Lasserre, 2012). The company is in the position to adopt new technology to learn more about what their consumers want, but if they don’t … The database is updated daily, so anyone can easily find a relevant essay example. Chang, S, Kogut, B & Yang, J 2016, ‘Global diversification discount and its discontents: a bit of self‐selection makes a world of difference’, Strategic Management Journal, vol. IvyPanda. The competitive analysis is done to understand the relative positioning and market share of the company's direct and indirect competitors. It could be argued also that better branding is linked to its vision of moving from a food and beverage company to a wellness, health and nutrition company. Instead they should focus on being more of a healthier food and beverages company as a cost leader with its current Nestlé model. According to Ansoff (1965), market development is the introduction of existing products into new markets. Nestlé also made a strategic decision of restructuring its R&D unit to satisfy customer needs and internal growth. Synchronization of data between manufacturing and retailers- through the GLOBE system. Online shopping Nestle has a remarkable opportunity to boost its e- commerce sites and online shopping platform. Nestle 2015, Improving supply chain resilience, Web. Operations Strategy. Looking for a flexible role? (Bell and Shelman, 2009).The aforementioned strategy for growth is expected to double Nestlé’s sales in the next 10 years. These benefits include proximity to markets which gives a firm the ability to create products that fit local customer specificities, gaining access to geographical clusters of knowledge creation and development access to good-quality scientists and the capability of a firm to learn from different market and cultures (Lasserre, 2012). Implementing the GLOBE is not enough to implement the new strategy, a culture of sharing information and best practices should also be introduced and reinforced. Thirdly, with the introduction of GLOBE in the mid-2000s, Nestle initiated an era of capturing data by tying all of Nestlé’s entities together under a common technological platform. Hitt, M, Ireland, RD, & Hoskisson, RE 2017, Strategic management: concepts and cases: competitiveness and globalization, 12th edn, South–Western College Publishing, Cincinnati, OH. According to Barney (2011), joint ventures are undertaken in order to manage risk, share costs, and enter into new markets and industries. An example would be the fact that Nestlé exited from cocoa roasting but still carried on producing chocolate. The total sales for Nestlé Nutrition segment has significantly increased from 5,964 million in 2006 to 8,434 in 2007, which represents an improvement of 41% as shown in Exhibit 11. It can also have a negative impact on the liquidity position of the company. Nestlé’s current strategy could be rationalized by foregoing their vision of being a nutrition, health and wellness organization. – It has a pool of experts- its staff consists of scientists, technologists from top universities (Bell and Shelman, 2009, p. 6). IvyPanda. Table: Nestlé’s M&As and their value created. Bulcke emphasized that the priority should be on ‘health, nutrition and wellness’ to implement the vision into every product segment and every country. Government set standard laws for companies that has to met otherwise they have to … We also announced the sale of our U.S. ice cream business to Froneri, our global strategic partner in ice cream. Each SBU concentrates on a specific product line, e.g., coffee and beverages, and cooperates with the firm’s R&D department to ensure consumer-driven strategy and innovation. He continues to add that for a firm to be economically superior in a single industry then they need to sell  at a high price and have small market share (product differentiator) or sell at a low price and gain significant market share (cost leader) therefore Nestlé needs to decide which of the two it wants to become . Changing consumer tastes and preferences and environmental consciousness also implies that people can quickly switch to brands that offer higher nutritional value, instant preparation, and convenient packaging (Varma & Ravi 2017). Under Brabeck’s tenure, a 60/40 preference rating system was introduced where products were either discontinued or sold if they did not achieve the 60% level. Company Registration No: 4964706. To achieve the objective of … SWOT analysis is a vital strategic planning tool that can be used by Nestle managers to do a situational analysis of the organization . This was done to renovate old brands by finding multiple uses for its product. It is through these four strategic pillars that Nestlé derives its current model, the “Nestlé model,” which refers to the company’s long term of objectives of organic growth (target of 5% and 6% each year), continuous yearly improvement in EBIT and improve capital management which determines the assets of the company against the profit it generates (Bell and Shelman, 2009). New products should reflect consumer tastes to enable the firm to create a differentiated position in its industry globally and charge premium prices. professional specifically for you? With many years of pursuing growth by acquisition strategy, Nestlé now owns 2,000 brands of products. However, due to Nestlé’s realisation of “consumers being increasingly aware of the link between food, health and personal wellbeing”, there has been more of a shift away from a technology and processing-driven image towards health and wellness (Bell and Shelman 2009). Once Nestlé diversified its portfolio, they followed-up by expanding brands through what Ansoff (1965) refers to as market penetration. Nestlé Entreprise Under Strategic Analysis Essay. Nestlé has implemented some innovative ideas in its product development; therefore, the company was selected for this analysis to provide insights into its strategic capabilities and responses to outer-organisational forces. It can also reinforce its operational position through vertical growth options that enhance value chain efficiency (Hitt, Ireland & Hoskisson 2017). A second strategy proposal is the differentiation model – vertical and horizontal. 37, no. Strategic Analysis- Nestle Malaysia By Student’s Name Course Instructor Institution Date Table of Contents TOC \o "1-3" \h Introduction3 Mission, Vision, and Objectives3 Environmental Analysis: PESTEL4 Political and Legal5 Economic5 Social5 Technological6 Industry analysis6 Capability analysis8 Proposed Strategy9 Strategy Evaluation10 Conclusion and Recommendations11 … In order to … IvyPanda. It is found that coffee is the best performing segment (27% market share) of Nestlé (Figure 1). An additional threat comes from baby food prepared at home. Nestle: Strategic Management and Swot Analysis 1862 Words | 8 Pages. “Nespresso corners”, boutiques and home delivery). However, growth strategies are criticised for focusing on expansion, as opposed to first developing production value, enhancing business efficiency, and adopting technology (Valcic & Bagaric 2017). Therefore, it is safe to assume that Nestlé’s current strategy is competitively sustainable in the present however it remains to be seen if it can be successful in the future with its new vision . Nestle. Porter (1980) cited in Barney 2011 further explains that if a firm tries to implement both strategies then one of them will fail. Its mission is to “make better food so that people live a better life” (Nestlé 2018, para. Such strategic options are meant to grow sales, revenue, or assets (Wheelen et al. Some of Nestlé’s well-known brands include Nescafe, Kit-Kat, Purina, Aero, Butterfinger, Maggi, and Haagen-Dazs. In fact, in terms of strategic operations, Lasserre (2012) argues that making fundamental changes in the value chain can lead to developing new products and services which can help a company sustain its innovative advantage. Consequently Brabeck made the strategic decision of initiating the GLOBE system. Indeed, the strong R&D platform enables Nestlé to produce more healthy products while maintaining its taste. A good example would be the fact that the Globe system allowed for a synchronization of data leading to an improvement in order fulfilment between manufacturers and retailers. 1, pp. You are free to use it for research and reference purposes in order to write your own paper; however, you must. Furthermore, the relationship between Nestle and L’Oreal developed further when they created two joint-ventures: Galderma and Laboratories Inneov. Another growth strategy recommended is horizontal diversification or geographic expansion. However, a differentiation strategy is prone to imitation by rivals, low market acceptance, and high costs (Kim & Wang 2014). However, this strategy came at a disadvantage to Nestlé as they lost the benefits of decentralization. Executive Committee consists of the CEO and 12 top managers. Nestlé’s market share and position in the fast-moving consumer goods industry are illustrated in Figure 1 and 2 below. We're here to answer any questions you have about our services. It is structured in four main sections. 2254-2274. The purpose of this report is to clearly apply strategic concepts and analysis to Nestlé S.A. and its industry . From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs. It contains thousands of paper examples on a wide variety of topics, all donated by helpful students. Concerns over the safety and nutritional value of some of Nestlé’s products may increase switching to other options by health-conscious consumers (Mohajan 2015). In the Swiss market, Nestlé is the third-largest player after Migros and Emmi (Schneider 2017). Personalized services – 24/7 service though telephone and internet help line for Nestlé’s premium products. Another of the future strategies initiated by Bulcke is to shift the structure of Nestlé from an “organisation by country” to an “organisation by business” through sharing best practices using GLOBE (Bell and Shelman 2009, p.10). Nestlé’s current strategy of reorganizing its operations did come as an advantage as in some cases moved away from its “agricultural and processing roots” to buying the ingredients from outside suppliers (Bell and Shelman, 2009). Thus, it can be assumed that Nestlé’s strategically unrelated acquisition of Alcon and partial acquisition of L’Oreal between 1974 and 1977, contributed to a decline in profits between 1978 and 1981. ⏰ Let's see if we can help you! This highlights the fact that Nestle was seeking to establish its value chain activities, or Global business system, earlier on in its history (See value chain above). Nestlé Entreprise Under Strategic Analysis. PEST Analysis of Nestle: Conclusion. ANALYSIS OF NESTLÉ STRATEGIES BUSINESS STRATEGY Conglomerated diversification strategy Nestlé has set up a diversification strategy developing a large products portfolio in many fields Offering the best tasting, healthiest choices across a wide range of food and beverages, from morning to night Its portfolio covers almost every food and beverage category: milk and dairy … December 16, 2020. https://ivypanda.com/essays/nestl-entreprise-under-strategic-analysis/. A key strategy in Nestle products and services is Subcontracting (also called co-manufacturing & co-packing or contract- manufacturing & contract-packing)/ Outsourcing. It is an important technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Nestle is facing in its current business environment. These factors are described below using Nestlé as a case study. Registered office: Venture House, Cross Street, Arnold, Nottingham, Nottinghamshire, NG5 7PJ. This statement shows a pledge to offer superior nutritional products. The responsibility of subcontracting activities relating to manufacturing rests with Technical and Production. One of the objectives of Nestlé is to be the reference for financial performance in food and beverage industry. Corporate strategy communicates a firm’s general growth direction in its industry (Hitt, Ireland & Hoskisson 2017). As of 2020, there are several marketing strategies like product/service innovation, marketing investment, customer experience etc. "Nestlé Entreprise Under Strategic Analysis." It owns local subsidiaries – factories and research centres – in 80 nations. Thus, Nestlé is an ideal trading partner for suppliers, which gives it considerable bargaining power in the supply chain. However, this would negatively impact on the financial position of the company as these are its core products. – Democratic leadership style: managers are given autonomy to take decisions. Therefore, the threat of substitutes is significant in this market. This vision is in line with Brabeck’s strategies of going beyond food to Nutrition, Health and Wellness (Bell and Shelman, 2009). Company: Nestle AG CEO: Ulf Mark Schneider Year founded: 1905 Headquarter: Vevey, Switzerland Number… Academia.edu is a platform for academics to share research papers. Therefore, in terms of operational efficiency, Nestlé can be seen to be sustainably competitive. (Bell and Shelman, 2009). Source: Developed by the Author for this work. In fact, Nestlé focused on reducing fat and calories as well as incorporating healthy and natural ingredients into a wide range of products. 60% of materials purchases from emerging economies, Direct sourcing -In developing countries agricultural commodities are bought from local markets and often directly from farmers- rather than on the world market. With effective business strategies across the global market, Nestlé is likely to capture the consumer behaviour which in turn increases its operational efficiency and productivity. Table 1: Corporate Strategy Classifications. Strategic Business Value/Supply Chain Analysis: Table of Contents Section 1 – Executive Summary3 Section 2 – Introduction 4 Section 3 – Nestlé Background 5 3.1 Brief History 5 Section 4 – Literature Review – The Value Chain 6 4.1 The Value Chain 4.2 Nestle and Porter’s Value Chain6 Section 5 – Nestlé Strategies 7 5.1 Creating Shared Value7 5.2 Sustainability8 5.3 International Competitive 4, pp. ensure the integrity of our platform while keeping your private information safe. Free resources to assist you with your university studies! The world’s leading FMCG Company is using different strategies in different markets. As Nestle grew and entered new markets, they worked towards horizontally integrating their supply chain. VAT Registration No: 842417633. ... Our NESTLE Case study writer at onlineassignmentwriter.com is providing you with … Additionally, Nestlé has managed to build strong foundations through mergers and acquisitions which has led it to improve its financial position. 15, no. (refer to Appendix 2). Nestlé SWOT Analysis In A Nutshell Nestlé is a large multinational food and beverage manufacturer with more than 2000 brands spread across 197 countries. 2014). No plagiarism, guaranteed! We continued to evolve our portfolio toward attractive, high-growth businesses by: Divesting underperforming or non-core businesses such as Nestlé Skin Health. This shows that the unhealthy products are in fact the cash cows of Nestlé which indicate that they are the foundation of the company. More than 275,000 employees. 8, pp. Porter’s Five Forces Model gives a framework for analysing a firm’s internal and external environments and strategy development (Hitt, Ireland & Hoskisson 2017). 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