Introduction: Nestle’s lineage dates back to 1867 when Henri Nestle founded the company Ste Henri Nestle and was responsible for producing infant food composed of milk, grain, and carbohydrates. Before Nestle even knew it, the company grew substantially and was required to build plants in each major market it was located in, so that to ensure efficient production and distribution. This way the company could gain sustainability within its home market, as well as in its European-based markets.
The gain in Nestle’s rapid popularity was mainly accounted towards large numbers of doctors all over Europe highly recommending the company’s product for malnourished infants.
Subsequently, Nestle also engaged in mergers, geographical expansions, and diversification of its product portfolio early in its life cycle. With headquarters in Vevey, Switzerland, Nestle is today the world’s largest food and beverage company. In 2007, the company recorded sales of CHF 107. 6billion, with a net profit of CHF 10. 6billion (Nestle, 2008).
The company’s strategy revolves around several base guidelines; * current existing products grow in their life-cycle through innovation and renovation while maintaining a balance in geographic activities and product lines * potential in the long-run is never sacrificed for short-term performance * highest priority lies with bringing the best and most relevant products to people, wherever they are, whatever their needs Nestle S.
A. , through its subsidiaries, manufactures various food and beverage products on a global scale.
Its products include bottled water, baby foods, dairy products, breakfast cereals, ice cream, nutrition products, beverages, chocolate and confectionary products, prepared foods, and pet care products.
The company offers these products under various brands consisting of Cerelac, Kit Kat, Friskies, Nescafe, Stouffer’s LeanCuisine, Nesquik, Nestea, Nestle Nutrition, Dreyer’s, Nespresso, Carnation, Purina, Hot Pockets, MILO, Coffeemate, Maggi, NIDO, DOG CHOW, and Poland Spring. In addition, it also manufactures pharmaceutical and surgical products (BusinessWeek, 2008). Nestle S. A. as over the years been a perfect example of how a multinational company doing business in many countries can present a deep understanding of cultural differences – that people are different across nations – and therefore products should be managed to meet the tastes and needs of local cultures. Nestle S. A. SWOT analysis: SWOT analysis is a basic model that provides a guideline for developing marketing plans. It aids organizations in analyzing their strengths and weaknesses, in addition to opportunities and threats. Its role is to receive information from environmental analysis and separate it into internal and external issues.
The result of the SWOT analysis should provide an indication of what will help the firm in accomplishing its objectives, or indicate an obstacle that must be overcome in order to achieve desired results (Marketing Strategy, 1998). The importance of a SWOT analysis for Nestle S. A. lies within its functionality of providing instant review for each company personality. It would be accurate to say that it is a basic instinct of every individual – or a firm -to be measured and evaluated, and SWOT analyses provide a wonderful tool for assessment purposes. The following outlines Nestle’s SWOT analysis: Strengths: Decentralized organizational structure – Nestle undertook a major internal realignment in its organizational structure with an objective to make it a company with multiple focus areas. It did this by implementing Strategic Business Units (SBUs) and processes that helped to further strengthen its wide portfolio of brands. By doing so, Nestle S. A. subsidiaries could take advantage of its sales and distribution channels so as to make them more efficient; as a result, subsidiaries could then effectively address the emerging channel opportunities that would contribute to the growth of the company.
Product innovation – the company has been continuously introducing new products within its global branches, in order to meet different cultural needs, while continuously keeping up-to-date with changing demographics. With Nestle being recognized worldwide, providing a wide variety of products ultimately results in greater flexibility and leverage for organizational decisions. In addition, existing products are prone to become stronger and gain greater value through innovations and R&D. The stronger Nestle’s brands are the more value they can create, not only for their consumers, but also for their shareholders. Weaknesses: Standardization of products – since standardized products and images are not sensitive to cultural differences, misfortunes accruing to global brands – such as Nestle – can reverberate across entire product ranges and tarnish corporate reputations either on a region-wide or worldwide scale. Therefore it is crucial for management to carefully analyze the cultural context in which it is operating. * Weak brand image in U. S. – a strong controversy over Nestle’s aggressive marketing efforts to 3rd World mothers resulted in a much publicized boycott in the U. S. that still persists today within the diverse American culture.
Another issue that adds to a weaker brand image – majorly by the U. S. – is that concerning the chocolate bar Kit-Kat. Even though Kit Kat is produced worldwide by Nestle, it is not the case in the U. S. where Hershey Inc. has acquired the license to produce the candy bar. Kit-Kat is considered the #1 brand in the UK, and the world’s #2 chocolate after Snickers, therefore Nestle being unable to capitalize on the U. S. candy bar market could result in a possible set-back in the long run. Opportunities: * Potential for expansion – the company has potential to expand to smaller towns and other geographies.
Existing markets are not fully tapped and the company can increase its presence by penetrating further. For example, with India’s and China’s demographics currently changing in favor of the consuming class, the consumption of goods provided by Nestle should be tailored to reach those untapped markets and try and meet the local needs as effectively and efficiently as possible. * Increase in health-awareness – over 60% of the U. S. population is considered obese and there is currently an increased effort of individuals towards becoming healthier within their daily lives.
Nestle could seize the increased health-awareness opportunity and consider reviewing its products in order to improve their nutritional value through both renovation and innovation (Nestle, 2008). In addition, it could contribute towards R&D in better understanding body weight management, health, and wellness. Threats: * Prices of raw materials – unexpected increases in the price of raw materials is a concern for Nestle. Prices of key input materials such as wheat, milk, coffee, and sugar have gone up before in the past, and similar scenarios could potentially rise up in the future.
In order for Nestle to overcome this price obstacle it would need to increase its prices on some of its products, and in some cases might also need to offer value-adding products at premium prices. * Competition – with the growth potential that the food processing industry has, it could potentially attract other domestic as well as multinational companies. As the industry becomes more-and-more saturated, further growth is limited through existing product improvements, a gain in market share, or a rise in overall consumer demand. Nestle S. A. Industry Analysis:
Nestle is large multinational firm that offers a wide variety of products to a large global consumer base. It is only natural that through its diversified portfolio the company be involved in multiple industries and markets simultaneously. Some of the main industries Nestle is involved in include: 1. Beverage Manufacture and Bottling – according to Hoovers (2008), the soda drink and bottled water industry in the U. S. includes approximately 3,000 companies that manufacture and distribute beverages; Coca Cola and PepsiCo hold more than 50% of market share.
Consumer tastes and preferences, as well as demographics are the forces of demand for non-alcoholic beverages. Firms that experience profits, do so due to effective and efficient marketing efforts. Nestle being a large manufacturer experiences economies of scale-and scope-in production and distribution. Bottled waters are increasingly becoming a rapid growing category of beverages regardless whether they are sourced from springs or locally filtered taps (Hoover, 2008). 2. Candy Industry – includes about 1,600 companies including Nestle, Mars, Hershey, etc, and characterized as being fragmented (Hoover, 2008).
The industry typically includes companies that make chocolate from beans, companies that used purchased chocolate to make candies, and/or companies that make non-chocolate candy. According to Hoover (2008), demand is driven by consumer tastes and population growth. However, in order to sustain profitability and market share, the company should be efficient in manufacturing processes, in its supply chain management, and finally marketing strategies (Hoover,2008). 3. Coffee Industry – according to Hoover industry databases (2008), the coffee industry contains about 250 companies and considered highly concentrated.
While consumer tastes are what deviate demand in the consumer sector; the business sector influences demand through economic growth of business. 4. Dairy Products Manufacture – this industry is rapidly becoming saturated and the profitability of individual companies becomes solely dependant on operation efficiencies, as well as marketing ones. Small companies can easily compete with larger ones due to low economies of scale, and the fact that existing larges companies have been built through acquisitions provide a greater chance for competitiveness from small firms (Hoover, 2008).
Course of Action/Recommendation: The SWOT analysis detailed above analyzed the internal and external factors affecting Nestle and the following course of action(s)/recommendation has been provided: * Continue efforts towards greater market penetration as well as discovering undiscovered niche markets. If an undiscovered market is found, be the first to move into and try and reap the benefits first before competition arises. * Maintain current trends of continuously renovating existing products, and increase efforts towards R&D for new innovative ones * Acquire license for Kit Kat in the U. S. and work towards improving brand image through positively adding value towards their corporate social responsibility principles * Conduct a thorough research and analysis of new trends within existing markets; design and implement a marketing strategy that will suit local tastes, and ensure all cultural beliefs and values are taken into consideration In addition to the above guideline, providing continuous training and development to the employees at Nestle could be critical so as to ensure the company maintains its market position globally, and that it has enough capacity to move its business forward.