Nestle is a Swiss, world leading multinational company producing a wide range of tasty beverages and nutritious food at international standards. Nestle holds on to a good brand name, innovative products, low cost, rising share market and a financial position which can be classified as Cash Cow using the Boston Consulting Group Matrix. Nestle has an employee strength of over 328,000 people around the world.
Nestle produces a wide range of baby food, dairy products, beverages, pet food, confectioneries and also pharmaceutical products.
My selected country Australia, had become the second largest export market for Nestle by 1906. This potential translated to setting up the business in Australia in 1908.
Nestle Australia Ltd is ranked at number 83 against 2000 Australian companies This public company is foreign owned and it’s profits are focused from Beverage, food and Tobacco manufacturing.
Strengths
The strengths of this company is it produces quality products. It’s more than 140 years in the industry has earned Nestle the world’s biggest brand.
Committed research and development through product innovation resulted in the invention of Milo in 1934 which is seen as a breakthrough in Nestle technology in Australia. Nestle is seen as the world’s biggest brand and was featured as a top brand in the Fortune 500 list
Nestle also hold a strong marketing and advertising power due to the global brand.
Nestle’s constant upgrade in technology has resulted in the quality and increase in healthy food production.
This is complimented by the skilled and committed team who are the reason for the Improved manufacturing techniques.
Threats
Weaknesses are internal characteristics that might inhabit or restrict the organization’s performance. (Daft, Richard L.2008)
The threats of Nestle remains to be the high competition from the competitors from the same category of food manufacturer like Arnotts Limited, Australian Co-operative foods limited and Cadburry Schweppes Australia Limited.
Weakness
Being a global brand, Nestle has faced many controversies in different countries of operation. This can also cause a negative impact globally.
The adverse reaction of infants to milk formula also is a major weakness to nestle which holds a major share of the baby formula market. In 2008, Nestle was impacted by the China milk scandal, involving infant formula’s and other milk products which contained melamine causing threat to lives. Over 53000 children fell ill from the tainted milk powder. However, Nestle had denied claims that the traces of melamine found in one product by the local government was far too small to be significant
Opportunity
Nevertheless, Nestle continues it’s opportunity into the food industry by introducing new products and new flavours as the needs and taste of consumer becomes more complex. For example, Nestle has invested in the introduction of health based products to tap the more sophisticated needs of the healthy conscious customers.
Opportunities might include the possibility of serving additional customers ( market penetration), the chanse to entre new markets or segments ( market development), or falling trade barriers in attractive foreign markets ( Dessler, Gary.1998).
The Degree of Rivalry
Nestle has high number of competitors which are also fighting for the same slice of the cake. But these competitors are concentrating on increasing the market share globally but have not researched on new products or new services in this industry. Nestle has made a name in the global market and it’s band has earned trust and confidence by consumers
The Threat of Entry
Nestle might have a few threats of entry in the future. Competitors duplicating the new products researched by Nestle and with new technology and machineries might be a threat for Nestle. However, Nestle has also taken actions to patent many of it’s products so that it’s rivals cannot replicate Nestle’s products.
The Threat of Substitutes
Nestle finds that there are high substitutes in the industry for nutritional food and beverages. However, Nestle’s branding is a recognized and trusted brand locally and globally due to their existence for over a century.
Buyer Power
The prices you can obtain will have the biggest impact on the profitability of your business. In most cases, buyers shop around for best prices and thus exert downward pressure on prices.(Friend, Graham & Zehle, Stefan. 2004).
For Nestle, the buyers power is the consumers right to demand lower prices of products and demand higher quality products. Products must also be nutritious, healthy, and up to the quality standards required by the consumers.
Supplier Power
For Nestle, there has been a tremendous increase in commodities pricing as the pricing of raw materials has been on the rise. Causes of price increase has been identified to be due to weather condition speculation and the hike in oil price contributes to the rise in raw materials such as coffee, cocoa and other ingrediants
The PESTLE analysis for Nestle Australia is as below.
Political
Australia is politically stable and complies with their country-specific requirements especially on minimum wages, franchising law and Food and Drug Administration (FDA) regulations. .
Economic
It is a government's responsibility in maintaining the macroeconomic environment to boost the economy (Palmer, 1992).
Australian economics is considered stable even though crisis hit many other countries especially ASEAN regions. There was still demand for Nestle’s products due to the wide range of food and beverage production. For example, the baby milk formula is seen as a necessity and this facilitates the growth for this food industry.
Social
Socio-Cultural issues are not highlighted as a problem, rather as an issue to be analysed or used in decision making process (Olawoye & Di, 1990).
Australian social challenges include the impact of the famers who are aging. This puts a direct impact on the supply chain of raw materials to Nestle. The productivity rate in farming has not grown as past as the past. Due to this factor, it is difficult for processors to source for quality raw materials.
Technological
The micro and macro environment would assist to comprise the marketing strategies. (Kotler, P., 1994).
Australia is technological savvy therefore the research and analysis sectors are well advanced. The Gene Technology compliments the on going quality control of the food and beverages produced in order to improve quality and nutritional value of food.
Legal
Nestle being a multinational group, very vigorously take advantage of the legal procedures in order to have an edge over their competitors. For example, the lodge for patent for its products so as its competitors are not able to imitate it’s products.
Environment
Nestle’s business depends on a sustainable of environment. The challenges faced by Nestle Australia is the water crisis. This is because Australia is a dry country and often faces shortage of fresh water. As such, water management has been a priority in Australia and Nestle has targeted to become the most efficient water user. This is proofed by the 34% reduced in water consumption since 2004.Moving forward Nestle Australia will continue to optimise the environmental and sustainability performance of both the packaging and the product using a new eco-design tool. This will ensure the business considers the all aspects of the packaging and the product, including agricultural production, ingredient sourcing, processing, manufacture and consumer use. Nestle aims to reduce our water consumption, particularly in manufacturing operations, through the implementation of Eco-Plans at each of their sites. The Eco-Plans also outline the waste and recycling targets for each site, which is supported by our operational performance approach to manufacturing
The Value chain analysis is a template that a firms use to understand it’s cost position and to identify the multiple means that might be used facilitate the implementation of a chosen business level strategy. A firm’s value chain is segmented into primary and support activities. Primary activities refers to the physical creation and it’s sale and distribution to buyer and it’s service and after sale. Support activities include the assistance provided for the primary activity to take place. (Hanson.D.,Hitt.M,Ireland.R.D & Hoskisson, R.E.,2011.p84)
The specific activities where a firm can create a competitive advantage is through a chain of interrelated chain activities.
Inbound Logistics
This includes the storage and control over raw materials received for production purpose. Quality raw materials are sourced by helping suppliers to develop sustainable and ethical practices. Non negotiable minimum standards are expected from the suppliers which includes no forced labour or child labour.
Operations
Nestle Australia’s head office were identified as the head quarters for the Oceania Region which included the Nestle operations in Australia, New Zealand and the Pacific Islands.
Outbound Logistics
Nestle products are known globally through their brand as their products cover almost every beverage and food category. Consumers are well known to the nutrition and tasty food which Nestle offers. In Australian, it is well received as it meets the changing needs of an individual
Marketing & Sales
Marketing and Sales remains to be the focus as it known to build. In Nestle, marketing is not an isolated activity but rather superior marketing is done while working hand in hand with service team. Marketing and Sales at Nestle is all about maintaining and building the future of the brands with the consumers, shoppers and customers. With such a wide range of products, you will get the opportunity to work alongside talented and driven individuals, combining insight driven strategy that will help identify, develop, evaluate and commercialise new areas of growth for Nestle’s brands.
Service
The service promise of Nestle is to help people lead a healthy life through its nutritional products with benefits. This is seen thru the baby milk formula which is a substitute of mother’s milk to children who are malnutrition.
Porter’s Generic strategies are often used to steer a company in order to maintain it’s competitive advantage and sustainability over it’s competitors in the market.
The Focus Strategy
The idea is to focus on the niche market and continue to understand the changing trends and taste of customers in order to focus on a particular market segment and to serve them well.
Research and technology will be invested on to uniquely develop products to serve customers. Measures are recommended to be taken to build a strong brand loyalty among customers.
The Differentiation Strategy
The differentiation strategy involves in making Nestles product different from it’s competitors through the use of technology, good research and innovation. Once this is achieved, one option to maintain the competitive edge is by patenting the products so that it could not be copied by other competitors.
These factors will enable the delivery of high quality products and services to customers.
And finally, to train and educate a marketing team to sell effectively while understanding the benefits and difference of the Nestle’s products when compared with of competitors.
Cost Leadership
My focus will not be in the area of Cost Leadership as a pricing strategy would not be my forte. Even though maximizing profits seem to be very attractive, how we compete in the market will be based on our sustainability and competitive market advantage.
My recommended strategy would be how the product or the services differ from the competitors
Furthermore, if the lowering of price strategy is adopted, it will only be obvious that the prices are reduced continuously in order for competitors not to catch up. Once competitors figure out how to sell their products for less, they will also apply it to their products.
However, efforts will be put towards reducing cost. Working together hand in hand with a team which consist of all levels of employees to derive with a success formula to reduce wastage at all areas, regardless it is a small savings or a huge one.
Full automation at the production floor will also be recommended to minimize manual work. This effort will also curb the increase in employee’s wages and also other staffing issues which may hinder operations and production of the products.
Another area would be working towards using a alternative of energy. This will be an advantage in the event there is a hike in energy cost. Furthermore, this will be environmental friendly.
Conclusion
Nestle has been a world leader in nutrition food and beverages and they have an advantage over other competitors due to the global experience of over 140 years delivering uncompromised quality and nutrition food and beverages.
Nestle Australia is successful due to it’s committed group of researches and scientists who are a treasure to this company. The work force is highly trained and are skilled and compliments the goals of Nestle Australia.
Putting together the knowledge gained and also the innovation of the future, Nestle will continue to invest in programmes that expand the understanding of the health benefits food and beverages can provide.
Reference
http://www.nestle.com http://www.nestle.co.uk http:// www.nestle.com.au http://www.nutrition.nestle.com http://babymilk .nestle.com http://www.iht.com http://www.bloomberg.com http://telegraph.co.uk Daft, Richard L. (2008) New Era of Management, 9th edn. Canada: South-Western Cengage Learning.
Dessler, G., 1998. Management: Leading People and Organizations in the 21st Century. [e-book] London: Prentice-Hall International Inc. Available through: http://site.ebrary.com [Accessed 9 September 2013].
Friend, G. and Zehle, S., 2004. Guide to Business Planning. [e-book] London, GBR: Profile Books. Available through: http://site.ebrary.com [Accessed 12 September 2013].
Kotler, P., 1994. Marketing Management: Analysis, planning, implementation and control. [e-book] London: Prentice Hall. Available through: http://site.ebrary.com [Accessed 5 September 2013].
Michael, E.P., 2008. On Competition : Updated and Expanded Edition : A Harvard Business Review Book. Harvard Business Press.
