I have prepared a strategic analysis to assess the competitive position of the world's leading nutrition, health and wellness company, Nestle. A company with 140 years of experience, founded in 1866 and started out with a product for kids, a combination of cow's milk, flour and sugar. It soon started diversifying its products with the launch of all sorts of chocolate, milk and coffee products as well as drink/juices and tapping into the wellness area with the acquisition of l'oreal. A company that has been in continues mutation, adapting to the necessity of difficult times and being quicker than others to launch new products on the market. With the boom or organic food industries even Nestle jumped on the bandwagon and started acquiring smaller organic firms and releasing a huge array of so called healthy foods. As you are well aware their brand is one of the most recognized in the world because they are creating value for different communities, for their partners and obviously for their consumers. Or as they call it, they are creating shared value.
Below a graph taken from their websites that enlists their strategy:
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Industry analysis:

Demographic Trends Cultural Influences
*Ageing population that can afford higher costs *Increased consumption of healthier food and is more aware of health issues. *More concern about the environment and
*Younger population more prone to diversify their the supply chain diets and meals and switch to healthier food

Technological developments Political-Legal Pressures
*new technologies allow better more cost effective *New laws for food processing procedures and higher quantities *Growing awareness of food safety *Related higher costs for small farms

Macroeconomic Impacts Global Trade Issues
*The spending is linked to the economy *96% of world organic food sales (US+EU) *Third world countries are the future

Major Competitors:
*PepsiCo
*Kraft Foods
*CocaCola
*Unilever
*Mars Incorporated
*Danone

Capabilities analysis

Capabilities 1 2 3 4
Processes Contracts,Alliances Positive culture,
Talent acquisition Money to acquire competitors
People Cash,Physical plant,patents,talent Brands,reputation,technical expertise,loyalty Training of staff
Systems Contracts,Alliances Positive culture,
Talent acquisition Differentiation in advertising
Alignment Build in low cost rural areas,design plant Rapid expansion,steady investing,low costs
Sustainability You are better than others!competitive advantage Much experience,hard for others to imitate Culture is advantage,huge network and relationships Can they maintain your advantage?
Things of importance today may be obsolete tomorrow!
Competitive advantage
Since Nestle is such a huge company with such a diverse portfolio I would like to focus on two of their major income sources in the past years such as the Nespresso and Nestle water (Purelife). Their strategy is very similar to what ex CEO of CocaCola Goizueta once said:”To be successful, we’ve got to make it impossible for the consumer to escape The Coca-Cola Company.” This sentence sums it up, Nestle is everywhere, their products are in every store whether big or small. Their innovation with Nespresso was a marketing strike of genius. They only became profitable in 1995 because prior to that their business model was horrific. Only after they started selling their product as a high end product, things changed. Through word of mouth, heaps of tastings, a great marketing strategy and obviously a simple yet elegant design, their earnings started to skyrocket. Now Nespresso is their fastest growing brand and they make billions.
Their competitive advantage is definitely their 140 years experience and their resources (whether human of innovative) which is hard to imitate.

Exhibit 1:

Source: http://amandapaynemba.wordpress.com/2012/03/

Lets take a look at the global water market since that is where they invest heavily and hope to become the market leader in the future:

Exhibit 2:

Source: http://www.globalwaterintel.com/archive/8/7/analysis/chart-of-the-month.html

Five forces analysis

Threat of entry: - very high and competitive, many companies enter the market.
– Nestle has a big share (over a century of experience) but is always a target.
– The threat of new entrants is moderate.

Suppliers: - Lots of suppliers, but Nestle has more power than they have.
– Nestle keeps long relationships with them and gives them lots of advice too.

Buyers: - Customers have great power because their is so many products out there
– Nestle knows that and focuses on health and wellness products
– They are environmentally conscious and invest in water sanitation programs and sustainable agriculture

Substitutes: - The threat is big due to so many products and companies
– Nestle has to improve constantly and come out with new products on a regular basis

Rivalry: - fierce competition meaning Nestle has to improve constantly to keep that market share
– very good for the consumers because there is a lot of improvement

In conclusion I would say that there is moderate to low threat of new entrants since the company has been around for so long and is constantly evolving and is established all over the world. There is a bigger threat for substitute goods. Nestle is in great relationships with their suppliers, always maintaining the upper hand though. The consumers instead have great power because there is so much to choose from, therefore must Nestle always improve and evolve to full-fill their customers needs.

Core capabilities:

People: - more than 330.000 employees
– they provide good wages and training for employees and suppliers

Marketing: - World known brand name and great strategy (cost leadership strategy to allow lower prices, and differentiation strategy that means lots of advertising through different media)

System: - Strict quality standards - Focusing on research and development all over the world
– Constant innovation and renovation
– Sustainable agriculture and invest in water programs in undeveloped countries
– Establishing a culture of values.
– Always trying to minimize their environmental footprint
– Constantly lowers their greenhouse gas emissions by improving their energy efficiency

I see the company as a worldwide leader even in the future if they keep working on their regional manufacturing network and keep reducing marketing expenditure by exploiting the synergies between brands. They keep investing heavily in R&D and having more than 3500 loyal scientists constantly trying to develop new and more improved products and foods will allow them to remain market leader for many years to come. By investing more in the baby food and water industry they will acquire new customers in 3rd world countries since water is getting scarce and the world population is always growing, especially in poor countries. They have fierce competitors that are trying to do the same but don't quite have the know-how and resources to be a real threat. Although with the price of raw materials increasing it is becoming a real challenge to keep the prices low and compete with the other big brands that may already be established in a country like Pakistan, India or Africa. Nevertheless if the company continues to focus and gain local suppliers they will not even lower their costs but make it impossible for competitors to step in.

References:

http://www.coca-colacompany.com/water-stewardship-infographic-conserving-our-most-precious-resource

http://www.ift.org/Food-Technology/Daily-News/2013/September/20/Nestle-tops-leading-sustainability-indices.aspx

http://www.nestle.com/csv/environmental-sustainability

http://www.scribd.com/search?query=competitive+advantage+of+nestle

http://www.just-food.com/news/nestle-to-double-chinese-rd-capabilities_id120831.aspx