American International University Bangladesh

Assignment Term Paper on Nestle Global

Submitted by

1.Tisha Monika Mehjabeen 2.Md. Moniruzzaman 3.Tashrif Hossain 4.Md. Mahfujur Rahman

Submitted to Mou, Musrat Faculty of Business Administration (BBA) AIUB

Table of content
Contents
1. 2. 3. 4. 5. 6. 7. 8. 9.

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Exclusive Summery.............................................................................3 Introduction..........................................................................................4 History..................................................................................................4 Overview..............................................................................................4 Mission Vission....................................................................................4 Types Of Businaess..............................................................................5 Products & Servises.............................................................................5 Organogram Of Organizational Structure...........................................6 Lecture Review a. SWOT Analysis...........................................................................7 b. BCG Matrix.................................................................................9 c. Porters Five Forces Model.........................................................9 d. Porters Five Forces Model For Nestle......................................11 10. Findings and Analysis on Nestle: a. SWOT Analysis Of Nestle.....................................................13 b. BCG Matrix Of Nestle..........................................................16 c. Nestle competitive environment in terms of the Porters competitive five forces model..............................................17 d. Strategies they using to market their products......................17 e. Kinds of organization............................................................19 11.Recommendation..............................................................................20

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Exclusive Summary
Nestle was founded in 1866 by Henri Nestle. It started off with one mans initiative to produce infant formula (for infants who are intolerant to their mothers milk) and grew into a multi- national cooperation worldwide. Nestle has more than 250,000 employees worldwide and factories all around globally. The infant product was so successful that it created demand all over Europe. Eventually this success brought in many business joint ventures and the company underwent many name changes along the way. Nestle started to enhance its product varieties and started to introduce baby cereals, breakfast cereals, chocolates, bottled drinks, beverages, ice creams, dairy products, food seasoning , pet food and many more. The products growth was encouraged by aggressive R&D (Research & Development). Nestl is a successful company that has been around for 145 years and still its headquarter inVevey, Switzerland. The companys objectives are to be recognized as the world leader and Nutrition, Health, and Wellness, trusted by all its stakeholders and to be the reference for financial performance in its industry .Nestl Environmental Advisory Group meets regularly to review current environmental issues and to anticipate potential concerns.A review of the three most recent annual reports, which include the companys balance sheet and income statement, displayed how Nestl is trying to be the reference of financial performance in its industry. Reviewing the companys assets, liabilities, and revenues reiterates Nestls success over the past couple of years. Today Nestl is seen across grocery stores; however, the general population identifies them based on their brands. Nestls most recent achievement was the purchase of Krafts frozen pizza business.

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Introduction:
History Nestle was established in 1866 by brothers George

Page and Charles Page. It is a Swiss maltinational company and its head quater in Vevey.

Overview It is a Swiss multinational nutritional and health-related Company. Headquartered in Vevey, Switzerland. Eemploys' approximately 2, 80,000people. 511 factoriesin 83 countries worldwide. World's most profitable corporation. With a market capitalization of $ 200 billion.

Mission Nestl's business mission is to manufacture and market the Company's products in such a way as to create value that can be sustained over the long term for shareholders, employees, consumers, and business partners.

Motto of Nestl is Good Food, Good Life.

Vission To be a leading, competitive, Nutrition, Health and Wellness Company. Preferred supplier. Sell preferred product

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Types Of Business : Corporation and Multinational

Product & Servises:

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Organizational Structure of Nestle

Governing body: AGM: - Annual General Meeting of Shareholders. Executive Body: Board of Directors There are four committees in Corporate Governance. In Nestle they have Executive Board which mainly consist company executives and department heads. They are responsible for managing the all operations of the company and they are the executives who implement the policies and strategies designed or we can say defined by Board of Directors.

Organogram

Literature review:
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What is SWOT? Why SWOT analysis is important, and how it affects strategic decision making.

SWOT Analysis

The term "SWOT" is an acronym for the words "strengths", "weaknesses", "threats" and opportunities. SWOT Analysis is the most renowned tool for audit and analysis of the overall strategic position of the business and its environment. Specifically, SWOT is a basic, Importance of SWOT analysis: SWOT analysis is very important. When attempting to determine where your marketing efforts need to be placed, the SWOT Analysis shows you the areas where youre doing fine and where you really need a helping hand. It gives you an overview of where your company stands. Be prepared for what you will see. Not everything will be perfect. You will have weaknesses and you may even be surprised at the areas that you thought were strong that really arent. You will see the internal and external factors that are affecting these various areas within your company.

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Below is a sample of what a SWOT Analysis looks at: Overview \ / Internal Analysis /\ Strengths Weaknesses External Analysis /\ Opportunities Threats

A SWOT analysis helps us decide how you should:

take advantage of a new business opportunity respond to new trends implement new technology Deal with changes to your competitors' operations. Building on strengths A SWOT analysis will help you identify areas of your business that are performing well. These areas are your critical success factors and they give your business its competitive advantage. Identifying these strengths can help you make sure you maintain them so you don't lose your competitive advantage and can maintain your business growth. Minimizing weaknesses Weaknesses are the characteristics that put your business at a disadvantage to others. Conducting a SWOT analysis can help you identify these characteristics and minimize or improve them before they become a problem. Seizing opportunities A SWOT analysis can help you identify opportunities that your business could take advantage of to make greater profits. Opportunities are created by external factors, such as new consumer trends and changes in the market. if you do have the capability to seize an opportunity and dont, it could also be damaging. Identifying threats Threats are external factors that could cause problems for your business, such as changes to the market, a competitor's new advertising campaign, or new government policy. A SWOT analysis can help you identify threats and ways to counteract them, depending on your strengths and weaknesses. Addressing individual & other issues You can conduct a SWOT analysis to address individual issues, such as:
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staffing issues business culture and image organizational structure advertising financial resources Operational works

Matrix:

Boston Consulting Group (BCG) Matrix is a four celled matrix ( matrix) developed by BCG, USA. It is the most renowned corporate portfolio analysis tool. It provides a graphic representation for an organization to examine different businesses in its port portfolio folio on the basis of their related market share and industry growth rates.

Porters Five Forces:

Diagram of Porters five models

1. Threats of New Entrants:

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A profitable company can be attracted by new entrants. Economies of scale mean larger firms can produce at lower cost per unit. This tends to lower the number of firms in the industry and reduce competition. Brand name and proprietary are those characteristics that cannot be copied at low cost by competitors will be a barrier to entry. 2. Threat of Substitutes: Substitute products refer to the products having ability of satisfying customers needs effectively. In Porter's model, substitute products refer to products in other industries. To the economist, a threat of substitutes exists when a product's demand is affected by the price change of a substitute product. If the price of substitutes is lower, the competitive threat increases as the price differential increases. 3. Bargaining power of suppliers: A producing industry requires raw materials - labor, components, and other supplies. Differentiation of inputs means that different suppliers provide different input characteristics for inputs that basically do the same job. The greater the degrees of differentiation among suppliers the more bargaining power suppliers have. The greater the number and closeness of substitute inputs the lower the bargaining power of suppliers. 4. Bargaining Power of Buyers: Buyer concentration versus firm concentration refers to the extent of concentration in the buyers industry compared to the extent of concentration in your industry. The more concentrated the buyers industry relative to your industry the greater the bargaining power of buyers has. Product differences and Brand identity increase bargaining power of a company. 5. Current Rivalry: Industry growth is the speed at which the market is growing. Rapidly growing markets provide less incentive for firms to aggressively compete with each other. Intermittent overcapacity is the amount demand fluctuates during a year (or over a business cycle) and the impact lower demand has on how efficiently the firm is able to use its plant and equipment. In some industries a decrease in demand leads to significant idle productive capacity, while other industries are not as susceptible to this factor. Concentration and balance is the number of firms in the industry and their relative size. An industry in which a few firms supply most of the output is likely to not be very competitive because the large firms will control the market.
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The power of Porters five forces varies from industry to industry. This five forces model help in making strategic decisions as it is used by the managers to determine industrys competitive structure Porters Five Forces Model for Nestle Porters Five Forces model analysis helps us to contrast a competitive environment. We analyze these five forces for NESTLE. To aid in our evaluation of Nestle and its status in the industry, we will apply Porters Five Forces Model to the company.

Threat of New Entrants Nestle has huge products and brand name. The food processing industry is very large and competitive; it is not uncommon for firms within the industry to do quite well. Luckily for Nestle, the company has been around for over a century and boasts a long history of quality products and consumer satisfaction which has allowed the company to obtain a considerable share of the market. As a result, new entrants into the industry must attempt to seize a portion of Nestls market share in order to survive. Essentially, Nestle is constantly a target and so the threat of new entrants is moderate. Threat of Substitute Goods Nestle is beset with the threat of substitute goods. From bottled water to lean pockets, there are arrays of similar products that compete directly with Nestle. It is vital for Nestle to continuously find new ways to improve its products as the competition is so fierce. In recent years, Nestle has focused on the health and wellness aspects of its products to maintain its competitive edge in the market. Bargaining Power of Supplier Nestle holds more bargaining power then its suppliers. It prides itself on creating and maintaining positive relationships for long time with its suppliers all over the world. Due to the large purchasing power of Nestle and the fact that the suppliers of agricultural commodities offer a product that is far from unique. In addition, Nestle also offers useful advice to its suppliers on how to perform more efficiently to minimize unnecessary costs and maintain good quality. Bargaining Power of Customer Customers have a large amount of bargaining power regarding their consumption of Nestle products. As stated previously, there are close substitutes for Nestle products which allows for
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the preferences of the customers to be very powerful. Nestle understands the power of the customers and has taken specific steps to meet the needs of its products consumers. Specifically, Nestle is incorporating health and wellness into the creation of its products as society has begun to grown more health conscious.

Competitive Rivalry within the Industry Nestle is a powerhouse is the food processing industry but so are Kraft Foods and GroupeDanone. These companies, among others, are in a constant and continuous battle to outperform one another. Regarding advertising alone, these companies spend hundreds of millions of dollars in an attempt to appear more desirable to customers than the other companies. As long as these companies continue striving to one up one other, consumers will continue to enjoy ever improving product lines. When applied to Nestle, Porters Five Forces Model depicts a competitive but profitable market for the food processing industry. Threats of new entrants is moderate but for substitution goods and rival companies buyer have bargaining power. For the final force, the model depicts a large amount of rivalry within the food processing industry.

Potential,opportunities and threats. The method of SWOT analysis is to take the information from an environmental analysis and separate it into internal (strengths and weaknesses) and external issues (opportunities and threats).

Findings and Analysis on Nestle:

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Strengths:

1. Unmatched product and brand portfolio. The company offers one of the widest portfolios of food and brewery products in its sector. It also operates 29 brands that earn more than $1 billion in annual revenues. With more than 8,000 products it is hard for any other corporate to compete against Nestl. 2. R&D capabilities. Nestl invested more th than an $2 billion in R&D in 2011.

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3. Distribution channels and geographic presence. Nestl runs in more than 100 countries and has extensive distribution channel all over the world, which supports its operations globally. 4. Competency in mergers and acquisitions. Over the years Nestl has been forming successful partnerships and acquiring other companies in order to grow and maintain its leadership in the market. 5. Brand reputation valued at $7 billion. Nestl is known almost everywhere and has a reputable brand for its products that are used by millions every day. Weaknesses

1. Inability to provide consistent quality in food products. Nestl has been recalling many products from trade due to food contamination or poor quality supplies. This does not only hurt firms sales but its image as well as the company is unable to control quality of the products. 2. Weak implementation of CSR. The company has announced and is involved in many programs that aim to make company more eco eco-friendly friendly and improving the working conditions of its suppliers. Still, Nestl receives a lot criticism over the effectiveness of its programs. Opportunities

1. Increasing demand for healthier food products. The trend of buying and consuming only healthy food products is a major shift in consumer tastes and opens up an immense market for companies. 2. Acquiring startups specializing in producing well well-being products. Startups are cheap and can easily be acquired. Nestl is focusing on providing more well well-being being products and this is a great opportunity to expand its portfolio. 3. Establishing new joint ventures. Nestl is already involved in many successful partnerships with major world companies like The Coca-Cola Cola Company and ColgateColgate Palmolive. Threats

1. Food contamination. Although it is Nestls responsibility to run thorough quality checks of its products, the company had been reportedly providing contaminated food or other products ucts to the market. Such actions hurt companys reputation and result in losses.
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2. Trend towards healthy eating. Nestl is a major supplier of chocolate and chocolate drinks that have high level of calories and due to changing customer habits, will experience decline in demand. 3. Growth of private labels. The growing number of supermarkets and other retailers are introducing their own label products that cost less and can easily compete with Nestls product portfolio. 4. Rising raw food prices. With an overall growth of world economy and population, the demand for raw food will rise.

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BCG Matrix for Nestle

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1. 2. 3. 4. 5.

competitive environment in terms of the Porters competitive five forces model

CUSTOMERS: Favourable COMPETITORS: Unfavourable SUPPLIERS: Favourable SUBSTITUES: Favourable NEWENTRANT:Favourable Favourable

trategies they using to market their products

1. Corporate Strategy
Nestl is able to maintain its mission and goals through three different strategies. The graph above shows how those three strategies (Operational Pillars, Growth drivers, and Competitive advantage) allow Nestl to maintain a competitive advantage over its rivals. Operational Pillars 1. Innovation and renovation 2. Operational Efficiency 3. Whenever, ver, Wherever, However
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4. Consumer communication Growth Drivers 1. Nutrition, Health, and Wellness 2. Emerging markets and popularity positioned products 3. Out-of-home consumption 4. Premiumisation Competitive Advantage 1. Unmatched Product and Brand Portfolio 2. Unmatched Research and Development capability 3. Unmatched geographic presence 4. People, culture, values and attitude These are the strategies used by Nestl to ensure that it succeeds in the market. What makes Nestl stronger than their competitors, like General Mills, is that Nestle uses strong brands that are able to create competitive barriers. Nestl also goes above its competitors using its strategy of unmatched research and development capability. They have also partnered with other large corporations, for example: Coca Cola. They also do something very different than their other competitors; Nestl acquires local companies to create regional mangers that know the local markets and culture. This allows them to gain a global strategic advancement and consumer satisfaction.

2. Business Strategy
Nestl is a company with many brands; the individual business level strategies are different from the corporate level, because each business has different markets and consumers. Like they have baby food, bottled water, cerles, chocolate, coffee, culinary and frozen food, dairy, drinks, ice-cream, pet care, sports nutrition, weight, healthcare nutrition, food service etc. Each brand of Nestl business has the same strategy since Nestl is a food corporation. The core strategy for each brand is the same as the corporation's strategy as laid out in the 3 pillars. The manufacturing factories for these brands follow the same protocol for energy reduction. They reuse many of their products in order to create energy to produce their products. Their main strategy is to create low-cost, highly efficient operations make a universally ability products, and to improve communications with their consumers.

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 What kind of organization structure do you think the company has?

Nestle is a corporation which established in 1876. Now this is a multinational company. Nestle has a 511 factories in 83 country and 280000 employee. For their great expansion they must followed tightly controlled structure. Above we saw from their organizational structure, they have hierarchical structure, and information flow mainly from the top to other parts. Employees are not empowered to take decisions, they are expected to obey and carry out order. So by considering these points we can say nestle is a mechanisticorganization

Recommendation:
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How they can use strength Nestle companys strength is its Brand name, product quality, potential buyers and long term experiences. But now its products are lack of innovation and for their large and wide channel it is losing its product quality, which can be a great threat for future. They can use their consumer support by using website and online voting about their new invented products. How they overcome those weaknesses Nestle weakness was Inability to provide consistent quality in food products. So they could talk with their suppliers for raw material quality to increase sincerity. Another weakness was Weak implementation of CSR. As a corporate company they have responsible to society and environment. They had improved their implementation of CSR to overcome this weakness but should be more conscious. Recommend strategies Educating the consumers through campaigning is a possible way to grow their business. Currently, Nestle sells its products through wholesalers and retailers. Nestle can improve its profit margin further by establishing their own retail outlets.

References www.nestle.com www.en.wikipedia.org/wiki/Nestle

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