Professional Documents
Culture Documents
2 INTRODUCTION 3
7 CONCLUSION 14
8 RECOMMENDATIONS 15
9 APPENDICES 16-20
10 REFERENCES 21-25
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Executive Summary
Nestlé is widely known as the world’s largest multinational food and beverage company,
with a 148-year history and operations in virtually every country in the world. Nestlé was
founded in the year 1866 by Swiss pharmacist Henri Nestlé in Vevey, Switzerland.With
successful product expansion and business strategies, Nestlé now employs roughly 339000
people and has factories or operations in almost every region. Nestlé owns a variety of major
consumer brands such as Nescafe, Kit-Kat, Carnation, PowerBar and so forth that has a
dominant position in a variety of markets. The industry leadership of Nestlé largely depends
on the company’s Research and Development (R&D) networks and activities. This enables
Nestlé to provide high quality, safe and healthy food and beverage categories for worldwide
consumers on a continuous basis. Aiming to become the food industry leader in nutrition,
health and wellness, Nestlé is committed to promote corporate common goals and create
shared values within a decentralized organizational model.
The purpose of this report is to evaluate Nestle Company industry based on the case
study and comprehend how the company develop strategic intent for their business
organisations following the analysis of external and internal business environments. It also
aims to identify market place opportunities and threats in the external environment and to
decide how to use their resources, capabilities and core competencies in the firm’s internal
environment to pursue opportunities and overcome threats. In order to strengthen this
assignment about Nestle, there are several methods of gathering data has been conducted,
such as PEST analysis, Porter’s 5 forces model, value chain analysis and SWOT analysis.
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In the end of this report, there are also research regarding Nestle’s strategy to overcome
other competitor as well recommendation and conclusion. In the Apendix, there are some
information regarding Nestle’s growth and histotry throughout time.
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1.0 Introduction
Nestle founder is Henri Nestle, a trained pharmacist and it was founded in the year of
1866. It is now one of the dominant leader in the environment of food and beverage
throughout the world (Osiris, 2014). It was began in Vevey, Switzerland when Henri Nestle
first invented Farine Lactée Henri Nestlé, which was filled with various combination such as
wheat flour, sugar and cow’s milk. The product was bought by a mother for her premature
infant whom couldn’t accept mother’s milk nor any other milk substances (Anon, 2015).
After the disruption of World War I in 1908, this created more demand, mostly from the
government contracts for dairy products. Nestle took chance of purchasing some of existing
factories in US and as the war ends, they have approximately 40 factories worldwide (Nestle,
2015). For partnership, they also merged with Alimentana S.A for Maggi products in 1945. In
addition, they are a major shareholder in L’Oreal, Cosmetics Company. The portfolio of their
brand is almost 2,000 global brands, sold worldwide based 196 different countries
(MarketLine, 2014). Not only that, this made Nestle to be in lead for some other industries
(refer Appendix 1). Financially, Nestle performance is defined as profitable. As stated in
Financial Times (2014), (refer Appendix 2), Nestle in 2013 had stream of revenue about
$99.5 billion which is calculated to be 2.7% more than the year 2012 end revenue. Nestle is
also awarded 41st most respected and well-known brand globally (Forbes, 2014).
For social responsibility, they have launched Nestle Cocoa Plan in 2012 to help farmers
rejuvenate farms and their productivity. They have reached a milestone whereby through
Cocoa Plan, by the year 2015 they are building 40 schools to help provide education for more
than 10,000 young children (Nestle, 2015).
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2.1 Political
2.2 Economic
According to Nestle (2014), they share knowledge and collaborate with local
companies even when Nestle is in the lad in food industry. By this, entrepreneurs get
to compete in a free trade environment in the terms of market growth. This too would
benefit the industry that takes part. Nestle along with the local government
collaborates in order to ensure technical help for farmers in harvesting and planting
crops. Both parties would be leaving with profits, farmers with their income and
Nestle gets raw materials to produce food. This is because the raise of price in raw
materials in need of source from a sustainable suppliers as stated in Kumar et al
(2013, pg. 205). They got to save money as they don’t have to import materials from
other countries. Customers too would be benefited as they get to buy products in low
prices.
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2.3 Social
Newman et al (2014, pg. 15) clarified that one of the main attention is to make
difference in consumers’ attitude and lifestyle. This terms constantly change as
different countries have different lifestyle as in religions, foods, taste, and also
language. In order to achieve targeted people in a region, Nestle comes up with
strategic plans. Not only that, customers’ value towards food is health. They
prefer food health conscious compared to junk foods (Watrous, 2015). Nestle is up
to the challenge in taking pace of consumer’s health in advance for their product.
2.4 Technological
2.5 Legal
2.6 Environmental
Nestle have increase their corporate social responsibility as in they have
established Cocoa Plan where they help poor ones to study and create a living
life for people in Africa (Nestle, 2015). Not only that, Nestle is one of the top
ten company worldwide to report corporate social responsibility by KPMG
(2013).
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STRENGTH WEAKNESS
1. Committed to their stockholders in 1. Certain Nestle products
the approach of business and strong encountered criticism in
cultural values (Schein, 2012). nutritional value. Often blamed
because of poor supplies
2. Strong commitment in social (GotAbout, 2015)
responsibility whereby as stated in
CSR Wire (2014) “long term 2. India government sued for unfair
commitment never being sacrificed trade practices ($100m) for Maggi
for short term performance”. product (BBC News, 2015).
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OPPORTUNITY THREAT
1. Developed their selling channel to 1. People more health conscious as
Africa with Coca Cola (Mark, chocolate related products are one
2012). of the major products.
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where there are taking actions to improve raw materials as it is one of their target
nutritional and taste quality in product for to source 100% of it by year 2020 as they
health. Not only that, they are giving are in the midst of doubling their
priority for women and fairness in company size. As for Nestle, they are
workplace by empowering 5 million facing high raw materials price which
women in Unilever by 2020 (Unilever, encounters them increase their product
2015). Nestle and Unilever both are price instead of enhancing their business.
progressing towards making a change for
organization and community by taking
opportunity in hand.
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This idea was defined by Michael Porter in 1985 in order to know how
customer value gets along with activity chain which in the end lead to product or
service. He too describes value chain as an internal process in company which “to
design, produce, market, deliver and support its product” (Imanet.org, 2015).
Referring to the diagram above, Porter have stated in his book “Competitive
Advantage: Creating and Sustaining Superior Performance” that business activity is
split into two: Primary and support activities (Refer to Appendix 4 (Porter, 1998).
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Customers knew Nestle through their brand where most food and beverage are
covered by them. From Baby foods and bottled water, culinary to coffee and
chocolates to drinks. Innovations by bottling packaging, delivering to regional offices
as demanded by customer and also having eco-efficient packaging (Nestle, 2014).
4.1.5 Services
Nestle have delivery services. They deliver to shops, hotels, offices and also
restaurants (Nestle, 2014).
Main raw materials by Nestle is cocoa, milk and coffee. From farmers, Nestle
receive vegetables, potatoes, cereals and fruits. Through trading, Nestle also receive
spices, meat, oil, sugar and more on. All this requires specific quality of raw materials
but in the lowest cost system.
4.2.2 Technological
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To make sure their employee have full rights, Nestle dedicate human research.
The aim of Management Trainee Programme is to develop young people in order
to help them in achieving a dynamic organization.
Nestle.com (2015) states in the Nestle Report that they have helped creating
labour forces in Africa and also help educating children. Not only that, they too
have built infrastructure like water treatment systems.
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Michael E. Porter came up with five forces model in 1979 while working for Harvard
Business School. The aim of this model was to show new way to identify, analyse and
manage factors by using effective strategy in an organization. It is divided into two parts;
Horizontal forces and Vertical Forces. (Kaumba et al, 2014). This was a framework which
shows the overall profitability and attractiveness in a market. Refer to Appendix 5 for the
Diagram.
The food industry is a large industry. It is common for companies in the industry to do
well for years and also to do poor in short period. Nestle luckily have been around for more
than a century and produces good products as well satisfaction of consumers. In order for
new threats to survive, they must be able to seize one of a Nestlé’s market share portion.
Example, Unilever is a threat for Nestle in certain products such as beverages. But somehow
Nestle is still on lead because of their trademark of healthy and long lasting credibility in
market. This made Nestle a target, and hereby the new entrants’ threat is moderate.
There would be always something new on the market. Like every other company, Nestle
too encounter threat of substitute products. Comparing from Pet food, confectionaries and
ice-creams, there are similar products out there to Nestle products. To be in lead
continuously, Nestle got to find innovative ways in bringing up their products and also to
come up with new products to ensure their future plans for the company. Example, Spray
(2015) stated in Marketing Magazine that Kit Kat by Nestle has been blocked from
registering the four finger shape chocolate by Cadbury and the case is still ongoing.
Competitions in food industry is vigilant as Nestle has now turned to focus on healthy food
aspects while maintaining their place in market. The threat of it is high.
Being one of a powerhouse in the industry of food processing, Nestle have competition in
national and international level. Example of competition Nestle have is Unilever, Cadbury,
Masterfoods and Kraft. These are strong companies, battling continuously to overcome one
another. Refer Appendix ( ), as in Global Food Market Share 2004, Unilever, Kraft and
Nestle have been competing closely to be in lead.
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Customers have high bargaining power as they are consuming the products. As there are
many substitute products for Nestle, customers could change perception and get influenced
by the factor of healthy food, low cost, and easy attainable. Nestle knows the steps to take in
order to meet their customers’ expectation. Since customers are nowadays health conscious in
products, Nestle have included health factor in their products (Nestle, 2015).
Nestle have more power over suppliers as they have large purchasing power and the
suppliers too offer unique products. Moreover, Nestle have long duration relationship with
their suppliers as they need to preserve the availability of raw materials and also the quality
of it. Nestle took initiative to offer their suppliers regarding the efficiency to perform and
minimize the cost of production.
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6.0Conclusion
“Your most unhappy customers are your greatest source of learning” by Bill Gates.
This quotes show clearly that Nestle too have bad experiences in the past, and yet they are
striving to make a change to their organization, family and also to the community.
Nestlé’s official website shows that they have huge potential in most developing countries
if they could keep up the pace. Nestle company is known internationally and their
company is able to deliver more goodness than they do before for the future. I am sure
that Nestle Company could do even better by applying more strategies then their
competitors.
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7.0Recommendation
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Appendices
Appendix 1
General information
Founded in 1866 by Henri Nestlé in Vevey, Switzerland, Nestlé is one of the world’s largest
food and nutrition company. Nestlé now operates 115 countries and has around 280,000
employees worldwide. Nestlé is ranked third by milk intake and first by turnover among
world dairy companies in 2010.
The timeline below reviews the significant events that mark the history of Nestlé:
1866‐1905
In 1866, two separae Swiss enterprises that would later form the core of Nestle, the Anglo‐
Swiss Condensed Milk Company and the Farine Lactee Henri Nestle Company, were established.
1905‐1918
The Company formed by the merger was called the Nestlé and Anglo‐Swiss Milk
Company. By the early 1900s, the Company was operating factories in the United States,
Britain, Germany and Spain. In 1907, the Company began full‐scale manufacturing in
Australia, its second‐largest export market. Warehouses were built in Singapore, Hong
Kong, and Bombay to supply the rapidly growing Asian markets.
1918‐1938
The manufacture of chocolate became the Company's second most important activity. New
products appeared steadily: malted milk, a powdered beverage called Milo, a powdered
buttermilk for infants, and, in 1938, Nescafé.
1938‐1944
Due to World War II, neutral Switzerland became increasingly isolated, and many of
Nestlé's executives were transferred to offices in Stamford, Connecticut. To overcome
distribution problems, factories were established in developing countries, particularly in
Latin America.
1944‐1975
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Throughout this period, Nestlé's growth was based on its policy of diversifying within the
food sector to meet the needs of consumers. Mergers and acquisitions made by Nestlé
within this period include Alimentana S.A., the manufacturer of Maggi seasonings and
soups (1947), Crosse & Blackwell, the British manufacturer of preserves and canned foods
(1960), Findus frozen foods (1963), Libby's fruit juices (1971), Stouffer's frozen foods
(1973), and finally becoming a shareholder in L'Oréal (1974), which is outside the food
industry .
1975‐1981
Nestlé's rapid growth in the developing world partially offset a slowdown in the Company's
traditional markets, but it also carried with it the risks associated with unstable political and
economic conditions. To maintain a balance, Nestlé made its second venture outside the
food industry by acquiring Alcon Laboratories, Inc., a U.S. manufacturer of pharmaceutical
and ophthalmic products.
1981‐1995
The Company's strategy for this period was twofold: improve its financial situation through
internal adjustments and divestments, and continue its policy of strategic acquisitions. In
1984, Nestlé's improved bottom line allowed the Company to launch a new round of
acquisitions, including a public offer of $3 billion for the
1996‐2002
In July 2000, Nestlé launched a Group‐wide initiative called GLOBE (Global Business
Excellence), aimed at harmonizing and simplifying business process architecture. Two
major acquisitions took place in North America in 2002 Dreyer's and Chef America, Inc.
Also in 2002, the joint venture Dairy Partners Americas was set up with Fonterra; and
Laboratoires innéov was set up, another joint venture, this time with L'Oréal.
2003‐2009
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Acquisitions made during this period include Mövenpick Ice Cream, Jenny Craig, Uncle
Toby's, Novartis Medical Nutrition, Gerber and Henniez. Also, Nestlé entered into a strategic
alliance with the Belgian chocolatier Pierre Marcolini. In 2008, Nestlé began a process of
selling Alcon by divesting 24.8% to Novartis. In 2009, Nestlé opened the Chocolate Centre
of Excellence in Broc, Switzerland, with Pierre Marcolini one of the master chocolatiers
Mission
Nestlé does not have a formal mission statement. Instead of a mission statement, Nestlé
uses a
clear set of principles and values to guide it through its business and corporate decisions.7
Nestlé
believes that attempting to capture all of its values and principles in a couple of sentences
would
fall short of what Nestlé strives to achieve. Nestlé operates under ten guiding principles of
operations. These ten principles are: 1) Nutrition, health and wellness, 2) Quality
assurance and
product safety, 3) Consumer communication, 4) Human rights in business activities, 5)
Leadership and personal responsibility, 6) Safety and health at work, 7) Suppler and
customer
relations, 8) Agriculture and rural development, 9) Environmental sustainability, and 10)
Water.8
Nestlé management believes that the company cannot create value society and for its
shareholders if it does not abide by its guiding principles.
The first three principles are in reference to Nestlé’s consumer. Nestlé works to
enhance the nutritional value, taste, and enjoyment of its products while guaranteeing a safe
product that fully informs the consumer about the benefits and pitfalls of its products. The
fourth principle is about recognizing the necessity of human rights and exercising and
promoting good human rights practices. Guiding principles five and six are about requiring
that employees respect each other and their management while also ensuring healthy and safe
conditions for all employees
worldwide. Principles seven and eight require that Nestlé’s customers and suppliers
adhere to the
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same high standards of honesty, integrity and fairness that it expects of itself. Lastly,
Nestlé’s
ninth and tenth principles revolve around environmental sustainability, and Nestlé
continuing
attempts to advance its environmentally safe practices and sustainability initiatives.9 It is
through adherence to these ten principles that Nestlé can give shared value to society,
customers,
and shareholders (its top priority stakeholders).
While Nestlé has a bit of a checkered past when it comes to corporate values due the
infant formula scandal of the 1970s, its new principles seem to be working very well. Per the
2011 Annual Report, in the last year Nestlé experienced internal growth in several important
areas, in spite of overall disappointing results.10 Additionally, both Chairman Peter Brabeck-
Letmathe and CEO Paul Bulcke agree that Nestlé’s principles will help the company to grow
in the future.
Apendix 2
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Appendix 4
Value Chain
Appendix 5
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