Marketing assignment essay help on: Nestle marketing strategies

1.INTRODUCTION

1.1 Brief Overview of Nestle

Over the previous 130 years Nestle Company has been able to acquire great amount of knowledge of almost all the varied markets of the world since 1866. This is the reason why Nestle has been able to gain a leading position in the global food operations as it has factories operation in 77 countries and it is selling its gamut of products in all the six continents. The best part so Nestle is that it occupies the leading market shares  along with a  broad and diversified  business portfolio in varied and many product categories which include  nutrition and baby food, coffee, dairy products, ice creams, mineral water, confectionary, chocolate and pet food and many more.

 Nestle has been committed to provide top quality products and brands which are essential for good health for all age groups. That is why it incorporated nutritional elements in its vast array of product categories so that they can be promoted into the markets as high quality products and safe too (Raisch & Ferlic, 2006).

 In June 1997 Peter Brabeck –Letmathe was appointed the CEO of Nestle and the critical challenge in front of him was to enhance the profitability of the company which already had mature markets. A suite of process innovation initiatives were being launched by Brabeck so that financial means can be generated to be invested in growth initiates which would result in maximization of existing assets, maximise distribution logistics as well as enhance the capacity utilization of the organization (Raisch & Ferlic, 2006). The goals which were followed by Brabeck involved strong investment in product innovation and it also involved speeding up the processes associated with product development. Brabeck also identified better and fresh growth opportunities in the mature markets through organic growth, this could be achieved through by strengthening the innovation capacity of Nestle, as suggested by Brabeck.

1.2Report Objectives, Scope and Limitations

The main objective of this case study is to find the ways for organic growth for Nestle in the mature markets all across the globe. Brabeck’s view of achieving growth through innovation needed significant amount of investments in the varied marketing capabilities and Research and Developments at the same time. It has been noticed that the  R&D department of Nestle acts as the key factor in the successful growth and provided a strong platform for achieving organic growth in future  (Hitt, Ireland, & Hoskisson, 2009).

The scope of Nestle can be defined through the ‘Mission’ and ‘Vision’ statement of Nestle which is:

‘Vision Statement’

“Nestlé’s vision is to bring the best and most relevant products to the people, wherever they are, whatever their needs are, throughout their lives.” (At a glance: introduction, 2010a)

The above vision of Nestle is being supported by the three-tiered mission which is entitled “Creating Shared Value”. Therefore along with compliance Nestle understands that sustainability of the planet’s resources is of vital importance (The Nestlé corporate business principles, 2010b).

The mission statement helps in analysing what Nestle stands for therefore the mission statement of Nestle states:

“Nestle is dedicated to provide the best foods to people through their day, throughout their lives, throughout the world. With our unique experience of anticipating consumer’s needs and creating solutions, Nestle contributes to your wellbeing and enhances your quality of life.”

The only limitation is that since it is a multinational company there might be some cultural as well as regional challenges which the company will have to face to implement the growth strategy framed. Moreover the expectations of the customers will also vary according to the country in which they are operating and their tastes will also vary as per the country.

1.3Define the key terms

Strategy:  An integrated and coordinated set of actions as well as commitments which has been designed for gaining a competitive advantage through exploitation of core competencies (Hitt, Ireland, & Hoskisson, 2011).

 Strategic Competitiveness: It is achieved when any organization successfully formulates and implements a strategy which is highly value-creating (Hitt, Ireland, & Hoskisson, 2011).

Competitive Advantage: It is the strategy of any firm which when implemented cannot be duplicated by competitors or they find it very costly to imitate (Hitt, Ireland, & Hoskisson, 2009).

Strategic Management processes:  They are a complete set of commitments, actions and decisions which are needed by any competition in order to attain strategic competitiveness and earn above-average returns (Hitt, Ireland, & Hoskisson, 2011).

Globalization: It is the increased amount of economic interdependence which exists between countries and their companies which is reflected through flow of goods and services, financial capital and knowledge across the country borders (Hitt, Ireland, & Hoskisson, 2011).

Global Economy: It is the economy in which the services, goods, skills, people and ideas are able to move in free manner across geographical borders (Hitt, Ireland, & Hoskisson, 2011).

2. EXTERNAL ANALYSIS

 2.1Industry of Nestle

Nestle belongs to the category of Food Company and the categorisation can be done is industrial sector of food processing section.

2.2Environmental Analysis

2.2.1Economic

The European economy started implementing environmental taxes on various sectors since 1995. This step was taken to adjust the revenues of national budget and then produce to some extent incentives for achieving behavioural changes amongst the citizens through increment of prices of certain products. However it helped the natural environment but the European business environment was partially flooded with tax burden. The profit margins were decreased due to implementation of these new taxes (Allen, 2001).

2.2.2Socio-cultural

A healthy and nutritious diet and apt healthy diet is what is needed for promoting wellbeing and health and is the focus of every person these days across the globe. It is applicable across all the generation be it Baby Boomers or Generation X. These days especially in western countries people prefer food products which provide them health benefits rather than junk food. Moreover it has been seen that generation X cohorts (1980’s-2000) possess the characteristic of adapting to changes and they are technology savvy too. These characteristics coincide with the aggressiveness of Nestle using technology and there was high influx of technology in Europe too (Allen, 2001).

2.2.3Global

In the 1990’s globalisation was the buzzword and in the twenty first century it seems that this will not diminish even a little bit. Some of the advantages attached with globalisation are it offers ease and high level speed of communication across geographical boundaries along with allowing growth and travel in the international investment market However along with positive effects it also has negative impact in the global environments like fall of the Triad economies in recent past that is Japan, United States and Europe. The downturn experienced by these three economies had negative impact on the world’s economic environment (Allen, 2001).

2.2.4Technical

The last period of twentieth century experienced the influx of IT capital investment in Europe. This enhanced in the spending in IT related to the selling of hardware, software , internal and external services along with related telecommunication has lead to enhanced  efficiency of the distribution channels across the globe and Europe . This led to bridging the gap between sellers and buyers and the final customer. It also resulted in enhancement of applications of computer information systems in companies especially in companies like Nestle which want to gain competitive advantage and growth through enhanced R&D (Henry, 2008).

2.2.5Political-Legal

The political and legal environment of Europe has been quite positive in the sense in the 2000’s the whole European continent combined the economy and launched the Euro as common currency to make their economy of all European nations stringer. Thus Nestle will have the ease of operations due to positive political and legal environment across all the nations in Europe (Allen, 2001).

2.2.6Demographic

It covers the age, sex and income level of the population and in Europe some of the economies performed really well and the people had good amount of spending power so it provides good opportunity for Nestle products to be bought by people (Allen, 2001).

2.3The Industry Environment

2.3.1Analyse the Porter’s 5 Forces

The Five Forces analysis of Porter mainly looks at five key areas which are depicted in figure below:

Bargaining Power of Supplier

• The bargaining power of suppliers is higher as the industry in which Nestle deals in relies heavily on the complex agro-business supply chain and Nestle has high purchasing power.
• Nestle maintains and creates positive relationship with its suppliers all over the world.
•  Nestle moreover believes in creating and maintaining long-term relationships with the suppliers because it helps in ensuring high quality raw materials to be purchased.
•  In addition to this Nestle also offers advice to its suppliers on serious matters like performing better to minimise unnecessary costs (Porter, 1985).

Bargaining Power of Customers

• Customers enjoy high amount of bargaining power related to consumption of products of Nestle.
•  The preference list of customers becomes very influential because there are many close-by substitutes for the Nestle products available in the market.
•  That is why nestle takes specific steps to cater to the needs of its customers because it understands very well the power of customers.
•  Since the society is becoming much more health conscious so Nestle has started incorporating health and wellness factors into almost all its range of products. (Porter, 1985)

Threat of new Entrants

•  Since the food processing industry is very large and competitive at the same time so it is very common that most of the firms perform very well in this sector. That is why many companies plan or enter in this market every year so as to gain a considerable portion of this profitable market.
•  But luckily Nestle has been in this market for centuries together and has a long and successful history to boast of because of quality products and high level of customer satisfaction.
• Nestle has been able to gain considerable profitable share in the market.
•  Therefore new entrants in this market will obviously try to take away Nestlé’s market share in order to survive.
• Thus Nestle is constantly a target and therefore the threat of new entrants is moderate for Nestle. (Porter, 1985)

Threat of Substitute Goods

• Nestle has been beset with threat of substitutes due to the nature of this industry.
•  From lean pockets to bottled water Nestle has to directly deal with competition in very segment from   wide array of similar products.
•  Thus it becomes very important for Nestle to continuously find innovative ways to improve its products, because of fierce competition.
•  In recent years Nestle has been able to maintain competitive edge by focusing on health and wellness aspects of its products.

Competitive Rivalry within Industry

• It has competitors which are industry giants like Kraft Foods and Groupe DANONE.
•  These companies are strict and huge competition which wants to outperform each other.
• Talking about advertising alone, these companies spend hundreds of millions of dollars just to appear more desirable that their competitors.
• Since these competitors will keep on trying to one up each other, the consumers will keep on enjoying ever-improving product lines in the food-processing industry. (Porter, 1985)

Figure 2: Porters Five Forces on Nestle

2.4 Competitive Environment

The competitive environment is very stiff in this sector and food processing industry being highly lucrative there are many big brands always seen buying or hiring the sales forces of their competitors. There are severe marketing and promotional campaigns which are continuously seen on every media in order to capture maximum market share. The product prices have also been found very competitive because of this tough and stiff competitive rivalry. However the food processing market has been found to be quite profitable for Nestle but it is found that it’s very competitive as seen from the Porter’s Five Forces Model.

2.4.1 Rivalry, Capabilities, Strategies and Threats from Competitors

Rivalry is very stiff in the food processing industry and this is really a nice thing for the consumers. But since food processing industry has many new entrants every year which keep on eyeing the market share of Nestle, it is very tough for the company to face challenges. Moreover if some of its rivals are real big-time corporate giants like Kraft Foods, Master Foods, Unlived which are truly global competitors, it has to face strong competition from national companies as well as regional firms too. Besides this many of its rivals have also gained operational efficiency too through major improvements technologically and through various R&D knowledge.

2.5 Opportunities and Threats

Opportunities

• Its transition into ‘nutritional and wellness’ company brings with it lot of opportunities like tapping both Baby Boomers as well as Generation X across the globe.
•  It can strongly focus on the developing as well as emerging economies of the world being a globalised company in true sense.
•  The booming out of home eating market give Nestle great opportunity as its product range is easy to carry along wherever you go type of products and healthy too.

Threats

• Nestle has faced some compliance issues in the past which have resulted in making penalty payments this has damaged its brand image and it might prove to be a threat.
•  Some of the macroeconomic factors in some economies of countries might prove a hindrance in entry like in economies which do not support foreign investment it will face entry barrier.
•  Allegations of unethical business activities on Nestle have tarnished its image and that might prove harmful for the brand image of Nestle in its buyers mind (Nestle SWOT Analysis).

3. INTERNAL ANALYSIS

3.1Resources of Nestle

 The tangible resources (Raynor & Bower, 2001) like  materials and human resources are found to be recruited and found through stringent quality checks and the best candidates are begin appointed in the company. Regarding the intangible resources (Prahalad & G., 1990) which include knowledge, skills and relationships which are being developed on-site through the development of best and effectual organizational culture and training. They involve management training (Goold & Campbell, 2000), knowledge conservation and redefinition of the product lines in order to continue the effectual use of capabilities (Chandler, 1994).

 Nestle has centralised activities for example R&D, IT, purchasing and quality control. Thus Nestle follows Centralisation and Standardization of resources.

 Nestle uses standardisation in its IT norms, branding and administrative standards for purchasing materials.

3.2Capabilities Identification

3.2.1 Human Resources

Internal promotion is policy of Nestle but when needed they do external hiring too for best expertise and skills and Special attention is given to individual candidate as per Nestlé’s culture.

3.2.2 Effective Sales Force

High level of sales force being trained in Switzerland and are very proficient.

3.2.3 Effectual Promotion of Brand name Products

The quality of brand is linked with features of the products to establish impact on customers mind and this helps in superiority establishment against competitors.

3.2.4 Strong Anti-risk Capability

 The modules combination strategy of Nestle helps it in resisting risks.

3.3. Core Competency Analysis

For each capability, we need to indicate which of the four tests of core competency Nestle is able to meet and this can be done easily through a table:

Global Presence  YES Unique Corporate Values and culture YES

3.5 Weaknesses

– Selective investment due to unstable political and economic conditions.

-Lack of proper communication channels

-Lack of awareness amongst the customers

-Product range is quite simple

-proportion of cereals and milk drinks is large and smaller share of other products

-This limits further expansion of market share of Nestle.

3.6 Pulling it together

SWOT analysis of Nestle

3.7 Current Strategies

AT the business level Nestle follows Cost Leadership Strategy. The diverse development which Nestle follows will give it high pressure but still it remains successful because of cost-effectiveness control it implements to achieve global growth.

It does the same pricing as its competitors do to gain excess profits to follow low-cost strategy they use specialized equipments, specialised staff and establish huge factories.

To reduce the threat of buyers Nestle has increased its yield along with low cost quality product.

The high-level output at Nestle causes large procurement which helps Nestle to easily get discounts from suppliers.

Since now Nestle has lower cost already, so new entrants try to adopt product differentiation strategy to seize Nestlé’s market

 Product substitutes are not easy to make because of low cost of its products the replication cost is very higher.

4. CONCLUSION

This case study of Nestle where the CEO wants to achieve the organic growth in the mature markets of Nestle through the strategies like acquisitions and gaining the brand advantage shows that this is the best way to achieve success in the markets. Moreover the large amount of R&D investments Brabeck has made in Nestle also helps in reaping the desired benefits. The advanced management model of Nestle has provided it with some core competencies like global presence, knowledge based outsourcing, well-known products and unique corporate culture and values. All these initiatives along with Cost leadership strategy followed by Nestle help it in diverse development. At the corporate level it follows the diversification strategy which is more concentrated on ethical values and social responsibility which helps it in handling the threats of new entrants, and product substitutes too. Thus this case analysis is a true example of following the best strategies for product innovation and successfully implementing them for profitable growth under the best leadership style which is being depicted by Brabeck in Nestle.

5. RECOMMENDATIONS

At corporate level Nestle follows is Diversification Strategy because it is a food and beverages company but through related product diversification strategy it designs multi-species, multi-standard and multi-level products which cover almost all the segments of food and beverages market. This give customers a variety of options to choose from as the brand can hold more shelf space which also prevents the invasion of competitors.

Thus Nestle can now use Cooperative Multidimensional Structure in order to implement the rather constrained strategy. The cooperative form is a very constrained strategy which has M-form structure with horizontal integration which brings interdivisional cooperation (Hitt, Ireland, & Hoskisson, 2011).

 Thus Nestle needs to follow decentralization through which Nestle runs multiple versions of inventory, accounting and planning which makes it difficult to share information with departments. Thus Brabeck implemented the Globe Business Excellence which helped in achieving operational efficiency. It helped in integration of global business of company and helped in intercommunication between different market systems. Moreover the formation of Local Application Centre, Product Technology Centre and Clusters helped Nestle to convert research concepts which were given fundamental research centre of Nestle into consumer products.

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