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Executive Summary
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. I will
analyse the strategic management process as firm used to achieve strategic competitiveness
and earn above-average returns. I will discuss the strategy formulation that includes businesslevel strategy and corporate-level strategy.
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 firms 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, Porters 5 forces model, value chain analysis and SWOT
analysis.
By the end of this assignment, future strategy will be mentioned as well as my
recommendations about Nestle that will fit into strategic orientation in order to perform better
in their business world. And continue to develop and implement its learning approach as the
chosen large company by using different strategies.
Nestl Company
Introduction.......................................................................................................................4
1.1
EXTERNAL ANALYSIS.........................................................................................................5
2.0
2.1
Demographic Segment.................................................................................................5
2.2
Economic Segment......................................................................................................6
2.3
2.4
Socio-cultural Segment................................................................................................6
2.5
Technological Segment................................................................................................7
2.6
Global Segment............................................................................................................7
3.0
3.1
3.2
3.3
3.4
3.5
4.0
Competitive Environment...............................................................................................10
5.0
5.1
Opportunities..............................................................................................................11
5.2
Threats........................................................................................................................11
INTERNAL ANALYSIS........................................................................................................11
6.0
6.1
Capabilities of Nestl......................................................................................................13
8.0
Nestl Company
Support Activities.......................................................................................................17
9.2.1 Procurement........................................................................................................17
9.2.2 Technological Development...............................................................................17
9.2.3 Human Resources Management.........................................................................17
9.2.4 Firm Infrastructure..............................................................................................18
10.0 Weaknesses.....................................................................................................................18
11.0 SWOT Analysis..............................................................................................................18
11.1 Strengths....................................................................................................................18
11.2 Weaknesses................................................................................................................19
11.3 Opportunities..............................................................................................................19
11.4 Threats........................................................................................................................19
12.0 Current Strategy..............................................................................................................19
13.0 Strategy...........................................................................................................................20
14.0 Conclusion......................................................................................................................21
References................................................................................................................................22
Appendices...............................................................................................................................23
Appendix 1..........................................................................................................................23
Appendix 2..........................................................................................................................23
Appendix 3..........................................................................................................................24
Appendix 4..........................................................................................................................26
Appendix 5..........................................................................................................................26
Appendix 6............................................................................................................................4
Nestl Company
1.0 Introduction
The most important thing for most of business company is an understanding their
successful performance among the other competitors in market place. For some parties, like
shareholders, it is essential for company to make a profit and gain above-average returns. In
this assignment, I will discuss furthermore about Nestls external environment in all aspects
such as their general environment, industry environment, competitive environment, and scan
the opportunities and threats of the company. And also I am going to explain briefly about
their internal environment includes their resources, type of their resources, companys
capabilities, evaluate their core competencies and so on.
1.1 Industry and Nestle summary
Nestl S.A. is a Swiss multinational nutritional and health-related consumer goods
company headquartered in Vevey, Switzerland. It is the largest food company in the world
measured by revenues. Nestls products include baby food, bottled water, breakfast cereals,
coffee, confectionary, dairy products, ice cream, pet foods and snacks. Nestl employ around
330,000 people in over 150 countries and have 461 factories or operations in 86 countries.
Nestl sales for 2011 were almost CHF 83.7 billion. It is one of the main shareholders of
LOreal, the worlds largest cosmetics company. Nestl history begins back in 1866, when the
first European condensed milk factory was opened in Cham, Switzerland, by the Anglo-Swiss
Condensed Milk Company. In Vevey, Switzerland, Nestl founder by Henri Nestl, a German
pharmacist, launched his Farine lactee, a combination of cows milk, wheat flour and sugar,
saving the life of a neighbours child. Nutrition has been the cornerstone of the company ever
since. In 1905, The Anglo-Swiss Condensed Milk Company, founded by Americans Charles
and George Page, merged with Nestl after a couple of decades as fierce competitors to form
the Nestl and Anglo-Swiss Milk Company. The company grew significantly during the First
World War and again following the Second World War, expanding its offerings beyond its
early condensed milk and infant formula products. In 2011, Nestl was listed No.1 in the
Fortune Global 500 as the worlds most profitable corporation. The Nestl Corporate
Business Principles are at the basis of the companys culture, developed over 140 years,
which reflects the ideas of fairness, honesty and long-term thinking. Nestl believes that not
only possible to create long-term value for their shareholders if their behaviour strategies and
Nestl Company
EXTERNAL ANALYSIS
2.0 General Environment Analysis
The general environment is composed of dimensions in broader society that influence an
industry and, indirectly, the firms within it. They group these dimensions into six
environmental segments such as demographic, economic, political, socio-cultural,
technological and global. These structured segments are external to the firm. The challenge to
the firm is to scan, monitor, forecast, and assess those elements in each segment that are of
the greatest importance. These efforts should result in recognition of environmental changes,
trends, opportunities and threats.
2.1 Demographic Segment
Nestls product is for everyone. People from any area, any culture, any age, and income
will drink water. It is not any luxury item which is used by a specific people. Nearly all age
from young to old people can produce Nestl. And all six continents are their customer. For
instance, Nestl segment into different of age. For baby, they have Nestl baby foods while
young people can drink Milo, Nescafe or eat ice cream, chocolate and cookies. In Vietnam,
Nestl Company
High credibility
Potential to expand to smaller towns
Improving trends
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Industry leadership
Increase the partnership
Product diversity and offerings
5.2 Threats
INTERNAL ANALYSIS
Here, I discuss about the nature of Nestls firms internal environment analysis.
Evaluate the role of resources and capabilities in developing core competencies, which are
the sources of the firms competitive advantages. In this section, I will discuss the techniques
firms can use to identify and evaluate resources and capabilities and the criteria for selecting
core competencies from among them. It also discusses the value chain concept and examines
four criteria to evaluate core competencies that establish a competitive advantage to Nestl
Company.
Total Revenue
Operating income
Nestl Company
Profit
Total Equity
Total Assets
Physical Resources
Coffee
Water
Ice Cream
Baby Food
Healthcare nutrition
Confectionary
Pharmaceuticals
Technological Resources
Nestl moved from being a technology led company that produced convenient, tasty
foods and beverages for sustenance, to being a science driven, health and wellness
company.
Continual involvement of rapid technological change.
Innovation Resources
Nestl R&D generates the innovative science and technology needed to build
nutritional and health benefits into products offerings Nestl legendary sensory
excellence.
Reputational Resources
Nestl scientists play their part in communicating the health and wellness benefits of
products to consumers.
From consumer need into research priorities.
From emerging science into consumer benefits and services.
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products are transported to customers from their factories and distribution centres.
Optimises their distribution network such as transport and warehousing in order to
minimise greenhouse gas emissions, to ensure the most efficient use of their transport
to reduce the distances travelled.
Human Resources
The Company employs around 330,000 people, operates in over 150 countries.
Nestl provides training on the Code, with staff from the 14 departments that are part of
the Codes compliance system participating in yearly or twice yearly training.
Nestl Company has a Board of Directors, led by their Chairman Peter Brabeck
Manufacturing
Nestl produced a probiotic especially for all infant formulas and created and patented a
spray drying process, used in manufacturing milk powders and Nescafe was first used
to make powdered paint dispersions.
R&D
Nestl Company first acquired the milk sterilising site to develop milk products and
processes.
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Inbound Logistics
Nestls Pure Life purchase plastics bottles with different size form supplier. Establish
warehouse in different countries and setup of water filling plant and disseminate inputs to
their products.
9.1.2
Operations
Nestl operations are water filling packaging and account maintenance. They know and
have approved the manufacturing for all their raw materials and packaging materials. Nestl
Company immediately instituted a programmed of major improvement to bring the facility on
par with international standards, introduce more efficient machinery. This has helped them
speed up production. Nestl handle their account for exclusive sale in their regional office.
9.1.3
Outbound Logistics
Nestle Pure Life deliver their product to their house. Operation has been done that
deliver to their regional offices according to their customer demand, innovations in bottled
packaging and eco-efficient packaging.
9.1.4
That produce is place in major city of Pakistan. Nestl promote their produce by personal
marketing, TVC, sales promotion and public relation.
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9.1.5
Services
Nestl provides the service home office delivery. They distribute bottle for exclusive
selective on shops, restaurants, hotel, etc. Their service is very efficient as compared to
others.
Procurement
The key raw materials purchased by Nestl are milk, coffee, and cocoa. These, as well as
fruit, vegetables, cereals, and potatoes are partly sourced directly from farmers. Sugar, oil,
meat, spices and other ingredients are sourced only through the trade; Sourcing has to
contribute to the sustainable and profitable development of their company by providing the
base for quality differentiation of finished products to customer or consumer satisfaction.
This requires a supply of raw materials at specified quality, in the quantities and the timing
needed, at the lowest possible system costs.
9.2.2
Technological Development
Nestl is strengthening its leadership in research and development by enlarging its global
Product Technology Centre for confectionary, based in United Kingdom. Nestl Product
Technology Centres have two roles. The first is to develop breakthrough technologies,
building blocks that are basis of new product development. The second is to deploy these
technologies to the companys operations.
9.2.3
people with the right skills. Understanding their people are the bedrock of all their business
strategies, it is their mandate to enhance their skills with cutting edge training and provide
them with world standard facilities. Their Management Trainee Programmed aims to develop
talented young men and women and help them achieve their potential in a dynamic and
enabling environment.
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11.2 Weaknesses
11.3 Opportunities
States
Ranked first in nearly all the product segments in which it operated (market leader)
11.4 Threats
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13.0 Strategy
Nestl describes itself as a food, nutrition, health, and wellness company. They believe
strengthening their leadership in this market is the key element of their corporate strategy.
This market is characterised as one in which the consumers primary motivation for a
purchase is the claims made by the product based on nutritional content. In order to reinforce
their competitive advantage, Nestl created Nutrition as an autonomous global business unit
within the organisation, and charge it with the operational and profit and loss responsibility
for the claim-based business performance by offering consumers trusted, science based
nutrition products and services. The Corporate Wellness Unit was designed to integrate
nutritional value-added in their food and beverage businesses. This unit will drive the
nutrition, health and wellness organisation across all their food and beverage businesses. It
encompasses a major communication effort, both internally and externally, and strives to
closely align Nestls scientific and R&D expertise with consumer benefits. This unit is
responsible for coordinating horizontal, cross-business project that address current customer
concerns as well as anticipating future consumer trends. Nestl business-level strategy is
integrated cost leadership or differentiation with wide range of products and low cost
operators. Nestl strategic leadership is to force the business to become more efficient, to
create a regional manufacturing network, integrate the companys business on a global scale
and to reduce marketing expenditures by exploiting the synergies between brands. Their
strategy to develop R&D network by improving existing products and creating tomorrows
nourihsments, two third of companys R&D activities are dedicated to renovating existing
products, the remaining third is reserved for radical product innovations, improve on
operational level and a number of organisational changes. (See Appendix 5)
14.0 Conclusion
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References
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Appendices
Appendix 1
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Economic
Demographic
Industry Environment
Threat of new entrants
Power of supplier
Power of buyers
Product substitutes
Intensity of rivalry
Political/Legal
Socio-Cultural
Competitor environment
Global
Technological
Appendix 2
Source: www.google.com
Appendix 3
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Source: 2011-FinancialStatements-EN.pdf
Appendix 4
Source: www.google.com
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Appendix 5
Source: www.google.com
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