PESTLE Analysis of Nestle - Case Study Example

PESTLE ANALYSIS OF NESTLE Table of Contents Brief overview of the NESTLE 3 PESTLE analysis and discuss how each element affects the company 3 The effect of the challenges faced by the organisation and how they might be addressed 6 References 9 Brief overview of the NESTLE Nestle is recognised as one of the reputed Swiss multinational organization, with it’s headquarter located in Vevey of Switzerland. It is the largest food and beverage organization in the entire globe comprising of a wide range of products such as baby food, coffee, dairy products, bottled water, ice-cream, pet foods, confectionary items etc. Since, its establishment in the year 1905, Nestle expanded in almost 195 countries that enhanced its total revenues and operating income by CHF 92.16 billion and CHF 13.07 billion by the year 2013. Along with this, the profitability of the organization also increased by CHF 10.02 billion by the year 2013 due to its numerous brands such as Kit Kat, Nescafe, Vittel, Maggi, Nescafe and Nespresso and many others. Due to which, the organization of Nestle became successful in enhancing its market share and brand value among many other rival players such as Pepsico, Unilever, Cadbury etc (Nestle, 2013). PESTLE analysis and discuss how each element affects the company The PESTEL analysis of the organization of Nestle is presented below. Political factors: the objective of the organization of Nestle is to offer healthy and nutritious foods products to its customers so as to position itself as the market leader in Nutrition. Due to this, the government of various nations such as Asia, Europe, Oceania, Africa, America and many others is always in favour of the organization of Nestle and its product lines. This is mainly because; the governments of all nations always desire to offer healthy products to the citizens in order to improve their life style and diets. This proved extremely effective for the organization of Nestle that amplified its demand and position in the market of Asia, Europe, and Oceania, Africa and America and others (Engel, Warshaw, & Kinnera, 2000). .Along with this, the political stability of Switzerland is extremely beneficial for the organization of Nestle that enhanced its market share and profitability among many other rival players. Other than this, the corporate tax rate of Switzerland is quite lower as compared to other European nations i.e. within 12 percent to 24 percent. Due to which, the organization of Nestle attained a significant advantage of enhancing its portfolio and reliability in the market of Switzerland among others. This proved helpful for the organization in amplifying its net profit and revenue by a significant extent as compared to many other brands. Economic factors: other than political factors, economic aspects also offer significant impact over the operations of the business. Inflation is considered as one of the most important economic factor. The inflation that took place within 2008-2010, reduced the per capita income of the citizens. As a result of reduction of the per capita income of the citizens, consumer buying behaviour is affected considerably. Due to which, the demand and total sale of the products of Nestle also reduced that hindered its market share and prosperity in varied markets of the entire globe among others (Bradley, 1999). Apart from this, due to inflation, the rate of unemployment increased that resulted in decline of the purchasing behaviour of the citizens. Other than this, taxation is another economic factor that offered a significant impact over food retail industry. However, due to enhancement of tax rates, the prices of the products increased that also affected the profit margin and productivity of the organization of Nestle as compared to many other existing rivals such as Cadbury, Unilever, Kraft Foods, Danone etc. Social Factors: varies social factors also offer a considerable effect over the profit margin of Nestle. Among them, population trend is one of the most important social factors, and so the organization tried to offer varied types of products for both young and elder generations of the society. Moreover, as the income of the elder citizens of the society reduces so their buying behaviour also declines (Doole & Lowe, 2001). Therefore, the organization of Nestle tried to offer varied types of discounts in order to fulfil their buying behaviour. In addition, most of the citizens in the entire globe in this age, desire to consume healthy and tasty food materials and so the organization of Nestle tried to utilise best ingredients in their product lines. By doing so, the reliability and trust of the consumers increased that amplified their profitability and efficiency to a significant extent as compared to many other rival players. Furthermore, the organization of Nestle tried to offer low sugar and low calorie products to its customers so as to reduce various disorders. Technological factors: the introduction of online sites or websites proved extremely effective for the organization of Nestle in this age of competitiveness. This is because due to the presence of online sites, the customers might easily order their desired products. By doing so, the brand image and popularity of the organization of Nestle increased that amplified its portfolio and market share as compared to others. Nestle offered high attention over research and development in order to develop varied types of inventive and standard quality food products for its customers. Thus, implementation of these above mentioned technologies, enhanced the popularity and ranking of the organization of Nestle increased to a significant extent (Engel, Warshaw, & Kinnera, 2000). Environmental factors: the organization of Nestle used to prepare products with best quality of ingredients that do not offer any sort of harmful effects to the environment. This factor also acted as a boon for the organization that amplified its total sale and profitability in the market among many other rival players. However, due to which, the popularity and trust of the elder generations over the products increased that amplified its position in this competitive market among others (Rajagopal, 2000). Legal Factors: as the organization of Nestle always followed the rules and regulations of Food Standards Agency, so its demand in the market is extremely high. Along with this, it also used to prepare the products as per the food hygiene rules and regulations and so it is extremely preferred by the customers of varying age groups and income groups. This factor also proved extremely effective for the organization of Nestle that amplified its popularity and brand image in the market among others (Doole & Lowe, 2001). The effect of the challenges faced by the organisation and how they might be addressed In this age, the most important requirement of an organization, operating in any segment is sustainability and competitiveness. This is because; it is extremely essential for an organization to enhance its profitability and market share among other existing rival players. Similarly, the organization of Nestle also tried to enhance its market share and popularity by introducing products as per the desires of the customers and market trends. After analysing the above mentioned information, it might be stated that, buying behaviour of the customers acted as a significant challenge for the organization of Nestle as compared to its rival players. This is because; at the time of inflation, the rate of unemployment increased to a considerable extent. As a result of which, the per capita income or the disposable income of the citizens reduced that lowered their buying behaviour. However, due to lowering of the buying behaviour, the demand and total sale of the product of Nestle reduced that hindered its market share and reliability. Therefore, in order to cope up with that market trend, the organization of Nestle might reduce the prices of the products so as to retain its demand. Otherwise, it may not be possible for the organization of Nestle to retain its customer base and loyalty in the market of United Kingdom, Switzerland, Asia, Europe etc (Carter, 2003). Other than this, introduction of point earning cards helped the customers to attain varied types of discounts and rewards. Due to which, the customers became extremely attracted towards the product lines of Nestle that amplified its total sale and demand among others. Furthermore, the organization of Nestle tried to offer low sugar and low calorie products to its customers so as to reduce the danger of obesity, diabetes, allergies, cardiovascular disorders etc. Thus, due to these above mentioned factors, the demand and popularity of the product lines of the organization of Nestle is increasing at a rapid pace in the entire globe. However, due to the introduction of these products, the demand and buying behaviour of the citizens increased, that improved the profitability and operating income for the organization of Nestle. Hence, in order to increase the buying behaviour of the customers, the organization of Nestle implemented varied types of strategies that proved extremely effective for the organization as compared to other rival players. In addition to this, consumer trend is also another important factor that offered significant influence over the organizational profitability and brand value. This is because; in this age, maximum extent of the customers desire for healthy and tasty food with low extent of calorie and sugars. So, that the rate of harmful disorders such as cardio-vascular disorders, obesity and many others gets considerably reduced in this age. However, in order to satisfy the changing taste and preferences of the customers, the organization of Nestle introduced varied products such as caramel cream, finger Kit Kat and many others. As a result of which, the demand and profitability of the organization of Nestle enhanced that amplified its dominance and position in this aggressive age (Alreck & Settle, 1999). Moreover, the consumer purchasing rate also increased that proved extremely effective for the organization thereby amplifying its brand value and reputation to a considerable extent among others. Furthermore, by introducing varied types of low calorie products, the intensity of competitiveness in the market among other rivals reduced that enhanced its prosperity and market value (Czinkota & Ronakainen, 2007). Other than this, introduction of varied types of confectionary products, baby products and coffee items proved effective for the organization of Nestle to increase its productivity and profitability in the market among many other contenders. Therefore, due to its wide range of product lines, in spite of changing trends of the customers, the portfolio and brand value of the organization remained extremely high in this age of competitiveness. Other than this, due to change of the life style and living standard of the citizens, most of them desire to shop through online sites. Keeping this point in view, the organization of Nestle also introduced its online websites so as to offer the enjoyment of shopping. This proved helpful for the organization of Nestle thereby amplifying its competitiveness and ranking in the entire globe among others. Apart from this, its customer base and total sale also increased to a considerable extent, as its website might be accessed from any part of the world. As a result of which, the demand and reliability of the brands of Nestle enhanced that increased its total revenue and productivity. In addition to this, the organization of Nestle became successful in increasing the level of awareness of the customers regarding the type of ingredients used in the preparation of the products, with the help of websites. This amplified its total sale and efficiency in the market in this age of aggressiveness and high bargaining power of the customers (Cateora & Graham, 2004). Hence, it might be stated that, all the challenges described above offered both positive as well as negative impacts but all of them proved extremely advantages for the organization of Nestle in order to retain its leadership position and reliability in the market among others rivals. References Alreck, P. & Settle, R. 1999. Strategies for building consumer brand preference. Journal of Product and Brand Management, Vol. 8 (2). Bradley, F. 1999. International Marketing Strategy, 3rd Ed. New Jersey: Prentice Hall. Carter, S. 2003. International Marketing Strategy. Oxford: Butterworth Heinemann. Cateora, P. & Graham, J. 2004. International Marketing. New York: McGraw Hill. Czinkota, M. R. & Ronakainen, I. 2007. International Marketing. Stamford: Thompson. Doole, I. & Lowe, R. 2001. International Marketing Strategy: Analysis, development and Learning and Implementation, 4t Ed. Stamford: Thompson Learning. Engel, I., Warshaw, M. & Kinnera, T. 2000. Promotional strategy: Managing the market communications. Boston: Irwin. Nestle, 2013. Healthier Products. [Online] Available at: http://www.nestle.co.uk/nhw2013/productinnovation/healthierproducts [Accessed on 21st June, 2014]. Rajagopal. 2000. Marketing Concepts And Cases. New York: McGraw-Hill. Read More