Success Factors of Nestle Company - Brand, Strategy, and Business Environment - Report Example

Running Header: MBA Report Student’s Name: Instructor’s Name: Course Code: Date of Submission: 1.0 Introduction Proper business and corporate strategies are one sure step of making a company competitive. A company that is able to formulate strategies that are able to anticipate the future by taking advantage of macro- environment, industry & competitive environment plus internal competencies & resources has ample opportunity to gain market leadership. This is because they are able to churn out goods and services that are in tandem with a given market segment demand. Competitive strategies enable a company to identify opportunities to be exploited and threats to be counteracted so as to maintain or gain market leadership. The aim of this report is to present the performance gaps that exist if any in the competitive strategies of Nestle Company. To understand if there is any gap, the report will analyses how the company is competing within the industry and how their competitive strategies aligns them to industry dynamics. Secondly, the report outlines how the company is exploiting opportunities and strengths through competencies at his disposal and counteract weaknesses and threats. Third, the paper outlines how the company is directing change so as to stay afloat. Finally the report will summarises the emerging findings on the strategies formulated how effective they are in ensuring competitiveness of the company. Moreover, based on these key issues, the paper in a theoretical construct and practical perspective advice what can be done differently if appointed the Chief Executive Officer. 2.0 Background Information 2.1 The company Nestle is a food and beverage company with its motto being “good food, good life”. Nestle Company traces its origin from 1986 when Anglo-Swiss Condensed Milk Nestle is a company dealing with food and beverages (Nestle, 2012b). Company opened a plant in Cham, Switzerland. One of the landmark changes that have defined the company up to now is when Henri Nestle in 1867 launched a product Farine lactee which is a mixture of cow’s milk, wheat flour and sugar. The company has grown in bounds and leaps up to now launching different products and engaging in new ventures. For instance, in 2010 the company launched a programme to supply 38 million cocoa seedlings which are disease-resistant. In 2011, the company announced its partnership with Chinese Company Yinlu as means of entry to Chinese markets (Nestle, 2012a). Currently, the company has a wide array of products which include baby foods like Cerelac, bottled water such as Poland Spring, Cereals such Cookie Crisp, Chocolate & confectionary such as Kit Kat, Coffee like Nescafe Classic, Culinary, chilled & frozen food, dairy products, drinks like Milo, food service, healthcare nutrition products like Nutren Junior, Ice cream, sport Nutrition, Petcare and weight management (Nestle, 2012b). The company vision is to enhance people lives by making products that are tastier and healthier so that their customers can care for themselves and their families (Nestle, 2012c). Moreover, as means of contributing to society well being, the company engages in corporate social responsibility like sustainability reporting. These engagements in society are partaken under the premise of shared values and meeting their commitments to society (Nestle, 2012d). 2.2 The company’s strategies To address the theme of delivering good food for good life, the company has outlined numerous competitive strategies to address the same, combat competition and ensure market leadership. The company’s objective is to be recognised brand globally in the market segment of nutrition, health and wellness. Apart from this, they recognise the fact that growth is also associated with behaviour and trust a company is able to build. To achieve these, the company has set strategic priorities that will ensure achievement of their objectives. The first strategy is tied to exploiting their competitive advantages. These advantages they note should be hard to copy and be exhibited in value chain. These include delivering unmatched product and brand portfolio, ensuring unmatched research and development capability, having unmatched geographic presence, people, culture, values and attitudes (Nestle, 2012e). Secondly, the company has identified four key areas that offer potential for growth and allows them to address their goal of “good food, good life”. These include nutrition, health and wellness, emerging markets and possibility for public private partnership, out-of-home leadership and premiumisation. Lastly, the company strategy is based on their operational pillars. These operational pillars are tied to the core competencies and used to attain product development, renewal & quality, operational performance, interactive relationships with customers and differentiation from competitors. The operational pillars of attaining the later points include innovation & renovation, wherever, whenever & however, consumer communication and operational efficiency (Nestle, 2012e). 3.0 Analysis 3.1 Industry Analysis (Porter’s Model) Industry situation To understand how the company competes in the industry, the best analytical model would be the porter’s model. Barrier to enter food & beverage manufacturing industry is high as a result of the fact that it requires massive capital investment and time to build reputation. For instance, main competitors like Uniliver was established in 1930 (Uniliver, 2012); The technological advancement, global branch network and financial capabilities possessed by Nestle prohibits prospective competitors to enter the market. Customers have high bargaining power due to low switching costs since there are numerous competitors with the same services. However, the ability of Nestle to differentiate and carter for different segments through competitive pricing allows them to lock in customers by creating low switching cost in their favour. The threat of substitution is high. This is based on the fact that there are other options to manufactured food and beverages. The fourth is the bargaining power of the suppliers which is low. This is based on the fact that Nestle develops a robust supplier partnership program and supplier assessments to collaborate and maintain good rapport with suppliers so that the suppliers are highly dependent on them as their main purchasers. Nestle’s ability in combating competitors lies in three factors: pricing, quality and differentiation. The company offers high quality at affordable price. In addition, they have diverse products to meet the needs of business travellers. How their strategies address competition Emerging issues on the performance gap in terms of how their strategies addresses the same 3.2 Internal Analysis (SWOT) Table 1: SWOT Analysis Strengths Weaknesses Winning strategy Acquisition power Knowledge of market Strong brand Outstanding market presence Skilled workforce Strong in-house research, innovation and development Challenges regarding new technology Corporate governance geared towards increasing shareholder value Opportunities Threats Emerging markets e.g. in India and China Global awareness on need for healthy food High competition from rivals such as Uniliver Soaring food prices How their strategies address this Emerging issues on the performance gap in terms of how their strategies addresses the same 4.0 Summary of Findings and key lessons for the firm Company Nestle is a globally recognized brand in the food and beverage industry which its motto that lays emphasis on providing good food for good life for the customers has helped to excel in the market and go beyond borders and also compete favourably with the rest of the industry companies. The far the company has come in terms of product development is attributable to the foundation laid by Henry Nestle in 1967 in the development of Farine Lactee which opened way for developing different products for the market. This analysis has also established that Nestle has managed to operate across borders and has been able to partner with its suppliers in growing cocoa seeds that are resistant to diseases. This is important in ensuring constant supply of crops that are used in manufacturing different products. The company is also on top with regard to product base which has a competitive advantage for the company since it helps meet the diverse demands of the market (Adrian and Richard 2003). The major company product categories that the company has managed to deliver to the market include baby foods, cereals, coffee like products, food services and weight management products. It has also been established that good public governance and social responsibility is kept at top of priority as can be seen from the company policy on regular sustainability reporting. Strategies The company has employed different strategies that gives it a competitive advantage and also ensure sustained market leadership. The different strategies employed by the company are also aimed at enabling the company to achieve its objective which is to develop a globally recognized brand in the target markets for nutrition, health and wellness. The analysis of Nestle Company strategies, has established that the company is using three main strategies namely exploiting competitive advantages that are hard to copy and which include delivering unmatched product demands portfolio through research and development; identification of four major areas of potential for growth and that address the company motto and which include nutrition, health, wellness and fitness and finally, developing operational pillars which are important in developing core competencies which are important in product development, renewal and quality, operational performance, interactive relationships with customers and differentiation from competitors. First and foremost, this analysis has established that Nestle is operating in the industry that is characterized high degree of barrier to entry because of the massive capital investment required to enter and compete favourably with the rest of the companies. Secondly, the industry technology is dominated by Nestle even though this has limited level competition in technological advancement. Thirdly, the customers in the market have high bargaining powers as opposed to the manufacturers since there numerous manufacturers operating in the industry and therefore making the switching cost to be low. Finally, in the industry suppliers are having low bargaining power and this is because Nestle Company has managed to partner with the suppliers in the production of various raw materials and this has greatly contributed to the suppliers becoming depended of the company as their main purchaser. Lessons learnt 1. The first lesson that has been learnt from this analysis is that the company motto is very important in determining what direction a given company should follow in trying to attain its mission. This is clear from the company’s motto which is “good food, good life.” This motto has helped the company reach in greater heights to determining its destiny and what kind of products and services that should be produced and made available for the market. 2. Having a company strategy is very fundamental in ensuring that the company is able to counter pressure from competition and enhance its market leadership. This is because strategy entails any designed plan that is being used by the business to improve its product and service delivery to the market. For instance the differentiation strategy that is being used by the company has helped it to produce different product brands that cannot be matched by the competitors. 3. Finally, it has also been learnt that virtually all companies in respective industries and all of which present different scenarios for the business and which can be explained using Porter’s five forces. The analysis of the industry is to determine various forces like technology, suppliers and buyers which influence the choice of strategy. 5.0 New initiatives if appointed CEO If appointed the company CEO, the following are the new initiatives I will consider for the company: 1. Put more emphasis in employing the most modern technology in order to continue increasing efficiency so as to be able to produce most cost effective products so as to offer best prices in order to remain competitive in the market (Bill 2004) 2. Consider revising the company corporate governance so incorporate the interests of all major stakeholders including the customers, investors, employees and the community in general (David 2005). 3. Consider reviewing production processes and product delivery to the market so as to ensure that the products prices are affordable and competitive in the market (Larry 2002). 4. Acquisition of other companies so as to penetrate to other global markets where rival companies like Uniliver are established. 6.0 Conclusion This analysis has established that the success of any given company is depended on a number of factors which include the company motto, brand, strategy and the industry or business environment. This is after it has been established that Nestle background has been key foundation of its success alongside its brand is globally recognized. The company motto which is “good food, good life” has also been instrumental in the company alongside the company strategy of partnering with the suppliers something that has given it more bargaining power. However, despite the company having numerous strengths and opportunities, the company is experiencing different weaknesses and threats which all need to be tackled in order to ensure that the company has remained more relevant and sustainable. References Adrian, S and Richard, W. (2003). With Karl Weber, How to Grow When Markets Don’t, Warner Business Books. Bill, B. (2004). Strategic Thinking: A Four Piece Puzzle, Douglas Mountain Publishing. Larry, D. (2002). The Strategy Machine: Building Your Business One Idea at a Time, Harper Business. David, G.T. (2005). Blueprint to a Billion: 7 Essentials to Achieve Exponential Growth, Wiley. Nestle (2012d). Nestle in Society: Creating Shared Value and meeting our commitments. Retrieved 27 November, 2012 from: http://www.nestle.com/csv#.ULSdllZot0s. Nestle (2012c). Our Vision. Retrieved 27 November, 2012 from: http://www.nestle.com/randd/ourvision#.ULScbVZot0s. Nestle (2012b). Our Brands. Retrieved 27 November, 2012 from: http://www.nestle.com/aboutus/ourbrands. Nestle (2012a). History. Retrieved 27 November, 2012 from: http://www.nestle.com/aboutus/history#.ULSFB1Zot0s. Stanley, C. A. (2006). Strategic Planning: A Practical Guide for Competitive Success, with CD- ROM, Thomson South-Western. Vijay, S. (2003). Corporate Entrepreneurship: Top Managers and New Business Creation, Foreword by Peter F. Drucker, Cambridge. Read More